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FEDERAL RESERVE BANK
OF NEW YORK

MISC. 4. 1-120 M-1-20

OFFICE CORRESPONDENCE
Governor Strong

FROM

DATE

SUBJECT

September 23,

192-1-

EMPlOYMent IncuirY

W. R. Burges8

I am sending herewith all of the returns which we have thus far
received in response to our employment inquiry.

I have not attempted to make any

tabulation or summary of the results as they are in the main ippressionistic rather
than exact.

I have had extra copies made of a statistical statement concerning

changes in the working force in the yards of the New York Shipbuilding Corporation,
since it seems to me that this statement might be placed with any data which the
Committee is putting tcgether.




_

iSC.0.1-110.1-1-20

FEDERAL RESERVE BANK
OF NEW YORK

OF ICE CORRESPONDENCE
TO

FROM

Governor Strong

DATE

September 24, 1921

SUBJECT

W. R. Burgess

The attached page, taken from the Financial and Commercial Chronicle for
August 27, 1921, gives in full the report made by Mr. Davis to the Senate Committee.
The essential figures making up the total estimate of unemployment are as follows:

,Inufacturing and mechanical industries
(including building trades)
Mining
Transportation..
Trade and clerical workers
Domestic and personal service

3,900,000
250,000
800,000
450,000
335,000

5,735,000

TOTAL

It is clear that in his letter Mr. Davis qualified his estimate much more
fully than one would have been led to believe by later comments.

The letter points

out that practically the only figure in the estimate for which substantiating
evidence is available is that for industries.

The letter further points out that

the figures submitted are simply for the numbers of persons released from occupations,
rather than the number of persons unemployed.
The estimate of 3,900,000 released from manufacturing and mechanical
industries is based on a survey made by the United States EMployment Service in
January, 1921, a copy of which is attached.

The amount of unemploymen

survey has been brought down to date in accordance with the-percentage changes shown
by current reports to the Employment Service by about 1,560 concerns.
appears to me to be somewhat too high.
rather a collection of opinions and miscellaneous records.

The estimate

The survey was in no sense a ce
The other data which

we have available, and which seem to me somewhat more substantial in character,




MMC,A.90M-1,0

FEDERAL RESERVE BANK
OF NEW YORK

_

"
DATE1aPtember

OF -ICE CORRESPONDENCE
TO

Governor Strong

FROM

24, 1921

W. 1, Burgess

SUBJECT:

- 2indicate a somewhat smaller decrease in the number of employees.

The indices for

both the United States and for New York State which we have been carrying and which
are illustrated by the diagrams which I am sending in the accompanying report, show
a decline in employment in industrial establishments of New York State of about 30
per cent between the highest point in 1920 and the present,and in the United States
as a whole of 24 per cent from the high point of 1920 to the present.

The modest

survey which the twelve Federal Reserve Banks made of the employment situation in
April of this year showed a reductian'of 24 per cent between April, 1920 and April,
1921.

I am attaching a copy of our lonthly Review which contains a report of that

survey.

While none of these three studies are as pretentious in their scope as the

survey made by the United States Employment Service, they have the advantage of

greater uniformity of treatment and closer control over the method of collecting
figures.

On the basis of these other figures, I should think that 3,000,000

would be much nearer to the actual number of persons released from industry than
3,900,000.

Concerning mining the situation is somewhat peculiar in that reduced

operations of the mines in general mean more part-time work rather than unemployment.
Er. R. H. Williams tells us that there is little free movement of workers in the
mining industry and that from repeated experience they are probably better able to
go through periods of slack work than most other industrial workers.

Of course

slack work is chronic in the mining industry, as it is an overmanned industry. In
determine what
considering the number of unemployed to/ general measures of relief should be undertaken, I should question the wisdom of including the miners.




That they need is more

1.1ISC.3.1-9014-1-20

FEDERAL RESERVE BANK
OF NEW YORK

OF -10E CORRESPONDENCE

DATE

TO

SUBJECT

-ROM

mining.

They are a specific problem unto themselves.
I have no way of checking the figures on transporatiorl.

They seem

extraordinarily high in view of the fact that railroads have to keep on operating in
times of depression on almost as large a scale as in other periods.

The shipping

group is of course a large one, but 800,000 seems to be altogether too high.

As to trade and clerical workers, the department stores of this City
report to us that there has been practically no diminution in their working forces
and the reports which the Federal Reserve Board receives from department stores all
over the country indicate that the volume of business being done is as large in
terms of goods sold as in 12.0.

There has of course been a considerable release

of clerical workers from public service,

banks, and business of all kinds, but here

again, the figures appear to me to be somewhat large.

The number of workers in

clerical work in the United States as reported by the 1:110 census was 1,737,000.

I do not believe that there has been a 25 per cent reduction in this group.
In view of the census figures showing an extraordinarily small proportion
in 1V20
of workers in domestic and personal service/, I should doubt whether there had been
any notable reduction in the number in this group.

This is one of the groups in

which reduction in times of depression takes place most slowly because the number
of workers in this group is an expression of the standard of living of the people and
the standard of living changes very slowly.

4 own estimate would be that the number of persons released from different
occupations has been more nearly in the neighborhood of 4,000,000 than of 5,700,000.
Of this number, it is clear that a considerable proportion has
other occupations.

been absorbed by

I should think that the number absorbed by agriculture, schools,

and miscellaneous occupations would take care of in the neighborhood of one-third
released.


of the 4,000,000


FEDERAL RESERVE BANK
OF NEW YORK
September 26, 1921

Dear Governor Strong:

You may not have seen the attached clipping from yesterday's New York Times.

It gives in considerable detail the exact

method followed by the United States Ehployment Service in their
survey of unemplojment last January, which was the basis for the
recent estimate by the Department of Labor of the number of
unemployed industrial workers.
One or two features of the method used are worthy of
note:

-Nine men covered the entire United States.
One man for example, had as ais allotment, Enine,
Hew Hampshire, Vermont, liassachusetts, Rhode Island
and Oonnecticut.
The men selected had, as far as we can learn,
no special knowledge of employment and certainly no
specific statistical training.
In most of the states there were no available
figures and the estimates made were based simply upon
the opinions of a number of interested people.
The final result for each district was an
average of the various sets of estimates

I do not believe that it is possible to secure a result
upon which reliance can be placed by such methods as these.
Very truly yours,

W. Randolph Burgess
Statistics Department
Governor Strong,
0/0 Federal Reserve Board,
Wasnington, D. O.



The worldwide decline in commoity rices which set in last spring, has,

ul;own conaiderable acceleration durilw tht,
,q11
C-

*.Ne United Stttea.

From the p

et month, ssiAmlally in Crftit

Brittoh Aficas aro down from TO% to 141.

Id

In prices are dog'', ill, while thc vrioue price indices in the United :Antes
31,4°1

show declines of from 15% to 22%.

Asubstftntisi portion of these declines has

ocoorred In Ue tt sixty days, and already there aro signs that the lowarrices
for raw meto)riel and goods et eholosale are beginning in f;oms casos

rklflected

in Total/ prices 'ma that thus Conc,uners aro beginning to rf. ceive the "Anefit of the
enhanced buying iover of the dollar.
NiPLE3A4L ?nICL INDICES

f Decline durinA_2-test month

rt,erted

United States
7ureao of Labor
This eankte index
(12 busic commoditiss)

7.0

.

rItish

17.6

,i :zr

-3 5.42444

4.3
7.3

v:".;--

Dunts

Rradstreets

15.7

cv, Z'-. a .2
5.4
4.4
--+ ,7 k .1'
2.1

conom1st

Statist
French
Italian
Japanese
Canadian
Swedish

1 Dillt

24.9
/4,/rtAbucer

9.9
' ,.7.9

2.1
26.5

(--;t-t--'-''-'?

li.e

F.9

4.4
2.5

Auotralian
Calcutta

5.2
:'.5

Cancellation of orders by aanufacturers and merchants, and post2oner,ent of

jorchasing by consumera havq, locou;snied th.,* fall In comic:My ;Jices strod au
as at home.

In the United Ststae, ghere the wice decline of

th

ot six months is

the most abrupt since that of tbe first six month43 or AM accon;y,nyin,i, the close

the Civil ear, the

tendencies are necessarily causing substential interruptions ,,ind

readjustments In mnny inJustrien,.



The orlsrly manner in ,thich these readjustments

11,,

have proceeded ham been greatly fmoilitated by the existence of the ereeent machinery

for the maintenance of credit flexibility end elaaticity. Troughout the year credit
has taen at all timee evelleble, RS the Federal Reserve Board pointed out in its statement of October 15, for ie spite of the rapid moveeenta of funds frem one part of the
country to another, member banks neve always felt ready to extend edditionel credit
where such A pouree seemed neceeeery end eound, knowing thtt they could in turn fall
back upon their Federal Aeserve .Benke

It is probable that in no pert of the country hes the demand for credit been
felt more acutely than in New fork City. In the seotember number of the Reviee, the
movevents of funds in end out of hew fork for the preceding three months were eet out

in considerable detail. Further drafte in October and Noveeber upoe the Nee York- City
elks have reduced their depoaito $250,O00,000. Not only have they been called upon to

mike direct advances to industry, commerce and egriculture in all tarts of the country,

but they have been called upon for Indirect advances as well, through loam to interior
corresoondent banks for the accomodation of their local ClIstomerm.

In Teeny of the Now

York banks the demands of interior banks. have been the heaviest on record, exceeding

even the atcomodetion they required before the estebliehment of the FederalReeerve
System.

Among those eaking for 'Gene are any banks abloh have never borrowed before.

On the other hand
On June 1

361

e country benks0.n thie district re gradually getting out of debt.

.;ut of 771 member banks. eere borrowing from the Federel #eserve Bonk.

On November 20 the number of borrowere was reduced to 211.

Just as with incre4eine 01008 the volumo of credit incremsed, so with falling T.TiCCII the volume of credit has lately showna, tendency to decrease. The folloAng

charts Pato* the course of credit during MO. The fluctuations of loose end de,ealts
are shown by the figuree of the 825 banks which report weekly end which reflect accuretely

the banking conditions of the entire country. The recent decline is the volume of credit
which these figures indiente is in turn shown in the decreesed rediscounts end circulation
and in the increased reeorve peroenteges of the Federal heserve System, the latter having




risen from 425 on October i.e to 44e1 on November 19.

11418,3 I STAT.9600-1021

FEDERAL RESERVE BANK
OF NEW YORK

O

ICE CORRESPONDENCE

To

Governor Strone

DATE
SUBJECT:

February 1

192 2

War College address

-rom___W._11Ii_urga.s

In the absence of hir. Snyder I have been over the correspondence
with General LeGlachlin and the attached cow of your address last year at
the War College.

The subject which General IcGlachlin suggests does not seem to me
a promising one. In the first place, I do not believe that the method of
payment for war material was in any large degree to blame for congestion at
shipping terminals. It was the custom to insrect and accept practically

all war material at the factory and it is my impression that payment was not
as a rule dependent upon receipt at a terminal. Congestion at ports was
more largely due to lack of any coherent program during the early days of
the War.

The supply bureaus had no exact information as to what shipping
capacity would be available from time to time or even concerning how many
men they would be called upon to supply with overseas equipment. It was not,
I think, until the early monthS of 1C,16, that there was an authorized schedule
of troop embarkations and of drafts on the basis of which the supply bureaus
could make their purchases and ship their goods. The wording of contracts
which determined the precise method of payment was a detail which could be
and was modified as the army program assumed more coherent form.

Ln interesting talk could well be made on the form of war contracts:
what method of payment they should provide, whether they should be on a cost
plus basis, how they might be modified from time to tine, under what
arrangements they might be canceled on the termination of hostilities. This
is a technical problem quite apart from the general problem of financing

the War and it is one an which we should find it extraordinarily difficult
to assemble data.

It would Seem to me that last year's address was admirably adapted
to the War College audience practically without change.




STAT,000110.21

FEDERAL RESERVE BANK

OF NEW YORK

ICE CORRESPONDENCE

_

To
.e

Governor Strong
%.1

DATE

January 5,

SUBJECT:

W. Randolph Burgess

At Mr. Snyder's request I am sending herewith tables containing
the information requested in your memorandum of January 4, together with some
additional data which seem pertinent.
The attached diagrams seem to me significant.

There has been a

quite remarkable correspondence between the amount of discounted bills held by
the Federal Reserve banks and the average rate of discount.

The amount of

bills held appears to be somewhat the same kind of measure of the Reserve Bank
situation as the reserve percentage would furnish if it had not been put out of
business by gold imports.
The second diagram shows the way our buying rate for bankers bills,

which has been free to fluctuate with the market, has risen in the past three
months, while our discount rate has remained stationary.




READ AND NOTED,'
fr.

1923

A

FEDERAL RESERVE BANK
-

OF NEW YORK

August 4, 1923.

IN REPLY PLEASE REFER
TO

Reports-WRB

Governor Benjamin Strong,
C/0 Cragmore Sanatorium,
Colorado Springs, Colorado.
Dear Governor Strong:

I am attaching herewith a report of the inquiry into the
unfunded credit balance, undertaken by the Department of Commerce,
together with a copy of Mr. Jones' letter.

It looks like a pretty

good job and furnishes further substantiation of John tqlliams' contention that the unfunded balance has been, and is, comparatively
small.

The figures would clearly be smaller still if reports had

been received

from

import as well

as export houses.

Mr. Snyder sails today on the "Franconia."
With best wishes,
Sincerely yours,

W. Randolph Burgess
Manager, Reports Department.

LGD
Ence.




COPY
DEPARTMENT OF COMMERCE

Bureau of Foreign and Domestic Commerce
WASHINGTON

July 27, 1923.

Mr.Carl Snyder,
Federal Reserve Bank of New York,
15 Nassau Street,
New York, N.Y.
Dear Mr. Snyder:

At last we have closed the books on our accounting of the unfunded credit balances due our banks and industrial and trading concerns on July 1, 1921 and July 1, 1922.
instituted last December, and although a number of follow-up letters
were sent out, the returns have come in very slowly.
However, I
think we have done all that could possibly be done towards getting
complete data.
I inclose a summary of the returns in duplicate, which I
would ask you to submit to Governor Strong.
interested in any deductions which you might care to make from these
My own thought is that one great weakness lies in the fact
figures.
that the industrial and trading concerns circularized were almost entirely engaged in export trade, so that the accounts payable are much less
Unless, of course, one assumes that our imports
than they should be.
It is
are very largely paid on a strictly cash or near-cash basis.
probably true that a portion of our imports paid in cash is very much
larger than the corresponding proportion of our exports.

These data have been recently submitted to Dr. John H. Williams
and will be used in connection with his study of our balance of international payments for 1922, as well as in our own study which will be
published at about the swab time as that of Williams'.
It is our intention shortly to destroy the sheets containing
Do you see any reason why they should
replies to our questionnaire.
be retained, especially in view of the fact that the data has been taken
off on long sheets which can be put away in our confidential files!

With kind regards, I am
Sincerely yours,
(Signed)

Grosvenor M. Jones,

Chief, Finance and Investment
Division.
Inclosure-47567



Although this

We

,Finance and Investment Division.

Data on Unfunded Credit Balances Outstanding,
July 1, 1921 and July 1, 1922.
NET STATILiaTT

Accounts receivable and Accounts payable
1921 and 1922.

A

Banks

Reports from 221 banks (of which 102 had data to reoort) show:

Accounts receivable July 1, 1922 - 079,000,000
July 1, 1921 - i;666,000,000
Decrease (July 1/21 to July 1/22) 4187,000,000

Accounts payable July 1, 1922
- 4418,000,000
- 358,000_000
"
July 1, 1921
Increase (July 1/21 to July 1/221 4 60,000,000
Industrial and trading concerns
Reports from 524 industrial and trading concerns (of
384 had data to give) show:

which

.,ccounts receivable, July 1,1922 - 4384,500,000
July 1,1921 - 510,500,000
Decrease (July 1721 to July 1/22) 4126,000,000
Accounts payable, July 1, 1922
July 1, 1922 Increase (July 1/21 to July 1/22)

0




47,500,000
45,0J0,000
2,500,000

Statement Total Accounts Receivable and
Total Accounts Payable.
Accounts Receivable
July 1, 1922

July 1, 1921
Banks
Business
Concerns

otal

4666,000,000

4479,000,000

510,500,000

384 500,000

cl,176,500,000

4863,500,000

Accounts Payable
Banks
Business
Concerns

358,000,000

4418000,000

45,000,000

47,500,000

Total

403,000,000

065,500,000

Net amount due American bankers and business concerns (chiefly
4398,000,000
4 773,500,000
exporting)
Decrease in net due
July 1/21 to July 1/22

4375,500,000

j,




-2-

715ccess of accounts receivable over amounts payable.

Banks

July 1, 1922
July 1, 1921
Decrease

61,000,000
308,000,000
',1:247,000,000

Industrial and trading concerns (chiefly exporting)
4337,000,000
July 1, 1922
465,500,000
July 1, 1921
Decrease

'.,;123,000,000

Combined banks and industrial and trading concerns:
4398,000,000.
July 1, 1922
773,500E000
July 1, 1921
Decrease

075,500,000 =

48 %

ralele

5

IIM-II23

FEDERAL RESERVE BANK

OF NEW YORK

--OFFICE CORRESPONDENCE
Governor Strong
FROM

DATE

August 31,

191

3

SUBJECT:

W. Randolph Burgess

We have been working on the suggestion in your memorandum of
a couple weeks ago, and attempting to compute the reserves released by
the transfer of demand to time deposits..

We have been pretty much baffled

to make any reasomble estimate of the amount of the transfer.

About the

most rational estimate seems to be based on the assumption that the normal
rate of increase for time deposits due to savings would be about the same

as the increase in deposits in savings banks, which is a yearly increase of
about 5.8 per cent.

Between June 30, 1917 and June 30, 1922 the increase

in tire deposits in national banks was $1,341,00u,000 greater than the normal
increase on this basis.

The reserves released to 7 per cent. would amount

to '94,000,000, which would support about-5_ times -as much deposits or leans,

or about $500,000,00G in 5 years.

This is, of course, a more dm:: in the bucket compared with gold
imports.

I wonder if we ought not to think ul) a cure for the fluctuations

in credit due to the
quential expansion.

foreign

gold movement before we tackle this less conse-

I feel too uncert- in

to make much of a ease in the matter.

or

the validity of our computations

I am going to keep our peole working

on it, however, until we produce something sound enough to send to the Board.
Incidentally I have been getting together figures to show the effects
on reserves of the establishment of the System.
down the whole thing somewhat comprehensively.




I hope before long to set

FEDERAL RESERVE BANK

MISC. 3. i-75M-9-23

OF NEW YORK

OFFICE CORRESPONDENCE
To

Mr. J. H. Case

1.

January 12, 1924.

Basic Conditions in Money
Markets and Suggestions for Open
Market Program.

SUBJECT-

W. R. Burgess

FROM

DATE

Basic Conditions.

While money is now extraordinarily

easy and many of the conditions are present for a period of inflation

and speculation, it does not seem to me that such a period is yet
upon us.

In the field of business and commodity prices there is no

evidence whatever of inflation or speculation.

Commodity prices

are hovering at the low points reached in the past month or two.
Business is continuing to recede in volume rather than increase.

The employment figures for December showed a decrease, as did also
the production of steel, carloadings and a number of other indexes.

The flood of return of currency and the decrease in bank loans since
the first of the year seems to me clearly to reflect reduced business
activity and continued caution in operations.

In the stock market

alone is there evidence of an expansion and there we have very far

from a runaway market, in spite of the pronounced efforts of many
speculators to create a bull market.

While stock prices are com-

paratively high, the street loan accounts are only moderately so,
particularly i

allowance is made for a seasonal increase at the be-

ginning of the rear.

It 07 my belief, therefore, that while the

situation clearly c7ontains a threat of serious inflation, the time

has not yet come to sell securities, particularly in view of the
limited amounts now held, but that we should rather continue to
acquire more as far as we can do so without making easier a market
already very easy.




192

WkAA-P.A43

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

192._

DATE
SUBJECT.

FROM

-2-

2,

The Program.

It seems to me wise to continue buying cer-

tificates and notes carefully as they are offered and as far as it
can be done without affecting the market.

The best opportunity for

purchasing would appear to be in the latter part of February and early
March, when spring needs of business begin to be felt and when there
is ordinarily some tightening in money rates, but some small quantities
might be purchased before that time.
Purchased Bills.

It seems clear that some arrangements

should be made by which the $300,000,000 of bills held by the system
should be subject to somewhat the same control as our

holdings of

certificates and notes, and that in general the policy should be followed of maintaining the bill portfolios at present, but letting them
diminish as they mature at times when certificates were being sold.
In order to accomplish this end it is clearly necessary to secure some
understanding between the Reserve Banks.
Earning Assets.

If the present movement toward reduction

of the earning assets of the system continues, it is clear that many
of the banks will be flat and unable to earn expenses.

This makes

more difficult an agreement as to purchased bills and raises the question as to a common policy in the whole matter of earnings.

Of course,

if a business boom should begin this difficulty would hardly arise.




FEDERAL RESERVE BANK

.3

0 CORRESPONDENCE
OFFICE

OF NEW YORK

TO

Mr. Jay

DATE

February 15,

SUBJECT:

W. R. Burgess

FROM

In accordance with Governor Strong's suggestion, -I have reviewed

with care the citations in Professor Bullock's letter from the Federal Reserve
Bulletin and our own Review.

I do not find any ground for differing from

Professor Bullock as to the statements made in these different articles.
I do not find in these quotations, however, what seems to me
adequate ground for asserting that we over-emphasized caution.

That was

done in the bulletin and our own review was to point out (1) that production
and trade were in exceptionally large volume in the spring of 1923; (2) that
large unused credit facilities existed; and (3) that the use of further amounts

of credit would be of doubtful value in stimulating a further increase in
industry and trade.

It seems to me that the outcome has demonstrated the wisdom of
exactly the action that was taken.

It is clear from the later decline in

'production and from the accumulation of stocks in a number of industries,
that production in certain lines, even as it was, had been somewhat overdone.

If there had not been a word of caution it seems entirely likely that production would have been much more overdone, that interest rates would have risen,

that we should have been forced to raise our discount rate, and that the
ultimate result would have been much less satisfactory than the present situation, in which the country appears to be in sound condition and perhaps ready
for an increase in industrial and business activity.




FEDERAL RESERVE BANK

,

OF NEW YORK

lar

OFFICE CORRESPONDENCE
To

192_

DATE
SUBJECT-

FROM

- 2 -

I have been interested to review the weekly letters of the Harvard
Economic Service, and they appear to me to offer a reasonable explanation of
Professor Bullock's feeling.

I find that in a number of the issues the

prediction is made quite definitely that production would continue at a high
level throughout 1923.

For .example, the weekly letter of March 31, 1923

contains the following sentence:

"We believe that the upward trend of business will continue
throughout the remainder of the year,"
and the letter for May 5, 1923 says:
"We forecast, therefore, the maintenance of a high level of
manufacturing output and business activity, accompanied by
firm or rising wholesale commodity prices and firm or rising
money rates for the remainder of 1923."
The Harvard Service was not alone in this prediction.

The decline

in business certainly occurred earlier than I had anticipated it and I think
Mr. Snyder would give similar testimony.
it becomes necessary to find a reason.
in warnings against inflation.

Since the decline did take place
Professor Bullock finds a reason

The study of our indexes of the volume of

trade, which are now available, leads me to feel that the cause of the decline
.

is probably to be found more largely within industry itself.

In the spring

of the year we were probably having a certain amount of over-production.

Many industries were certainlY getting into a state where additional outkut
would only be made at the expense of a higher wage bill and decreased effic-




FEDERAL RESERVE BANK

OF NEW YORK

-#ICE CORRESPONDENCE

192_

DATE

To

SUBJECT:

0

FROM

3

iency, which cut down profits-.
was

in many cases at least

That is, I think the psychology of caution

based on the internal condition of industry as

well as on the generally cautious atmosphere, which there is no doubt we
helped to create.

Of course a good many had a hand in the little game of warning the
public and I am a little amused to notice that the Harvard Service commented
at the time we raised our discount rate to 4 1/2 that this was probably a
preliminary step to raising it to 5 per cent.

This is certainly a vigorous

type of warning, in view of what the educated public knows about the meaning.
of increases in our rates.

Of course the picture is not complete without

a discussion of our open market policy, but that is another story.

Broadly speaking, there has been rather general agreement among
economists that one of the,most useful contributions to business which &:ny-

body could make would be to help restrict the swings of the business cycle.

Our efforts, along with those of others, were precisely in that direction
and I think there would be general agreement that the result was good.

Its

most serious evil consequences was to ruin a number of predictions as to the
future course of business.




-

PIECED/Ft CY

8OVERia8 %try
FE
pOr..--TvE

MISC. 3.1-75M-9-13

BANK

bf'YORK

OFFICE CORRESPOND
To__

Governor Strong

DATE
SUBJECT:

March_ 14,

The. McNary-Baugen Bill

W. R. Burgess

FROM

-MAR 14

At Mr. Snyder's suggestion I have reviewed the McNary-Haugen bill
and the following comments supplement his memorandum.

The bill is a very clever attempt to create benevolent monopoly
price control in a field where coordinated action is more difficult than anywhere else.
trade,

It is a governmentally organized combination in restraint of

lt is frankly class legislation.

But aside from these theoretical

objections the most serious criticism of the bill appears to me to be found
in its probable results in practice.

Will it work?
I do not think the equalization scheme would work.

Suppose the

price of wheat were fixed by the Commission at $1.50 per bushel)and in order
to cover losses through sales abroad of the surplus the farmer was to receive
25 cents in scrip and the balance in cash.

This scrip would be of Blight and

Now if a trader offered a farmer $1.30 or $1.35 cash for his

doubtful value.

wheat, the deal would be to the advantage of both parties.

The farmer would

get more cash instead of scrip; the trader would save 15 or 20 cents a bushel
on his purchase.

It would be very hard to convince all the farmers of this

country that they could not sell their wheat or other products freely to the
best bidder.

If this happened on a large scale the receipts from the scrip

sold would be in much smaller quantity than the losses of the corporation from
foreign sales.

The corporation would shipwreck financially and the market

price of wheat would be considerably under the fixed price.




192_4

MK.3.1-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE. CORRESPONDENCE
To

192_

DATE
SUBJECT

FROM

-

2 -

This argument is simply to the effect that a regulation which makes

it illegal

freely to buy and sell commodities, particularly when the parties

to the transaction are the scattered and individualistic farmers, cannot be
enforced.

Effect on Production.

If the bill were passed the production of wheat and other products
in which an emergency was declared would immediately increase.

Instead of

an 800-million bushel crop we might well have a 1,000-million bushel crop, as
marginal land was brought into production by the prospect of higher prices.

This would create a larger surplus to be dumped in foreign markets; it would
lower the world price; and increase the losses of the corporation to be made
up by the sale of scrip.

In the course of a very few years the farmer mould

be paid so largely in scrip that the return on his wheat would be very close
to the present price.

The cost of living would have been increased without

the slightest gain to the farmer, and the condition for which a remedy was

sought would be even more aggravated, for the productive capacity in wheat
would be enlarged.

Effect on Foretni Relations.

The Republican National Platform for 1920 contains the following
sentence:

"We favor a liberal and generous foreign policy founded upon

definite moral and political principles, characterized by a clear understanding
Of and a firm adherence to our own rights, and unfailina rtqaect for_the_rights
of others."




It needs no argument to prove that the dumping of large

quantities

1011SCA.I,N-943

FEDERAL RESERVE BANK

0 OFFICE CORRESPONDENCE

OF NEW YORK
192__

DATE
SUBJECT:

To
FROM

3

of American wheat in foreign markets at an artificially reduced price is
not in keeping with respect for the rights of other nations.

There is

nothing which has been more vigorously resisted in this country than the
dumping of foreign products here.
Effect on Prices.

We have made a computation which shows that the proposed scheme,
if it could be put into effect, would bring the farm products index of the
Department of Labor up from 145 to 175 or thereabouts, (1913 . 100 per cent).

At this level the prices of farm products would be out of line with other
prices, due to the fact that certain farm products, such as cotton, are selling at unusually high prices.

Since farm products is one of the largest

elements in any price index, the Department of Labor index would be increased
from 151 to about 158 or 159.

This increase in the general price level would

carry in its train a whole series of effects which it is difficult to foresee.

There would be effects on the volume of bank credit, foreign exchange, money
in circulation, etc.

Once we start playing with such fundamental economic

factors as prices we set in motion a series of events
and unforeseen consequences.

which lead

to remote

We disturb the economic equilibrium and shake

public confidence.

Puttin

the Government in business.

4

The Export Commission and Corporation proposed by the bill have
powers and duties almost impossible to fulfill sucessfully.



They must sell

MISC. 3. I-75M-9-23

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

192_

DATE
SUBJECT

FROM

-4

abroad something like 500-million dollars' worth of farm products.

They

must estimate the export surplus and the probable selling price abroad
of all the commodities in which an emergency is declared to exist, and
they must make these estimates so precise that the corporation will come
out clear.

They also have the power to deal in foreign exchange, to

make loans, to maintain storage warehouses, facilities for transportation,
and facilities for processing commodities.

The executiv

to be responsible for these matters is to receive a salary of $10,000 a
year.

The administration which undertakes the burden of sponsoring a

corporation of this sort is undertaking a terrible responsibility.

It

is putting the Government in business with a vengeance.

with the Shipping Board, government control of railroads, etc., have demonstrated the desirability of the Government's keeping out of this type of
gigantic financial and business undertaking, unless the ends to be served
are clearly for the public good and the plan is clearly practicable.




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MIK. 4. 11,00M

%

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

DATE

August 18, 1924197

SUBJECT

W. R. Burgess

FROM

I have made the attached analysis of some of the outstanding
deficiencies of the latest Chase bulletin, so that we might have it available for any use which seemed wise.

att.




c'e

a,




ASSERTIONS WHICH ARE NOT IN ACCORDANCE WITH THE FACTS

"So far we have had no policy to meet the inflow of gold."

(Page 21).

The Federal Reserve System has had a definite policy, set forth in part in
the 1923 annual report of the Federal Reserve Board.

"Excessive Federal Reserve Bank earning assets due to a feekkag_ELILiepart of
the Federal Reserve authorities that they owe it to their stockholders to
earn expenses and dividends at all times."
(Page 3, also some tho
Pages 5, 6, 23, 24).
Program of open market purchases has been determined not as Mr. Anderson
states, but as stated in the annual report of the Federal Reserve Board for 1923, page
16, "That the time, manner, character, and volume of open market investments purchased

by Federal Reserve Banks be governed with primary regard to the accommodation of commerce and business and to the effect of such purchases or sales on the general credit
situation."

"Dividends of Federal Reserve Bank stock should be paid out of this surplus.
There appears to be nothing in the law to forbid this but there seems to be,
some doubt as to the legality of it in Federal Reserve circles."

Dividends have already been paid by the Reserve Banks for the first half year
with the knowledge that at least a part of the dividends will be paid out of surplus.

An opinion of the Attorney General rendered on April 27, 1922, settled the matter
definitely.

There is not the slightest doubt of legality in the minds of Federal Re-

serve officials.

Several statements dealing with the effect of open market operations.
"In the present state of declining trade, both incoming gold and Federal Reserve
Bank investments are reflected almost entirely in an increase of member bank
balances, with immediate and even violent effect upon the money market."
(Page 3).

,ths,Federal-Raserve Banks wo
arket_100.,tov-200-Tilli
doIIErg-,qtheir
lc
1 mone would dUappeairoverni t."
GaYernmeft secuAil.ki
Wage 4).

"If, for example, the Federal Reserve Banks should sell a hundred to two hundred
million dollars of Government securities, they would promptly cancel a large,
almost exactly equivalent amount of member bank reserves. They would have to
be paid out of the liquid assets of the other banks in the country, and this
would be primarily by checks drawn on the Federal Reserve Banks themselves.



2.

These checks would be cancelled with corresponding debits to member bank balances, and with a corresponding reduction in the total of member bank balances.
2% call money would disappear overnight." (Page 23).
"When a Federal Reserve Bank makes a loan or an investment, it makes payment therefor with its own liabilities, which liabilities are accepted as final payment
by other institutions leading to a net increase in the volume of funds in the
market."
From these quotations, it is clear that Mr. Anderson has an erroneous im-

pression

of the relation of the money market to the Federal Reserve System.

He appears

to imagine that the money market is divided into two water-tight compartments,

in one

of which the borrowings of member banks takes place in response to commercial needs,
while in the other, the open market operations of the System take place.

As matter of

fact, it is familiar to careful students of the money market and was set forth in the
latest annual report of the Federal Reserve Board that the open market and discount operations of the reserve banks cannot be separated.

If the Federal Reserve Banks were to

sell securities in the market there would usually be an equivalent increase in member
bank borrowings and no decline in the reserve deposits of member banks.

Similarly the

purchase of securities usually leads to a decline in the rediscounts of member bunks
but does not affect reserve deposits.

The fact is that the purchases of open market

holdings by the Federal Reserve System during the past year have not resulted in additions to the total volume of credit save to a very limited extent, but have simply
changed the form of part of the earning assets of the reserve banks from rediscounts
and bill holdings to holdings of Government paper, and the present total of earning
assets is near the lowest since 1917 and about 300

million

dollars lower than a year

ago.

This erroneous impression which Mr. Anderson has of the effects on the money
market of open market operations by the Federal Reserve Banks vitiates his entire presentation.

The whole matter was adequately set forth in the annual report of the Federal

Reserve Board in a why which makes Dr. Anderson's misinterpretation quite inexcusable.




3.

"Approximately 40% of the member bank balances, which constitute the primary
supply of funds in the money market, thus rest on the earning assets of the
Federal Reserve Banks." (Pages 4 and 5).
This leaves out of account altogether Federal Reserve notes and other curIn fact,

rency placed in circulation originally by borrowing at the Reserve Banks.

all currency in circulation rests on Reserve Bank earning assets just as much as do
the member bank reserves.

Earning assets are less than 12 per cent. of the reserves

plus currency in circulation.
"The added complication of excessive Federal Reserve Bank earning assets has created,
in conjunction with the gold, a very great artificial excess of reserve money."
(Page 9).

Mr. Anderson attempts to show the existence and size of this excess by comparing the amount of reserve credit available in 1917 with the present amount.

He asserts:

"From the standpoint of prices and volume of business activity, we needed at that time
(in April 1917) more money and bank credit than we need to-day even making allowance
for the growth of population."

This argument is supported by stating that the general

average of commodity prices was 19% higher in April 1917 than to-day while business
activity was very intense as against the present state of business slack.
It is quite erroneous to assume that wholesale commodity prices represent the
general price level and determine the need for bank credit.

While wholesale prices are

lower than they were in April 1917, wages are very much higher, rents are very much
higher, and the cost of living is higher.

A computation of the general price level

which takes into account wages and retail prices, as well as wholesale prices, indicates
that the price level is at present about 34 per cent. higher than in April 1917 and
therefore a much larger volume of bank reserves is required as a basis for the country's
business.

As a matter of record, the change in total available bank reserves, including

all money outside the Treasury and Federal Reserve Banks, and reserves of member banks
in the Federal Reserve Banks shows an increase of about 40 per cent.

The difference

between this increase and the increase in the general price level is easily accounted
for by the growth in the country's trade in the seven years since 1917.




There is no

4.

tremendous excess of reserves as Mr. Anderson imagines.
7.

"Certain English writers have for four years been expecting us to have a violent
boom and flare-up of commodity prices as a consequence of the gold which has
been coming to us. As their predictions have failed they have explained the
failure on the interesting but mythological theory that Federal Reserve Bank
policy has prevented the gold from having its normal effect. They are quite
mistaken in this. Federal Reserve policy has intensified the influence of the
(Page 7).
gold."
Mr. Anderson appears to forget in this passage, that the policy of purchasing

seturities in the open market, which he criticizes so severely, dates only from November
1923, whereas the English writers are concerned with the four year period.

Mr. Anderson

also forgets that when we take the four year period into consideration, the earning assets

of the Federal Reserve Banks have been reduced from nearly $3,500,000,000 to about
$800,000,000 and that this decrease has considerably more than offset the *1,500,000,000
in gold imports since the fall of 1920.

Even since November 1923, there has been a de-

crease in Federal Reserve earning assets amounting to *200,000,000 or nearly sufficient
to offset all of the gold imports since that date.

That has happened has been that member banks receiving gold imports have
utilized those imports directly to pay off their debts at the Reserve Banks and gold
utilized in this manner has been retired from circulation without any effect upon the
credit structure.

The retirement of rediscounts and advances at the Federal Reserve

Banks by this and other means has been more than sufficient to offset all the gold imports received.

This procedure may perhaps be ascribed to the mere existence of the

Federal Reserve System rather than to its policy, although it would have been possible
for the System to follow a policy which might have led to the use of new gold for credit
expansion rather than for paying off debts.

In any case, it is clear that the English

writers are nearer to the truth than is Mr. Anderson.

In the past month or two in New York City, the member banks have become substantially out of debt at the Reserve Bank and gold imports are being felt more directly
on the volume of credit.

If Mr. Anderson had limited his comments to this period, it

would be nearer to the truth but he makes his assertions in regard to the past four years.




5.

Aside from these actual errors in fact, it is perhaps worth noting what

Mr. Anderson suggests as the proper policy for the Federal Reserve Banks to pursue.
He says:

"There should be a drastic reversal of the open market policy of the Federal
Reserve Banks. Instead of buying Government securities or open market
paper when money is easy and rediscounts are falling off', they should sell
under such conditions; and instead of selling open market paper or Government securities when money is tight, they may sometimes be well advised to
buy under such conditions
lotting out slack and taking up slack." (Page 22).
If we apply this rule it means that the Federal Reserve Banks should endeavor
to make money easy at times when business is booming and speculation is running high,

but that they should endeavor to make money tight when business is in the doldrums and
requires encouragement.

Mr. Anderson consistently emphasizes the need for removing the

fluctuations in interest rates.

He pays no attention however, to the provision of the

Federal Reserve Act that discount rates and presumptively open market policy of the
Reserve Banks shall be determined with a view of accommodating commerce and business.

The Federal Reserve System has been following the policy that it was its duty, in accordance with the terms of the Act, to encourage business at times of depression but
to discourage excessive activity at periods of unwise expansion.

Mr. Anderson is greatly

concerned over the present easy money and yet he does not point out definitely what the
evils are.

Business does not seem to be injured materially by the present easy money

but is rather benefiting from it.

The easy money may have the effect of facilitating

a return of Sterling to par which* Mr. Anderson admits, is a necessary step toward the
recovery of the world.

In fact, there does not seem to be any real ground for Mr.

Anderson's great concern over the present ease in the money market.
It is also worth noting that if Mr. Anderson's suggestions were followed the

Reserve Banks would now have no portfolio of securities and would hence have no weapon
to combat on speculative expansion which might now arise as a result of gold imports.




RAL RESERVEARIA4

F

MX. 114M4-24

Jr

"OF NEW YORK

OFFICE CORRESPONDENCt
To

December 30,

_192.4

c-i,___Inventories and Forward

Governor Strong

FROM

DATE

W.R. Burgess

Buying, December 1924.

DEC 3 9 "'

The following paragraphs summarize our recent interviews on the status of inventories and forward buying:
Iron and Steel:

IronAge,

(Messrs. Koon and Smart)

Stocks in consumers hands were reduced to very small proportions by curtailed
buying during summer.
Recent buying has in general not covered needs beyond
the first quarter of 1925, and forward orders are still considerably below the
usual level.
No evidence of buying in excess of actual needs.
United Metals Selling Co.

(Anaconda Copper Co.) Mr.Welch.

Consumers are buying only for actual needs. In recent years they have not been
disposed to speculate in raw materials, due to sharp price changes.
Machine Tools:

Niles, Bement, Pond Co.

(Mr. Cornell)

Inquiries have increased, but actual contracts show no material expansion.
Cotton Goods:

Hunter Mfg. and Commission Co.

(Mr. Walcott)

Buyers have recently shown more disposition to cover requirements for a moderate distance ahead.
Mill buying of raw cotton probably equals that of a year
ago, but the amount still to be done is larger, as mills now face expanding
operations.
Wm. Iselin & Co.
(Mr. Cromwell)
Cotton goods are in a fairly good position, compared with other textiles, but
forward orders are still below the usual quantity for this time of year.
Woolens and Worsteds:

Wm. Iselin & Go.

(Mr. Cromwell)

Woolen mills are fairly well sold up, but worsted are still in difficulties.
Mills have bought raw wool only a short distance ahead, as supplies are considered adequate.
Silk Goods:

H.R. Mallinson & Co.

(Mr. H.R. Mallinson & Mr. Hanson)

Buyers are placing email but numerous
Staple silks have improved gradually.
Forward buying is not up
orders, which is favorable to continued good business.
Wm. Iselin & Go.
to normal.
(Mr. Cromwell)
Sales have improved considerably, but forward business is not up to normal and
Mills have not covered raw silk requirements very
it is still a buyers' market.
far ahead, as they feel supplies are adequate.




FEDERAL RESERVE BANK

MISC. 3. I-60M..1.21

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

W.R. Burgess

Inventories

SUBJECT: ___

and

1924

Forward

Buying,_DeOember 1924.
--

Knit Goods:

December 30,

2

Wm. Iselin & Co.

(Mr. Cromwell)

Current business fairly large, but retailers have placed not more than half their
season's requirements and re-ordering isdow.
Department Stores:

R.H. Macy & Co.

(Mr. Knauth,

Merchandise Control)

No perceptible change in department store policy, which is to maintain quick
No evidence of inadequate
turnover rather than speculate in inventories.
stocks in hands of wholesales or manufacturers, or of competition for goods.
Lord & Taylor.

(Mr. Shipley, Merchandise Mgr.)

In last few years, retail stores have been inclined to carry smaller stocks and
Mr. S. sees no probability of a change.
to maintain stronger cash position.
Goods in Storage - New York City:

N.Y. Fire Insurance Exchange

(Mr. Robb)

Total premium income on storage warehouse underwriting in New York City-in 1924
will run about same as last year, which was $45,000,000, compared with $39,000,000
Presin 1922, $38,000,000 in 1921, and $48,000,000 in 1920, the highest year.
ent factory capacity and rail efficiency make large inventories and large forward buying unnecessary.

**************

The tables on the following page summarize the principal available statistics relating to stocks and unfilled orders.
For reporting department stores in this district, outstanding orders and stocks on
hand have run throughout 1924 lower than in 1923, and have generally been
close to 1922.
The second table relating to the country at large shows
the facts for a wider range of commodities.
During 1924 unfilled orders
for iron and steel and building materials have run lower than last year,
although since July the discrepancy in iron and steel has become somewhat
less.
Commodity stocks in 45 lines have run higher than lest year and
have increased slightly since mid-summer, reflecting increases in raw and
manufactured commodities other than foodstuffs.




tAdS,C.

PEDERAL RESERVe SANK

S. 1-64M-1-1

OF' NEW YORK

OFFICE CORRESPONDENCE
Governor Strong

ro

Second District,

December 30,

_192,4,

Inventories and Forward

SUBJECT

Buying, December 1924.

W.R. Burgess

FROM

I.

DATE_

Department Stores
Average Monthly
Jan-Mar. !_12,E=Iefl July-Sept.

Outstanding Orders:
(In per cent. of total
purchases of previous

1922
1923
1924

year)

8.1

5.1
6.8

6.8

5.1

4
2

+2
t5

5

-fr

3

6.5

End of
Oct. Nov.
8.2

7.3
9.4
7.8

6.7
6.3

6.9
6.8

5.5

-1

-2

+- 1

-+ 8

4-14

0

0

Stocks on Hand:
1922
1923
1924

(Per cent. change from
previous year)
II.

United States

July 31, 1924
Index

(a)

% Change
from year
previous

Unfilled Orders:
(1920 ay. = 100)

Total, 8 commodities
Iron & Steel (1)
Building materials (2)
(b)

Stocks on Hand:
(1919 ay. = 100)

,iSeik1.4
7A,*--

Total, 45 commodities
Raw foodstuffs (3)
Raw materials for' manufacture (4)
Manufactured foodstuffs (5)
,

S.g,Manufactured commodities (6)

44

October 31, 1924
Index

- 35
- 47

31
96

43
34

-+ 30

138
154
130
87
164

-7

4--

% Change
from year
previous

-20
-23
-11

ufga'-/

131
153
95
89

161

2-4

+ 5
+ 6
+26
+15

4-

36

4-9
4-23
4-

17

Steel (U.S. Steel Corporation) locomotives, merchant pig iron, steel sheets (independent mills).
Maple and oak flooring, face and clay fire brick.
Sugar, wheat, corn, oats, eggs, poultry, fish, apples, coffee.
Cotton, cottonseed, flaxseed, rosin, turpentine, petroleum (crude), tin.
Meats, wheat flour, butter, cheese, rice.
Refined oils, cottonseed oil, cement, brick, flooring, lumber, enamelware, zinc,
pig iron, newsprint.




4

-1

FEDERAL RESERVE BANK

MISC.3.1.6°M-4.24

OF NEW YORK

L.eigFICE CORRESPONDENCE

DATE

itirTrTrie

January 1, 1925_192._

SUBJECT

W.

-ROM_

urgess

I am attaching a rough draft of a suggested expansion of the
last half of your biography contained in Miss 6leecker's letter to
Mr. Derby under date of December 9.

I think if you could dictate a few paragraphs about your experiences in .1907, including suggestions on the Aldrich plan, it would
be most appropriate.

Was there any citation in connection with the cross of the
Chevalier of the Legion of Honor?

If there is such a citation I .think

it would be appropriate to include it, as perhaps also any citation in
connection with the doctor's degree at Princeton.
Can I help you further with this?

c2%L

cZ

cJm

2L 44 zt,

Att.




7
4,10.--tA

*74"C'42:4--147'.
e

pieta,

S

A

FEDERAL RESERVE BANK
.GC.1-444

OF NEW YORK

F ICE CORRESPONDENCE
SUBJECT

_Governo: :trong

Febr1.4+,4 y 5,

DATE

_

W. R. Burgess
tOM

Here is another

draft of your bioL

National Cyclopedia of ,aerican Biography.




.hy for the

The chief point

bit is that section
here the study might be expanded u
I have dropped

plan.
dealing with your work on the ,Ildrich

a line to the editor
to

him

saying

that we hope to forward the material

before very long.-

I am sorry this

has

betn ao delayed.

getting our annual resort into

final

shape

We are juLA

and it hub

absorbed

most of our working time.
frum
You may be interested in the attached note
John

h13 :ii

.

you
King, although I suspect he has written

also.

_19e:

FEDERAL RESERVE BANK
OF

NEW YORK

CE CORRESPONDENCE

DATE_March 12, 1925.
SUBJECT:

Benj. Strong

My thought about the analysis of the latest McFadden Bill, and of our
policy in dealing with it, is roughly as follows:

A careful mathematical analysis should be made of the bill to
show what the effect will be upon reserves, etc.;
or deflationary,

whether it is inflationary

what classes of banks will be benefitted and what classes

hurt, if any, etc.

Then we should have a clear analysis made of the bill as to the

general effect upon the banking business of the country, and
A more particular statement as to its effect upon the Reserve
Banks, not only as to what they may be restricted in doing as a result, but upon
their policy generally, which would include, of course, consideration of gold
exports.

The above relates simply to the provisions of the bill.

But in

connection with this I want to send a. letter to Governor Crissinger suggesting

some sort of an approach to the public.
Some of our leading economists should be advised of the views we hold;
some of the best-newspaper men;

and certainly some of the bankers, including

level headed, responsible men who may be on the Executive Council of the American
Bankers Association.

And I should suppose a few members of Congress should be

made aware of just what the bill will do.

The entire Reserve Bank

organization

should be well posted and able to discuss it intelligently, so that they may
answer the inquiries of bankers and business people.

desirable to bring the matter to the attention of some of the country's business



And, f

FEDERAL RESERVE BANK

OF NEW YORK

,E CO.

SPO

ENCE

Dr. Burgess
"ROM

Benj. Strong

DATE_ March 12, 1925.
SUBJECT.

-2-

organizations, who might find very definite and specific grounds of objection.
should think such concerns as those who accept and deal in bills, and those who
issue bankers credits in connection with commercial transactions might be very
definitely interested.

All of this should be worked up merely as an outline for Governor
Crissinger, and, when it has been done, then we should ask for a decision as to

whether the Federal Reserve Board will deal with the matter thoroughly, or
whether some other means shall be undertaken.




I

FEDERAL RESERVE BANKIr

444

_

FFICE CORRESPONDENCE

662. Afr".

itt

To

Governor Strong

SUBJECT:

FROM

Mr. Snyder and Dr. Burgess

01

it

OF NEW YORK

ATE

March 13, 1925

192

Bill




_

The Effect of the New McFadden

As Mr. Harrison points out, it is impossible to calculate the
full effect of the proposed measure because, while it seems to abolish
the issue of Federal Reserve notes against gold or bankers/ acceptances, and
to restrict this practically to eligible paper, it does not repeal the provisions of Section 13 which make possible such an issue in another way, by
"working the pump."
As it stands, then, the only direct effect of the measure would
be the return of 40 per cent of the present Member Bank reserve deposits,
or about 865 millions, to the Member Banks.
As these banks now held, at the last combined statement, some 527
millions of cash, or "till money," presumptively this amount would be released for use by the banks, since the 40 per cent of reserves returned to
them as cash would be much above their present cash holdings.

Eventually the most profitable use of this released cash would be
to deposit it with the Federal Reserve banks for the basis of further loans,
or investments; so this would mean a net loss to the Federal Reserve System
of only about 339 millions of cash.
As the Reserve System would still have ample gold reserves against
note expansion, this would mean that the Member Banks could, at a maximum,
then expand their loans or investmentsLa, ?proximately ten times the amount
of bank cash released, or something 1VW;five billions of dollars, provided,
always, that the Member Banks were willing to rediscount sufficiently to secure
notes to supply the demand for currency created by this expansion of bank
As the ratio here is about five to one, an expansion of 5 billions
credit.
would require approximately 1 billion of added currency.
On the basis of no further rediscounting, the possible expansion
under these amendments would then be only about one-third this, or approximately a billion and a half of dollars.
Assuming, however, that the plain intent of the amendments, to restrict the issue of Reserve notes to the basis of eligible paper, would be
carried out by further necessary changes in the Act, the maximum amount of
Federal Reserve notes would then be cut down to 400 millions, requiring the
This, with the net
retirement of 1327 millions of Federal Reserve notes.
loss of 339 millions in reserves, would bring the total loss of gold to the
System up to about 1666 millions.

As the required reserves on what would be left of notes and reserve
deposits would then be only about 615 millions, this would still leave nearly
600 millions for a basis of expansion as indicated above.
In other words, on any interpretation it would be a highly inflationary measure.

'c
I

tva

(3j.1(.);A0E

7.7-1/\\

c sza




=
r GI-OGISIAL. 1,G.Gr% V C. 011111M 1

OF NEW YORK

1

.CE CORRESPONDENCE

DATE-

Governor Strong
FROM




Mr. Snyder and_DrBurgesa_

March 13, 1925

...,ECT_The_EfffIct of_the New McFadden
2

Bill

For the purpose of clearness or simplicity the calculations may
be set forth as follows:
March 4

Present note issue
Total discounts
To be retired

1727 millions

Present Member Bank reserves
Reduced by 40 per cent
Leaving

2166
866
1300

Present gold in System
Less notes
Reserves
Leaving

2860

tt

2192
668

"

400
1327

1327 millions
"
865

Required gold reserves
40% on 400 million notes 160 mil.
dep.
455 "
35% on 1300 n
Leaving free gold
Present cash in Member Banks
Eventual free gold in System

615
53
527
580

"

4

tECEIVED

3OVER1\10 ITS OFFICE

!Iv?i 1925 3
=




FtUtRAL XtbLAIV, LIAM(
OF NEW YORK

OFFICE CORRESPONDENCE
To

MisS M. S. Bleecker

DATE

May 5, 1925.

SUBJECT:

W. R. Burgess

FROM

The only change in the new edition of the First Ten Years is
the addition of pictures.
out some time ago.
annual report.

Att.




.

I am attaching also a release which we gave

I wonder if he has been sent a

copy of our latest

.0

C.

'Er 1

FEDERAL RESERVE BANK

4. I-200M-7-24

OF NEW YORK

OFFICE CORRESPONDENCE
Miss Bleecker

DATE

June 15,

SUBJECT:

W. R. Burgtoil

ROM

3uggest the following reports to be sent to Governor
Strong during his absence:




Daily letter to the Federal Reserve7:Board
45.

Weekly 3usinese and Financial Summary
Weekly-gold report
MonthIy Review

i.eport of open mexket committee

192_5-

mtsc. S. t-soN-I-25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
-,ro

Governor Strong

DATE

July :3, 192.5-M

SUBJECT

W. R. Burgess

FROM

I think the notes and reports which the other officers are sending
cover practically everything of interest, except perhaps the money market.

Last Monday call money went to 6 per cent for a short time and
rates, as shown by our daily letter, continued high during the week.
appear to be two principal explanations for this high money:

There

The first was

wire transfers, indicated not only by our wire figures, but also by a decrease
of about 80 million between June 15 and July 1 in the street loans of out-oftown banks.

This movement appears to have been partly the natural backwash

of funds after Treasury transfers to this district had created a vacuum elsewhere, but it is probably due in part also to an effort of out-of-town banks
to show a clean elate on June 30.

The second cause is currency withdrawals

for the holiday, which have amounted to more than 30 million in this district
alone.

The banks were well up on their reserves last night and are paying

us off in part today.

No purchases were made for the special investment account to meet
this tight money situation, since it was obviously a temporary movement and
reflected in considerable measure window dressing for the June 30 statement.
I think on the whole the influence of the brief period of tight money has

been beneficial as a kind of warning that there is not really any extra
money lying around loose.

Today's operations included a withdrawal of $585,000 Of gold bars
and coin for export to the new Mexican "Bank of Unico."




This follows a

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
-SO

Governor Strong

DATE

July 5,

SUBJECT:

W. R. Burgess

FROM

2 -shipment of approximately $1,000,000 to the same destination in June.

You

may recall that we had an inquiry suggesting total shipments of about $7,000,000
over a period of six months.

Mr. Jay and I have just returned from Chicago and Cleveland and we
fegard the trip as very much worth while, as I believe he is writing you.

worked over the A. B. A. Committee report with Ayres and I think it will be a
good one.




Mr. Crane is reported to be sailing on July 4.

(#2)
MISC. 3. IIOI-2M

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong

To
FROM

DATE

(Copy to Mr. Case)

July 10, 19254n_

SUBJECT

W._R._Burgess

This has been another quiet week and I think most of the special events
are being covered by memoranda from the various officers.

The money market has been what Mr. McGarrah would can comfortable, with
call money between 3 3/4 and 4 per cent, and
practically every day.

bank

reserves equal to requirements

The market has been losing through transfers for the past

two days and our loans to hew York City banks are well up to 100 million dollars.

Money has just gone to 4 1/2, reflecting some withdrawals to the interior, currency withdrawals, and a little averaging up.
is underlying firmness in

the

market.

It is perfectly

Short governments, for example, are not

well taken.

The stock market continues strong and street loans are at new high
points.

There is, however, a distinct undercurrent of belief that the turn is

not far off.

One report

is that pools

are having great difficulty in unloading

their stock because the public is more wary;

another report is that houses

find great difficulty in persuading their customers to unload.
are two phases of the same trouble.
Our business reports for June continue to indicate some lessening in

business

in certain lines, but in the main things are holding up well and better

trade in the fall is generally anticipated.
corner has been turned.

The steel people

Prices, at least, are somewhat firmer.

Mr. Sailer tells me that the Niagara Fire lease has been executed and
alterations are under way.

Also, that two prospective renters are considering

the sixth floor of this building, but that no new definite propositions have been
made anywhere.



misc. s. t-soit=1,5.

1#2

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong

July 10, 195-IS2_

SUBJECT:

W. R. Burgess

FROM

-2 Talley is replacing McKinney as Governor at Dallas and Colonel C. C.
Walsh, of San Angelo, Texas, has been appointed Federal Reserve Agent.

The Tribune man just called me up to say that your visit to Germany
to visit the Reichsbank with Governor Norman has just come out on the news slips.
It is evidently impossible to keep the movements of central bank officials quiet
at this stage of the world's history, and I wish, therefore, that we had told
the boys when you left; but it cannot be helped now and they will print a
thousand surmises.

I am, of course, telling them that this is your usual visit

to Europe which you have made

practically

every year.

Mr. Jay and I are working away on public relations matters,

preparing

at the moment a brief hand-book for easy reference on Federal Reserve matters.
I am enclosing a. copy of a speech which Mr. Traylor, of Chicago, is

giving tomorrow, in which we had a hand and to which wide circulation will be
given.

Willis is out with another diatribe, which makes him even more vulnerable.

Hot here and very damp.

Att.

WRB:R




(No. 3)

MISC. 3. I -75M -9 23

FEDERAL RESERVE BANK

OF NEW YORK

-OFFICE CORRESPONDENCE
To

Governor Strong

DATE_

July 17, 1925. 192_

SUBJECT:

W. R. Burgess

FROM_

Not many officers writing today, so I shall have to tell the story.
our

It has been a quiet week, with two outstanding exceptions,

work on public relations matters and a good deal of discussion of policy.
Mr. Jay is writing about the progress on the first of these.

A discussion about policy arose from Mr. Younz's discovery at the
executive committee meeting on Monday of the present level of street loans,

He had been under the impression that the

which he had not realized.

decrease which followed our action in February had been maintained and was
shocked to discover that it had not.

He suggested a report covering street

loans and related credit matters as bearing on any action which it might be
desirable for us to take.

I think his feeling was that the present level

of street loans indicated a dangerous situation, which might result in

break, and

occurred to him that it might be better to put on

it

pressure and to have some liquidation now rather than in the fall, when it
might interrupt the course of business and prove more serious.

We accordingly wired you (an afternoon when I was absent) and
prepared the attached report.

The report was reviewed carefully at the

officers' council meeting on Thursday morning and was read to the directors
Thursday afternoon.

There was unanimous agreement to the recommendations

made that no change in rates or open market operations was immediately
desirable.

The money market was turning easier about the time the cable was
sent to you.




After firm money on Monday heavy transfers came in and the

(No. 3)
FEDERAL RESERVE BANK

OF NEW YORK

t(4iiii"12C3 E
To

CORRESPONDENCE

DATE

Governor Strong
W. R.

FROM_

SuBJECT.

Burgess

-

2 -

movement was inward on Tuesday and Wednesday also.
and so far today.

July 17, 1925. 192.__

It split even yesterday

Money went off on Tuesday and reached 5 1/2 for

yesterday; it renewed and has maintained at 3 3/4s today.

a while

The banks have

been pretty well up in their reserves since Tuesday and are only borrowing
8 million so far today.

Federal funds are 3 to 3 1/4.

It is perfectly

clear that the stiffening of rates for the last week in June and the first

week in July was largely due to temporary causes and that we may anticipate
moderately easy money through most of August, with the exception of the

jet
August 1 period; that is, there is no indication/of any large or continuous
movement of funds to the interior.

The recent inflow here has more than

offset the transfers out, which occurredt/Efew weeks before.

There may be

some movement outward in the next few weeks, but I should doubt if it began
seriously until September.

We have been looking over the September 15 figures

&bit, as far as we can judge them from this distance, and it looks like very
close to an even break between receipts and payments for the period.
The news of your presence in Germany created some newspaper discussion,

but on the whole the boys handled it very quietly and sympathetically.

I

think the statement the Reichsbank gave out yesterday went very well and was
helpful.

I am enclosing a note which Wasson sent me,

which is water over the

dam now but indicates the newspaper man's reaction.

The Traylor speech is getting wide publicity and I think is serving
exactly the purpose you had in mind in discussing an article in an agricultural
paper on the Bank of England arrangement.




The Chicago bank gave it wide

(No. 3)
FEDERAL. RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

DATE_

Governor Strong

July 17, 1925.____192_

SUBJECT

r"-)

W. R. Burgess

FROM

circulation to farm periodicals.

-

3 -

The regular clippings will show you how the

New York papers handled it.

Reverting to the discussion of policy above, I am afraid my discussion

and the memorandum may give the impression that we are a little asleep at the
switch in watching the present stock market movement, whereas the situation is

being watched very closely, and I believe the feeling is that some sale will be
made from the special account whenever it seems most desirable.

It seems

pretty clear, however, from your cables and our reviews of the business situation,
that we want to avoid a raise in rate as long as possible and we do not want to
take action which will force such a raise on us.

I think what we do need is a

number of good statements from other sources pointing out the extent of the
present stock market movement.

Ayres has such an article in his last bulletin.

I wish that the street loan figures were public property just now, from this
point of view at least; I think they would have a restraining influence.
We are going to work on the little inquiry of your letter of July 7.

Encs.

ITRB:R




IVIPERAL pl onT

BANK
OF NEW 11RK

MISC. 3. 140M-1.14

OeFICE CORRESPONDt.NCE
Governor Strong

To

July 24, 19.25A92_

DATE
SUBJECT:

W. R. Burgess

FROM

We have received a letter from the Bank of France asking us to receive
and convert six million dollars of gold bars and to
Their letter and our cabled reply &reattached.

pay

the proceeds to Morgan's.

The gold is due to arrive next

Thursday, and we are considering buying it ourselves.
At the directors' meeting yesterday some time was spent in reporting
to the directors all of our foreign relationships and they were shown the attached
statement, summarizing the present status.
.Mason tells me that he and Parmalt presented the express rate case to
the Interstate Commerce Commission on Wednesday for about three hours.

In general,

they were favorably receiv&I and the Commission took the case under advisement.
Deputy Governor Peple of the Richmond bank has been here all week and
we have been going over with him the various proposals for public relations work,
agreed upon at the Chicago meeting.

As a result we have been gradually discover-

ing what can and what can not be done, with the time and ability at our disposal.
All of the banks have approved the new ratios of distribution for
acceptances and they are now in effect.
The money market is unusually firm for this time of year and month and
rates have been running up to 4 1/2 per cent frequently this week, in spite of the
fact that the banks were only slightly under in their reserves.

banks are

Tonight the

in to borroW fi.om us somewhere around 50 million dollars, although

there appears to have been an ample supply of funds in the street.,

It looks to

me as if vacations and golf were interfering somewhat with the maintenance of
narrow reserve margins.




There were, however, heavy transfers out late in the day.

(No. 3)
FEDERAL RESERVE BANK

MISC. 3. I-60M-1-24

OF NEW YORK

DATE..

-C)1=FICE CORRESPONDENCE
To

Governor Strong

24, 1925_p 192_

SUBJECT.

W. R. Burgess

FROM

-

2 -

There continues to be general anticipation of firmer money in the fall,
together with more active trade.

We hear differing reports about the Australian loan.

Kenzel gets

the impression that the distribution has gone well, but from other sources

comes the report that it is a bit sticky and likely to slump when the peg
is removed.

There appears to be some belief that it was written with a

'little too low a rate.

Rather a disconnected memorandum today, in the midst of many
interruptions.

Erica.




FEDERAL RESERVE BANK

MISC. 3.1,5111-943

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE July_bl, 1_925

192

SUBJECT:

W. R. Burgess

Mr. Jay and Mr. Harrison are writing about specific matters, and I
am enclosing also memoranda dealing with the case of one Pedro Merla, who came to
It
us with an introduction from Mr. Winn and has been going through the bank.
therefore remains for me only to report current "gossip."
He is a Mexican Congressman
Perhaps a further word about Sena'r Merla.
who is visiting this country to prepare legislation for the next Mexican Congress on
three topics:
Farm loan banks.
Oil.
kJ:mink of issue.

He has completed his investigations on the first two topics and has
His visit to us was preparatory to preparing legislegislation under preparation.
He is an intelligent young man,who
lation to establish a bank of issue in Mexico.
His negotiations in respect to credit relations
makes a very good impression.
between this bank and a new bank of issue are not, I suspect, to be taken very
While he was here in the bank we gave him an ample supply of information
seriously.
I think that there is nothing to be concerned about
"B" but no information "A".
with regard to his visit,but that it assists moderately and slightly towards the
establishment of a bank of issue in Mexico.
You will be interested in the attached clippings from the Dow-Jones
news tieker of yesterday, together with a clipping from the New York Tribune of
this morning, which we inspired,, with the idea that it w4A better to anticipate
About the only way to prevent misfuture stories about your movements in Europe.
leading and harmful dispatches seems to be to give out carefully prepared statements such as you arranged in Berlin.
Mr. Sailer tells 'me that July expenses of the bank are likely to
total $532,000, as compared with a budget of $562,000, $540,000 in July, 1924, and
The salaries of a number of our people on three months
$544,000 in June, 1925.
"departure salary" have lapsed.

I lunched, this noon, with Professor Haney of New York University, who
is acting for the Program Committee of the American Economic Association in the
We discussed the program for the Federal reserve
absence abroad of Allyn Young.
Reed, who
meeting to be held in connection with the annual December meetings.
wrote the book on Federal reserve policy, has already been secured as one speaker.
Mr. Mitchell, of the City Bank, has declined to speak - reason not specified.
Professor Haney is going to try to get George Roberts of the City Bank, and we disIt seems to me
cuseed,also,having the discussion led by Allyn Young and Stewart.
that we ought to have one Federal reserve person on the program and that Stewart is
If Mr. Roberts refuses, as he may after Mr. Mitchell's refusal,
the logical one.
we have talked of Mr. Alexander, of the Bank of Commerce, Carter Glass, and
Melvin Trailor.
It seemed to us that two speeches, with two discussions and



5. 1-75M-9-23

\

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

July 31, 1925.

192_

Governor Strong
SUBJECT:

FROM

W. A, Burgees_

2.

Have you any
probably discussion cut off at that point, would make a good meeting.
We may have to go ahead before there is an opportunity to act on anysuggestions?
thing you suggest, but the chances are that it will drag along for some weeks.
As to money conditions: money weakened a bit yesterday to 3 3/4% for a
few hoursAfollowing a considerable flow of funds to New York for two days previous.
The enclosed sheet shows that things are tighter to-day and, I suspect, are likely
to continue so well over the first of the month.

One begins to hear, on a good many hands, of a spreading feeling of caution
I have just been talking with GarrQtt, financial editor
as to the stock market.
of the Evening Post, and he is going to talk caution in his Saturday edition, as I
You will note by the clippings that Dow-Jones
think Franz Schneider will, also.
has made another estimate of brokers loans, this time not quite so bad as on the
We have taken particular pains in our eview going through to-day
last occasion.
to point out the position of loans on stocks and bonds, and I think perhaps they
Their fluctuations, after all, reoffer a way out of some of our difficulties.
flect rather closely the changes in brokers loans, and they have long been a matter
of public knowledge., What I have been hoping, and I think it will happen, is that
the security market will ease off by its own weight, which will leave us in a position
to have freer regard to the international money situation.
It has been the unanimous opinion of the officers, in cabling you with
regard to the situation here, that we do not need to be seriously concerned at
This belief seemed to me to be based on
present about the stock market situation.
two factors: one, the hope just mentioned above,that any abnormalities in the
present situation would correct themselves; and, two, the feeling that present
prices and volume of loans are not seriously abnormal.

On the other hand; it has, I think, been the feeling of the officers that
if this stock market should coast along until early fall without any decline, and
if there should be added to it a considerable increase in business activity, together
with an increase in open market money rates, it would then be difficult for us to
avoid an increase in our rate.

Ends.




yr^

FEDERAL RESERVE BANK

3. 1-10N-1-23

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Strong

August 7, 1925;91_

SUBJECT:

W. K. Buigess

FROM

We are enclosing as complete as possible a set of clippings concerning the Bank of England change of rate.

It seems to me tha

the change was very good here, the major emphasis being on the achievement of
the British in gaining a technical position which made such a change possible
It

within a little more than three months of the resumption of gold payment.

is too early to get any indication of the actual effect, if any, on the New
York market.

I think possibly the most important effect will be the encourage-

ment to trade and financial activity from the inference which many have drawn
that the lowering of the Bank of England rate means that ours will stay put.
The stock market

seems to be strong today thus far.

I am sending along also today the material requested in your letter
of July 7 to Mr. Jay, having to do with the balance of international payments,
and including also a memorandum from Mr. Snyder on the general subject.
Miss Rose is largely responsible for the compilation of the data, which I
think you will find in good order.

We have appended complete supporting

tables in each case, so that you can have somebody work out the detail at

any point which you desire, although I suspect that all you want is a summary
on each point.

My own feeling on this whole problem is that the discussion of the
problem in the past has underestimated the importance of new financing.

I

suspect that in the past, before the war, England could never in any one year
have actually collected all the interest or principal due her.

What she

_actually did was accept equities in foreign countries, in lieu of interest




S. IIOl-Z5

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
-0

IS2_

DATE
SUBJECT:

FROM

-2payments and payments on principal.
further pledge of collateral.

She really took another I. 0. U. with a

And I suspect that the ability of European

countries to pay the United States interest and principal in the future depends
upon our willingness to accept further obligations of those countries.

From

this point of view there is little practical limitation to the amount which
Europe can pay us each year.

The limitation is largely psychological and has

to do with the extent to which we will accept European securities.

And this

,involves a curious paradox; our willingness to accept European securities de-ends in no small measure upon our judgment as to whether or not they can pay.
Mr. Jay got away Saturday and is planning to be back September 3rd.
Case is back looking very well and full of pep.

Ws are continuing to spend an enormous amount of time on public reltions work and we are getting a good deal of favorable publicity.

You will

)ubtless notice among the clippings a number of quotations from Melvin Traylor,
Id the Periodical heview reports a couple of bits.

You

the attached release on acceptances, which we prepared and which I think will
have a good circulation.
We are working away at material for the inquiry.

Nothing

unusual in the money market.

Conditions are firm as usual

over the first of the month, with call rates running between 4 1/4 and 4 1/2,
and the New York City banks borrowing from 100 to 150 million.

There is no

indication as yet of any considerable transfer of funds to the interior beyond
the usual monthly movement.

Encs.
http://fraser.stlouisfed.org/
WRB:R
Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANK

OF NEW YORK
August 14, 1925.

Dear Governor Strong:

Mr. Case, Mr. Harrison, and Mr. Sailer are all writing today and
there is little to add.

I have received your letters of August 1 and am glad to be able to
have such a good basis for discussing your absence with the newspaper men.
As it happens, however, we have been able to avoid any real difficulty on the
subject.

I have talked pretty frankly with most of them along very much the

same line as your letter suggests, and they have all been very decent about
handling any news that came through.

Wasson himself is abroad at the present

time and he may look you up somewhere there.
I think your thought of giving the boys a statement when you return
is excellent.

I think on the whole it would be safer, and in the interest of

maintaining cordial relations, to give such a statement to the Wall Street
men rather than to the men who meet the steamers, if it is possible to dodge
the steamer men, or put them off with some very brief statement to the effect
that you found European conditions generally better than on your last trip
and that the trip was simply your usual visit to correspondent banks, combined
with a holiday, and of no special significance.

I will find out a little more

about how this can best be handled and write you further.
AS to the money market, there is very little change in the position.

The street loan account continues to edge up a little every week or two, but




FEDERAL RESERVE BANK OF NEW YORK

2

Governor Strong,
Biarritz, France.

August 14, 1925.

)

K.)

the total increase since you left has been only about 60 million.

The stock

market averages are acting about the same way, withomAsamiralternate rises and
recessions, and the averages are now only a few points higher than when you
left.

There is still no considerable commercial demand for loans, although

the last Federal Reserve statement gives some indication of a slight increase
in the demand for currency.
I am leaving tonight for a holiday, which I shall spend at Highlands,
and shall be within easy calling distance if anything arises here.

Gidney

will take care of affairs in the agent's function until Mr. Jay returns the
first of September.

There is going to be too much boiling here in September

for me to delay vacation until then, with any hope of getting any.

Mr. Case,

with Mr. Roberts' help, will see to it that there is no break in the flow of
information to you.

I shall be back for a few days toward the end of the

month to help in getting out the Monthly Review.
Sincerely yours,

W. Randolph Burgess

Benjamin Strong, Esq.,
Biarritz,
Fr-taco.




?OFF

E

SERVICE DIVISIO.

E SLIP
DATE

MES,SX_NCIER SECTION

September 19,

1114
DEPARTMENT
i.iDIVISION

PO- -CU-- e..-A-4117,

kForcs
c

- FROM
N. B.

SECTION

1 undertaa$I4,r are sendiru the D.E.
the otkottv RBs, the photogrtph
ticl the report on certmint tests.
A. 6. 'tileecker
...

A.

12,i/2s-------

USE TH,S FORM INSTEAD 0, OFFICE ENVELOPE WHEN POSSIBLE,

DEPARTMENT

DIVISION
SECTION

it

TO INSURE PROMPT SD 1,..S.C3, TF t DELIVERY ALL COMMUNICATIONS SHOUL,D El-DISTINCTLY LABELED




4111

FEDERAL RESERVE BANK

MISC. 3. 1.1011-1-25

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

V

DATE

October 8, 1925 tn._

SUBJECT

FL Burgess

suggel3t that the group of economipts to meet Dr. 6chacht be

ma e up br. follow:




H. A. E. GILA:Idler,
BLI-Ic of Commerce

David Friday,

54? Tn,nsportation Building,
13 Street N. W.,
H
Vashiugton, D. C.

George Roberts,

N-timil City Bgnk

Tesle7 C. Mitchell
Bureau of Economic Research,

181 wet 12 Street, New Iork
V:...lter W. Stewart,

Federal neserve Board
O. M. W. Sprague,

Hrvard University

Edwin h. k. Seligman,

34 Test 66 Street, New York

Allyn Young,

Harvard University

laien D. Young,
General Electric Company

Lerrd F.
-,;:evelamd Trust Company

Jaoob Hollnder,
180

Eutaw Place,
Baltimore, MaryL,nd

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Governor Ctrong

October 8, 1921. 22_

SUBJECT:

FROM

For the group of journalists I think the folleyxing should
probably be included:
D. Noyes,
Ne

York Times

Geoffrey Faroons,
New York Herld Tribune
VM.ter Lippmann,
Net

VorId-

Fr!inz Schneider,
Ne;.. York Sun

B. C. Forbes,

Ne,- York ,,merican

Kent Cooper,

.,ssocited Press

I. F. Hamilton,

rall

'..1-treet Journal

Paul T. G&rrett,
Ne

INPB:R




York Evening Post

tEL-mdo:.'10




ueda gravoilot elLt licit& I alabAilluot
,

.a
eaii4TIfaa
004,D=1i Itea110e0

eaudi-IT LITilti 51ot 7e1
anam 14 ti 1 sJ
1.;.

'

1-om lio/ Aol
1aebtenif3?,
atJa ..1.101- =Yon
12wd-iol

a.,.....3.1-tosp, *ma 'el
tri*X

ttio.ii
kt.ersuot .15011-L.

1.

0.1,3114;C,

wif..nava

cif

,velit

As.s.

ed




FEDERAL RESERVE

MISC. 4. 1-200M-7-24

OF NEW YORK

OFFICE CORR SPONDENCE
T6)

Governor

DATE

192-5.

December_Pl,

SUBJECT:

Burgess

FROM

'v:e have a pretty complete file on all foreign loans, which we have

made up by clipping the advertisements from the papers.

These advertisements

usually contain nearly all the information which appears in the prospectuses,
but we are now making arrangements to secure the prospectuses as well as the
newspaper advertisements, so that our file may be complete in every detail.

VJRB:R

ik 0-6 htt/0

FEDERAL RESERVE SANK

OF NEW YORK
April 50, 1926.

Dear Governor Strong:

I have been over the list of things that Miss Bleecker is sending and
it seems to be pretty complete.

You may note that we are now carrying in the

Business Summary a table which gives the aggregate figures, by weeks, for the
gains and losses to the market as we report them on our hourly reports.

Mr. Harrison is covering the gold movement to Canada and the progress
of affairs in Washington.

My trip to Washington was postponed because of

Mr. Miller's continued testimony, and I have no word as to when I am to go.

The most obvious result of our change in rate has been a stimulation
of a redistribution of borrowing at the Reserve Banks.

Transfers to the in-

terior since the rate change have totaled something like 050,000,000, and
Wednesday's statement shows that discounts at Reserve Banks other than New
York were reduced $45 000 000

in the week, whereas our own discounts

were increased by about $75,000,000; and this afternoon the banks are taking
$57,000 000 more from us; to offset a very heavy movement of funds to the
interior, together with currency payments and gold withdrawals.

Tonight

the hew lork City banks owe us $148,000,000, but are well over in their
reserves and will undoubtedly come down some 50 or 40 million tomorrow.

Clearly, if the other banks hold their rates a redistribution of this sort
is logical, although of course it is accentuated at this time by the usual
end of the month transfers.




FEDERAL RESERVE BANK OF NEW YORK

2

Governor Strong

April 30, 1926.

I think it is now clear that the rate change has been generally well

As you will see by the clippings Miss Bleecker is sending, the news-

received.

papers were most of them favorable, although the Chronicle took its usual crack
at us.

The directors reported yesterday that the comments they had heard were

largely favorable, although Mr. Reynolds reported that he had heard three types
of comments from bankers immediately after the rate was changed.

The first

comment was to the effect that the change was foolishness; the second that it
was ---- foolishness, and the third that it was .---- ---- foolishness.

I lunched today with the statisticians and economists and their
testimony from various industries bore out what our own figures are showing,

that business is continuing at a remarkably high level and that there has been
as yet no real cessation.

Retail sales of automobiles for 17arch for all makes

of cars in 27 states were 20 per cent ahead of last March's.
cent ahead and General Motors 50 per cent ahead.

Ford was 3 per

The sales in April thus far

are at almost the same tremendous pace end there is little indication of a letup.
New building projects for the first 20 days of April are running well
ahead of last year and at very nearly the pace of March.

The steel plants appear to be again increasing their volume of operations, with better orders from the building and automobile industries.

There

are more blast furnaces coming in.

All of this in the face of some continued price weakness; prices of
scrap iron are still going off and lumber prices are off a bit.

clusion of the group appeared to be, however, that the downward movement in
business is likely to be postponed for a few months, and probably until summer.

Mr. Curtiss cane in yesterday and is opposed to a change in the Boston
rate at this time, which a number here thought was a wise position to take.




FEDERAL RESERVE BANK OF NEW YORK

5

Governor Strong

April 300 1926.

The Federal Reserve Board has approved the appointment of the Czecho-

C7

Slovakia National Bank as correspondent.

Our board yesterday approved Mr. Jefferson's leave of absence in the
fall.

I am attaching herewith a letter received from Governor Crissinger

concerning

the Belgium matter, and also a letter and memorandum which Mr. Case

sent Governor Crissinger in order that he may talk intelligently about our rate
change in case he is called before the House committee.

By the time you get this letter you

and your

economic confreres will,

I suppose, have settled the Indian currency question, and I suppose congratulations are now in order.

We shall be much interested in hearing the story

when the experts return.




Very truly yours,

FEDERAL RESERVE BANK

OF NEW YORK
May 7, 1926.

Dear Governor Strong:

I am just back from Washington after spending Tuesday, Wednesday
and Thursday there, and appearing before the committee a half day on each
of those days.

The discussion of the Haugen Agricultural Bill for boosting

prices of agricultural products was going on and the committee only held one
session a day, except on Wednesday, when their morning session was devoted
to hearing Major J. R. Bellerby, whom you may remember as a visitor at the
bank about a year ago while he was working for the International Labor Office.

Bellerby had been well coached up by Sprague and did a very good
job in pointing out the importance of international matters in the determination of our policy.

Bank of England.

He paid a very high tribute to our arrangement with the
The only point in his testimony which might possibly lead

to difficulty is his emphasis on the desirability of an international monetary
conference, but he qualified his recommendation in that regard by saying that
the same result might be produced by informal means and that in any event the
time was not yet ripe for suCh a conference.

He suggested as an alternative

for the Strong bill the insertion in the preamble to the act of "to maintain

the gold standard and the value of gold and to promote business stability."
This is Sprague's suggestion, but with some slight modification.
I talked mostly about the money market and our relation to it, in-

cluding a careful description of the methods by which we follow developments
in the market.




I also got into the record a statement of factors considered

FE.DERAL RESERVE BANK OF NEW YORK

2

Governor Strong

May 7, 1926.

in making rate changes at their request.

o

There had thus far

forward statement of that sort put into the record and I think it makes a good
antidote to the emphasis on prices alone.

I also suggested that the danger of an automatic adjustment of complicated economic matters, such as the price stabilizers have in mind, is
perhaps illustrated by some of the difficulties arising from the British plan
of adjusting wages by prices, and I showed them charts of wages and prices in
this country and Great Britain.

They seemed to be much interested in these things and seemed very
The only point at which there was any serious question was on re-

friendly.

purchase agreements.

Both Mr. Wing° and Mr. Goldsborough raised the question

as to the legality of these transactions.
Board for a statement

concerning

They are asking the Federal Reserve

the legality, as I think Mr. Harrison has

indicated, and they are asking us also to prepare a statement of the general
purposes to be served by the repurchase agreements.

In my discussion all I

attempted to do was to deal with the importance and necessity of our aiding
the dealers.

After the discussion was over Mr. Wingo told me privately that

he now felt convinced that we were on sound legal ground, although he wonders
whether it would not be well to have somewhat more specific authorization
written into the act so that there would be no doubt.

The committee would like to have this full statement on the repurchase
agreements placed in their hands, with sufficient copies, so that each member
of the committee could study it and then have another session on it.

They

have suggested my coming back for that and other matters with Mr. Harrison.
Governor Crissinger has already called on Mr. Harrison for the preparation af
the legal memorandum.




FE5ERAL RESERVE BANK OF NEW YORK

Governor Strong

5

May 7,

1926.

It was clear to me that the committee had been hearing outside
criticism of our arrangements with dealers and this gives us a chance to
Oa^

bring the whole thing out into the open and finish it off.
As you will see from Miller's testimony, he made three principal
recommendations:

That the Reserve Banks be given in some way greater control over
A
speculation.
That the office of Federal Reserve Agent and Chairman be separated
and the Agent's job held by a lesser person.
That open market operations be conducted under the orders of the
Federal Reserve Board.
I gathered from a number of comments that the committee was not
greatly impressed by these recommendations and recognizes that they are simply
an attempt to extend the power of the Reserve Board, which does not meet with
their favor.

esterday the committee adjourned until next
)1(*19-4-11-ftehingtmc

week without any definite plans, although I rather gathered it was their inten-

tion to keep this hearing going pretty vigorously for some time, and McFadden
suggested to Goldenweiser that he might call each member of the Federal Reserve
Board and Goldenweiser himself.

Goldenweiser tells me that Hamlin in par-

ticular is making careful preparation.

Money conditions here remain about as they were last week, with the
bew Xork banks owing us well over 100 million dollars and the bill dealers in
for about 40 million, SD that money is firm at 4 per cent, and there is still
a tendency for funds to move to the interior.
the first of the month.

Part of this may be blamed on

It, of course, raises the question as to whether we

ought to make further purchases in the open market, but I do not think it would




FEDER/kg. RESERVE BANK OF NEW YORK

4

May 7, 1926.

Governor Strong

be a good idea until there is a little more indication of less active business.
There is no such indication at present.

Street loans increased over 150 million dollars between the time you
sailed until the first of May, largely due to increases for the account of the
New York banks, but they have gone down 100 million since May 1 and are now
only a little over 50 million above the lowest point, so there is nothing to
worry about there.

Mr. Sailer is back looking very well.
Mr. Jay is in Chicago making a speech before the Industrial Club.
Mr. Case is leaving tonidat for a week.
Very truly yours,

e24A--pa-o--sf,

Mr. Benjamin Strong,
C/0 Bank of England,
London, England.




41,

FEDERAL RESERVE BANK

OF NEW YORK
May 14, 1926.

Dear Governor Strong:

Perhaps the most interesting event of the past few days has been
the passage by the Senate, without a division, of the McFadden Bill, as
amended.

Prior to the passage an attempt was made to restore the Hull

amendment, but was defeated by a vote of 60 to 17.

An account of all this

is given in some of the enclosed clippings, together with some vigorous
remarks made by Mr. Glass on the subject of the Hull amendment and the
position taken by the American Bankers Association.

There are various

opinions about what will happen to the McFadden Bill in conference, but
nobody of course

knows.

I am enclosing copy of a letter which I have received from
Bellerby which reports his activities in regard to the Strong Bill.

On

reflection I do not think I like Bellerby's inclusion of the phrase "value
of gold" in his proposed text "to maintain the gold standard and the value
of gold and to promote business stability."
original form is better.

It seems to me Sprague's

However, I suspect the committee is ready to

follow the form that you may want to suggest, if any.

Harrison

is now in

Washington conferring with the Board on the

memorandum concerning repurchase agreements and he telephones today that
he has arranged that the whole memorandum, legal and otherwise, will be
prepared here and submitted to the committee through the Federal Reserve
Board.




This makes it possible to make a single finished job of it and is

FEDERAL RESERVE BANK OF NEW YORK

2

May 14, 1926.

Governor Strong

much more satisfactory than preparing two memoranda on different phases of the
matter.

Mr. Alexander attended our directors' meeting yesterday to discuss the
program for the Advisory Council meeting next Friday.

The council proposes

to meet on Thursday for a day preliminary to the meeting with the Board on
Friday in order to decide on what they want to discuss with the Board.

Mr. Wetmore will be in New York on Monday for a discussion with Mr. Alexander
and perhaps with some of the officers here, and then will spend Tuesday and
Wednesday in Washington with

individual

members of the Board; all of which

indicates that the council proposes to make something of their work.

has invited the

council

Board has asked the

Dr.

Miller

to dinner on Thursday night. The questions which the

council

are more interesting and broader in scope than

usual and in addition the council itself has a number of questions.

It seems

clear that there will be some discussion on the relation between the Reserve
Banks and speculation, and

in particular

that Dr. Miller's suggestion that an

attempt should be made to limit the use of Federal Reserve
tive purposes will be discussed.

funds for

specula-

Mr. Alexander seems to be fully alive to

the difficulties of that problem.
Supplementing the cables on the matter of a possible credit to France,

Mr. Young, who

was not present when the matter was discussed on Monday, said

yesterday that he hoped he would never be called on to vote for the extension
of credit to any country until it had a sound plan for monetary stabilization.
This is similar to views expressed by other directors, which support

your

own position without any qualification.

It was thought by a good many here that the conclusion of the British
general strike would be followed by some recovery in the stock market, but
this has not proved to be the case.




dull

and trading is
The market is very

FEDEFrAL RESERVE BANK OF NEW YORK

Governor Strong

running less than a million shares a day.

Money has been 3 1/2 per cent to

4 per cent all week and moderately firm.

The New York City banks have been

in debt between 75 and 100 million dollaxs.

The bill dealers have had

larger portfolios than at almost any time in the past, due to the fact that
over the first of May the banks dumped a great many bills to adjust their
position.

The bill dealers now owe us more than 60 million dollars.

afternoon the l'ew iork City banks came

in for

This

about 41 million dollars and

owe us tonight nearly 130 million dollars; but they can pay off at least 40
million tomorrow and still have their reserves in good shape.

The fact seems to me to be that there has been no liquidation
throughout the country outside of the liquidation in street loans, and that
liquidation has been partly offset by some increase in commercial borrowint
and some further demand for currency.

The consequence is that the country

needs nearly as much Reserve Bank money now as it has at any time in recent
months.

On top of this there has been some shifting of borrowing from other

centers to New iork because of our change

in

rate.

Wednesday's report shows

that total bills discounted outside of the New York district were only 369
million dollars.

Funds have been moving toward New York in moderate amount

this week, but not enough to offset several previous weeks of outward move-

ment, and today the movement was outward again, as shown by the three-thirty
money sheet I am enclosing.

I em also putting in a table summarizing the

status of the street loan account, which as you see is now very close to the
low point of April 15.

There is every indication of continued business activity on a large
scale.

Although I believe that a break is coming, it is certainly a long

time on the way, and there is still a chance that industry may get itself
into bad shape, with large inventories and overproduction, before the




" FEEI.Eg-AL RESERVE BANK OF NEW YORK

4

Governor Strong

May 14, 1926.

0
recession appears.

0

I do not see anything in the present situation, however,

to give alarm.

Mr. Jay reports a good trip to Chicago and to St. Louis.

He found

a good deal of misunderstanding in both places as to our rate changepand talked
to some of the Reserve Bank officers and a small group of the St. Louis bankers
concerning some of the major factors of the background and found these gentlemen very sympathetic as they understood more of the circumstances.

We are all delighted at the result of the Indian hearings and are
anxious to hear the details.
Very truly yours,

Mr. Benjamin Strong,
C/o Bank of England,
London, England.

En es.




f

Copy of letter from Mr. Bellerby to Dr. Burgess, dated
May 8,

1926

63 Oxford Street,
Cambridge, Mass.
8 May 1926

My dear Dr. Burgess,

I am writing to remind you of your kind offer to get

me out of a hole in the matter of supplying (1) a list of countries
which had (a) resumed the gold standard (b) stabilised their exchange
rates with the dollar, (2) a copy of the Resolutions of the Genoa
Financial Commission.

It seemed to me that since these would need

to be included in an appendix together with other resolutions and
evidence I am submitting, it would be best if the items you promised

to supply might be sent direct to myself, so that I may place them
in their due order in relation to the other matter.

I could also,

in that way, insure due acknowledgment being paid to the source
of each document.

As regards the Genoa Financial Resolutions, it seems to me

that it would be well to publish the whole twelve, especially in view
of their being out of print now and nobody holding any responsibility
for their re-publication.

So, if you could send me the whole series

of twelve I should be most grateful.
I was sorry not to be able to stay to the end of your evidence
at Washington on Wednesday.

It was going exceedingly well when I

left you; and if your nerves were still continuing to cause you trouble,
that certainly was not evident to the outside observer.




You looked

- 2-

Li

as if you might have been doing that sort of thing every day of your
life; and what was said was most clear.
I saw Lombard on Wednesday night for 3 hours and also stayed
Thursday night and part of Friday with Irving Fisher, as a result of

which I think I have brought them round to the acceptance of the
Sprague test, to which they were initially very much opposed.

In-

cidentally, the whole subject of my visit was to consolidate the Sprague
test in the mind of the Committe, so as to rebutt all the other
suggestions which had been put forward.

Anything else I attempted

was mere clothing for the one purpose I had primarily in view.
Unless something very untoward happens I think the Sprague
tellt will become the future basis.

Though it may be little early

to speak now.

Please give my kindest regards to friend Snyder.
all good wishes to your self




Very sincerely yours,

(Signed) J. B. Bellerby

With

Misc. 3. 1-50M-R.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
TO

Governor_atrongReport s _Department

FROM

DATE

May 14

Confidential_Report_on Mold
Reserves and Foreign Accounts for

SUBJECT:

week ende.1

riay

Following a decline of $132,000,000 in the two previous
weeks, gold reserves of the New fork Reserve Bank recovered 432,000,000
in the week ended. May 12.
The principal gain was in a return flaw of
ordinary commercial and financial funds from the interior and there
were also small gains in Treasury transfers and Reserve Bank settlements
of acceptance transactions.
Currency and. coin receipts also exceeded
payments, notwithstanding the withdrawal of $5,000,000 gold for shipment
to Canada.
There was no change in earmarkings of gold for foreign
accounts, the total remaining at $53,000,000.
Free balances of foreign correspondents were reduced
$300,000 to $4,970,000 due largely to payments from the Reichsbank
account.
Holdings of bills declined. 4500,000 to $67,150,000, maturities
of $1,100,000 from the National Bank of Hungary account and $150,000
from the Reichsbank being only partly offset by additions of $500,000
to the Swiss National Bank of Zurich and. $250,000 to deNederlandsche
Bank account.
The proceeds of bill maturities from the account of the
National Bank of Hungary were invested. in Treasury securities and we
also purchased. 4750,000 of Treasury's for the Bank of England, so that
total security holdings advanced to 471,975,000, an amount about twice
as large as our custodies for foreign account at the beginning of the year.
This increase has been chiefly in the Bank of England account which
advanced 427,750,00G during the period.
May gold movements to date include exports of 8,000,000
to Canada and net exports of $240,000 through the Port of New York.
Gold exports from the United States in April aggregated $17,900,000 and
imports, $13,100,000, making a net export of 44,800,000 for the month of
April.




192_6_

STREET LOANS;

(Based on confidential daily reports from 41 New York City banks)

High point, Dacember 31,

1925 -

$2,962,000,000; 1926 low point, April 15,

-

$2,198,000,000.

Millions of Dollars

For own account
For correspondents
Total

Balances, Out-of-town
correspondents




Amount
May 13
905
1,326
2,231

690

C.Liag,211,
Previous day

+6

Week Ago
-32

-18
-12

+ 4
-28

+14

- 4

Feb.15,1926
-300
-414
-714

- 29

FEDERAL RESERVE BANK

OF NEW YORK
May 21, 1926.

Dear Governor Strong:

The most absorbing topics of conversation in the bank this week have
been the officers' golf tournament, the official status of the Bank Polski, and
the rescuing of the bill market.

The officers' golf tournament takes place

Sunday at Eddie Kenzel's course.

I think the attached schedule of the event

may amuse you.

Harrison is covering the Dank Polski, which leaves the bill

market to me.

Following our change in discount rate in April we made only a
moderate reduction in our bill buying rates, with the thought that that course
would encourage distribution at a time when the amount of drawings was diminishing.

Just prior to and following our change of rate the bill dealers put their

rates down, bringing 90-day bills to 3 1/8.

That happened

ing weeks bills began to pile up in the dealers' hands and distribution was very

_slow.

Dealers' portfolios rose to perhaps 120 million, the largest amount that

they have ever held.

The principal causes of this situation were, it seems to me, two:

first, that the dealers had pitched their rates a little too low, anticipating
easier money than actually occurred; and second, with our buying rates a bit
above the market banks were loath to take bills because they could not melt
them down except at a loss.

This was particularly true during a period when

they were borrowing substantially from us.

Of course, both of these causes

arise from the anticipation of an easier money market than has in fact developed.




FEDERAL RESERVE BANK OF NEW YORK

2

May 21, 1926.

Governor Strong

On last Monday the dealers raised all their rates 1,/8, except for

the short 1 to 30-day maturities, and we followed that up yesterday by bringing our rates down to the market.

into

These two changes have started the market

activity once more and it looks as though all difficulty would be corrected.

The New York City banks still owe us 100 million dollars, besides
60 million we are advancing on bills.

this

Money has gone to 4 1/2 per cent

afternoon, after remaining steady most of the week at 3 3/4; so there is no
immediate prospect of sloppy money, although money is available to meet every
genuine need.

We are still losing funds somewhat to the interior.

The June 15 Treasury financing is going to carry with it some interesting problems.

Mr. Case had a talk with Dewey this morning and finds

that the Treasury will be able to meet its maturities and interest payments
wholly from income tax receipts and the British debt payment, and without
using any of the balances now on deposit with member banks.

June 15 operation will probably leave the Treasury

with a

balance of 80 million

in the Reserve Banks by June 20, which we shall have to figure out a plan to
take care of without disturbing the market.

We have 36 mil

ties in the open market account which Mr. Case proposes to get authority to
replace, partly in advance of June 15.

We are selling 33 million from the

A. P. O. account to Morgan to use in the British payment, and we are buying
3rd's in replacement, so there is a bit of buying to do for the Treasury before
we

replace our maturities.
Business continues active, but with some further signs of an impend-

ing letup in the textiles and iron and steel.

Building contracts awarded

through April, and into May, continueiargely- above last year, although April
permits were a bit off.




et

FEDERAL RESERVE BANK OF NEW YORK

5

Governor Strong

April 21, 1926.

The stock market is feeble and street loans have reached a new low
point, 40 million under the lowest point in April and 800 million under the
high point on December 31.

The recent decreases have been largely in the

funds held for out-of-town correspondents.

We are looking for the Reserve Board examiner in the near future
and a set of rules governing our relations with him has been carefully drawn
up and all officers and chiefs thoroughly instructed as to
Very truly yours,

Mr. Benjamin Strong,
C/o Bank of England,
London, England.

Encs.




procedure.

May 7, 1926.
TO

FROM

J. H. Philbin, Secretary, Officers Group

courtesy of

In my notice of April 28 I informed you that, through the

Mr. Kenzel, the privileges of the Green Meadow Golf Club at Harrison (near Rye),
New York had been extended to the officers of the bank for their annual tournament
for Governor

Strong's Cup, to

be played on Sunday, May 23.

Sixteen acceptances have been received, which will permit four well balanced foursomes, and I am sure you may look forward to spending a most enjoyable

day.

In order, however,

regular club

members as

that so large a number of visitors shall inconvenience the

little as possible, it has been agreed to start the last

foursome at not later than 9:00 a. m.

ready

Will you please, therefore, be present and

to tee off at the time indicated below:

Starting time 8:45 a.m.

The'lkplorers"
foursome
Starting ttme 8:50 a.m.
The "Oddfellows"
foursome
Starting time 8:55 a.m.

The "Goodfellowship"
Foursome

Mr. Barrows
Jones
"
"
Mason
"
Philbin

Handicap

Mr. Case
"
Crane
"
Matteson
"
Gilbart

Handicap 30

Mr. Gidney
"
Schneckenburger
"
TenEyck
"
Vansant

Handicap

Mr. Jay 60-1f-44:.11-''

The "Highboys"
foursome

Handicap 40

6
6
6

"

"

"
"

"

Kenzel

"

"

Hendr Joke

11

"

Snyder

"

U. S. G. A. rules govern all play except that the penalty
loss of distance only.
No Stymies. Stymies will not be
hole may be requested to

played.

either lift or put.

Events

10
15
30

"

"

Starting time 9:00 a.m.

0

for

6
10
17
20

30
25
40

out of bounds is

The player whose ball is nearer the

Championship - Match play 3/4 handicap (taken where indicated on the ca
Prize for winner - Prize for low net (full handicap) - Prize for low gr

first

tee in each foursome plays his first match play
The first player off the
round against the third player off, and the second player plays likewise against the
fourth player. The subsequent matches will be decided by matching cards; all cards
to be given to Mr. Jones or Mr. Barrows.




FEDERAL RESERVE BANK

MISC. 3. 140M-4-24

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

Reports bepartment

DATE_

May 21,

Confidential Report on Gold
Reserves and Foreign Accounts for
week ended May 19.

SUBJECT-

Gold reserves of the New York Bank advanced $9,000,000 further in the
week ended May 19.
The principal gain was in Treasury transfers to this
district to meet May 15 interest payments, and we also gained somewhat in
Reserve Bank settlements of acceptance transactions.
In addition, counter
receipts of gold exceeded counter payments for the second week.
These
gains, however, were partly offset by a movement of ordinary commercial and
financial funds to the interior, following the influx of commercial funds to
this center during the previous week.
For the seventh consecutive week, total gold earmarkings for foreign
account remained at $53,000,000.

LQ

At $4,970,000 free deposit balances of foreign correspondents apt-e.a.red
Holdings of bankers acceptances were reduced
virtually unchanged.
$2,700,000 further to $64,500,000 and are at the lowest level since the week
This reduction was the result chiefly of maturities
of December 23, 1925.
of $2,100,000 from the Reichsbank and $600,000 from the account of the National
Bank of Hungary.
Custodies of securities increased $200,000 further to
$72,200,000, due to additional purchases of Treasury securities for the
National Bank of Hungary in reinvestment of a part of the proceeds of bill
maturities.
Gold movements during the reporting week were practically
For the month to date there have been exports of $8,000,000 gold
negligible.
to Canada and net exports of $167,000 through the Port of Aew York.




FEDERAL RESERVE SANK

OF NEW YORK
May 28, 1926.

Dear Governor Strong:

The two matters of unfinished business from last week were the
Bank Polski and the bill market.

We have received satisfactory assurances

from the State Department and from the Bank Polski itself, which leaves no
course open but to renew the loan and honor their drafts.

cordingly been done, although the situation clearly needs careful watching
continuously.

I assume Mr. Harrison is giving you all the details of

this transaction.

The bill market is working out of its difficulties, although two
days ago the dealers' rates for unendorsed 90-day bills were raised 1/8
further to facilitate distribution.
out of 90-day bills.

As a consequence they are now cleaned

Their sales contracts with us are down to 29 million,

although this reduction is largely due to outright purchases for the system.
The market is now running on an even keel.

The movement of funds has been in this direction for the past week
and last night the New York City banks owed us only 64 million dollars.
There was a loss of funds yesterday, largely through currency withdrawals,

and today currency is being paid out and we are losing through the transfers
as well; so that the New York City banks may owe us up to 100 million to
balance their accounts for the week.

The money situation is generally

regarded as comfortable, but without any sloppiness.

Stocks have been a

bit stronger for several days.




-

This article is protected by copyright and has been removed.
The citation for the original is:
“In and Out of the Banks.” The Wall Street Journal (New York, NY), May 28, 1926.




FEDERAL RESERVE BANK

OF NEW YORK
June 4, 1926.

Dear Governor Strong:

We have just completed a preliminary tabulation of retail trade
statistics for the month of May from 52 stores in this district and find
that their sales were 5.7 per cent larger than in May last year.

It is a

very satisfactory increase, which seems to me to indicate that retail trade
is going forward at a steady pace without any interruption other than
occurred earlier in the spring, due to cold weather.

Au

was more than 400,000 cars and building contract awards continue in large
volume with little evidence of a decrease as yet.

The only points in the

business horizon where there seems to be genuine evidence of difficulty is
in the textiles and iron and steel.

Textiles are apparently in pretty bad

shape, with very large price concessions and diminishing production.

The

output of iron and steel is still large, butdecreasing, and likely to decrease
further.

I do not believe, however, that we were wrong in anticipating some
recession in business in the second quarter of this year.

You may remember

that the textile trades were among the earliest to be affected in

1921.

What

appears to be happening is that business is receding a bit, but doing so very
slowly; and I doubt if our volume of trade index crosses normal on the way
down for several months to come, and I do not think it will go very low even
at that unless real estate and building and automobiles begin to crack.
depends on how much things are overdone in the next few months.




Much

FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

2

June 4, 1926.

It is quite remarkable how steadily the system's earning assets have
been maintained at a level between $1,100,000,000 and $1,200,000,000.

c>

closing a chart which gives these figures by days.

Practically the

I am en-

only

change

since the first of the year has been some slight shift of borrowing from other
districts to New York.

The New York City banks now owe us a little over 100

million and their requirements seem to be satisfied by an amount of borrowing
between 75 million and 100 million.

The steadiness of the earning assets of the system reflects a considerable degree of stability in the total amount of bank credit in use.

The follow-

ing table shows the changes in different types of loans and investments for all
reporting member banks:

Loans and Investments all Reporting Member Banks
(in millions of dollars:

January 27
26
May
Change

Loans on stocks
and bonds
5509
-

5295
204

Commercial
loans
8278
8408

+

130

Investments

+

5477
5705
228

Total loans
and investments
19426
19579
153
4

You will note that total loans on stocks and bonds are off
lion, whereas street loans are off 700 million.
able shift from broker to private borrowing.
New York City,

only 200 mil-

There has clearly been a consider-

This is particularly true outside of

The decrease in loans on stocks and bonds has been almost all

offset by increases in commercial loans and in bank investments.

As you see, there

has been a considerable increase in bank investments in the past few weeks,
in the face of a considerable volume of rediscounts at the Reserve Bank.

even
This in-

crease in investments has accompanied strong bond prices and, as you will observe,
there has been a further recovery in stock prices in the past few days.

I think

there has been an erroneous impression among the banks here that money was going
to be very sloppy, and banks have increassed their bond holdings in anticipation
of this event.




DERAL RESERVE BANK OF NEW YORK

Governor Strong

June 4, 1926.

Mr. Jay and Mr. Harrison, I believe, are covering most of the matters

Q

outside of the money market.
up unfinished tasks.

We are getting a little chance these days to clean

I have been working on the discussion of the Chronicle

criticisms to insert in your testimony, and have also been correcting proof of
my own testimony.

John Rovensky has resigned from the Bank of Commerce and has been made
first vice president of the Bank of America, where he is directly in line for
the top job.

George Roberts has written a fine piece
monthly review, a copy of which I am enclosing.

out the Strong bill in his

Mr. Mitchell is also writing a

good letter to Mr. Strong on the sane subject, in reply to a circular letter
which Strong has sent about to a great many bankers and others asking their
opinion about his bill in revised form.

The revision is worse than the original,

very wordy and just as objectionable.

The professors were here a week ago looking very chesty ad hearty and
reporting great success, at which we were much delighted; and your letter giving
a full account of proceedings has also given us a vivid picture of the whole
affair.
' Very truly yours,

4C'4118.41"1'-744
Mr. Benjamin strong,
C/o Bank of England,
London, England.

Encs.




MILLIONS
OF DOLLARS




EARNING ASSETS ALL F.R. BANKS

This article is protected by copyright and has been removed.
The citation for the original is:
“Paris and London Formulating New and Far-Reaching Commercial Treaty.” Federal Trade Information
Service (Washington, DC), June 3, 1926.




Misc. 3. 1.50M-8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
.0
FROM

Governar_Btr erg
Bap4rts_DeoP rtmen t

DATE

June4

Report on Gold_____
Reserves and Foreign Accounts for
la_andeA_Jume-Z.--

SUBJECT

Gold reserves of this bank declined 431,000,000 during
chiefly as the result of the more or less usual
the week ended June
There was
loss of funds to the interior over the first of the month.
also some loss of gold reserves due to counter payments in excess of
receipts but this and other losses in miscellaneous accounts were about
offset by gains in Treasury transfers and in Reserve Bank settlements
of acceptance and security transactions including payment to us by
other Federals for their share of 0,500,000 of securities purchased
in partial replacement of June, 15 maturities in the Special Investment
Account.

at

Total gold earmarkings for foreign account were unchanged
53,000,000.

A reduction of 300,000 in the Bank Polski account and
:. 200,000 in the Reichsbank resulted in a decline in total free balances
of foreign correspondents t o 44,300,000, the lowest level for any reporting date since July 15, 1925.
The balance of the Bank Folskils indebtedness to the System was increased 41,500,000 to 48 , 9 00 , 0 0 0 .
In bill
holdings the principal changes were increases of 41,000,000 in the Swiss
National Bank of Zurich account and 0850,000 in the Reichsbank, and decreases of 575,000 in the National Bank of Hungary and c.,125,000 in deNederlandsche Bank account.
Consequently, total bill holdings advanced
The purchase of an additional 4564,000 of
4;1,175,000 to 465,000,000.
Treasury securities for the National Bank of Hungary in reinvestment of
the proceeds of bill maturities advanced holdings for that account to
44,297,000 and custodies for all accounts to 03,100,000.

May net gold exports through the Port of New York and to
Canada were 48,369,000, according to preliminary figures;
For the first
three days of June, there have been net exports of 4239,000 at New York.




1926_

June 10, 1926.

Dear Covernor Strong:

Your ,etter of May 2.5 from Bone arrived this morning with the

enclosed report to r. lielion and the furtaer private letter.

ke are em-

barr ssed by not neving. received any documents from London, except Ina
papers welch Proteeeors evregue and Hollender orou6,ht with them.

Those

papers, hosever, include everything except he prepared statement which
Mr. George Roberts pre6en4ed to the Comeiseion.

We are putting together

uocumente 1 to 7, 68 eentiened in your letter, and eunding them forward

tomorrow to Mr. ';elion, toeether witn your report, and we -re sending the

private letter steparetely.

It ht.43 been quite a chore 1,J

ke the necessary

corrections in the documents.

I have had e chance to 0 1.4rouh molt of the evidence and it is
delightful reading.

I hope the Commiseion *ill print sufficient copies of

tne evidence so that it can be dietributed with :Acme freedom in this country.
It will make a most interesting economic document.
I am enclosing an ccount of the latest meeting of the Stable l'oney

League, which ee all ignored by non-attendance.

I am going into seclusion agsin tomorroe on the Sting bill evidence

and will leave the letter writing to other officers.

I suspect you are feel-

ing that toe /low of let era in your direction is more then adequate.
.eincerely yours,

Ir. Benjamin Strong,

C/o Bank of England,
London, Engl



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FEDERAL RESERVE BANK

OF NEW YORK
June 24, 1926.

Dear Governor Strong:

Mr. Harrison's cables of June 18 and 21 will have told you of the
general progress of things in the money market.
exactly according to Hoyle.

The progress of events was

Money went to 3 3/4 and 3 1/2 for two or three

days around the fifteenth, and then came back to 4 last Friday.
it has been 4 1/2 and 4 1/4.

Since then

The Treasury's decision to invest 40 million of

its balance resulting from tax payments in sinkirg fund purchases has prevented
any large Treasury balance from piling up.

In fact, our latest report shows

a Treasury balance of only 20 million dollars for the system.

At the present

time the New York City banks owe us only about 40 million dollars and money is
comfortable.

The banks are lcising today in the transfers and it seems clear

that the tendency will be toward firmer money next week.

Mr. Case, I believe, is sending you the report and minutes of the
Open Market Committee.

The gist of the thing was that they decided to buy or

sell 50 million additional seourities temporarily to take care of the end of
the month, but otherwise to leave the portfolio at its present amount of 275
million.

It is still doubtful how much it will be desirable to do in the way

of temporary purchases.

I have an idea that after last December's performance

a number of the New York City banks will be more willing to put out money, particularly with our rate at 3 1/2.

I also have the feeling that a temporary

crack in the nose may be a good thing for the stock market.

There has been a

fearful amount of twaddle about very easy money this summer, and that talk has




FEDERAL RESERVE BANK OF NEW YORK

helped feed the stock market.

2

Governor Strong

June 24, 1926.

A little runup in rates just now might be a

healthy demonstration that there is no great surplus of money kicking about.

(7

If there is any real pinch in money the action of the committee makes it
possible to deal with it.

In looking over last year's figures I observe that there was some
evidence of firmer money in the second half of July and during August, and I
suspect the same tendencies will appear again this year.

In fact, I think

that there is a bit firmer undertone in the market now than there was a month
ago.

The bill dealers lifted their offering rates on 90-day bills to 3 3/8

again yesterday.

They have never really cleaned up their portfolios.

money seams to be pretty definitely at 4 1/4, which is rather firmer than it
was a month ago.

The stock market went off quite vigorously yesterday and I think the
reaction may continue next week, with firmer money.

Street loans are up 100

million dollars from the low point, but are still about 700 million under peak.
This apparent inconsistency between the strength of the stock market
and the comparatively small street loans, has been a bit puzzling, but I think
we have found the explanation.

I suspect you were able to read between the

lines of our cable and make the interpretation yourself.
happened is this.
tomers for margin.

What seems to have

When the market was going off brokers called on their cus-

In New York that margin was met partly by the supplying of

additional collateral and partly by liquidation of stocks.

In other parts of

the country inveetors were not in a position to provide extra collateral but
went around to their banks and borrowed directly on securities, sending cash to
their New York brokers.

increase in direct

loans

loans

The result was a liquidation of brokers loans, but an
to customers on stocks and bonds, so

thkt

the total

on stocks and bonds by banks outside New York City remained practically




FEDERAL RESERVE BANK OF NEW YORK

unchanged.

a

Governor Strong

June 24, 1926.

Another factor which would tend to produce the same result would be

a distribution of stocks into stronger hands.

In any event the total loans on

stocks and bonds by all reporting member banks are now only about 150 million
under the total at the end of January, while brokers loans are 750 million lower.
I think it is clear that the total amount of credit employed for the holding of seclarities is within some 150 million of the amount when the market was at its top.

Similarly, the total earning assets of the Federal Reserve Banks are practically
the same as they were at that time.

Increases in commercial

investments more than make up for the decrease of loans on stocks and bonds and
the total amount of bank credit, as indicated by the reporting member banks, is
500 million larger than at the end of January.
There does not seem to me to be anything very alarming in this situation.
I think the atmosphere is much soberer than it was early in the year.

If money

remains moderately firm and if business continues to work off a little, as I

think it will, I do not think there will be serious speculative excesses, although
we may have another mild burst or two.

One of the rumors which is going about

just now is that the purpose of the recent rally was to distribute stocks to the
public and it was quite noticeable that the rally was led by United States Steel
and General Motors.

A number of brokers report that the public is not very

much in the market, but that of course is very difficult to determine.

In connection with all this discussion it is interesting to see the
attitude of the Stable Money people.

I sat next to Irving Fisher a few weeks

ago at lunch and he suggested that what we ought to be doing was buying securities,
and J. H. Rogers made the same suggestion yesterday.
simple universe.

They live in a beautifully

Our basic commodity index, by the way, hit a new low point for the

year this week at 142, although this move comes after a number of weeks of comparative stability.




FEDERAL RESERVE BANK OF NEW YORK

4

Governor Strong

The business situation is little changed.
a bit worse.

Iron

June 24, 1926.

The textiles are getting

and steel production is being slightly reduced, but the

latest report is of better orders for iron and steel and somewhat firmer prices.
It is clear that building is going to be active for the balance of the year.
The automobile people are announcing more price cuts,
a further

reduction in

one of the latest being

the price of Fords, ranging from 15 to 40 dollars, with

the further change that Ford now furnishes starters and other equipment without
extra charge.

This makes it amount to a cut of 75 to 100 dollars.

I wonder if you ever ran into a chap named Charles, who is secretary
of the American Defense Society.

I first met him some years ago when he came

to tell me about a scheme he had for beating the stock market, which was based
upon the ratio of a country's gold

holdings to

its total currency circulation.

He has a complex in favor of complete gold cover for notes, as nearly as I can
understand it.

He has recently bobbed up again, this time with a great interest

in the activities of the Stable Money Association in his capacity as secretary
of the American Defense Society.

He has discovered that the Stable Money people

have associated with themselves a number of parlor radicals, some of whose activities will not stand very close investigation.

He thinks this is one reason for

fearing that the association may be genuinely dangerous.

A further interesting

fact about Mr. Charles is that he seems very well acquainted indeed with McFadden,
and I think that that connection gives us a clue to the lineage of some of
McFadden's ideas.

He has been telling Congressman Strong and McFadden something

of his findings with regard to the Stable Money Association.
I have, of course, indicated to Mr. Charles that we cannot

concern

our-

selves with the personalities of the Stable Money Association, but he is keeping
me informed as to what is going on.
when they meet in the fall.




The committee have asked to have him appear

FEDERAL RESERVE BANK OF NEW YORK

Kenzel, Gidney,

Governor Strong

5

June 24, 1926.

Hendricks, and Downs, and Mr. Treman are just back

from the New iork State Bankers

Association

reporting a

profitable

session.

Chase of the First Trust and Deposit of Syracuse was elected president, and

Mr. McGarrah was elected vice president, which means he will be president next
year.

This represents an effort to make

the

activities of the association of

genuine importance.

It is very good of you in the midst of your vacation to take time to

answer my letters so interestingly.

Please feel no obligation to do so.

Mr. Harrison tells me he has forwarded copies of all the testimony
since Dr. Miller's.
testimony.

We are still working on putting into shape your and my

It is a slow job

because so many inserts

are called for.

Sincerely yours,

4"-zeir5/t-W. Randolph Burgess

Mr. Benj. Strong,
C/o Bank of England,
London, England.




I

FEDERAL RESERVE BANK

OF NEW YORK
July 2, 1926,

Dear Governor Strong:

The stook market continues to boil.

After a little hesitation last

week it has been very strong this week, particularly in the case of some of the
big industrials with large surplus earnings, where a melon may be cut.
Steel has hit 144.

U. S.

There has, however, been no general rise of stocks to com-

pare with the movement of a few of these leaders and, as you see by the daily
letter, the industrial average is still about 8 or 9 points under the year's
high.

All this in spite of firmer money conditions this week, but 4 1/2

Wednesday afternoon, yesterday, and today.
to worry about.

The money situation gave us nothing

It was not necessary to make any temporary purchases.

We sold.

25 million thirds from the special account and replaced them from the market.

The Treasury paid for these by drawing 25 million from their balance with depositary banks left over from the March issue.

Since this withdrawal was made all

over the country and our purchases were made in New York, it had a tendency to
put money into this market temporarily.

Transfers to the interioi were not as

heavy as might have been expected, - the banks out there having obtained funds
by increased borrowing from their local Reserve Banks.

Meantime, the New York

City banks showed a great willingness to put money into the market and let

borrowings appear on their June 30 statement, as indicated by the fact that money
went from 5 to 4 1/2 the middle of the day on Wednesday, June 30.

Street loans

of the New York City banks increased 55 million that one day.
The New York City banks owe us 116 million today.

ing was necessary to take care of heavy currency withdrawals, considerable




FEDERAL RESERVE SANK OF NEW YORK

2

Governor Along

July 2, 1926.

transfers to the interior, and increased deposits over the half year.

I should

think that rates might stay at 4, 4 1/4, or 4 1/2 per cent most of next week.
It will not be long after that before the seasonal tendency for firmer money
begins to set in.

Moreover, I think other influences on the stock market are

apt to be negative rather than encouraging.

There is increasing evidence that

the Florida situation is flattening out badly.

There have already been a half

a dozen bank failures, and there may well be 20 or 50 more.

I think some other

sections which have been having real estate booms will also prove fruitful of
losses.

There are a number of other weak points in the situation with which

we are all familiar.

Meantime, however, most of the big industrial concerns

seem to be well geared up to meet any situation.

Last night Mr. Aarrison took the midnight train with all of our testi-

mony, exhibits and memoranda in his brief case to deliver to Mr. McFadden, and
he tells me today over the telephone that they are now delivered and that matter
is off our minds, for the present at least.

We have been rather steadily at it

for a number of weeks and very vigorously at it for some days.

It has been quite

a chore getting together all the insertions, including memoranda on the Chronicle,

repurchase agreements, and, for my testimony, a stAement of powers which the
Reserve System possesses for stability.

I think the material is now pretty bomb-

proof and I was greatly impressed, in reading galley proof for the past few days,
with the high quality of the Whole thing.
document.

It is going to be a very important

6e shall probably see page-proof and make an index.
Additional copies of the testimony before the Indian Commission have at

last arrived.

I find that express packages of that sort are frequently hellup

for weeks in the express office here and we can greatly expedite the process if




FEDERAL RESERVE BANK OF NEW YORK

Governor Strong

July 2, 1926.

we have a description of the package together with information as to the date
and place of shipment, and the consignee.

O'Connor, the head of the finance section of the U. S. Chamber of
Commerce, was in yesterday and tells me that they are planning to go forward
with that study of the Federal Reserve System which they proposed a year ago.

It means the appointment of a large number of committees of prominent business
men, the employment of some expert staff, and a kind of oombindation of investigation and publicity.

You may remember that we were a bit doubtful about this

program a year ago, when they suggested it, particularly as it seemed likely to
concentrate on recharter.

I think the picture has greatly changed this year.

The Strong bill and the activities of the Stable Money Association have given
much broader reason for the proposed study and I think perhaps the Chamber's
work may provide the means for offsetting any harmful results which may follow
from mistakes of the Stable Money Association.

Lombard is going about the

country now lining up tilahundreds of business men to support the Stable Money
Association.

He is clearly a thoroughly dangerous person, - a fact which I

think O'Connor appreciates.

Meantime, of course, we are keeping hands off en-

I think Later Stewart will serve on the steering committee of the

tirely.

Chamber's investigation.

At any rate I greatly hope he will.

The McFadden bill seems to be deed for this session.

The latest

suggestion was one from Carter Glass that the bill be passed without

compromise

reference to branch banking.

I doubt if this would commend itself to the House.

In any event it seems too late now for a last minute compromise.

The matter

will be up again in the fall.

It is hot and close here and it is a fine time for you to be aww.
You can realize from the clippings to what extent you are in the limelight here.

I do not get the impression, however, that there is any real mis-

apprehension concerning your position and activities.




I find

FEDERAL RESERVE BANK OF NEW YORK

4

Governor Strong

July 3, 1926.

newspaper men make inquiries it works pretty well to ask them in return

0

what they think they would do if they were you and were abroad.
question usually satisfies them.
Sincerely yours,

Mr. Benj. Strong,
C/o Bank of England,
London, England.




That

FEDERAL RESERVE BANK

OF NEW YORK
July 9, 1926.

Dear Governor Strong:

By the time you get this letter the money market will have settled
back to a more normal status, I trust, and we shall have cabled you to that
effect.

But just now the thing we are interested in is the very heavy borrow-

ings of the member banks, which reached a high point, as we indicated in our
cable, of 190 million on Wednesday.

Their loans increased 137 million in the

five business days from July 1 to July 7.

We got over the window dressing period without the slightest difficulty
and the borrowings never ran up much beyond 60 million.

Then on July 1,

2, and

3, there were heavy currency withdrawals and transfers to the interior, so that
the market lost over 120 million.
All this made quite a problem but it was finally decided not to make
any purchases in the market, partly because money conditions were so steady with
the call rate at 4 1/2 and no real stringency, partly because the stock market
was acting up and would not be injured by a little pressure, and also because it

was clear that the condition was due to temporary causes and would be corrected
shortly.

Yesterday the banks paid off 15 million dollars and brought their borrowings down to 175 million.

They may pay off a little today, but in any event

they will start the new week tomorrow about 40 million over in their actual reserves.

Only about half of the 35 million dollars of Fourth of July currency

has been returned and more will be in next week.
some transfers from the interior.




Also, next week should see

It therefore seems as though the banks could

FEDERAL RESERVE BANK OF NEW YORK

Governor Strong,

2.

July 9, 1926.

reduce their borrowings next week to 100 million dollars or less.
One interesting feature of the financial transactions over the halfyear period was the movement of street loans.

Just as last year the out-of-

town banks pulled money out of the street at the end of the year and have now
put it back in,

OD

that the picture shows a big increase on June 50 in loans

by New York City banks, but a decrease since that time of 80 million.

The

total of street loans is 150 million higher than the low point.
As far as future money conditions are concerned, it seems clear that

what has taken place in the past week is evidence that it only takes a little
extra demand to firm up money conditions Quite considerably.

I think this

means inevitably that the fall demand will bring with it somewhat firm money
conditions, which will give us an important problem in policy.
I take it that one important phase of the question is the relation
of rates here and in London.

A good foreign exchange man told me yesterday that

with 90-day bills d 3 5/6 here and 4 1/4 to 3/8 in London, and with the present discount on forward exchange, there is no particular attractiveness to
move funds in either direction.

We have almost a precise balance.

The future

relationship of the two markets, then, seems to depend a good deal on how they
reflect respectively the seasonal tendencies and the busiress tendencies as well.
As far as the domestic situation is concerned, I think if you were

here you would feel that the most important fact was that the psychology is
reversed from what it was last spring.

At that time recession was in the air.

At present there is much more confidence and a good deal of blind talk about
how the present tremendous prosperity will continue forever.

I have just been attending the meeting of the Atlantic States Shippes
Advisory Board at Atlantic City, going down with Mr. Chellis Austin to explore the
euestion whether there should be a bank committee as a part of their organization.




FEDERAL RESERVE BANK OF NEW YORK

3

Governor Strong

July 9, 1926.

There does not seem to be anything very definite for such a committee to do at
present.

But the interesting thing was the reports which different groups of

shippers made on business conditions in their several industries.

The ooncen-

sus of opinion seemed to be that the movement of goods over the third quarter
would be very close to the second quarter, but that the tendency was downward,
tA)414D

although I must say there were a good many failed to see any downward tendency.
Sincerely yours,

r
Mr. Benj. Strong,
C/o Bank of ringland,

London, England.

WIT :R




7

MISC. 3. 1

80 M

12-25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
7o

FROM

Governor Strong
Reports Department

DATE

July 9

Confidential Report on qold
Reserves and Foreign Accounts.for

SUBJECT:

weekended July 7

Total gold reserves of this bank were reduced 4107,000,000
during the week ended July 7 after advancing 071,000,000 during June.
The loss was chiefly in the usual first of the month movement of commercial and financial funds to the interior which was accentuated, this
month by the heavy disbursements which occur at the half year end.
There were other losses in Treasury transfers and Reserve Bank settlements,
and withdrawals of holiday currency from us early in the period were only
partly offset by a return movement on the 6th and 7th.
Ire released 4750,000 of gold from the Swiss National Bank of
Be me account and credited the proceeds to the Bank of England's account
with us.
Earmarkings for the Swiss Bank are new 45,730,000.

Free balancesof foreign correspondents increased about
1,000,000 to 05,800,000 due to an increase of 05009000 in both the Bank
of England account and the Reichsbank account.
The total of loans to the
Bank Polski was reduced 4600,000 further to 44,900,000.
Bill holdings
were reduced 4160,000 chiefly as the result of maturities from the
Reichsbank's ownership.
The purchase of 05,000,000 Treasury securities
for the Bank of ngland advanced holdings for that account to $55,250,000
and total security holdings for all accounts to so,soo,00e.
July gold. movements through this port were Unimportant thus far,
restating in a net import of 0200,000.




192 6

CHIEF FOREIGN OFFICE
PARIS

10 SQUARE DESNOUETTES

(19 BOULEVARD VICTOR)

WHALEY-EATON SERVICE

WASHINGTON. D. C.
MUNSEY BUILDING

"A CAPITAL INSTITUTION"
CABLE ADDRESS: WHEAT

America

Letter No. 412.

All rights reserved.

FOUNDED 191E1

TELEPHONES1

7679
7727

FRANKLIN

July 24, 1926.
For Clients Only.

Dear Sir:

The following, in substance, is a conversation with an important
official whose opinions carry weight in the conduct of the Government:

Q. Would it not be highly beneficial for this country, on its own
initiative, to cancel the war debts?
A. It would have been right after the war, but it is politically
impossible now. Moreover, had we cancelled then our trade
gains might readily have been greater than our direct recoveries now are likely to be.
Q. The country is hardly in a state of military preparedness.
it safe to incur the hate of all Europe?

Is

A. The strong are usually hated by the weak. I do not think that
feature of the case is substantially important.
Q. Assuming that the Allies should be willing to reduce the Dawes
Annuities to a point where Germany would and could pay with
fair grace, would it not be good policy for the United States
to reduce the war debts in proportion?
A. That is what the Germans and others are now proposing. Such a
solution would have economic results of the highest importance,
but it would not lessen criticism of the United States, because
such criticism has become the stock in trade of European politicians. Nevertheless, it is about what we are going to come to.
Q. Do you think the franc can be stabilized at present values?
A. Again there is political danger. Were the franc stabilized at
two cents, say, stabilization would no sooner get well under
way than the politicians would be demanding that the value be
raised to three cents. A whole new set of illusions would be
constructed, filling franc security-holders with hopes of a
In
gradual return of the paper franc to the old gold parity.
any event, stabilization at present values would mean the beginIt would be a palliative
ning of a long and painful movement.
rather than a remedial measure. The introduction, on the other
hand, of a new currency at the old par, drastic as it would be,
would in the event be best for France. And there is ample
It would be
gold in France to make such a maneuver a success.
the quickest and the best way to bring French currency back to
normal and completely to restore confidence.



a

7/24/26#

2.




Q.

Do you think France is inherently sound?

A.

Unquestionably,.

Q.

Will payment of the debts reduce the standard of living in Europe?

A.

Undoubtedly. Differences in taxation constitute a real differential in cost of production. Payment of the debt penalizes
the European in two ways. First, he must work longer hours and
produce more in order to earn the excess revenue necessary to
meet the debt payment, and, secondly, he must accept wages that
enable his employer to meet the competition in world narkets
that lower taxation in America entails. As wage scales in
Europe are normally law, there is no room for sacrifice except
at the cost of food and drink and housing. From a selfish viewpoint, therefore, it would seem to enhance our chances in world
But world trade, it is
trade if we insist on debt payments.
well to remember, depends on the ability of the world to buy.
America has very little she can sell to poverty-stricken populations, except foodstuffs. A prosperous Europe could absorb
many American automobiles. There are other factors and, on
the whole, economists agree that cancellation would benefit our
overseas trade.

Q.

TThuld it not be possible to secure valuable economic concessions
in return for debt cancellation?
For instance, might i
pay us to remit the British payments in return for an agreement
by London to eliminate rubber restriction and aim, say, at an
approximate,price of 35 cents the pound for that commodity

A.

I am against trades of that character, particularly where they
would have to be more or less secret. Governmental price-fixing
is economically suicidal. I am aware, of course, that war
loans heretofore made in history were denominated loans only
in order that the creditor country might have trading material
at the peace table, and not with any idea that such loans would
ever be repaid. But the United States has never been in the
habit of buying policies for cash.

Q.

VJOuld you favor cancellation by indirection
ing to lower our tariff barrier?

A.

Decidedly not. Our purpose in the world should be to bring the
rest of the nations up to our standard of living, not to lower
our standard to theirs.

Q.

Do you expect a comprehensive stabilization plan to be worked
out this summer?

It is a country rich in what economists regard as virtues.
But it is a law-price country, which adds
greatly to its difficulty in liquidating external debts. The
best young men, who normally now would be furnishing initiative
and resourcefulness for business enterprise, are dead. The war
took them as first toll. France, as it were, has lost a generation, as has England. In estimating the capacity of a country
I doubt if our
to pay, this is one of the imponderable factors.
people have given it sufficient consideration.

that is, by arrang-




3.

7/24/26.
A.

It is probable, or rather possible. "I under:Stand that GovernorsStrong and Norman hare done heroic.work and have what they
think is_a workable_apheme. Moreover,
they think it workable one may be certain that it is. It all 'depends, one may
suspect, on the willingness of France to divorce her banking
from politics. When there are iron-clad assurances on that
score, stabilization will be certain.

if




FEDERAL RESERVE BANK

OF NEW YORK
July 19, 1926.

Dear Governor Strong:

Our cable of last week and Mr. Onsets letter, which goes forward
today, will have covered the general credit situation pretty thoroughly.
Money renewed at 4 1/4 this morning and has gone to 4.

The market is gain-

ing on the transfers from the interior, member banks are starting the week

about even in their reserves,

and the New York City banks owe us less than

100 million dollars.

Thus the

prospects

seem

to

be for moderately easy money conditions

this week, although it will be time in the next few weeks for the seasonal
demand to begin.

their sales at

The commercial paper dealers are still reporting most of

4 per cent, but

they are beginning to sell some of their

I think it

at 4 1/4 and there is an increase in the amount of borrowing.

will not be

paper

many weeks before 4 1/4 becomes the prevailing rate.

Time money

is now 4 1/2, except for occasional transactions in shorter maturities at
Ninety-day bills are 3 3/8, with a few transactions

4 3/8.
at 3 1/4.

during

still

taking place

My guess is that the bill rate will overtake our discount rate

August.
With regard to the business situation, we had a careful review of

the whole picture last Friday at our luncheon of economists and I spent the
weekend with Ayres, Stewart, and George Roberts.

Even such confirmed pessi-

mists as we are have to admit that the anticipated business recession is a
good many hours behind the running time scheduled for it.




The figures which

FEDERAL RESERVE BANK OF NEW YORK

2

Governor Strong

July 19, 1926.

are now in indicate that business during the second quarter was somewhat less
good than during the first quarter of the year, but the decline was not sufficient to be termed a recession and the figures are now well above normal in
most lines of business.

In

particular

the building industry, the steel in-

dustry, and the automobile industry are holding up remarkably well.

In fact

the year 1926 is likely to produce new high records of output for automobiles,

probably

iron and steel, building, railroad traffic, and

some other phases of

business.

The continuation of active business seems to be due in oast to the
continuation of a large consumption

of

material, particularly in automobiles

and building, and it seems to be partly due to a change in the psychology which
makes people more willing to place orders further ahead.

If I

had to guess I

would think that business in the third quarter will be almost up to the second
quarter, but that by the time the fourth quarter

be sufficiently

overbuilt and overproduced

to

of

this year is reached we may

require a period of readjustment.

A few months ago I had the feeling, as I think you did, that this very
long continued prosperity had been too good to endure and that a more vigorous
recession would have taken place before this.
why maladjustment

has

I suppose the

not yet occurred are these:

By more efficient methods and more intelligent
management; we have avoided a labor shortage
or labor difficulties.

By faster transportation, which has made forward
ordering unnecessary, and because of a downward
tendency in world prices, we have avoided price
inflation.
By gold imports end increased use of Federal Reserve
facilities, we have avoided credit stringency.
At almost any time in the past such a long extended period of prosperity
as we have had recently would have been followed by a labor shortage and disturbances

clogging of transportation



leading to

advance

ordering, large inventories and advanc-

FEDERAL RESERVE SANK OF NEW YORK

Governor Strong

ing prices, and further by credit stringency.

July 19, 1926.

Without the 100 million of gold

we have imported and the 100 million increase in Federal Reserve earning assets,
it is clear that money would now be tight.

I think it is a fair question which many people raise when they say
that, now we have disposed of the old bugaboos which previously pounced down upon
and destroyed our prosperity of previous periods, we may now enjoy continuous and
uninterrupted prosperity.

It may be possible, and yet I suspect that the only

safe position for a dispenser of credit to take is one of skepticism.

The old

maladjustments of the business cycle were based in the last analysis on humaa

psychology, which

is quite unable to act always with philosophical moderation,

but successively overdoes and underdoes whatever it undertakes;

and

that we are finding ways now to overdo our prosperity, particularly in building
and real estate.

It is very difficult, however, to estimate the time or extent

of any recession which may take place.

We clearly have no precedents which apply

directly to this kind of situation.
As to the stock market, it is now about as high as it was in the spring.
Rails are several points higher and industrials are several points lower.

The

outlook, moreover, as reflected by brokerage houses and others is much more optimistic than it was last spring.

I think there is a much more general feeling

that the present values are based upon substantial foundations than there was
last spring and there is some basis for this belief,

first, because the yield

of a number of securities has been increased by an increase in the rate of dividends or by distributions;

second, the prosperity has continued longer than had

been anticipated, with excellent business earnings;

and third, because brokers'

loans are much smaller.

Colonel Ayres has been doing a perfectly tremendous amount of work for

the last eight or ten months on the movement of stock prices, and some of this




FEDERAL RESERVE BANK OF NEW YORK

4

Governor Strong

July 19, 1926.

work seems to me to have an important bearing on the normality or abnormality of
present prices of industrial stocks.

One job that he has done is to compute

the prices andyields of all the dividend-paying industrial stocks traded in on
the New York Stock Exchange each month for the past 25 years.

With these

figures as a basis it is possible to compare over a period of years the relationship between stock prices and their yield.

This is done on the back page of his

July circular, which I am enclosing and which I think you will find interesting.

It is the soundest rational justification for present stock prices that I have
seen.

I am including a number of other papers which I think you will find
of interest, including the Tribune's account of a recent sporting event which I
judge to be a good account, having checked it up with a number of eye witnesses.

If anything, the contest appears to have been closer than the account would
indicate.

Sincerely yours,

W. Randolph Burgess

Ence.

WRB:R




MISC. 5.

I

60 MI

FEDERAL RESERVE BANK

I 1-25

OF NEW YORK

OFFICE CORRESPONDENCE

DATE
SUBJECT:

FROM .

July 15,

FIRST NATIONAL BANK,

AMITYTILIE, N. Y.

A. J. LIM -

Cashier Percy L. Hall called and discussed his bank's Southern
loans, which he said totaled $77,000.
Stock Exchange collateral.

About 50% of this total is secured by

The balance, save a small amount, is secured by

Southern banks, bills receivable.

while this may be a slow work-out Cashier

Hall feels that the maximum loss that his bank will sustain in this connection

will be about 05,000.
He stated they ware very fortunate indeed to be in their present
position, and gave the F. R. Bank of New york entire credit for the large
reduction in his bank's southern loans (which totaled $623,000 on 8/24/23
against their present total of *77,000).

If news should get out tnat his bank

is connected with the Witham system, he said a slight flurry might occur in
Amityville and wanted us to be famil.. r with their present position in case

he neoded our assistance.




(rk

t9E__6

MISC. 3.

1

60 111

FEDERAL RESERVE BANK

12-25

OF NEW YORK

OFFICE CORRESPONDENCE
Governor Strong
FROM

Reports DepnrtmAnt

DATE

July 16

Confidentinl Beport_on Gold
Reserves and Foreign Accounts for

SUBJECT,

week ondadJu1y-14.

Gold reserves of the New York Reserve Bank during the
week ended July 14 regained 436,000,000 of the 4107,000,000 lost
There was a return of commercial funds
in the previous Week.
from the interior and of currency from circulation within the
Gains in Treasury transfers were offset by an adverse
district.
balance of Reserve Bank settlements.
Are released 43,,.:.50,000 of gold from the earmarkings for

the Swiss National Bank of Berne and their balance so held is now
429480,000.
Free balances of foreign correspondents wdre reduced
about 41,300,000 to 44,500,000 chiefly as the result of payments
of 41,000,000 from the Bank of England account and 4400,000 from
Our loans to the Bank Folski were reduced
the Reichsbank account.
Acceptance holdings declined
$1,700,000 further to .)3,200,000.
4400,000 principally due to maturities from the Reichsbank and
The purchase of 47,000,000
de Nederlandschs Bank's holdings.
Treasury securities for the Bank Of England, 41,200,000 for the
Agent General for Reparation Payments, and 41,000,000 for the Swiss
National Bank of Zurich raised total security custodies to 490,000,000.
July gold movements to date include net imports of 4100,000
through the Port of New York and 41,500,000 from Mexico. This
Shipment from Mexico Mak9S a total of 46,500,000 received from that
Figures on June gold movements
country since the middle of June.
between the United States and other countries show imports of
018,900oo0 and exports of 43,300,000, resulting in a net import of
415,600,000.




1926_

FEDERAL RESERVE BANK

OF NEW YORK
July 30, 1926.

Dear Governor Strong:

Money has just gone to 5 per cent after a °Duple of weeks at 4.

This seems to be a logical development of the end of the month and is in
keeping also with a tendency for money rates to grow steadily firmer.
Commercial paper is now generally 4 1/4 instead of 4 per cent;
is 4 1/2 to 4 3/4;

time money

bills are unchanged.

Our loans to New York City banks are steady around 100 million
dollars and system earning assets are about 1100 million, or about 100
million more than a year ago.
After a temporary slump last week the stock market

For some

is

boiling agai n.

weeks the trading has been unusually °concentrated in a few stocks.

A quarter to a third of the trading has been in General Motors, United Statea
Steel, Dodge, and Hudson.
above 147.

General Motors has passed 190 and steel has gone

What appears to be happening is that there are a number of very

strong pools operating in the market and that there is very little public
participation.

The pools appear to be hoping and praying that by fall they

can generate a market in which the public will be interested.

From what I

gather from other sources, the enclosed clipping from this morning's Times
seems to be a pretty accurate comment.

There has been no particular change

in street loans for some weeks.

Business in general continues to be excellent.

The principal

weak spots where trouble may be generating appears to be building and real




FEDERAL RESERVE BANK OF NEW YORK

estate.

Governor Strong

July 30, 1928.

There are increasing reports of very soft real estate markets in

a number of different localities and the building materials market seems to
be

increasingly a

buyer's market.

Building contracts and permits have been

since early

in the year aad there is some anticipation

tendency will continue;

it will certainly be logical for it to do

gradually working off
that
so.

this

There is probably overproduction at a number of other points, perhaps

most notably in silk, where the stocks of finished articles are very large.

There is nothing, however, in the business situation which gives

good volume

cause for immediate alarm and it seems clear that there will be a
of business for the balance of the year.

The business sentiment

continues

optimistic, perhaps a little too optimistic.
About the hearings

in Washington,

I find that I was wrong in

that they had all been forwarded to you.

had said.

I passed

saying

I misunderstood s

on to him that paragraph of your latest letter.

I am leaving tonight for

my vacation, which I shall

Jersey coast within easy reach of the bank.

spend on the

I shall be in the latter part of

the month to get out the September 1 Review and will keep in touch with things.

Sincerely yours,

Mr. Benj. Strong,

0/0 Bank of England,
London, England.

Enos.

WRB:R







The Public Not "In."
canva..s of some of the larger
Stock Exchange ho,uses yesterday dis-

closed the fact that despite the ''boiling'
mot

arket, they are doing little

Ian they had anticipated for

midsummer. In other words, it is only
the houses with pool connections and
affiliations with banking institutions,
which are doing a big business at the
present time. In most wire houses
the same conditions prevail and the
orders
ter in by 100, 200 and 300share lots, which is not very pleasing
to the heads of these firms when they
see a total of almost 2,500,000 shares
dealt in on the Exchange. These men
feel perfectly confident from the evidence of their own books that the
public is not in the Steck market, and
that the big transactions which had
Wall Street so excited yesterday were
to a large extent professional and the
work of pools. The head of one large

house said yesterday that the loans
of his firm had advanced scarcely

.

$1,000,000 from the low point of the
year.




4uoi Western Pacific pf. (U
300 West. lin. Telegraph
5,200 W'house Air Brake (t7
3,000 W'house E. & M. f.4).
79% 65
19% 13% 4,500 Weston Elec. Instrum
600 Wheeling & Lake Eni
32
18
900 White Eagle Oil (2)
29% 25
19,400 White Motors " 's
51
rigs
400 White Rk. M.
38% 26
85%1 7

147% 1374
134 105

48
34

99
12%

222

47%
18
91%

6
13514

44% 201

39% 24
69
602
327/ 20

101 91%
89

6
3

8
3

22
3

69

pf.
400 White Sew. Ai
41,600 Willys-Overland
300 Willys-Overland pf. (7
100 Wilson & Co.

4,600 W'lworth (F.W.) Co. (
200 Worthington Pump
2,900 Wright Aeronautical (
Yale & Towne Mfg.
9,200 Yel. Truck & roach (72
,ch pf.
300 Yel. Trk. &
& T.

10,900 Youngstown

RIGHTSEXPIRE.

8,100 Am. Tel. & Tel., Aug.
2,900 Cuba Co., Sept. 8
2,700 Int. Cement, Aug. 11
2,500 Int. Tel. & Tel., Sept.
5,000 N. Y. Air Brake, Aug.
500 Reading, Jan. 1
5,800 Yellow Tr. & C., Aug.

Dividend rates as given in the abov
based on the latest quarterly or half-3

noted, extra or special dividends are not
Partly stock. t Partly extra. $ Pi
§ Payable in common stock. If Plus 3%
rate. b Ten per cent. in common stock
Payable when
stock. d Alm. 1 /SA eho,.. earned. e Pap
atnear

MISC. 3.

1

60 M

12-25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
70
FROM

Governnr strong_

-Reports-Wartmont

DATE
SUBJECT:

July 30

Confidential Repert on g-old

Reserves and Foreign Accounts for
meek-ended-July-2as

An increase of 43,000,000 during the week ended July 26
carried gold reserves of the New York Reserve Bank to 41,005,000,000,
an amount, however, 449,000,000 lower than the total on June 30.
The largest gain to this bank Was in commercial transfers and check
settlements but we also gained through Treasury transfers and gold
On the other hand, the balance of inter-Reserve Bank settleimports.
ments was against us and the movement of currency over the counter
was outward,

For the third consecutive week the total volume of earmarked gold was unchanged at 449,600,000.
Free deposit balances of our foreign correspondents
of receipts of 41,500,000 for
increased 1,200,000 as t%-)e re.,7M-,
_cyments
the Reichsbaak account which were only slightly offset '
Loans to the Bank Polski were reduced
from various other accounts.
Bill holdings declined 41,900,000
41,700,000 further to 41,300,000.
A purchiefly due to maturities from the Reichsbank's holdings.
chase of 45,000,000 of Treasury's for the Bank of England account
increased security holdings for that account to 467,250,000 and custodies for all accounts to 496,100,000.
For the Port of New York, gold imports during the first
In addition
29 days of July were 4600,000 and exports, 41,400,000.
to gold movements through this port, shipments of 0,000,000 from,Mexico
were received in New York, and yesterday 44,500,000 of gold VMS withdrawn from us for export to Canada, accompanying an advance in CanadNet exports
ian exchange to a premium of 3/16 of one per cent.
for the month to date. 4300,000.




192 6

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Misc. 3. 1.50M.8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
7.-0

Dr. Burgese,

FROM

DATE Jnnimry 14, 1927.

192_

Miss Bagwell

SUBJECT:

European Consumption Estimates

-

It seems extremely difficult, from the available data, to make any
very accurate comparisons of European consumption of food and other consumable materials, as before and since the War.
It is, of course, easy enough
to make estimates, and from such estimates conclusions have been drawn which
are difficult either to prove or disprove.
We may take, for example, the case of wheat and wheat flour.
European countries (outside of Russia) normally raise about two-thirds of
their own supply and import the other third.
The reported figures show that, in the four years ending with 1925,
European wheat crops outside of Russia averaged about 18 per cent below the
immediate pre-war averae, and that their total imports from outside countries averaged about 10 per cent higher.
This would suggest that consumption
may have been lower bydreath-qi per cent in the post-war period.

But it is very doubtful if production figures, especially, are
accurate that any hard and fast conclusion can safely be drawn.

so

As regards our own exports of wheat and wheat flour, these were, of
course, very heavy in and since the War, but in the last few years have
fallen off sharply.

But this decline in our own exports has been just about compensated
oy the great increase in Canadian exports of wheat, which are now the largest
in the world.
Combining the exports from the two countries, we find that
since 1916 the exports of wheat from this Continent have varied very little
from a level of about three times the pre-war average.
These heavy exports have, of course, been due largely to the dieturbane.e of Russia as a large wheat exporter and would naturally be affected
by the return of Russia to its former role.
But the actual increase in
wheat exports from this Continent over the pre-war appears to be considerably
larger than the decrease in Russian exports, so that it seems probable that
other countries, principally those of Eastern Europe, have also fallen off in
their available exports.

As regards meat imports into Europe, there appears to have been a
quite striking increase, amounting to something like 50 per cent of pork products
and around 80 per cent in beef products.
Our own contribution towards this has
been principally in pork products, and these in the most recent years have been
about 75 per cent above the immediate pre-war average.
These heavy imports may have been due to the greatly reduced meat production of Central Europe, but this is the sort of production which can be very
quickly stimulated, and we are now more than eight years away from the close of
the War.



Misc. 3. 1.50M.8.25

FEDERAL RESERVE SANK

OF NEW YORK

OFFICE CORRESPONDENCE
70

Dr. Burgess

FROM

DATE

January 14, 1927

192

Miss Bagwell

SUBJECT: European Consumption PlAtimmtes--2

These increased meat imports into Europe have, therefore, tended
to support the rather paradoxical belief advanced in some quarters that there
actually has been a rise rather than a. decline in the standards of average
This equally would be a theory difficult to prove or
living since the War.
disprove.
But it does appear from the shipping figures that European foreign
trade has made a very remarkable recovery in the last four years, and that in
some countries, at least, this increase would be nearly sufficient to make up
the relative deficit caused by the War.
It is very difficult to make use of money values for such a comparison, but there is a very fair measure of this trade in the actual tonnage
of ships entered and cleared from the principal ports, especially for measuring
the average rate of increase.

In the ten or fifteen years just preceding the War, this rate of
increase in tonnage cleared in the eight principal shipping countries was very
If such a rate had been continued from 1913
close to 4- per cent per annum.
straight through to this year, it would mean a total increase of about 75 per cent.
The actual increases for the four principal Central European shipping
countries were:
A

France
Germany, nearly
Belgium
Netherlands

Increase of total for
these countries

(0/1,,,

,

6

-60=per cent

'50331

465o

n

100

50 per cent

Four other principal shipping countries, Great Britain, Italy, Norway
and Sweden, appear to have made no such gains; and as these eight countries do
the larger part of the total shipping of Europe outside of Russia, this naturally
But it at least seems clear that there
lowers the average for all of Europe.
could have been no such increase in the countries named if there had not been
a quite marked recovery in their industrial activity, and hence in their foreign
trade.

'

j

L-rldot

Even the immense loans made to Europe and other foreign countries

would be quite inadequate to cover the immense purchases of Europe for food and
cuv-andZ64.4.,
crude materials7




AI., 3. 1.504.8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
ro

Dr. Burgess

FROM

DATE January 14, 1927

92_

SUBJECT: European Consumption EPtimpt,RA__3

Miss Bagwell

There is, of course, a variety of definite quantity data, such as,
for example, production of coal, iron and steel and similar products, which
indicates that European production has gained very little beyond immediate
pre-war levels; but our own experience in this country, where we have such an
extraordinary variety of information and can make very wide and definite
comparisons, is that it is quite dangerous to draw too hard and fast conFor example, our production of pig iron and
clusions from such barometers.
even our total railway traffic has grown at no such rate in the last five
years as in the five years preceding the War, and yet these five years have
been years of great industrial expansion and prosperity.
As regards the decline in European consumption of cotton and our own
exports of cotton to Europe, we have a gain that stands quite by itself.

cavak.
In the first place, our own production of cotton has, until the last
year or two, been greatly reduced, which resulted in very high prices for
American cotton and a corresponding decline in the demand for cotton goods.
In consequence of this low rate of production our average share in the total of
the world's cotton production has declined from a pre-war average of about
62 per cent to recently around 54 per cent.
And, on the other hand, Europe's share in the total mill consumption of
cL
cotton has likewisev that is, we have absorbed about one-third more of our own
cotton product at home, and other countries outside of Europe, India and Japan especially, have increased their share of mill takings from 18 to 28 per cent.
As a combined result, out exports of cotton to Europe in the last
three completed crop years, have been about one-third less than the last three
Bilt this appears to have been due as much to the small
years before the War.
cotton crops and high cotton- prices, and to increased competition by this country
Europe's exports of
and other countries with Europe, as to any other cause.
manufactured cotton have fallen off, while the cotton manufacture of the United
And the world's cotton crop
States, Japan and India has sharply increased.
has averaged, in the last .E'Yee completed years (not including the current crop
year) about 10 per cent higher than the trare*W11 years before the War.
We have then, in sum, about this situation: our exports of wheat and
wheat flour and pork products are very much heavier than pre-war, and the total
European consumption of these products (outside of Russia) appears to have been
slightly below pre-war levels.
On the other hand, imports of meat products into Europe have very heavily
increased, while cotton imports have very seriously decreased.




Misc. 3. 1.501.8.25

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
-- To
FROM

Dr. Burgess

DATE
SUBJECT-

January 14, 1Q27

European Consumption Estivates--4

Miss Bagwell

And shipping
therefore, presumably,
higher now than before
and this is especially

in the eight principal European shipping countriee, and
the total foreign trade, appears to be considerably
the War, and very markedly higher than five years ago;
true of the four Central European countries named.

This investigation has consumed a great deal
difficult to obtain the data easily and much of it had
separate sources of information.
It is not nearly as
wish, but it has been very carefully done and we think
the facte of the case.




of time because it seemed
to be dug out from
satisfactory as we could
represents substantially

Misc. 3. 1.50M825

FEDERAL RESERVE SANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

February 18, 1927

192

Mr. Snyder

MeNaryetlaugen
SUBJECT : _

Bill

As the McNary-Haugen Bill neared its passage I have been thinking
about it a little, and with a feeling that poseibly, under favoring circumstances, the scheme could have a fair measure of success.
But I fear that
the proposed set-up, of an unwieldy board of twelve members, nominated by
conventions of cooperative associations, etc., would prove fatal.
I was
wondering a little if one way out might not be if the President could make
his veto on the ground of the kind of organization propos d.
Would not such a board of twelve men, probab y not unattracted by
the salary, almost inevitably foredoom it to failure?

But if the direction of the whole plan cØild be in the hands of
one man, or, say, three men, all just the right t pe, I am not sure that it
might not achieve some interesting results.
have watched with a good
deal of interest the workings of the Stevenson Committee on rubber, the
Brazilian valorization of coffee, and the con rolling of sugar grinding in
Cuba, and while without doubt the winds of f rtune have favored each of
these, it is always true that the skillful ariner may do fairly well even
when the winds are not so favoring.
At least it seems as though t ere might be a fair chance as to
cotton, corn and hogs.
It looks as i wheat would be hopeless without the
cooperation of Canada, and perhaps Au ralia.
Rice, I know nothing about.

But if there could be a re sonable control of expecte,tions, would
not the problem be nearly half solv d?
It was clearly 30low-priced corn that wrecked the S. th and made it plant 17 million more
acres of cotton in 1926 than in 19'1.
I suppose there would be a wild outcry at the thought of limiting th
price of any particular commodity,
keeping it near to some given fi
re; but probably that would be the
possible means of keeping down to high expectations and preventing overproduction.

I wish the President ould have been advised to center his efforts
on getting the measure into a ntore workable and practical form.
The country
would certainly go with him on/that.
Possibly the political side would wreck the whole scheme anyway.
But you will remember that there was a good deal of that feeling about the
original Federal Reserve Act, and if the present scheme could have the same
kindly fate that the other had, to come, as I see it, under the aegis of a
genius, it might likewise disappoint expectations.
I do not know if these are matters that interest you, but I am
sending it along.




FEDERAL RESERVE BANK

AMC. 9.1 60M 7-26

OF NEW YORK

ICE CORRESPONDENCE
To
I

Governor _Strang

ROM__




14

DATE

Jun e 26,

SUBJECT:

Burgess

A careful review of Mr.

Warburg90

draft makes

me think it is moat effective with very few changes.
have indicated one or two modifications which t think

will atreagthea it, the reasone for which I think will be
obvious to you.

There are a number of other spate where

the expression is a little more exaggerated than you or I
would naturally use, but they all go with tae general
effect and tone, which are remarkably good.

WRB:R

att.

1924.




The men, who under

the

leadership of John

T. Pratt, formed and constituted the National Budget
Committee,desire to record their deep sorrow at his untimely death.

In11919, when the Committee was organized,

the number of those who were able to envisage the im4-1
pelling necessity:pr'the adoption of a budget system by
our

country was pitifully small; artdc--

---4133=Aitter-e-14A-Ben-s-

of----Alteitrit4-d------Sttrtsw, there was onlY oneAwhoxcoupled
-Asti-M1

a full vision of the great object to be achievede_villr

the courage and unselfishness to give his entire self

-40

to the accomplishment of an endtwhich then appeared4
yond the

reach of

actual attainment.

During the years of the operation of the
Committee, Mr. Pratt gave his 4im6 and his energies
without reserve.

There were times when he carried on the

Committee's work almost singlehandedly, and when it was
only his moral and material support that enabled the Corn-

mittee to keep its flag flying.

-

It is due

IA

no small

degree to the untiring efforts and never failing idealism

of Mr. Pratt that the United States today enjoy thut.
benefits of an orderly system of budgeting, an
owes him a deep debt of gratitude.

the country

-2-

0




It must be a consoling thought to those near
and dear to him that their grief is shared by his
friends and admirers all over the United States.
Mr. Pratt's old associates of the National
Budget Committee desire to express to his family their
heartfelt sympathy; they will always cherish the memory
of their loyal friend and inspiring leader.

July 7, 1927.
To

Governor Strong

F. W. R. Burgess

The resolution wording and the form of engrossing
have been agreed to by Messrs. Leffingwell and Warburg.

Colonel Stimson is out of town.

Ames & Rollinson is

now going ahead with the work.




W. R. Bi...chh,4
S

01-A.X4
3041

9 26

FEDERAL .RESERVE BANK'

OF NEW YORK

OFtICE CORRESPONDENCE
To

Governor Strong

SUBJECT:

W.R. Burgess

FROM

I have
it

with

given

Mr. McGarrah.

about it at the moment

'ABB:R

att.




DATE*

neaember 14,____ 1922.

Article referred to in_

Governor

Norman/A letter of November 15, 1927.

a good deal of thought to this and have discussed
Neither he nor I sees anything which
Some day the

opportunity

may came.

can be done

FEDERAL RESERVE BANK
OF NEW YORK
June 8, 1928.

PERSONAL AND CONFIDENTIAL

Dear Governor:

I have wished a good many times since my return that there were a chance

for a talk with you, both about the experiences abroad and the developments here.
You have probably heard by now the first half of this story pretty completely from
'alter Stewart-

I haa hoped on the trip home to get further along with the gold

exchange standard report, but found it took most of the trip to write a speech for
the New Jersey Bankers /Association, which had to be thrown away because it was too
acid for our people here.

Since then we have been pretty completely absorbed by

the current credit situation, though our people are working ahead on the gold exchange report and I have sent Stewart an introduction, copy of which I am attaching herewith.

(

/4.i,kc etv-,444--g,,,,, 4.1.9 /46vi.44.0
'16---4-

Ot-Plra

4

I have a feeling now, for the first time, that we are beginning to get
on top of the credit situation, though it is clearly a different kind of thing than
anything I have experienced since coming with the bank.

When

e look back at 1923,

1925 and 1926 and realize how little was necessary to deal with those situations it
becomes clear just how different the present picture is.
The new feature of the situation is that the loans and investments of the
member banks are beginning to decline.

Since the first of May the liew York City

banks have liquidated .It'80,000,000, mostly call loans, and there is evidence of some

real pressure that is shown by 5 3/4 to 6 per cent, time money and some 6 1/2 and 7
per cent call money.

The very high call money rates, however, are stimulating the

usual economic flare-backs in the form partly of some flow of foreign funds to this
market, some flow from other districts, but more particularly a shift of corporation funds from bank deposits to street loans.




Loans by "all others' '1a,ve increased

FEDERAL RESERVE BANK OF NEW YORK

2

Governor Strong

6/8/28.

nearly $400,000,000 since the first of May.
The net result-of this - plus gold exports - has been that the New York
banks have lost $175,000,000 of deposits during May and have met this partly by
reducing their own loans and partly by increasing their borrowings with us.

But

meantime brokers loans have continued to increase with the exception of two weeks.

The psychology, I think, has changed, perhaps as a result of a feeling of pressure
by the banks.

As you will observe stock prices have broken badly on a number of

days, although they are not down fur.
We discussed all this very thoroughly at Officers Council and Directors'
meetings yesterday, and Sprague and I had a considerable session in Washington early
in the week with some of the Board people and some of the governors who were attending the Chamber of Commerce meeting on the Federal Reserve System.

It was clear to

me, very shortly after I landed and particularly after the Open Market meeting,
about which Mr. Case has, I think, told you, that the outside banks were disinclined

to take the leadership in raising rates, partly because there have been many reactions from business, and partly because of an evident feeling that it was up to us
to lead on such a move regardless of the technical economics of the situation.
feeling is now strong in the Board, and I think

The

in many of the banks, that we

should deal with the situation in other ways than by rates, if possible, and the
discussion at our meeting yesterday tended in the same direction.

Vith so large

a volume of member bank indebtedness in New York, averaging about $250,00Q,000,
borrowing has become more continuous.
My reasons for optimism-. about the situation are

cld-4-441 tier/A--

First, that we understand the situation better and are prepared to

A

act vigorously,




Second, that the banks are feeling the pressure, and
Third, that the public atmosphere appears to be changing.

rj)
FEDERAL RESERVE SANK OF NEW YORK

Governor Strong

3

6/8/28.

This whole experience leads me to wonder whether, as a long run policy,
we should not consider working toward a position where our open market holdings
are larger, our discounts are much smaller, and our discount rate relatively higher,
if that can be done, and I am inclined to think it could if the discounts were small
enough.

The Chamber of Commerce meeting affords no cause for concern.

There were

about one hundred there, including a dozen Federal reserve people, a number of
economists, and a fairly good representation of bankers and business men.

report presented at

The

the meeting was good on the whole, although there were some

undesirable recommendations.

The worst of the recommendations were killed in the

meeting, so that the final resolutions are tame and involve so little change that
the report may die in the Chamber Board.

I had a fine visit with Sprague and brought him back to New York for a
day, partly to work on our economic survey problems, but mostly to talk over our
own problems with him.

e had an interesting lunch with him and Messrs. Case,

"McGarrah and Snyder.

I think the new bank organization is working well and happily and need
not worry you.

I should like to be listening in on some of your discussions, for the
struggles over here have not yet obliterated the vividness of the European problems.

I am appalled by the suggestions of delay in stabilization of France
which have been appearing in the press.

A continuance of the artificiality of

international money markets under dominance of the French position would certainly
create puzzling problems.

I am hoping this is newspaper talk.

I seem to detect in your messages that you are continuing to feel better,
which I devoutly hone.
Sincerely yours,

Mr. Benj. Strong,

C/o Morgan 4: Co.,
http://fraser.stlouisfed.org/
P-ris, 'rance.
Federal Reserve Bank of St. Louis

-6,,,71(444N-74:.

4147-441-1(

FEDERAL RESERVE BANK
OF NEW YORK

June 15, 1928.

Dear Governor:

Today's advance made it clear that the liquidation is con,inuing, but all the reports indicate that it is doing so in orderly
fashion.

There are no rumors yet of failures of stock exchange

houses, etc., although our friend who has been buying up banks in Jersey
is getting squeezed and today had to sell one of his banks to the directors.

A number of his compatriots are reported to be in trouble, -

all of which will be wholesome.

The principal feature that appears to need watching at present
is some congestion in the bond market and some slackening off in new
issues.

I think the party is over, but do not believe we can afford to
let up too quickly or there will be trouble again.

On the other hand,

we have got to be ready to move promptly in the other direction when
the time comes.

We got through the tax day with 5 1/2 per cent money, but it
might go lower on Monday or Tuesday.

By liednesday the market will be

tight again.

All goes well here.
Sincerely yours,

Mr. Benj. Strong,
c/o Morgan & Company,
14 Place Vendome,
Paris, France.

WEB:R
http://fraser.stlouisfed.org/
,?nc.
Federal Reserve Bank of St. Louis

FEDERAL RESERVE BANK
OF NEW YORK
CONFIDENTIAL

June 26, 1928.

Dear Governor Strong:

There is just time before the mails close to acknowledge and
thank you for your most interesting letter of June 13.

I am particularly

glad to get your point of view and to know that we arc so closely in

agreement, as you will have gathered by my previous letter which crossed
yours.

I have just been reviewing the figures in preparing a leading
article for our Monthly Review.

The liquidation of credit, which has

been principally reflected in a decline of 300 million dollars in brokers
loans, has been confined almost wholly to New York.

The total loans and

investments of the New York City banks are off about 200 million dollars
since May 2 and their deposits are off 400 million dollars.

Outside of

New York City there has been no reduction in the total volume of credit.

The banking figures, moreover, do not tell the whole story because increases in loans to brokers for the account of others partly compensated
for the decline in bank credit during May.

Thus the liquidation has

not yet gone very far, though I hope that this week's figures will show a
continuation.

Under these conditions we run the same danger as last

February in relieving the pressure too soon.

I quite ag

we must be very alert, particularly in view of the change in the international
movement of funds

which is

following the French stabilization.

So far the

domestic price and business situation does not appear to have been unfavorably affected by high money rates although, as you say, there is a considerable lag which must be provided for.



.L RESERVE BANK OF NEW YORK

Governor Strong,
Morgan & Company,
Paris, France.

2

There does seem to be confusion in Riot's letter.

June 26, 1928.

What actually

occurred was that we earmarked 50 million of gold and shortly thereafter
they increased their free balances with the commercial banks, not with us.

They advised us at the same time of the possibility of taking 30 million
dollars more of gold as a maximum, but as yet we have heard nothing further
as to that.

I an interested and pleased to see that the French stabilization

program follows so closely the proposals which Quesnay had in mind at the
time I last discussed the matter with him, and particularly that the reserve
percentage is 35 per cent and not 40.
our counsel was in the same direction.

I an glad to note that here again
Miss Holmes is sending along a

bunch of clippings about the French stabilization, which may interest you.
I am grateful for your kind words about my trip.

I enjoyed every

minute of it and it gave me just the psychological kick that I needed.
I am glad you are feeling better.
Sincerely yours

44-7-fa-4-41-1

Mr. Benj. Strong,
c/o Morgan & Company,
Paris, France.

VIRB : R







FEDERAL RESERVE BANK
OF NEWYORK
July 6, 1928.

Dear Governor Strong:
The situation certainly changes fast.

A few minutes

after I wrote you last week the stock market began boiling again
and this week's brokers' loan figures show an increase of 140

million dollars. The question is now whether the pools will be
able to get the public in again.

I do not think they can but they

may be able to make more trouble for us.
The 10 per cent money on Monday reflected the end-of-themonth window dressing piled on top of heavy borrowing.

In the con-

fusion the banks overborrowed heavily on Monday and on Tuesday

found themselves with large reserves with which they partly paid
us off, but the drop in money rates Tuesday was primarily due to
the fact that their checks put on the street on Tuesday were not
collected until Thursday so they got a day's free interest.
present 5 1/2 per Cent money, I think,

will prove

The

temporary.

I am preparing a memorandum for our directors next
Thursday, looking forward to a meeting of the open market committee
on July 18.

The situation is still very puzzling and I am anxious

to talk it over with Harrison when I see him before many hours.
Sincerely yours,

e0,--10,44414Mr. Benj. Strong,
C/o Morgan & Company,
14 Place Vendome,
Paris, France.

da-te-4-

July 12, 1928.

A little less than a year ago, or on August 4, 1927, our
discount rate was reduced to 3 1/2% with a view of stimulating the
European exchanges, thus making it possible for Europe to buy our agricultural products as they came to market.

Accompanying that easier money

program, which was effective in stimulating the exchanges and in bringing
about lower rates in the money maiket, considerable stimulation occurred
in the stock exchange security markets and in bond trading.

Coincident

with our low rate policy, Europe and South America have since taken approximately $500,000,000 of our gold.

This probably has gone abroad to stay so

that the American credit base has been definitely and permanently contracted
by that amount.

Following a continued expansion in credit this year, the System
in January began selling Government securities and has since reduced its
portfolio from a peak of $423,000,000 to $75,000,000.

On February 2, 1928,

and again on May 17, 1928, the Federal Reserve Bank of New York increased
its discount rate from 3 1/2% to 4% and from 4% to 4 1/2% respectively.
The combination of the loss of gold, the sales of securities and the mark-

ing up of our discount rates has naturally had the effect of materially increasing rates in the money market.

Time money is now quoted at 6%, call

money 6% to 8%, commercial paper about 5% to 5 1/4%, bills approximately
4 1/4%, short-term Governments about 4 1/4%, while long-term bonds have sold
off with corresponding increases in the yield.

Meanwhile, member banks' in-

debtedness to the System has been steadily increasing and now ranges between
41,000,000,000 and 41,100,000,000.

Under present conditions there does not

appear to be much chance of liquidating this indebtedness in the near future.




2

July 12, 1928.

As the result of firmer rates for money in the market, the
foreign exchanges are now again somewhat depressed and unless fairly
strong

measures

are adopted now, it seems not unlikely that as the crop

moving season approaches this autumn, agriculture may again be confronted
with depressed exchanges plus high money rates.

Under these circumstances

it seems desirable that prompt consideration be given to raising our discount rate.

In this connection, consideration has been given to recommen-

dation of a raise of 1/2% and 1% respectively.

The great preponderance of

opinion among the officers is the belief that a 1/2% increase at this time
will prove effective.

It is believed that such an increase will result in

considerable liquidation, permitting of gradual retirement of some part of
member banks' indebtedness.

Having in view the fact that there probably will be the usual
seasonal demand for additional credit this autumn, it seems not unlikely
the rate increase if made today will so set the stage as to make it

that

possible for us to go into the market during the autumn and again build up

our

portfolio of Government securities.

This program would enable the mar-

ket to meet the autumn demand for money without forcing our banks to

it by increasing their indebtedness to the Federal Reserve Bank.




obtain

FEDERAL RESERVE BANK
OF NEW YORK
July 15, 1928.

Dear Governor:

You may be interested in the attached memorandum which our
directors had before them at their meeting yesterday, and a most interesting meeting it was, with a fine discussion.

Owen Young really

carried the day and there was only one negative vote.
This ought to put a nail in the coffin, although stocks are
moderately strong today.

It seems to be possible that there may not

be a further heavy liquidation.

It is somewhat a problem of the in-

trinsic value of the common stocks today and there are arguments on
both sides of the question.

But even a few weeks of quiet ought to

pave the way for the kind of program we have in mind.

We started the weekly cable service with the Bank of France
yesterday.
Sincerely yours,

Mr. Benj. Strong,
c/o Morgan & Company,
14 Place Vendome,
Paris, France.

VERB: B.

encs.

NOTE:




I sent the memorandum which was attached to Dr. Stewart, through
Mr. Siepmann.
- B.S.

A
_

FEDERAL RESERVE BANK
OF NEW YORK

RRESPON'OENCE
,L

OA

Mr. burgess

OF

MIRO).

_EsA14., atrosi

FR

Comiarit:on of thto ruts, :,tsdit.count of this BAiu

iaid the

riato of diw-

count of ti* e .N.ok of-England, liana of Manse, ReiOnotant aad the r.,,ank of
If ..nythint, (wl.n to obUined

danUry 1, 1420 to the

Aly

.14,AA, fro&

ratea charged

or cooMeroiul cocomg:od.-tIon by co:axereill Luise in those countr1eL4 it will to of
or telegram.

A ooiy of the karagra n in Ay letter/to Mr. J-y, writtori fros

ia

I opposed ttie swondiont to the boderal AOscrve

atev'sadtny oorretiondsuce which lie, or Qthor5ut the '..

authoriving the *ro.ro.5tiv*

had eitn tho Feder,1 Rs.

verve Loard indicating ci,osition to the aten&Aint.
.

A stAttacnt of Lancet rte' for wady since Januxry l, 1Z2G, ty ,eriods,

sh..rted if conveniont.

Thle ahould snot wootythnce mtes, osrtifioAtes of indobtedns.

ruteL, *to ct eitosang, call ic-ul r&tes, eLoexcauge time 1.oat mtge., .ad costzerciA

(v-r
Any written evidence in our

int

..00, or eorresio do:Joe, inuioating our

2;-.44icy in the saAtri of rte %ad credit oont,rol in :ios Yo
31onta;.

,ast t1f,,too:.

This should includo qiCI,i0O Of .11 ainute te.-"xt14 on thie subject durin,

Oze

pqriod, oitnt.4 direetors' or xesative cAaittco.
A. states:eat,

by

Ariods, for theo dighteon month*, thowin theamount

our loans ,inti invoitaanta, olassified ano in total.
d.

A Etutswent of til4 nuater of sew-law:don t of natiootl and ettite Lanky

ra,uiroa ty Fedemi and Etuto LiOft. Of tli0 three vtatec- embraced in' our district; the
mmtler reo/ired by the Clearing houze; and the nuistr ro,cired to to'madt Ly direct:: E.
7.

A st,U4!.ent by mr. CKeo of how we de4It Vita 10* Y,:rt City i:.unws which

were iarg0 borrower aurni,, tnis 0.,rior- of cintsen mont.sL.
8.



146a0 ono sill nevi to.go LtiOK through the irctorslf,a4nuteL, the es,o,Liv,,.,

soamitt've minutes, and the files of the bane, froa

d..te oto

Nn to ttl)

-o

FEDERAL RESERVE SANK
OF NE.W YORK

CE C

ON1DENCE
SU EJ EC,

TO

Ztronf.

FROM

t here theC.

gred to civ e 1.t tab reigns of examlAtioas, to tot 4.11

of tht. data correo,oP6enee, etc., alto the Coa,trciior of the Cureney,
Re6ervv,

.flL ocretari of Ue ire

oard, ;vita tho ;:eilret?,,ry or

P9deral

Lou, mad !any

isonai oorresAndence of tti. Jape or asine on this auL,Jact, egicu will ihiAoht the
41culty ahlea pla

by addreroed

of tht? letterv bxo

Orieneod in getting thic data.

cj

ronLy toll.Warburgi. otherE may La ad6re,;bod to Governor Hording

or to C4/: r,or iu1jj.

.orr.oauot withr, Starreek, *

evamihdx in taie dietrict;, shouid ciat,

isv

X

lnea.

s

tiken n&Lion,4 teht

Lottere both to 4aid fru. tile

ttis

uanoAl ehouid be locaon at.

A Ceborio,ion of the wort of tho a4ter lAak ReiNliche DokartAe0.; the

iriod, the gind of wiviee VIt hes
en giVon them atout oredit conditione; tho noH.-:ir of ai,,iotlag of eatiatry Lin - avid

nuit:or

vioiti, rade to !nember bankiscb.r1nk. thi

at our tnI nc ho wail they ire attended;

no the general ghar4oter of the dicguemione

credit csimditiot)e tiald posioiee tthe;,e mt.etinge.
t."
1U.

As cum leta extracts ae koseibie from this Foderal Reserve :ulletln, from

nthly Roview, trial, any tOdrssee mode 4 the ;:4fricers. of the blina, And tr.
loirepondeno

both ,r.

y

.

td

ti,

pervonF"

rr-k4,;,Ueace and the tuirroteinglineo
.01.3,1

4-

) alth the .F.-derui Reserve ::Gard and it lAggberS, and with the officmrti of

cheory Dertenti to indicate our rolioy Ourint; ti .oriod (a.:,,: ,142i track ir,to
cr 1919) ca,Aior,ing banze againit t4ucolation tt4t1 i)x.,,analon;

,

.406ft prowci.

:&

noun ohterpriseR; and, in thtt recont i, riod, after lisoidation toA plaee, the eiellr
...._...
.,-.

dtta indicAtiL taat our attitude eat, then to uree tha bant.t to take or of their
cuvtomere AT

:.

. ,!.t

I made et the gauntry basket's meeting early this ye..Ar at the ';:obritom*i Aylodtli6,t1 I;




Illi

not to fore.* lituigation./ Tree might ingiude refereneo tu tit addrw,s
i

two extreots from the Conference of 6evernor 'held in krill and a gener.=.1 atat,2uent

nvB BAN

YORK

CO

DENCE

-

OAT. AALLY 21,4421

,aJ EC,

Cues- wad any other °Moore, it4=t tha 4ttitAo which they had at,,meo tow rd
weAtvr t-2,:nke j. t40 city.

It .-Aakou.i.c re t.r:_h_ht out that MEW eOflt4

reLeonsiiie for etarti.,!. the movoueht for buying oome,aroi.i "'sr.

0*6 wore

it etould ,iho he

dialted the,t we h4ve never twlen stop,' to tring ttout abeo1ute oredit restrlotion,
ue to stoot exoh,,Dge sieouittion, -and the detaiie of our ,oi.toy. in that regard need

not bs .r1tt.

t, hut 1 wart comrlete figuree uf the etook ehon4hge iontoo:unt a4
uad of the &tool. oxoa,age lowL uocount

ted bynt,
Of Lae 01.0011. e

oov:iring the kast eighteen month4.

tNer

f:Aif

also' L 3 amount of out..oftoen money loaned on thu eaohaage, and-the &mount -of Net ric

ney loaned on the xchance, and udould give a oh.J.rt or tit Jo of the rates durinE the
!eriod.

4 A%teirent from Mr. Staniey of the Guarthty Trwt COnkeny (to Le

tmined

nficiontiAliy) of the voiusie of iurchileee of gr%in and ootton exiert biliovand tiuAlux

export bliis, durilkg the orriod of their hc.,vieet borrowing from

A owOote record of offioers' aaiaries, from the,organiyttion cf tLe
tkwn to th, ,reAnAL

nt in too great detei1 tind elaboration, i:vt so ke to show
4h,e

hos tho inorleo have devolo,cia eitt the 1,, creates inAforoe. (Refer to
6

siekeh in whioh he sontione the inereaee from'4:.4)80)O,to V4JX40C0 in 1.11)14-.144)

The

groeth of the force ehuuid te &wen, und ouzeolly tho. trUWth7111,a16 VOitaits of busines,
add the ,-ohount which eau for ,coouht c,f the ire4.sury.
15.

A reeerd of ityroli 4nereases) of bonue paymvnts) hf our motion in

regard to Lonueev.)

of the Oak440 of the inores of t7714010 in ,.tyroli at the Leginninc

of 1i2 ) of our .nalysie t the Gott ,f

vin; of the tlatrek,a of ort&IL of our olericu

tad the Audy thtt we Itthe of livin4 eonditionb fur Liag oierat) of our rel,tive



level.with th-A of other LuAktal

an

ttt: oa.nge6ir

r

r ne

amount IA3r cai;ita,

other detu.ii to

\

FEDER-AL RESERVE BANK
OF NEW YORK

IDENCE

DATE

TO

*Nip 21,

SUBJEc,

-4-

FROM

PLOA tnkt our olerke are hot olwr,id and tnAt the
LW n600k4ty for takiaii chIVIr t41 Litorty L4

tbe incrovseiii tho vo4lize or Lufill:e,t

4,1

.coi hot oursisn4d.

fiefor to
tn

0::ganizttion and Subtremsury for0,1

oontrattoowith too oos4arativeiy stAtion4ry

1,1110 other iortlnout fatitcre thit justify our kelk,ry niiey.

nurA.or oeaniloyes)

'el in this the argtment bent to the Feder&I Rei.erve 'curd to juvtify the salary in-

crese in 14)2

.

.11,1 th

clftes, of !00416 4Lonts, with the figureo la. Jay nnAl giyink

owai,ariconz of our t,:a141.rie .AW thei:..e in tiv2; .o.i.41he Nee York LA4k60

ma, rioon

tatoe

o. our se.ari.a with thot of other Rorer e
14.

A otatehient of the coot of our roti catAo ier eiuure foot; oo.t

tAnk

groper, exo.oelve of tu.ult& e.ad other item:,, not 4hoo1ute,y bOiidinA rduoo

t to tot:: eutic foot baeleir add 1. co4 or XT. &iiIersi stetouleht of the ue,ods of the
lied for outhority to go ahoo
%nk whion rae oubzitted to tbe fie$A.rve Boxrd in we
(brief)
Tro bride," decriition/ of th,(. oh.foteriv, ,roviuion,
with to. buildinz, L'et from
;the reoretAion dieleion, of the aeseiebiy ro,z,s, of Vas

tut, of We

ve.ult by old methoo of oonetruotiou nô two oo,A, of our ..rooiA.d

vid the saelni, ilue to tus v-uit test;

'int; cue to uoini;

&md

incluoe

at of th5 nuaL:a. of 4A.,,logo wo havo.000upied, includin, the sarehouge in
the haount of v.Aea we QCCLI,.intais

trot, 46d -areet, two tht
toe nui.,Lo-c of floorq

AL tn

the rent:A rw; ti;4Taio AAA; th4,o.

e 0,tiort mt.) thKt neesotred'on oar
rented ty tlAd E,tritabio Buieingl
Intbs

4nd the mto at whioh

QL Lrizon
P11t1

r

N ktatoa.sot of ort:roroedin, in the vILrioui. de-

of the hulLbr of c,ice of tuiorculot.io in tho force; of tha nuuttor of

'cal]ing at L., :end Le,--irtwent, every
bond

t occurred durineuonvereionwhon,



or tho crutl (witicA.ine the numbr 4f ,120:00

tha,t puri)oee;

reo,t1,..,

tItheamt ,f the date the ovlice.ntified %lc. of Unql

wht0CoW tle

to Lion ui the

11k,

of the

DERAL RESERVE SANK
OF NEW YORK

dul 21, -e1

F10E CORRES ONIDENCE
-6-

ZArong

4f the Wall .'.t.rset explon:lon, and gonarally of the

scattered i. difteren% vau1Le as far u,toen aw 440 Etreet;
and ohch whicn 40 hol.;
6110k emery day;

i30i;.4t0

,A14 in

tue total a.ount, a wecorition

the v,Lule of eecuritiot 4nd (meth which J,ust bit taxon out od

the nuvler of weft in. the ,rotectioh foroe'And

the On t of oiler:Ai:16 the esti:Aerial

RAI tusy t4r trd;

the coe,t to the olerae .per luncheon :served; the

hea0Mts of service in th3 tier; buildiaL.

All of thit cuA te ex,re:-Ado i U. Lriafoet
4sitle tom, simply the facto vithout laboration..
15.

Th4 iLt

t.Trowluridgete eacioyment; of 4r.. ho,flie;

U e acohitectal competition wfia- held;

dlte when Eitz waw,emloyed;
the nundution Coo,Any;
18.

thedt.e -whoa

the date when the engineers were AuloyAl the

the cil4to of the proliminAry fooadatioos examiaation by

the cite when the first idurchene of mil ett,tattJ

A utatee,ent of our trlixeling exi;onz:e account; Allat it (Poeta per diam,

exciire of railroad taro, 4,ad how much of .it ie Vvv-o6r

BeLatione repartlAult;

a

atA,teaent of my on wx,enA, adoount, e,nd or woat it conclwte (Zro tile it five yesr,i
probaLly oaly railrcid fro ooverin6 tripe to 16.:44hihtL.on);

a complete Aislyeil. or the

ex;ionas to36,,urit of tee hank, ehowine it growth from the teginniniA, .it.4 a deaeriptioa (41

the s.,thode of octroiling exioneer; %Ad entorela cchoxy, with th.3 forse of vouchers,
etc., u:Atd;

thEqattu, of oom;wtitivo tiddin,g;

tNe Qapenbes of the kktnw;

the caution which iia.t hosa givea rec,rd.

tee sto;s se am tkin L. furtuer redoes exponeew;

and

a ec..aration of the itemc t*tween tho 3 whion are conLroilatie J.nci thou* Whist cannot be

controlLod, wuch, for in*tance, so Pederll F0661143 ;:vard steersente, eeet of

to lieue4

etc:.

\

loto

17.

A etuteent, vith otort if ;iceeitio,

dtiodelts, note

of our losn.




,A1J6 th;.4 floctuutiow i4 our

nd reietvo accuptsor the lt. oioteen 42ov:the; es anlAysis \'4
Ree,erve L-ti4L, with ouittio

ni4tion et our xLothed

I

FECJERAL. RESERVE BANK
OF NEW YORK

I

11-710E CORRESPONDENCE

DATE411:4 2,17 .411,
SUBJ,CT:

:OM

a3

Eonj.

-6-

ronic.

tOiiOY in porchaeing ail-a for other A *r-tr
A spielAti etatewent wallt4d oy .,enator -immones the deVille Or 'hien are to

obtioad trAn Ar. Eddy.

Ti e should Lo , repared very

,;omktly.. /.

borrowir

A etatmeent et the fluctuations in the dei?otite 404 leant:, lave tzente, and/

etc., Al ieriedal of the San Tor city meaiber banks' (better tate only ,Tatiattan and give
the L'0144 by letter or nuator) during the erio6 of sintoun mouth-.

Thim 6hould

bo preparoC that it 'iii khoe Lho heavy kuil on'the Nee York bank& oaut-ed 4 withdrawals
of dlkoaits to the interior and by demanda okon No* Iork. hanks ter 4.6004,LOG4tiOW, fros'

the interior.

. J, for Covernor fiarding,

We have toe° data in the Eank,

eboain no the :,1,5*

ahre inore:Ited their I(V.ag to out.of-ton banke, firms,

etc., during Ctim porloo of vtrain.

Any data that oe can U6, alreNtly in L40 b,nk, may

be later euk,ltionted, if need ta, by a Ailt4Lie 01406

.

na.ara to '6,9 *out to 1;116 Likortat

banka, but thib 8,40U40 not he tient, hooever4 until later.
Thie semoranduiVis ;reparee in five co,418, for Lesors. Cia., &Alma,-k)urcey

44/701.bili who are aaked to take charge of getting out the loteriai, vita 1;0. a6elart 4ce

Vaat thtoy a _,od, and doing wo ju t ac ,;roa,tly aeoiLa.

ujU esios4 rel4 Vae tenoraeUus,

fke tote of muggeetions thi.t he an offer, and let me bv bLi y Le.arneae or teiegrAt
in Wathlogton tons-rot:.

Brevity means seed and better understandir61






FEDERAL RESERVE BANK
OF NEW YORK
September 23, 1921.

Dear Doctor Burgess:

I have just finished reading

the report which accompanied your

memorandum of September 22 relating to unemployment.

It is exactly what

I wanted, and I cannot refrain fram saying it is such an admirable report
that I am sure it will be of great value to the members of the conference.
One point on which I should like to have some information, is the

basis of statistics on unemployment issued by the Department of Labor, and
the basis of the comparison which they nake with former years.

Speaking

from memory I recall that they recently estimated that 5,600,000 men had been
released from industrial employment.

I have heard that these figures are

arrived at by taking some 1,700 industrial establishments and then applying
some system of averages to the total of industrial employes in the country
and comparing them with the peak of employment during the war.

I should like

to get this in more detail, as well as have a critical examination of the
basis of these figures made and see whether they are not, in fact, misleading,
as I believe they are.

Any further material you get I should greatly appreciate having as
soon as it can conveniently be sent.

Nany thanks for your help.
Very truly yours,

Dr. W. R. Burgess,
C/o Federal Reserve Bank,
15 Nassau Street, New York

BS/RAH



'.3optamLor 24 1921.

..rootor 3ur4;-es8:

have lust finiahad re:4110g- the report whi a4 aoomossial wonr

oralanm of Septombor 22 rel tl.a, to uaal4;loosat. It iz extotly ttat

adr/roblo rovrt

..antad, aad Ialalut rofrttin fzem oavi.:4,2, it lz
tirAt

-m vire it :11 wO of ,raut Ar.lte to UWDrocnitora of tic. aonfaronoe.

oc tuf,r=tion, is tie

0-ae peirit it alleh I should 1-1:ze to 21.7.ve

a-sis oe stetiotio:- on tam.:Tployloal. lowaed b; tho Doprtr.oat or Laoor, aad

the L-iii of tho oomvaris..in hich Cloy tAke with forma° ye.Lrs.
from me.:7ni7 I?Quail Clat jre rooen.".ly

ite

41am-..inC

that 5,300,0W =on had oocma

elaZ1:74.1t Ih;...o hoard th t those auureo ere

rulkasel. rIVIA

arrivod at ,y tiAL4, ztAm 1,700 inZ4utr'..a3. eztablilamntz and then arlaWinC
rgle total of ind-chutrial employcs. in the ocantry

some oystoc.1 of averat;es

and caspaensiei

it

tha peak of amolojmunt 0321n, tho war0

Ishould lige

a 21,..ve a critic:A_ ez.zaraination

to 014 tLis I. Awro
buziz of VIC= f13-ures ni,do and see

of tha

ther tboy arc not, in fr.ct, ml,AALdirk

asI o1ievo they ure.
Lny further rt4I cia Jot I hould zreatly 4proolute /want; ss
pow. as it zaa conSenlantly ho saat.

tiaaks for your help.

'to, truly youea,

1h*. W. £t..2airzoss,
C/o 20.tra1 Rozervo 254744
16 lele4aau Street, Iicr.



FEDERAL RESERVE BANK
OF NEW YORK

O
September 28, 1921.

Dear Doctor Burgess:

Thank you for your note of the t6 containing further information in regard to the figures of the Department of Labor. I

have suspected the figures of being inaccurate, and feel very sure
that they are, and sincerely hope that the conference on unemploy-

ment will clearly disclose that fadil(21

1:11N1

Very tru4.Yours,
4,11Lc

ALuk.

Dr. W. R. Burgess,

Statistics Department,

Federal Reserve Bank,
15 Nassau Street, New York.




AE V

NE,

-./RK

iFFICE CORRESPONDENCE
To

Dr. Burgess

FROM

DATE Feb. 14, 1922

192

Governor Strong

SUBJECT.

Colonel Ferguson was my host in Washington and treated me most
delightfully when I was last there.

I would like if possible to get him

the studies to which the Attached letter refers, and change the letter so
as to indicate that we are sending him them, or at least point out in detail
where they can be obtained.

The statements contained in my address, which came I think from Mr.
Snyder, indicate that efforts at price control completely failed in the
desired result.

BS.MM
at
 t.


M-4-22

MISC.

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE

Oanow-

To

192

DATE

SUBJECT

FRG

dw1l'

Etut&o

jr

o4f-o-to

42-

racettnAq 0-74,0(atc_)

4,ci4,3p run, t-zo

&art?) itg-to-

MAP kr:W-5

CA-7~c-)

?_t_c

-tfrayi/y'

/1ka-CA:re
t9-1

77vi4Z--)

f(ct,f

(-a

es2f-pnt_ayl

-

4A-

Cg7Avnyffei

cAr fie
15-10-r

-

ttAt1L-v tA-;

144,t-

17/wtt

0-CA

774,tilk-f

.

Gr4z_oc-f-

7144L----6,7,A4LeziA,k;

tVd

JikAi dov)

6r5

.

a

air-v)

ik-take_k

g-(74v)

714,1LE4v11771,-,

ktuttuA4- naufte-i- fact

ClchinivititJ




hkater

ify

traALA' a

fru-

tccittcc-_

kno

MISC.

.0 M-4-22

FEDERAL RESERVE BANK

OF NEW YORK

oFFICE CORRESPONDENCE
To

DATE

192

SUBJECT:

FROM

AuteA.1

iratt:r /qzttea7Lt4

11174_17u

ML Q

(P/Lo--ce

-

041-2,Z&

Cte-6110

ake

64

CY

cr-a_9?

IX-Fsaraui

fit'

yei,

f-xv-rk
dctx_

Crue_c_e_t_Csa-sLq4J

(0-ctiAg

7ktel

11. 73(A__4

Auk

t;cioq. 130-43D1)
,rfktuf-- rke)




ut-ek

OttivVriicuLt-1

(

m

4

Tetfr,, Vaistr<

tue-ryvt tic

kritease

n010 ror Mr. burgess)

misc.4.1-Inws-a

FEDERAL RESERVE BANK

OF NEW YORK

uFF10E CORRESPONDENCE
To

Mr. Burgess

DATE

Aug. 25, 1924
1

SUBJECT:

Governor Strong

FROM

Attached is a very confidential memorandum which

Mr. Winston somewhat in a spirit
reading;

of irony, which you might

was prepared by :7be interested in

also Mr. Snyder.

Please see that it is returned to me without fail as Mr. Winston

does not want

ES .MM

att.




it to leak.

#2.Am.....

FEDERAL RESERVE BANK
OF NEW YORK

Spa, Belgium,
July 21, 1925.

Dear Dr. Burgess:

Now that mail is coming regularly, I am getting
your reports, which are very interesting, but which I shall
acknowledge separately, because my other letters to the

noeX
ficers of the bank will cover everything I have in mind.

40:1just want to let you know that they are appreciated.
Very truly yours,

Dr. W. R. Burgess,
Assistant Federal Reserve Agent,
Federal Reserve Bank of New York,
33 Liberty Street, New York.







FEDERAL RESERVE BANK

OF NEW Yo R

K

Biarritz, France,
August 1, 1925.

My dear Dr. Burgess:

I was very glad to have the report on the stock market
situation, but, unfortunately, it came after my cable No. 4 was
sent, caused, I presume, by the usual delay in the mails.
I am writing Mr. Case about the rate matter (as Mr.
Jay will be away).

And I am also writing you a separate letter

about the newspaper men, so that you may show my letter to them
if you think it wise to do so.

With best regards to all at the office,
Sincerely yours,

h
Dr. w. R. Burgess,
Assistant Federal Reserve Agent,
Yederal Reserve Bank' of New York,
33 Liberty btrcet, New-York.

in c.







MISC. 4. I -240M-1-24

6

FEDERAL RESERVE BANK

OF NEW YORK

Or FICE CORRESPONDENCE
To

DrBurgess

DATE

June 13

1925

SUBJECT

FROM

Will you please be good enough to let me have a list of such
reports as Governor Strong would find it useful to have sent
abroad this summer.

to

him while

It is desirable to keep the number down to those

which will be of real value, and yet have them comprehensive enough to
keep the Governor in touch with the situation and conditions here.

192._

FEDERAL RESERVE BANK
OF NEW YORK
Biarritz, France,
August 1, 1925,

My dear Dr. Burgess:
)/11,4('

Thank you for sending me a copy of Mr. Wasson's 17

ter, and of your reply."9//f

/

1/6

mistake for me to leave without
Possibly it was
taking them into my confidence, but you and they must remember
that there are considerations on the other side of this question.
Had the news been spread abroad of my sailing, I
would have been met on this side with endless importunities from
representatives of the press to explain the object of my visit;
and undoubtedly would have been beseiged by all sorts of people
to do all sorts of things which I could not do, or would not want
I have been through the same thing before many times
to do.
and the embarrassments resulting from such trips when they are
heralded in advance ere much greater possibly than representatives
Besides that, it might
of the newspapers understand themselves.
have given some official character to a trip which was largely for
And that might have made it necessary for me to accept
pleasure
no end of invitations which I did not want to accept, and which
would very much have reduced the pleasure of the trip for both my
daughter and for me.
Mr. Wasson, I believe, is misinformed in regard to Mr.
Morrow and Mr. Leffingwell. Neither of them intended to make any
statement, and when I saw them on the boat the night we left, I
found that they had been discovered by the representative of the
Wall Street Journal.
And it is my impression that neither of them
had given any statement prior to sailing, although I did not ask them
definitely.
I am scrry to have Mr. Wasson take the position that the
newspapers have an inherent right to information of this sort. Surely
one has the privilege now and then of going to Europe for a holiday
without telling the newspaper men about it, and even to come over here
for informal visits with some bankers.
I think they attach altogether
too much importance to the whole affair.
I do at times resent the
urgency and the importunity with which members of the press make demands,
Surely they would resent very
as distinguished from requests.
strongly any urgency or insistance on our part in the publication of
material which they do not want to publish; and why should' we not resent
their urgency and insistance upon publishing stuff which we do not want
published?




-

..AL

Biarritz, France
8.1,25

Dr. Burgess

RESERVE BANK OF NEW YORK

Mr. Wasson is right when he says that I dislike
publicity, but it is not a matter of personal like or dislike.
really a question of what is best for the bank.

It is

It may be that I shall give the boys a statement on my
return, and I would appreciate any suggestions that you or they may
have to make about it, - whether it should be given to the men on the
steamer, or to the Wall Street men.
Please write me when you have a chance.
Sincerely yours,

Dr. W. R. Burgess,
Assistant Federal Reserve Agent,
Federal Reserve Bank of New York,
33 Liberty Street, New York City.




FEDERAL RESERVE BANK
OF NEW YORK
Hotel Majestic,
Paris, kranco,
August 18, 1925.

Dear Dr. Burgess:

Many thanks for your memorandum of the seventh and the papers
I have not had a chance as yet to study them fully,
which accompanied it.
but will do so and shall probably write something to Winston in the course
of a few days.
It is much more important to get a debt settlement which will
leave room for monetary reconstruction over here than it is to collect more
money and prevent monetary reconstruction.

We get a little evidence in the clippings of the publicity work
that you refer to, and my only word of caution is not to become involved in
anything that savors of propaganda.
Of course I know you will have
mind.
with the banks borrowing from $100,000,000 to $150,000,000 as
early as the middle of August, it looks as though the fall demand will be
considerable. But I rather agree that the rates are not likely to get
If they do, we must buy some more securities.
objectionably high.
The reports
get are most illuminating, and help to keep me
up to date, and to avoid the vacuum which otherwise must be filled on return.
Best regards.
Sincerely yours,

Dr. W. R. Burgess,
Assistant Federal Reserve Agent,
Federal Reserve Bank of New York,
33 Liberty Street, New York.




-

Hotel Majestic,
Paris, France,

August 20, 1925.

Dear Dr. Burgess:
I am grateful to you for your report of :uly 31.

The attitude we took with Senor Pedro Merle was absolutely correct. We certainly cannot make a banking arrangement with a
hypothetical bank of issue, which hasn't yet got a charter, or officers,
or anybody to make contracts.
Of course I am sorry about the publicity regarding my
be avoided, but if the newspaaer men bother you
about it, you can tell them that by observing some caution I have been
spared the necessity of doing many things which I would not want to do,
and of declining to do things which would be embarrassing to decline.
Any advance notice over here of my arrival mould have kept me pretty
busy. Fortunately, skipping from one place to ancther, and going to
some resorts as well as to the capitals, as well as staying in Paris
in a hotel which is suite unfashionable, has spared me a good deal.
trip.

It

could not

I wish that I could be more sympathetic about all the
Federal Reserve System and recharter.
It
would suit me perfectly to have the whole thing left alone for a while
for a good sound sleep.
over on my return.
We

agitation regarding the

can talk it

If the American Economic Association meeting must be a
ederal Reserve party, as seems the case, I should think Carter Class
ould be an excellent man to make a talk, although you may have difficulty in getting him.

We have got

to be a bit cautious about that stock market

this fall. If business looks up at home, following good crops, and
these funding arrangements are conclude, and then some important

countries over here undertake monetary reform, az is not impossible,
we might have another burst of enthusiasm at home, and we would then
have to do something about it.
But I guess it will keep until I am
back and we have a chance to talk it all over.
I have read all of the

reports with

much interest.

There has been a good deal of emphasis laid upon the
moderate amount of commercial borrowings as distinguished from borrowings on securities. It seems to ma the explanation is simple
enough. We have had a great period of refunding and capital raising.
Transportation, utility and industrial corporations have raised capital
am paid off bank loans, and actually had money to loan. The result is



Paris, France

Dr. Burgess

8.20.25

lower borrowings, heavy flotations of securities, and more security
borrowings.

whole thing.

I believe that this explanation lies at the root of the
Sincerely yours,

r. W. R. Burgess,
-f-,ista.lit Federal Reserve Agent,

ederal Reserve Bank of New York,
33 Liberty Street, New York.




(2)

Hotel Majestic,
Paris, France,
Auguet; 25, 1925.

Dear Dr. Burgess:

Thank you for your letter of the fourteenth.
will be guided by your views about n. statement
and try to duck the men on the steamer.

rbet

you read my letter to Ur. Case about the rate
situation, as it partly answers yours.

shall do tho best T can to give

when I get

you all a report
think will make our decision as to the
few months easier than it can be until I do

back which I

policy of the next
return.

sincerely yours,

'. R. Burgess, Esq.,
Assistant Federal Reserve Agent,
Federal Reserve Bank of New York,
33 Liberty Street, Now York,




MlSC

FEDERAL RESERVE BANK

4. 1-200M-7-21

OF NEW YORK

OFFICE CORRESPONDENCE
To

Governor Strong

FROM

DATE

October 50,

SUBJECT:

W. R. Burgees

The nerspaper men are very anxious to see Dr. Schacht, and after
our understanding with them that there would be an opportunity it would be
too bad if anything'slipped up so that they miesed the chance.

possible to make any definite appointment now?




Is it




For

ifNo. 131.

Office Correspondence
TNDr.

FEDERAL RESERVE
BOARD

iili r ei s s

From




Dee

November 2, 1925

Subject:

Benj. StronE
2--8495

cfn

g *1%
NON

gib.1

pOINikYLtqb
Your memorandum of October 30, in regard to

Dr. Schacht giving an interview to the members of the
press, reaches me here in Washington.

As I think

you are advised, Dr. Schacht will be in Chicago this
week, but he will be-here long enough after bis return,
and, as promised, will see the newspaper men.
be arranged when I get back.

It can

FEDERAL RESERVE BANK

OF NEW YORK
Hotel du Cap d'Antibes
Antibes, June 6, 1926.

Dear Doctor Burgess:

I have your letters of April 30th, May 14th and May 21st, all

having been read with much interest, and none of them acknowledged because
I have had no time for the routine mail.

The following are the only comments

that occur to me:

A program for meetings of the Advisory Council should be prepared at least a month in advance to give them time to study.

Any proposal to amend the Federal Reserve Act so as to eliminate
the use of Federal Reserve funds for speculative purposes is a folly.

e

cannot identify the funds once they are borrowed, nor control their use.
Attempts to do so will be fruitless and just cause trouble.
I think we need none of us worry about credits to France by
American bankers until they have got a complete and sound plan.

I have my-

self talked with Governor Norman, Mr. Lamont, Morgan Harjes & Company, Clarence

Dillon, the Paris representative of Blair & Company /,Mr. Monet)and others,
and I think they all agree as to the unwisdom of any credit until there is a
asound plan.

None of our directors need have any anxiety on that score.

If Morgan & Company should decide to consider lending them some money, they
will certainly advise us in advance, and I shall expect my associates to keep
in touch with them in New York.

I hope our rate change works out all right.

There seems to be a

note of doubt in your letter, but with prices declining, I cannot see ground




9,,,OERAL RESERVE BANK OF NEW YORK

(:

for uneasiness.

2.

Dr. Burgess.

June 6, 1926.

It was inevitable that large borrowings would be transferred

to New York when the rate change was made, and the fact that our portfolio has
been maintained indicates that we still have a grip on the market, which is as
it should be.

But you will have to look out for the June 15th maturities or

we will have a money jam then.

Some temporary purchases

necessary.

Many thanks for your fine letters, which keep me so well informed.
I will be glad to hear how the golf match turned out.
everyone at the office.
Sincerely yours,

14; ifitt&itit

Dr. W. Randolph Burgess,
c/o Federal Reserve Bank of New York,
New York.




Pleas

FEDERAL RESERVE SANK

OF NEW YORK

Hotel du Cap d'Antibes,
Antibes, June 7, 1926.

Dear Doctor Burgess:

Your note of May 28th is just received.
I hope you will write me fully when you have time giving details
of such report as Sprague and Hollander make on their return.
As I am now loafing and out of contact with things, there is no
news to send.
Sincerely yours,

Dr. W. Randolph Burgess,
c/o Federal Reserve Bank of New York,
New York.




FEDERAL RESERVE BANK

OF NEW YORK
Hotel du Cap d'Antibes,
Antibes, June 11, 1926.

Dear Dr. Burgess:

V
I find I have failed to acknowledge your letter of May 7th, and at
this late date comments would seem rather stale.
If we get a record of the hearings subsequent to Dr. Miller's, which
I have, it would interest me a good deal to read it and give me a little understanding of the situation in case I am called again.
It keeps my conscience easy to get such reports as yours.

Otherwise

I am likely to feel a bit of a slacker!
The reports

in

the newspapers and what I get from the office indicate

that you are probably being puzzled a bit about the money market and the possibility of a revival of stock speculation.

The situation will need watching.

So long as we have a large portfolio, we have the situation in hand.
I noticed

in

Dr. Miller's testimony a statement that he thinks we are

now carrying too many Governments.

2

He is all wrong.

The situation over here

could develop overnight in such a way that we could get 200 or 300 millions of
gold, and it is those Government securities that we must rely upon to protect us.
There is some growth in France of the idea that stabilization of the
franc should be attempted at once, even though involving great sacrifice, and
that it should be supported by, first, a Government loan in the United States,
and second, the utmost freedom in using the Bank's gold reserve.

If Germany

should undertake cash payment of reparations to France, and France should undortake stabilization with Italy and Belgium following suit, and the wretched
British coal strike not be settled, I could see quite a little gold going to




FEDERAL RESERVE BANK OF NEW YORK

America.

Dr. Burgess.

2.

June 11, 1926.

I admit the contingency is somewhat remote, but we cannot afford

to be forced into a position where our only protective measure would be dissipated, because a high bank rate would not help us a bit, in fact would make

matters worse, and a low bank rate might deliver us into the hands of the speculators.

Our security through this period of readjustment over here is going to

be eternal vigilance in looking ahead, and I see nothing in Dr. Miller's testi-

mony which indicates that he is looking further ahead than the end of his own
nose, nor indeed that he has a comprehension of the world monetary problem.
Sincerely yours,

Dr. W. Randolph Burgess,
c/o Federal Reserve Bank of New York,
New York.




Orothiefi

C.. BENJ. STRON

1010

WI

111_

Hotel du Cap d'Antibes,
Antibes, June 21, 1926.

Dear Dr. Burgess:

Yours of June 4th is just received, and what you send is all very
interesting.

Dodge's article in the Federal Trade Information Service is

not a patch on what we get over here, sample of which, from a newspaper at
Nice, I am enclosing.

I will be interested in hearing the outcome of the Open Market Committee meeting in Washington, which I presume will be along now in a few days.
I am glad to get your letters.

They keep me well informed.

Best regards.

Sincerely yours,

Dr. W. R. Burgess,
c/o Federal Reserve Bank of New York,
New York.




a

REI"C.FIN,E:rm
Lilft,

4

126

This article is protected by copyright and has been removed.
The citation for the original is:
Barral, Jean. “La Corde au Cou! [The Rope Around our Neck!]” L’Eclaireur du Soir (Nice, France), 1926.
The original clipping is preceded in the file by a typewritten translation into English.




Hotel du Cap d'Antibes,
Antibes, June 29, 1926.

Dear Doctor Burgess:

Your letter of June 10th regarding the Indian evidence reached
me only yesterday.

It does not call for any special reply, so I am merely

acknowledging its receipt, with many thanks.
Sincerely yours,

Dr.W. Randolph Burgess,
c/o Federal Reserve Bank of New York,
New York.
BS:11




FEDERAL RESERVE BANK

OF NEW YORK
Hotel du Cap d'Antibes,
Antibes, July 3, 1926.
Dear Dr. Burgess:

I am returning the proposed circular in regard to the ratio of bank
capital.

In its present form, it seems to me little likely to give rise to

uneasiness such as I had feared at home.

Either the text has been changed,

or else a few weeks' rest here has made me less apprehensive in such things.
I can see no objection to its publication.
Of course this appears as an official circular.

Our official circu-

lars, as a rule, have been confined to matters having to do with the operation
of the Federal Reserve Bank, and it seems to me
is really a magazine article in the form of

rather questionable

an official

Bank circular.

it a character that hardly strikes me as being justified.
into the regular monthly bulletin instead?
Sincerely yours,

Dr. Ir. Randolph Burgess,
cio Federal Reserve Bank of New York,
/
New York.




to put what
It gives

Ilhy could it not go

WASHINGTON: D. C.

CHIEF FOREIGN OFFICE

rm

PAR.

WHALEY-EATON SERVIR

10 SQUARE DESNOUETTES

(19 BOULEVARD VICTOR)

0

"""nvtuNsey BUILDING

"A CAPITAL INSTITUTION"

CABLE ADDRESS: WHEAT

FOUNDED 1919

JUL

Itre

RATEL FFIHNoisigs:

NKL

larklals

American Letter No. 409.

All

July 3, 1926.

-

rights reserved.

For Clients Only.

Dear Sir:
1.

In view of the many surmises as to Governor Strong's mission abroad,

and with particular reference to stories that he has offered many millions of
American Federal Reserve credits for stabilization of the Belgian, French and
Italian currencies, We have had careful inquiries made, in various capitals,

and the following may be regarded as authentic in all essentials:
Governor Strong has offered no Federal Reserve credits of any
sort to France, to Belgium or to Italy.
Governor Strong has not seriously conferred with any political
financiers. He has carefully avoided undertaking a function
that is outside his line, although it is true that efforts
were made by more than one Finance Minister to negotiate with
him.
Governor Strong was not sent to Europe on a special mission by
the President. He has been in conference with the heads of
European banks that are correspondents of the Federal Reserve
Bank of New York, as is customary.

The one special mission Governor Strong had in view was accomplished quickly. It was, it is intimated, strictly a British
banking matter.
There have been some negotiations relative to French credits, but
these negotiations were and are conducted by private persons.
2,

AMERICAN POSITION:

The American position in reference to French credits may

De epitomized as follows:




It was one thing to grant credits to the Bank of England and
it is another to grant them to the Bank of France. The former
institution is free from all political coercion, although
backed to the limit by the British Government, which is stable
and economically sound.
The latter institution, on the other
hand, has recently been conducted on accepted principles only
because of the heroism of its Governor, who was constantly
subject to attack by political elements and who has finally been
removed. Federal Reserve resources are the most sacred trust

7/3/26.

2..

The responsible authorities would not
dream of committing the System to a credit program that
would involve it in the vicissitudes of political currencies.
Nor could they sanction credit operations in cases where
Governments are obviously lacking in stability and where
this instability is likely to reflect itself in arbitrary
instructions to the banks of issue. Neither is it an American
It is to be recollected
habit to pour money into rat-holes.
that even the arrangement for comparatively small credits to
Belgium fell through.
fund. in America.,.

PROMISES:

Although no commitments of any kind have been made by America, and

least of all a promise, there has been, and still is, a sort of understanding
that both the United States and Britain are ready, when strong hands have taken
strong measures, to assist in stabilization of depreciated European currencies.
But the intent to stabilize must incontrovertably have been demonstrated in advance, as was the case with Germany.

American authorities are ready to go a

long way to bring all of Europe back to gold, but the first "rescue movements"
must be from inside, not outside, the countries affected.

The Federal Reserve

System has almost unlimited capacity to aid through its ability to purchase
foreign bills.

It will be noticed that gold has been moving to Britain the

past several weeks.
SITUATION:

At this date, then:

(a) No Federal Reserve credits for France,

Italy or Belgium are under negotiation; (b) Responsible authorities do not believe that the French franc will be stabilized at 35 or 40 to the dollar.

On

the contrary, the best neutral opinion is that the franc, when stabilized, will
be at the old par, approximately 5 to the dollar.
PROPAGANDA:

It was natural, in view of speculative and other attacks on depre-

ciated currencies, that the countries affected should have encouraged propa-

ganda intended to give the impression that enormous American credits were being
arranged; and that politicians, for domestic purposes, should, have represented

themselves as resisting exorbitant foreign demands.

The facts, however, are as

stated in the foregoing paragraphs.
TRANSPORTATION:

merce Commission


There are three important situations before the Interstate Com-

and they can be briefed seriatim:

Hotel du Cap d'Antibes,
Antibes, July 16, 1926.
Dear Doctor Burgess!

I have yours of July 2nd, with a fine report of what has been going
on.

Many thanks.

Mr. Warren is in communication with the Secretary of the Indian
Currency Commission in regard to a supply of the complete printed report and

testimony for circulation in America, and I will ask him to let you know the

result

.

I would like to see the galley of our statements before the Peuse
Committee whenever it is ready, and am glad that you all feel satisifed with it.

A recent letter stated that the balance of the record of the hearings was being
sent to me, but it has not yet come.

I have Dr. Miller's complete statement,

but nothing else.
rhat you write about the Stable Money Association is no more than I
expected.

Their activities trouble me, and I am wondering where the money comes

from to maintain them.

I hope you are not all suffering from heat and overwork while I am

loafing in this delightful place.
Sincerely yours,

Dr. W. Randolph Burgess,
c/o rederal Reserve Bank of New York,
New York.
BS:M



Hotel de l'Europe,
Amsterdam, August 3, 1926.

Dear Doctor Burgess:

There are so many letters to be written that I am just sending you

this acknowledgment of your letters of July

9th and July 19th.

I read them

always with much interest.
You enclosed a memorandum about the First National Bank of Amityville,

which reminds ma

that on this Witham Bank business, Mr. Case did a

grand job.

think he deserves a medal from some of those banks who were coaxed out of
their difficult and dangerous position.
Sincerely yours,

Dr. W. Randolph Burgess,
c/o Federal Reserve Bank of New York,
New York.

BS:11




Hotel de l'Hurope,

Amsterdam, August 11, 1926.

Dear Doctor Burgess:

Governor Strong has asked he just to acknowledge for him the re-

ceipt of your letter of Ally SOth, about the market and business situation,
which he read with much interest, SA he always does your letters.
re are moving on to Basle tomorrow, there we expect to meet Dr.

After that, plans are uncertain, and

PaChmann of the Swiss rational Bank.

the Governor will perhaps roturn to Paris, or else go 73ast to Budapest and
Prague.

!Ir. rarren, Who has become a real PLrician, will probably join us

at Basle,
It looks as though we would not sail before September 15th or 22nd,

but no doubt by the tine this reaches you, the cables will have given you a

better idea as to that.
1th best regards, T am
Sincerely yours,

Dr. V. Randolph Burgess,
c/o Federal Reserve Bank of New York,
New York.
13$ :M




FEDERAL RESERVE BANK

OF NEW YORK
Biltmore, N. C.
Sunday, January 9, 1927.

Dear Dr. Burgess:

You have, probably, escaped the lightning bolt - and if you like
thunderbolts.

I'm truly sorry.

This is mainly to let you know that I

have not and do not withdraw one word of what I said to you in my apartment.
It is also to let you know that finding your own appointment not now possible,

I am to-day unreservedly urging that Mr. McGarrah be appointed, and am also
trying to persuade him to accept.
If knowledge of our good will, of our appreciation of your work,
and worth, - is a satisfaction, - you have that in full measure, - and we all
want you to know it.

stand by the ship.

Get old and

bald

and grey - as some of us are - and

She needs you at the braces and halyards.

My beet to you always,
Yours,

Dr. W. R. Burgess.




FEDERAL RESERVE SANK

vod
18 1927

OF NEW YORK
Stuyvesant Road,
Biltmore Forest,
Biltmore, N.C., February 15, 1927.

Dear Doctor Burgess:

I am much interested in the memorandum of January 14th about
European consumption.

There are only two points that I will refer to now,

as the probability of my dealing with the matter at present is rather remote.

One is to call attention to the fact that when examining a price
factor in the prosperity of the classes producing these export goods in this
country, one must bear in mind that we are not dealing with the total crop

when considering exports, but merely with the marginal production which influences the price of the whole crop.

If capacity to sell this marginal pro-

duction is impaired for any reason, the suffering resulting to the entire producing community is caused by a comparatively :mall shrinkage in consumption.

My belief has been that we are suffering from the arrest of the normal increase
in consumption which should have occurred during the past seven years, rather
This

than from an absolute contraction of the amount consumed before the War.

is commented upon in the second page of the memorandum, in referring to meat.
The paradox of a great general price inflation, even considered on the basis
of gold values, for manufactured goods which embrace a vast category of luxuries, at the same time that the values of necessities of life such as meat,
cereals and cotton have declined, is something that needs explanation.
least, I am still "from Missouri".

We will refer to this later.
Sincerely yours,

Dr. W. R. Burgess,
33 Liberty Street,
New York City.



At

sc. 3. I

601417-20

FEDERAL RESERVE SANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

DATE

ffc

September 12,

SUBJECT

PRomGevernor Strong,

To

aid

Mr. Alexander in considering the procedure leading up to the rate

change inaugurated on July 29 by the Federal Reserve Bank of Kansas City, the

following statement shows in chronological order the various meetings and other
actions prior thereto._

May 9, a meeting of the Open Market Investment Committee was
held in Washington at which a memorandum was submitted
discussing this whole situation, and this resulted in
the authorization of purchases of $100,000,000 Government securities in the open market, of which, however,
only about $30,000,000 were purchased.
June 28, Dr. Rist and M. Ricard of the Bank of France arrived
in New York, having come for the purpose of discussing
the whole central bank problem and the relations between
the European and American money markets.
July 1,

Governor Norman cf the Bank of En,land and Dr. Schacht

YiV ::7L

f:z
7ce-_-:ca(tgemtleen com;In-Jo,.e
discussion toc.k place as we inmediately left New York

:f

1-011:,/f_7z

z:

and spent five or six days at a private house on Long
Island.
July 6,

Messrs. Norman, Schacht, Rist, Hoard and -)trong went
to Washington and spent most of July 7 in discussion with
the members of the Federal Reserve Board, lunching with
them at the Hotel Willard.

July 8,

the members of the Open Market Committee, Messrs.
Harding, Norris, Fancher, McDougal and Strong, together
with Governor Crissinger, spent the day in New York, most
of it devoted to a discussion of these same subjects with
Messrs. Norman, Schacht and Hist. Thereafter the visitors
from abroad left on different dates, the last, Governor
Norman, sailing on July 20.

July 27, a meeting of the Open Market Investment Committee was
held in Washington for the purpose of reviewing the situation, especially in the light of the meetings previously
held, and because the authority to purcheee securities up
to $100,000,000 was expiring on August 1st. In addition
to all the members of the Open Market Investment Committee
and the members of the Federal Reserve Board then in Washington (Dr. Miller and Mr. Cunningham were away) there were
present Governors Young of Minneapolis Biggs of St. Louis.




7

0

FEDERAL RESERVE BANK
OF NOW YORK

OFF!ICE CORRESPONDENCE

DATF

10
FROM

September 12,

SUBJECT

GOVPrnny strong

-

2 -

Dr. i3urgess of the Federal Reserve Bank of New York.
Governor Bailey was in Washington the day previous when
Governor btrong was also there, in order to discuss the
situation with the Federal Reserve Board, and left at
once for Kansas City as his meeting occurred the following
day and he had to return in order to lay the matter before
his directors. At this meeting of the Open Market Investment Committee a memorandum was submitted similar to theona
submitted at the meeting of May 9.
are

0




Following this discussion, on July 29, the Federal Reserve Bank
A few
of Kansas City reduced ite rate to 3 1/2 per cent.
days later the Federal Reserve Bank of Boston reduced its
rate, requesting the Federal Reserve Board to make the
announcement simultaneously with the announcement of the
rate reduction in Now York when that occurred
On August 5, the Federal Reserve Bank of New York reduced its rate
to 3 1/2 per cent., and that reduction, together with the
Boston rate was announced on the eerie day.
The other changes werenmds in the following order:
Cleveland, August 6
Augumt 12
Dallas,
August 13
Atlanta,
Richmond, August 16

On September 7, two Meeting days having elapsed in Chicago, the
Federal Reserve Board reduced the Chicago rate to 3 1/2
per cent. and announced it.
Oa September 8, Philadelphia reduced.
On September 10, San Francisco reduced.
Minneapolis
September 9 and 10, Governor '''trong was in Washington on other
matters having to do with the Treasury Department, his
visit there having been arranged witaMr. Parker Gilbert
prior to the ,action by the Federal Reserve Board in
reducing the Chicago rate, and his visit there was not
a result of the Board's action or in any way related to it.

7
192.-

01416C.

3.1

601417.26

FEDERAL RESERVE BANK

OF NEW YORK

OFFICE CORRESPONDENCE
To

Dr. Burgos°

A

'

SUBJECT

FRomGovernor Strong

(To be inserted at the proper place where there is
of our ettitude in regard to the Chicago change

a discussion
of rate.)

When Governor Crissinger and the members of the Open Uarket Committee
were in Kora York

Governor Crisinger suggested that he and I should visit Cleveland

and Chicago for the purpose of meeting the directors of those two'banks and
ing the situation personally.
when I

as next in Washington.

explain-

He raised the question a8ain either by telephone or
I thought it over, consulted my assooiates here,

and decided that it would be unwise for no to appear before the directors of any

-

other Reserve bank for

the

purpose of discussing n rate chane

by

that bank, and

accordingly wrote Governor Criesinger, copy of my leLter on that subject
among those accompanying this memorandum.




.being

rdiec. 4 A NO

FEDERAL RESERVE BANK
OF NEW YORK

UN

I(

OF r ICE CORRESPONDENCE
To

Dr. Burgess

FROM

DATE

October 27,

190_

Governor Strong

The attached

SUBJECT

note from Lubbock explains

itself.

If you will

make a note of the contents and send it beck to me I will acknowledge it.




Misc. 4 A 184J

,

,

FEDERAL RESERVE BANK
OF NEW YORK

,-FFICE CORRESPONDENCE
Tr*,

Dr. Burgess

FROM

DATE

Governor Strong

SUBJECT.

It would throw an

we could get figures

giving

importing during this year.




interesting light on

the German situation if

some analysis of the type of

stuff

Germany is

FEDERAL RESERVE BANK

MISC. 4 A 126M-4-27

OF NEW YORK

'7FICE CORRESPONDENCE
To
FROM

Dr._Burgese

DATE November 29, 1927
SUBJECT:

Governor Strong

Attached is a very interesting letter from Mr. Jay and the newspaper clirpings referred to.

Could you have someone go through these and

mark the portions which are of sufficient consequence for me to read?
Also will you be good enough to attend to the circulation of the letter
within the office among those officers mentioned in Mr. Jay's letter, and
then be sure that it all gets back to me, as I have not yet acknowledged
it.




ur-6-2-c2,

192_

FEDERAL RESERVE BANK

OF NEW YORK
Op:TE December 1, 1927

ICE CORRESPONDENCE
-Or. Burgess

SUBJECT

Governor Stropg

referred to in Governor Norman's
Will you please read the article
whether the time has arrived
consider, with the other officers,
letter and
for us to do something about it.




44,

-

lea_

Sr. argess.

2.

t

is aIreaSy o'eseervaUts e to arrest

thick it soma to
azeirease parpeaeo,

-aaarip

Sties.

6/12/28 -

moats ca zeta

for

situatiaa areteekas sem erery intereetiag

na

enahae

to. get held

moixatt At we4 pr

ea

4,

Grand Hotel,
Grasse, June 13, 1928.

PERSMIAL

11E4,

1,

411

\

Dear Dr. Burgess:

a
I don't dare cable you about matters in New York, for I am too

eaw

4?

f!V?

much out of touch to risk any definite opinion.

4

On the other hand, there

is almost no news of myself to cable which would justify doing so.

A letter has just reached me from Dr. Charles Rist of the Bank
of France, advising quits fully of the progress towards stabilization, and
in it he refers to earmarking 50 millions more gold and drawing upon their
outside deposits for #100,000,000 to increase their balances with us.

The

letter was a little ambiguous, and I am not sure Whether the figures really
a

an

express what they are doing.

This of course comes on top of pretty heavy gold Shipments, our
44_ r'
sales of securities and increased discount rates, and will give the Federal

-eee

Reserve System the most complete control of

the money market whieh it could

desire.

am always afraid at the Bank of
lay in sudden Changes of policy.

hesitation and

consequently de-

I think we sometimes overlook the fact

a
that the effects of any given program last for some time beyond the point at

which they

are discontinued, and that them is

consequently a considerable
,

lag in the effect of a change of policy being felt.

as

you know, that later in

the year

There in a possibility,

England may take some gold from us.
--A

I doubt if they take more than half of their balances.

On the other hand,

the great change in money conditions in New York will have a tendency




-

6/12/28.

Dr. Burgess.

2.

which it seems to me is already observable - to arrest exports of gold for

0

exchange purposes.

ities.

The situation presents some very interesting possibil-

Unfortunately, T. am unable to get hold of up-to-date figares of

our statement here, and that makes it even more difficult to have even a
hazy opinion, but I went to make the following very tentative suggestion,
with some hesitation.

It may appear necessary, in connection with these gold maneuvers
by France and England, for us to take over a. part of the portfolios,

with

the possible consequence that:
41+,

(a) An increase in our

Government holdings will be shown;

(b) Some pretty heavy losses will be inflicted upon our best
friends.

If the pressure on the money market gets to be too severe, it may
be a good thing to dhow some relaxation in our position.

And if we can ad-

just the position of our correspondents by taking over bills on which they

will suffer no great loss, I should hope it would be

done.

But I am afraid

of these losses on long-time Governments and for that reason have been urging
that we keep the maturities as short as possible.

The mein point of

this letter is to suggest the need of watching

carefully for evidences that the moment has arrived to change our position
and begin to buy back some Governments in the market, as distinguished from
what we may take over from our correspondents.

1 am addressing this letter to you, although it was intended also
for Mr. Mc Garrah and Mr. Gass, partly because I have

long time and partly

it the

because I shall make

not written you in a

excuse for advising you of

the very admirable impression gained by our friends here from your visit.

That applies to both Paris and




London.

I am sure you made a real contribu-

Dr. Burgess.

6/12/28.

tion and that it was appreciated, and I hope you felt repaid by the interest of the meeting and the new contacts you made.

With warmest regards to all it the office, believe me
Sincerely yours,

P. S. - I enclose a copy of Dr. Rift's letter referred to
as well as a copy of my reply.

Dr. T. R. Burgess,
33 Liberty Street,
New York.

BS:g




above,

Royal Hotel,
Evian-les-Bains, July 18, 1928.

Dear Dr. Burgess:

With ample time for reflection, I am thinking about the change
in the situation at home a great deal.

The suggestion in this letter

may already have been anticipated.
Since a year ago this time, there have been very considerable

changes in the Reserve Bank position as to gold reserves, Government bond
holdings, discounts, bills

owned, on the one

in currency outstanding.

Unenlightened readers of our figures may cas-

side;

and on the other side,

ually conclude that the Increase in our earning assets from under a billion
to about
credit.

11 billion dollars represents an
This we know is not the case.

change of consequence in

expansion of Federal Reserve Bank

Why not make an analysis of every

each item in our statement, that is, loss

of over

t400,000,000 of gold from the stocks of last September, sale of Government

securities, the reduction in

bills owned,

reduction in currency

outstanding,

etc., and show that the increase in discounts, with the exception of a
small part of it, is all accounted for by changes in our position which
involve no expansion of our credit.

Theso figures would, I

believe, be most enlightening to our

directors and justify publication in our

Monthly Review.

strike you!
Sincerely yours,

Dr. W. R. Burgess,
33 Liberty Street,
New York.

BUM



Bow does it

tcv\

Royal Hotel,

Evian-les-Bains, July 18, 1928.
Dear Dr. Burgess:

I am sending you a copy of a lecture delivered by Dr. Bachmann
last month, together with his letter and my reply.
Obviously, the lecture cannot be published in its present form.

Gramar, rhetoric, idiom and everything needs revision.

Besides that,

it needs to be recast a little bit in order to be of interest to the
American reader.

It is, however, to me a very interesting discussion of

one of the rather obscure monetary problems over here and well worth publishing in one of the banking Journals which has the proper class of
readers.

Besides that, Dr. Bachmann has a little liking for this sort

of thing, and I would like very much to please him.

My suggestion is that you or one of your associates go over the
article carefully and recast it, then write Dr.

Bachmann that, at my sug-

gestion, you have taken the liberty of putting it in form suitable for
the American reader, and arrange to have it published if you can, not as
the lecture itself but as a revision of a lecture delivered by Dr. Bachmann, etc.

This will avoid any charge of disingenuousness if it should

be read in Switzerland.

Dr. Bachmann is a very fine, upttanding member of the central

banking fraternity and

one of our beet friends over here.

Best regards to you and all of the "gang".
Sincerely yours,

Dr. W. R. Burgess,
33 Liberty Street,
New York.
BS:M





Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102