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WAR LOANS VS. BUSINESS AS USUAL
Article by Benj. Strong, North
American Review, April 1918.

Two groat Government war loans have now been issued, which have gathered
into the Treasury $5,800,000,000.

Our Government also had outstanding February 13

over $2,100,000,000 of short notes, togetheir representing $7,900,000,000 of war

borrowings concluded in six months and, in addition, taxes have been paid by our
citizens amounting to many hundreds of millions.

People are beginning to ask how

these loans and tax collections may continue at such a pace during a possible long
war when the estimated national saving is but somewhere about $6,000,000,000 a year.
In general it may be said that after the Government has borrowed all the
uninvested .und of savings, further loans must rest upon bank expansion also borrowing must stop.

The conclusion is obvious, that increased savings means a corres-

ponding curtailment of expansion, a sounder loaning and financial condition for the
nation and, even more important in the long future, eabits of individual, thrift.

But what is the relltion between thrift and war loans, and how may thrift be
practiced without imposing great losses upon merchants and mlnufacturers who would
both pay taxes and buy bonds +f they were prospering under the influence of the

illusive slogan "Business as Usual?"
some very obvious conclusions as to

To answer this, we must accept as realities
nation's wealth and how it may be diverted

from the uses of peace to those of war.

The wealth ofanation isnot alone its

natural resources, for, were it so, this country would have enjoyed greater wealth
before its discovery and settlement than at present, since we have consulted much
of its natural resources in the last 400 years.

Nor is it population alone, for,

in that case, China, India or Russia would enjoy wealth far greater than ours. The
wealth of a nation is what Ja-, produces from its natural resources, by the applica-

tion to teem of th. labor of an energetic population so that their products may be
used and enjoyed and made serviceable for further production, leaving out of account
the less important wealth represented by investments, or services renderod, in foreign




2

countries.

In time of peace, the production of a nation is roughly equal to its

consumption, plus what it uses in its foreign trade.

When war comes, production

must be increased to meet the appalling wastageof war, and, if the war is extensive and long, the amount of labor required for production of both peace time
consumption and war consumption is insufficient, and is soon reduced by withdravoal
of men for war making.

The demands of those who want consumption as usual, meaning

"business as usual" is the natural conflict of peace conditions with war conditions;

in other words, competition of th, individual consumer in the markets for labor and
material with the Government which needs labor and material.
nation will not prove sufficient to meet the demands of both.

The "wealth" of the
The time soon arrive:,

when unnecessary consumption must be reduced or stopped, else this bidding of individual against Government will advance prices of labor and materials to prohibitive
Erpsnsion in bank loans an- deposits and inflation of currency issues

levels.

will be a necessary accompanyment, and the whole economic structure will be undermined.

This is "economic exhaustion.*
Various means of minimizing these evils are possible, and we must set

about employing them.

Our reward will be certain in later years.

The more impor-

tant steps to be taken are:
First:
Second:
Third:
Fourth:
Fifth:

Reduce the consumption of luxuties
Avoid waste in the consumption of necessities
Develop more effective application of labor to production
Bring women into productive occupations
Economize the supply of credit

But some one will at once sly that by this program his business, say that of manufacturing musical instruments, is ruined because he produces a luxury.

And the

grocer may see vanishing profits if his trade in luxuries is stopped and in staples
cu_ tailed;

and the laboring man see lower wages if his work is made more productive

and women employed in addition, and the banker see less interest profits if he curtails loans to customers of the "luxury" class.

This is all true enough - in fact

so true that it appears as though here must be the root, or some of the many roots,
of the evil of "business as usual."




- 3The Changes and adjustments forced upon us by war can not all betwought
about at once.

Just now, with general economy the theme of every lecture, we .sear

many cries of protest, each indicating in tarn "whose ox is being gored."

If

every change ultimately necessaxy were instantly accomplichad, no harm would result
to eayone.

Possibly some personal discomfort due to self denial would be felt but

labor eould find new kinds of employment, manufacturers new kinds of production,
traders new articles of trade, and banks new customers.

were only a few readjust-

nents made at once and others allowed to wait, our plight would reeemble that or
an aecursion boat whose passengers all rushed at once to one rail.

It might cap-

size.

These czar readjustments should proceed as eapidly as ooesible, each at a
rate so adjusted that labor will be constantly- employed, but with no shortage of
labor, se that each manufacturer can adjust his afi airs and apply his power, his
naehinery and his organizatien to some war need;
old lines and introduce new and essential ones;

each effected trade liquidate

each bank reduce loans for unneo-

eseary purposes as it expands loans to Government and customers for war eurpoees.
Of course no such ideal readjustment is possible in its entirely and in
detail.

Some injuriee will occur, losses will be sustained, the balence of employ-

ment and supply of labor will not be exactly preserved.

Only ehen we take a national

rather than personal view of the matter, do we sec that our preblem is bot# to win

a military war, nhich if lost, may mean our destruction, and to conduct an economic
ear, which, if lost, might

cost us as dearly as -:11

loss of the military war.

Form to preserve our economic strength, whic21 is fund:mentally tne ebility to pro-

duce goods and finance their production and distribution cheaply in the world's
competitive markete, including our owns will give us the comforts of a future tree
of so heavy a war mortgage that we can at once go about our business eithout the
usual post war prostration.

supption



Failure to readjust eo as to bring ebout curteilment of unnecessary con -

by individuals and thereby set free goods and labor for war consumption

by the Government means that we must conduct the war by the employment of goods
and labor at constantly increasing prices.

That makes war more costly, makes

the burden of taxation heavier and the total of the Government's borrowings
greater.

All of the goods and labor employed for war purposes are produced and

employed during the period of the war and not by future generations of producers.

If the price level at which war is conducted is indefinitely advanced because of
competition between the individual consumer and the Government, the Government's
borrowing needs are just so much greater.

The loans to provide the sinews of

war furnished by those who buy bonds become in effect a mortgage on the nation's
future iecome to be liquidated by lUture generations of tax pgyers.

If the science of Government were so perfected that this ideal transformation could be brought about, the following consequences might be assumed:
First:

The consumption of raw materials would be limited
to the manufacture of personal necessities and
war materials.

Second:

The product of labor would provide in part or
wholly the not increased consumption of goods
caused by war.

Third:

There would be little, if any, shortage of labor,
for it would not only be more effective, but
women would replace men drafted into the army
and navy.

Fourth:

Advancing prices would be checked, both for labor
and materials.

Fifth:

Credit required for production and distribution of
luxuries and to finance waste would be saved for
the Government's needs.

Sixth:

The "wealth" of the nation, destroyed in war, would
more largely be furnished out of economies practiced.

SeventhL The Government would need to borrow less as its supplies would cost less, and would pay less interest
because the sueply of credit would not be burdened
with the loan of *business as usual.*

It is claimed, as may be true enough, that even so visionary a program
would not enable the *wealth" of the nation to meet the demands of war.
Them, insafe
deed, we must accept a carefully/guarded plan of eepansion to make up the balance.



- 5 Our people must to that extent mortgage their future "wealth," the product of
their future 1-1:or applied to our resources, and do it cheerfully.

That mortgage

on our labors of the future will largely be tee loans, both those made by our
Government and those made by individuals to enable them to pay taxes and to buy
bonds of the Government.

With the mortgage kept at the smallest possible amouet,

we may confidently expect that greater efficiency of labor, a lower price level,

and stronger bank reserves than other nations, will allow us to emerge from the
warp weakened to be sure, but not exhausted, and stronger than most ot-lers.

There seem to be four procedures immediately necessary, some of which are
already alder way:
First:

home control of raw materials by the Government

Second:

Education of the public as to how they should not
spend their incomes.

Thirds

Education of laborers as to where they should work.

Fourth:

Education of beakers as to what loans should be
gradually redused or discontinued.

The effect of the fourth it
sidered here.

Usual.

of the program is the only one to be con-

It dirOP'dy relates to the contest of "War Finance vs. Business as

If the bankers of th

oloa:try were able to curtail unnecessary and waste-

ful boeeowings by their customers, loans, the proceeds of which are used to build
or improve homes, extend plans and businesses pertaining eilely to luxury, build
places of amusement, and for marry other purposes Which I purposely refrain from
in loans to
enumerating., all of these bankers would have surplus credit to eaplq7
Those from whoa credit was so
the Government or industries vital to its war needs.

and materials, many would
withheld would be restrained from the employment of labor
them, so also saving labor
liquidate some part of their inventories and not replace
of credit would reduce loans
and material, and, equally important, the lessened use
reduce interest rates and faciliand deposits, increase the ratio of bank reserves,
tate the Government's financial program.
along these lines would be
A cautious but deliberate and voluntary policy

safer, more


as the only alternative, which is
equitable, and probably, as effective

higher rates of interest, along with higher prices for everything.

The natural

check to eeTansion in time of peace is the prohibitive interest rate, combined with
over production induced by rising prices.

In war tines, the operation of this law

proves embarrassing because of the excessive rates which the Government must pay
for loans, and the coreespanding shrinkage in security values sold in competition
with Government bonds.
interest rates.

Other serious dangers accompany the elevation of prices and

In a long war it mey seam to become an endless race with the dog

chasing his tail in a circle.

These problems must not only be faced courageously, but dealt with intelligently.

The fathers of young men who are serving tn2ir country in the army

and navy are proud of the sacrifices they make.

Too often, however, when the

sacrifice appears at the altar of business, where we have so long worshipped false
values, we shrink and protest.

6eme, unfortunately, must sacrifice their sons, others some part of
their business prosperity, and still others may face the or-Thal of a double sacrifice of both.

It is one o

the awful consecusaces of war.

Let us devote our-

selves to avoiding an unnecessary sacrifiee of both bsys and business by ordering
our affairs so that we are not consuming the supplies at home which our armies need
at the front.




sr

t

,t1.%

) tit

PUBLICITY DEPARnENT
LIBERTY LoAr coiaTTE:
SECOND .FEDERAL R-LiSERVE DISTRICT

12C BROADWAY
NEW YORK

11111

ft

hn Price Jones
Assistant Director,
In Charge, Press Bureau.

,To

Addresa by Benjamin Strong, Governor of
the Federal Reserve sank of New York, at
the Liberty Loan Meeting at Carnegie Hall,
Wednesday, April 3rd, 1916.
Fellow members of the Liberty Loan Organization:

This meeting has been arranged in order that those who
now compose the financial army of our Government in this district
may make every possible preparation for the third great offensive.

The organization of Liberty Loan committees has

so

extensive that it would take ten buildings as large as the one
in which this meeting is held to accommodate all of those who are
now enrolled in our committees.

Contact with headquarters must,

unfortunately, be largely by correspondence, but if it is possible
in later loans, the disadvantages of this limited personal contact
among the various branches of the service 7:111 be overcome by hold-

ing meetings similar to this in all parts of the district.

You will hear speakers to-night from whom you will gain
inspiration and encouragement.

But my part is rather to discuss

some of the principles which we believe should be observed in the
conduct of the great financial operation which we are about to
undertake, in the hope that it may aid you in concluding the campaign with a glorious success beyond your best expectations.



3 No. 82

-2-

This loan is to be placed with our people at the same
time that the greatest battle of all time is raging in Europe.
So long as that battle is undecided, everything that we value is
at stake and hangs in the balance.

The presence of our troops

in large numbers in France has developed in the minds of our

people a new and intense anxiety as to the outcome; a personal
interest in the venture far beyond anything that has existed since
the outbreak of the war.

For the first time we are actively

conscious that we are at war; for the first time we realize that
we have a personal, human investment in the war.

One million

eight hundred thousand families in the United States have sons,
41

husbands, or brothers in the nation's service either in France
or in training in this country or in the navy.

Throughout every

part of the country our people are watching military developments
with breathless anxiety.

Your task is by so much the lighter.

Those who are seeking security for their own flesh and blood will
not withhold the dollars needed to insure victory.
be the keynote of our campaign.




This should




-3-

3 No.82




- 5-

3 No. 82

We must continue to maintain the standard of patriotism
ID

which has been displayed in this district in other-previous
borrowings of the Government, for our :iuota cf every loan, 7hether
r

of

on

bonds or short certificates of indebtedness, which our

Government has heretofore offered, has been heavily oversubsorlb±d.
But this matter of quotas requires some exp.Lanation in order to

avoid misunderstandins and dissatisfaction.

when our Government

sells an issue of bonds, it does nct require from the subscribers
that payment be made in (-old or currency.

Payment, in fact, is

made by checks on banks, which simply effect a transfer of bank
balances from the credit of subscribers to the credit cf the Government.

Therefore, in order that the amount of the loan be equita-

bly apportioned among the Federal reserve districts, and anion,;; the
various communities within the districts, consideration must be
riven tc the amount of bank balances in the respective districts

and communities which will, in part, be transferred to the Government.

A committee of our or7anization has secured data from all

banks in the district and based upon this data secured especially
for the purpose, has effected an apportionment.

It is based upon

the resources of the banks, after allowing fcr savina.s depOsits,

for duplication of bank balances, and foreign balances.

The appor-

tionment of quotas is, as far as can be made by experienced men,
fairly based upon accurate data.

In every community where dissatis-

faction arises as to the a.yportionment, it should be expiaiaed that

the utmost care has been exercised to assure a fair determination
of this matter,. which, at best, is most difficult to arrive at.




3.14o.82

Questions are asked daily by intending purchasersas to
where they should make their adbscriptions.

any of our indus-

tries and transportation lines have offices in one place, plants
or investments in other places.

Many business men have more

than one residence or place of business.

The spirit of emulation

which actuates all branches of the orF6nization, naturally and
properly, inspires comEittee men to secure the largest volume
of subscriptions possible for their own communities.

It is,

however, desirable that this .Latter be governed by some fair
principle, if one can be found, so as to avoid criticism.
real principle, after all, is a simple one.

The

As the apportion-

ment is based upon bank deposits, so the subscriptions should
41

be based upon bank balances.

Mere a corporation or individual

has more than one bank account, the balance carried in those

accounts form the basis of the apportionment of quotas to the
communities where the accounts are carried.

Therefore, the

subscriber should apportion his subscription according to the
amount of balances carried in his various bank accounts, out of
which his payments are made.
In every instance, however, where ellployers of labor

arrang

to secure subscriptions from their employee, it is

&sirable that this subscription be made and financed at the
place where the plant is located.

The interests of the commun-

ity demand this, and it is of course, only fair to the employes
who are subscribing.



3 No. 82

-7-

It came to our attention during the last campaign that
in some communities when quotas had been completed the committees
discontinued work.

If every organization adopted this policy,

the loan would not be fully subscribed because in some sections
quotas will certainly not be filled.

Your efforts should con-

tinue, without relaxation, until the close.

We are not simply

raising money for the Government; we are enlisting a great army of
bondholders whose moral support is needed to win the war.

Every

additional bondholder becomes an addition to the war spirit of
the country.

Let none escape.

Many questions have been asked as to the attitude of
the Liberty Loan organization towards depositors in savings banks.
The answer presents no difficulty.

It is not expected or desired

that depositors in savings banks should withdraw their deposits in
order to subscribe for these bonds.
themselves buy the bonds.




The savings banks should

Subscriptions made by those who custom-

8 -

40

3 No.

82.

arily have savings in the savings banks will, naturally, somewhat
interrupt the flow of savings deposits to that class of banks.
But it has been the er.perience in Canada and abroad that the plac-

ing of war loans even at higher rates of interest than those allowed by savings institutions has not caused withdrawals from such
banks to any dangerous extant; in fact, has had little effect other
than to cause a temporary suspension of new deposits,
perience is similar.

Our own ex-

Even the postal savings deposits, which bear

a much lower rate of interest than is borne by our Government bonds,

have increased during the entire period of the war, notwithstanding
the large sales of.Government bonds,

Probably no subject has caused quite so much complaint
as the failure to deliver bonds promptly to the subs:ribers.

We

have endeavored to wake clear through the press, by circulars and
otherwise, that delays of that character are unavoidable.

Our

people must be asked to show consideration to the officers of the
Treasury, who are doing their utmost to meet a situation quite unprecedented in variety of difficulties.

Facilities have not here-

tofore been adequate to prepare tha enormous aLeunts of bonds required to be issued.

The Bureau of Engraving and Printing has been

taxed to its utmost capacity to prepare nc less than forty-four
million pieces of bonds up to date to meet the needs of the Government.

The bonds can not be finished until the terms of the loan

are known.

In the case of. the present issue, the bill authorizing

the bonds has not yet been passed by Congress.







-9-

3 No. 82
In order

the bonds
text.

I

Bureau of

of the te

President

rapidly a

an operat
with the

tance, bu

justed th

which I h
11

two loans

subscript

district,
who have

organizat

ing on Li

produces

much, the
borrowed

3 No. 82
First - by whether it is necessary to encourage that

process in order to insure a successful loan, and,
Second - by some knowledge of the extent to which the
finances of the people of the country are equal to absorbing
Government loans without mortgaging future earnings.
very difficult question to answer,

That is a

There are various estimates of

the amount of the available current savings funds, and it is important to determine to what extent those who hold these savings
are willing to invest in war bonds,

Probably if all the people of

the country up to the present time had been willing to appropriate
all of their savings to the purchase of the bonds so far issued it
would not have been necessary for the banks to lend one dollar to
subscribers.

As it is, the amount of borrowing by subscribers to

the first and second Liberty Loans is exceedingly moderate, and it
is our hope that the present outburst of patriotic enthusiasm for
the war will insure a very large subscription to the third Liberty
Loan, without the necessity for heavy bank borrowings.

In England,

it has been found quite safe to discourage subscribers from seeking
accommodation for the purchase of war bonds beyond a period of six

months, upon the theory that a new loan will be offered every six
months, and thus the subscribers should confine their subscriptions
to their current savings, or to what they expect to make within the
succeeding six months.

I am not at all sure that this policy Irkit.t.,.

be safe for us to pursue, but it is expected that an explicit statement will be issued before or in the course of the campaign which
will be a guide as to the policy to pursue.



3 No.82

-11-

One unfortunate effect of excessive subscriptions by
those who are unable to liquidate loans out of savings, has been

heavy sales of bonds on the stock exchange and their consequent
decline below the issue price.

This would not occur, certainly

not to the extent to which it has occurred, if subscribers to.
the bonds took them with the firm intention of holding them,
even though the economies necessary to do so were severe enough
to hurt.

In general, we think subscribers should be encouraged

to borrow where it is not the intention of the subscriber to
promptly dispose of hia bonds and where he has the means to repay the loan in a reasonable period.

You have frequently heard the statement made that the
farmers of the country have not generally subscribed to the
Government loans; that they are unpatriotic; and that in
various ways they are bad citizens.

I do not believe that

they are unpatriotic, neither do I believe that they are bad.

citizens, nor is it a very good way to sell bonds to abuse
the prospective buyer.

Our difficulty in the past has been to

so organize that the farmers could be personally reached and
through agencies in which they have confidence,

Our plans

have now been arranged to take the farmers into our organization. Thd.Fark,9ureaus, Granges, and the Diarymenls Organiza-

tions are cooperating with us and we hope, by encouraging them
to keep separate records of the amounts subscribed by the
farmers of this district, that they will completely emancipate
themselves from any of the charges which you have heard,






- 12 -

3 No. 82.

personal s

if possibl

being prep

to deal wi

conducting
tures.

Th

ceeds of e

expenditur

by certain
10

should stri

Federal Res

submission

the Departm

members of

tected agai
hand, that

Carefully p
point.

-1311

3 No. 82

As the campaign approaches, it is necessary that the
entire organization shall be somewhat of the same frame of mind,
undertaking the work with a uniform spirit and avoid mistakes
which have been made clear to us by our past experience.

It is

a great mistake to undertake the placing of one of these great
loans with too much assurance of success.

No undertaking of this

magnitude is accomplished without hard work, and, if the idea that
the loan is a success before the subscriptions are actually received, should become general, it might indeed seriously injure our
prospects of success.

On one or two points I am led to speak a word of serious
warning.

We must be careful that the public is not imposed upon

by dishonest people who pose as being parts of our organization,
10

but who, in reality, are seeking to perpetrate a fraud on the
people.

The propaganda undertaken is so extensive and public

opinion is so aroused as a result, that it may indeed become

possible for designing persons to take advantage of this and
practice despicable fraud, particularly upon ignorant people.
Every organization should watch for this with scrupulous care
and, at the first indication of any development of that character,

it should be brought to the attention of the proper officers of
the law,




-..

- 14 -

3 No. 82

And now, ladies and 9.entlemen, our work is about to begin;

our armies are at the fion

fighting; they riot only need the

suupplies which the proceeds of this loan will provide, but they need
the encoura7ement, the stimulation, the cou7age that they will gain
by the knowledge that they are supported at home.

News from home to

the soldier at the front is what makes the spirit of the army.

Suppose the men of our army were permitted daily to receive hundreds
of thousands of communications from a7ents of the enemy, directed to
undermine their morale, who can say what the result would be.

They

do, however, receive hundreds of thousands of letters from home. What

0 a, difference it wiii make to them if those letters contain words of
_encouragement rather than depression.

How Treatly will they be en-

couraged and heartened when they hear, as they will, that the greatest of war loans has been successfully placed at home in order that
they may be victorious abroad.

-,erythin7 depends upon a spirit of patriotism and selfsacrifice by the American people.

Te may find in this country the

same determination as has just been expressed by a patriotic Frenchman.




-15-

3 No.82

He says that "to fight Germany France will "sacrifice
"all her sons, and when the men are gone the women will

rie

up, and when the women are gone the children will rise up,
0

and when the children are all core the dead will rise up to

"defend France; for France has determined tc be free or die, and

"France will live"
This task is now committed to your hands.

Cur armies in

France, our people at home, the people of the n:tions with
which v:e are in alliance are awaiting new evidence of the
spirit of the Ar:.erican people in the war.

appoint them.

Q.




We must not dis-

Your reward will be thL victory of our army.

Address by Benjamin Strong, Governor
of the Federal Reserve Bank of New York,
at the Liberty Loan ideeting at Carnegie
Hall, Thdnesday, April 3rd, 1918.

Fellow members of the Liberty Loan Organization:

This meeting has been arranged in order that those who now compose the
financial army of our Government in this district may make every possible preparation for the third great offensive.

The organization of Liberty Loan committees

has now become so extensive that it would take ten buildings as large as the one
in which this meeting is held to accommodate all of those who are now enrolled in
Contact with headquarters must, unfortunately, be largely by

our committees.

correspondence, but if it is possible in later loans, the disadvantages of this
limited personal contact among the various branches of the service will be overcome by holding meetings similar to this in all parts of the district.

You will hear speakers to-night from whom you will gain inspiration and
But my part is rather to discuss some of the principles which we

encouragement.

believe should be observed in the conduct of the great financial operation which
we are about to undertake, in the hope that it may aid you in concluding the campaign with a glorious success beyond your best expectations.

This loan is to be placed with our people at the same time that the
greatest battle of all time is raging in Europe.

So long as that battle is unde-

cided, everything that we value is at stake and hangs in the balance.

The presence

of our troops in large numbers in France has developed in the mines of our people
a new and intense anxiety as to the outcome;

a personal interest in the venture

fax beyond anything that has existed since the outbreak of the war.
time we are actively conscious that we are at war;

For the first

for the first time we realize

that we have a personal, human investment in the war.

One million eight hundred

thousand families in the United States have sons, husbands, or brothers in the
nation's service either in France or in training in this country or in the navy.
Throughout every part of the country our people are watching military developments
with breathless anxiety.

http://fraser.stlouisfed.org/
seeking security
Federal Reserve Bank of St. Louis

Your task is by so much the lighter.

Those who are

for their own flesh and blood will not withhold the Collars needed

- 2 -

to insure victory.

This should be the keynote of our campaign.

It is, of course, desirable, in fact essential, that every subscriber
to a Liberty bond should understand precisely the terms of the loan.

In previous

loans, unfortunately, the enthusiasm of those selling the bonds has occasionally
led to their making statements not altogether accurate as to the various provisions
of the law under which the bonds are authorized.

Some misunderstandings have occa-

sionally been caused as to the privilege of conversion, or as to the tax exemption,
or other features, which possibly could not be avoided.

But every dissatisfied

bondholder is an obstacle to overcome when the succeeding loan is placed.

So to

the extent that the terms of the loan are discussed, great care should be exercised
that accurate information is given, and, for that purpose, all necessary instructions will be issued from the bank.

Just now subscribers to these bonds are not betraying anxiety as to
rates of interest, dates of maturity, tax e,:emption provisions, or conversion
rights.

Their anxiety is that the money they subscribe be promptly and effectively

spent by our Government to insure victory to our troops and their safe return.

Do not let the notion become prevalent that buying war bonds is simply
a financial transaction.

It is

more than that;

i c is a contribution of war

materials and of the labor to produce war materials to enable our armies to win

baides.

It has been estimated that prior to the war the annual production and

turnover of the country had a value of
increased to $60,000,000,000.

$50,00;;,000,000.

This may now have

The appropriation bills passed by Congress repre-

sent requisitions made upon the labor and industries of the country for not less
than $23,000,000,000 in value of goods and services.

It is no longer a question

of whether we can produce these war materials, but it is a question of speed of
production.

Industries and labor loaded with the production of everything re-

quired to enable us to live as we were in the habit of living before the outbreak
of the war can not produce :923,000,000,000 of goods in time to equip the armies



- jnow os urgently needed, unless our people withdraw some part of their demands
and give the Government right of way.

To the extent that we indulge in unnec-

essary expenditures, by so much we retard production of war materials; to the
extent that we thereby delay the presence of fully equipped armies in Europe we
jeopardize the outcome of the war.

You have been advised of the arrangements as to quotas.

In this loan

the Second Reserve District is asked by our Government to sell nine hundred
million dollars of bonds.

We must continue to maintain the standard of patriotism which has been
displayed in this district in other previous borrowings of the Government, for
our quota of every loan, whether of long bonds or short certificates of indebtedness, whLch our Government has heretofore offered, has been heavily oversubscribed.

But this matter of quotas require

misunderstandings and dissatisfaction.

some explanation in order to avoid

Then our Government sells an issue of

bonds, it does not require from the subscribers that payment be made in gold or
currency.

Payment, in fact, is made by checks on banks, which simply effect a

transfer of bank balances from the credit of subscribers to the credit o: the
Government.

Therefore, in order that the amount of the loan be equitably appor-

tioned among the Federal Reserve districts, and among the various communities
within the districts, consideration must be given to the amount of blink balances

in the respective districts and communities which will, in part, be transferred
to the Government.

A co:limittee of our organization has secured data from all

banks in the district and based upon this data secures especially for the purpose,
has effected an apportionment.

It is based upon the resources of the banks, after

allowing for savings deposits, for duplication cry' bank balances, and foreign
balances.

The apportionment of quotas is, as far as can be made by experienced

men, fairly based upon accurate data.

In every community where dissatisfaction

arises as to the apportionment, it should be explained that the utmost care has



- 4 -

been exercised to assure a fair determination of this matter, which, attest, is
most difficult to arrive at.
Questions 'Ire asked daily by intending purchasers as to where they should

make their subscriptions.

Wiany of our industries and transportation lines have

offices in one place, plants or investments in other places.
have more than one residence or place of business.

Many b

The spirit of emulation which

actuates all branches of the organization, naturally and properly, inspires committee men to secure the largest volume of subscriptions possible for their own
communities.

It is, however, desirable: that this matter be governed bysome fair

principle, if one can be found, so as to avoid criticism.
after all, is a simple one.

The real

As the apportionment is based upon bank deposits,

so the subscriptions should be based upon bank balances.

Vhere a corporation or

individual has more than one bank account, the balance carried in those accounts
fora the basis of the apportionment of quotas to the communities where the accounts are carried.

Therefore, the subscriber should apportion his subscription

according to the amount of balances carried in his various bank accounts, out of
which his payments are made.

In every instance, however, where employers of labor arrange to secure
subscriptions from their employes, it is desirable that this subscription be made
and financed at the place where the plant is located.

The interests of the com-

munity demand this, and it is of course, on*y fair to the employes who are subscribing.

It came to our attention during the last campaign that in some communities when quotas had been completed the committees discontinued work.

If every

organization adopted this policy, the loan would not be fully subscribed because
in some sections quotas will certainly not be filled.
without relaxation, until the close.
Government;

needed to



Your efforts should continuo

We are not simply raising money for the

we are enlisting a great army of bondholders whose moral support is

win the war.

Every additional bondholder becomes an addition to thee war

- 5spirit of the country.

Let none escape.

Many questions have been asked as to the attitude of the Liberty Loan
organization tow,rds depositors in savings banks.
culty.

The answer presents no diffi-

It is not expected or desired that depositors in savings banks should

withdraw their deposits in order to subscribe for thesd bonds.
should themselves buy the bonds.

The savings banks

Subscriptions made by those who customarily

have savings in the savings banks will, naturally, somewhat interrupt the flow of
savings deposits to that class of banks.

But it has been the experience in Canada

and abroad that the placing of war loans even at his:her rates of interest than

those allowed by savings institutions has not caused withdrawals from such banks
to any dangerous extent;

in fact, has had little effect other than to cause a

temporary suspension of new deposits.

Our own experienceis similar.

:yen the

postal savings deposits, which bear a much lower rate of interest than is borne
by our Government bonds, have increased during the entire period of the war, notwithstanding the large sales of Government bonds.
Probably no subject has caused quite so much complaint as the failure
to deliver bonds pro7]ptly to the subscrib;:rs.

17e have endeavored to make clear

through the press, by circulars and otherwise, that delayscf that dharacter are
unavoidable.

Our people must be asked to show c nsideration to the of.icers of

the Treasury, who are doing their utmost to meet a situation quite unprecedented
in variety of difficulties.

Facilities have net heretofore been ade :uate to

prepare the enormous amounts of bonds required to be issued.

The Bureau of

Engraving and Printing has been taxed to its utmost capacity to prepare no less
than forty-four million pieces of bonds up to date to meet the needs of the
Government.

The bonds can not be finished until the terms of the loan are known.

In the case of the present issue, the bill authorizing the bonds has not yet been
passed by Congressln order to overcome this delay, it has been arranged to prepare
the bonds in all particulars in advance except as to printing the text.



I am

-6told that there are thirteen million pieces in the Bureau of Engraving and Printing
completed ex_ept for the addition of the text, and that the instant the bond bill
is signed by the President these bonds will be put on the presses and turn e] out
as rapidly ashuman effort can do so.

This is one of the details of an operation

of great magnitude which will frequently interfere with the success of our plans
far out of proportion to its importance, but, after all, subscribers to the bonds
have usually adjusted themselves to the necessity for a little delay in deliveries,
which I hope will not be necessary on the ne,:t issue.

In the last two loans our

books show that we have only a0,000 of unadjusted subscriptions by subscribers to
nearly two billions of bonds in this district, and a balance of less than 63,000
owing to subscribers who have defaulted in their payments.

One of the greatest difficulties to be dealt with by our organization is
the establishment of a policy in regard to borrowing on Liberty bonds.

Every bond

purchased with borrowed money produces bank expansion so long as such loans remain
unpaid.

How much, therefore, we should encourage subscribers to buy bonds with

borrowed money must se determined.

First - by whether it is necessary to encourage that process in order to
insure a successful loaf, and,

Second - by some knowledge of the extent to which the finances of the
people of the country are ecdual to absorbing Government loans without mortgaging
future earnings.

That is a very difficult question to answer.

there are various

estimates of the amount of the available current savings funds, and it is important
to determ_ne to what extent those who hold these savings are willing to invest in
war bonds.

Probably if all the peoPle of the cou:.try up to the present time had

been willing to appropriate all of their savings to the purchase of the bonds so
far issued it would not have been necessary for the banks to lend one dollar to
subscribers.

As it is, the amount of borrowing by subscribers tothe first and

second. Liberty loans is exceedingly moderate, and it is our hope that the present



outburst of patriotic enthusiasm for the war will insure a very large subscription to the third Liberty Loan, without the necessity for heavy bank borrowings.
In England, it has been found quite safe to discourage subscribers from seeking
adcommodation for the purchase of war bonds beyond a period of six months, upon
the theory that a new loan will be offered every six months, and thus the subscribers should confine their subscriptions to their current savings, or to what
they expect to make within the succeeding six months.

I am not at all

this policy would be safe for us to pursue, but it is expected that an explicit
statement will be issued before or in the course of the campaign which will be a
guide as to the policy to pursue.

One unfortunate effect of excessive subscriptions by those who are unable
to liquidate loans out of savings, has been heavy sales of bonds on the stock exchange and their consequent decline below the issue price.

This would not occur,

certainly not to the extent to which it has occurred, if subscribers to the bonds
took them with the firm intention of holding them, even though the economies necessary to do so were severe enough to hurt.

In general, we think subscribers should

be encouraged to borrow where it is not the intention of the subscriber to promptly
dispose of his bonds and where he has the means to repay the loan in a reasonable
period.

You have frequently heard the statement made that the farmers of the
country have not generally subscribed to the Government loans;
unpatriotic;

and that in various ways they are bad citizens.

that they are

I do not believe

that they are unpatriotic, neither do I believe that they are bad citizens, nor
is it a very good way to sell bonds to abuse the prospective blAyer.

Our diffi-

culty in the past has been to so organize that the farmers could be personally
reached and through agencies in which they have confidence.
been arranged to truce the farmers into our organization.

Our plans have now

The farm bureaus,

granges, and the Diarymenis Organizations are cooperating with us and we hope,

by encouraging them to keep separate records of the amounts subscribed by the



farmers of this district, that they will completely emancipate themselves from
any of the Charges which you have heard.

Too much emphasis can not be laid upon the advantage of personal
solicitation.

Prospective subscribers should be approached, if possible with

some knowledge of what amount they should subscribe.

To assist in this work throughout the district, maps are being prepared
and furnished which willenable the local committees to deal with every resident
of their respective territories.

You will appreciate that no small part of the burden of conducting this
campaign is the regulation and control of expenditures.

The Congress provides

that a certain percentage of the proceeds of each loan may be used for expenses,

but, as you know, the expenditure df funds of the Government is surrounded, necessarily, by certain safeguards and rules Which it is necessary that we should
strictly observe.

All expenditures are advanced by the Federal Reserve Bank and

only reimbursed by the Treasury upon the submission of satisfactory vouchers which
conform to the rules of the Department.

I hope that great care will be exercised.

by all members of the organization to see that in this matter we are protected
against charges of extravagance or waste, and, on the other hand, that money
Which is ppent shall be spent most effectiveAv.

Carefully prepared rules are fur-

nished to every committee on this point.

As the campaign approaches, it is necessary that the entire organization
Shall be somewhat of the same frame of find, undertaking the work with a uniform
spirit and avoid mistakes which have been made clear to us by our past e:pPrielice.

It is a great mistake to undertake the placing of one of these great loans with
too much assurance of success.

No undertaking of this magnitude is accomplished

without hard work, and, if the idea that the loan is a success before the subscrip0
tions are actually received, should become general, it might indeed seriously injure
our prospects of success.




- 9 -

On one or two points I am led to speak a word of serious warning.

We

must be careful that the public is not imposed upon by dishonest people who pose
as being parts of our organization, but who, in reality, are seeking to perpetrate
a fraud on the people.

The propaganda undertaken is so extensive and public

opinion is so aroused as a result, that it may indeed become possible for desining persons to take advantage of this and practice despicable fraud, particularly
upon ignorant people.

Every organization should watch for this with, scrupulous

care and, at .the first indication of any development of that character, it should

be brought to the attention of the proper officers of the law.
And now, ladies and gentlemen, OLIT work is about to begin;

are at the front fighting;
this loan will provid9,

they not only need the supplies which the proceeds of

but they need the encouragement, the stimulation, the

courage that they will gain by the knowledge that they are supported at home. News
from home to the soldier at the front is what makes the spirit of the army. Sup

pose the men of our axw were permitted daily to receive hundreds of thousands of
communications from agents of the enemy, directed to undermine their morale, who
can say what the result would be?
of letters from hoke.

They do, however, receive hundreds of thousands

What a difference it will make to them if those letters

contain words of encouragement rather than depression.

How greatly will they be

encouraged and heartened when they heal( as they will, that the greatest of war
loans has been successfully placed at home in order that they may be victorious abroad.

Everything depends upon a spirit of patriotism and self-sacrifice by the
American people.

We may find in this cou-try the same detessination as has just

been expressed by a patriotic Frenchman.

He says that "to fight Germany France will

"sacrifice all her sons, and when the men are gone the women will rise up, and when
the women are gone the chi.ldren will rise up, and when the children are all gone the
dead willrise up to defend France;

fo. France has determined to be free or die, and

France will live."




This task is now committed t

your hands.

Our armies in France, our people

- 10 -

our people at home, the people of the nations with which we are in alliance
are awaiting new evidence of the spirit of the Ame.-ican people in the war.

must not disappoint them.




Your reward will be the victory of our army.

We

1,:r.

Secretary, and fellow Members of the Liberty Loan Army:

This is the second convention of our members.
It is again my duty to remind you of the size of the undertaking entrusted to us,

by stag as I did at our last meeting, that hardly 2`" of our members
can be accommodated in this building.

The magnitude of the task of financing the creation and maintenance of our military
army is indicated by the size of this financial army.
But the importance of the work must be measured by other standards:
Success will be another battle won and failure will be a retreat.
These are not days, however, when American Armies are retreating.

Our experience in handling three loans has given us a better understanding of the
work;

has brought about a more harmonious and effective operation;

and, in the minds of us all, a better knowledge of the technic.
I small not, therefore, as at our last meeting, review in detail all of the various
technical matters with which we are now so well acquainted.

During the next four wee:Ls, we are about to undertake the greatest transaction
in the history of finance a;:nd it is important that certain general

rules which must govern our work should be frankly discussed
and understood.

These have been deliberately adopted in this district after careful consideration,

and, in the opinion of experienced men, are best designed to bring
success.

7e believe that successful sales of bonds of the amount n.cuired must be based upon




a thorough understanding by the public of the war;
which we are fighting;

of the purposes for

and that this loan will be successful in pro-

portion as tliS patriotism of the people is stirred and aroused.

In the Third liberty Loan, every banking town in this district (with one
exception) won the honor flag.

And over 755 or the towns without banks won nonor flags.

As in the past loan, this flag will be awarded to those towns which subscribe
their fall 4aotas.

In addition, a blue star will be awarded for each over-subscriTAion of 50`;.

Accompanying the honor flag will be a penant for those communities of Which
25% of the population subscribe to bonds,

And an additiorl penant will be awarded for each additional

of the population

that subscribes.

The industrial honor flag, used with great success in this city during the Third
Loan, has been adopted for the whole country.

It will be awarded to those organizations which secure subscriptions from 74
of their employes.

end if a larger percentage subscribe, )0

will be indicated on the penant.
Adl(r1(.

At the sugbestion of La's. Wilson,. the names of communities show&Ag the largest

A
oversubscriptions, and`

the largest percentage of population

/\

subscribing, will be given to new ships to be launched and to new
tanks being built for the army.

Ten ships and ten tanks have been assigned to this district.
The rules governing the designation of the communities will shortly be 7ublished.




Impetus must, therefore, be given to the campaign by publicity of the highest order,

designed to reach the mass of the people through every possible
avenue.

It is upon this preparatory work of education that a campaign for voluntary subscriptions rests.

The selling organization, through various agencies, must undertake to reach every
individual and corporation, the methods varying according to the
size and character of the community.
In this city many methods must be pursued.

In some communities an individual canvass of every resident is possible and frequently proves most successful.

But, so long as we employ publicity, and depend upon the understanding, sympathy
and enthusiasm of the public, we must confine our campaign of
solicitation to those methods Which make the individual value the
fact that he is a voluntary subscriber.

He must, however, be shown his duty.

Every person who subscribes by free choice, for patriotic reasons, is a better subscriber, more satisfied with his invest:ent, and more contented to

keep his bonds than one aho purchases bonds under duress and whose
first impulse, once the bonds are paid for, is to sell them.

Our program, therefore, contemplates an intensive, dignified, and impressive
publicity to reach every person, no matter what may be his means or
what the country of ,his birth.

We must not, however, lower the standard of a dignified campaign by permitting
ourselves to indulge in sensational displays, extra_

t statements

or by employing methods calculated to arouse ridicule or bring reproach
upon the organization.

The enthusiasm of the members of the organization should not lead them to employ devices




which willtsagaXate this serious undertaking with the methods of a
3jrcus or of a lottery.

- 3 -

Performances of that character on the streets, in tne theatres and in public
places can not expect a sympathetic reception from those who have
relatives, ur who have lost relatives, in the battles in France.
It is important to maintain enthusiasm at the highest pitch, and, at the same time,
to restrain it within the limits required by the seriousness of the
great enterprise in Which this country is engaged.
- - - - - -

-

-

You are aware that bonds of previous loans, bearing the same rate of interest as
those now to be sold, are selling at less than par in the market.

I shall repeat, with less fear of contradiction now than when I made the same statement at our last meeting -- that with over a million and a half of
our American boys in the fighting line in ?ranee, Whose victory
depends upon the success of these loans, the American people will
not subject their patriotism;

their resolution to support that

army, to be measured by a rate of interest Jr by a permium or discount on the bonds of their Government.

But an important change has just been made in the investment position of Liberty
Bonds by Act of Congress, to Which I must refer in some detail.

since the last bond sale, Gongress has been asked and doubtless will increase
revenues from taxation from ,4,0J0,3000:)30 to ,;13,000,000,000 a year.

As the income from all but the 3 l/2% bonds of the first issue is liable for surtaxes and for war profits anti excess profits taxes, an increase in

those taxes, naturally, reduces the net return on the bonds now to
be issued.

Congress has, t,erefore, passed a law increasing tax exemptions, the provisions of
which should be brought to the attention of every intending subscriber,
as well as to the attention of every subscriber to the first three issues.
I shall read a summary of the act, which it is important that all should understand.




- 4

of the exemptions originally applying to the earlier issues, of course, remain
unchanged.
1.

The interest on not exceeding. 430,000 principal of bonds of the fourth Liberty

Loan shall be exempt from graduated additional income tuxes, commonly
known as surtaxes, and excess profits and war profits taxes, now or
hereafter irposed;
2.

The interest received after January 1, 1918, on an amount of bones of the
earlier loans, excepting the 3 1/2s of the first issue, the principal
of which does not exceed ir15,000 in the aggregate, shall be exempt
from such taxes;

Provided, however, that no owner of such bonds

shall be entitled to such exemption on an aggregate principal amount

exceeding one and one-half times the principal amount of bonds of the
/fourth Liberty Loan originally subscribed for and still owned by him
at tae date of his tax return;

The old bonds to Alia' the exemption applies are all of those outstanding, incltdingthose arising from conversions, excepting, of course, the 3 1/27. bonds
of the first issue.
3.

The exemrtions provided in the bill are to continue during the period of the war,

and for two years after the date of the termination of the war, as
fixed by proclamation of the President.
To summarize;




In addition to all tax exemptions now provided by law, any
subscriber to bonds of the ?ourth liberty loan will be
exempt from surtaxes and excess profits and war profits taxes on the
income from not exceeding 430,000 principal of bonds of the 3ourth
if he retains his bonds,
loan and may gain similar exemItion on the income from one and onehalf times that amount of the old bonds;

the exemption to continue

for tho period of the war and for two years thereafter.

5.-

You will observe that the passage of this law .viii have tie following effect,

provided it is thoroughly and widely understood:

As to a holder of the existing bonds who is now liable to income surtax --

iIRST:

He may only enjoy the exemptions from taxation provided in this law

butrp

in case he purchasa.s and retains bonds of the new issue in the proportion provided by the law.

Therefore, every holder of bonds of the second and third loan, and of those received through conversions will find it absolutely essential, in
order to enjoy this exemption, that he shall buy and retain new
bonds.

NEXT:

As to an intending subscriber to the fourth loan -- It is plainly to his
advantage, if he does not already own the necessary proportion, to
purchase such an amount of bonds of the old issues as will enable
him to enjoy the maximum tax exemption allowed.

One may suggest that it is not desirable for an intending subscriber to purchase
the old bonds, 4nen he might, in fact, be induced to purchase only
tne new bonds.

It must be borne in mind, however, that the holder of the old bonds who sells them
does so in order to subscribe to the new issue and thereby gain tax
exemption on the bonds which he still has left.

The effect of this new plan of exemrtion Mrom taxation should, therefore, as it
becomes generally understood, bring about a large subscription from
holders of existing bonds.

It should, liAcewise, provide buyers of bonds of the old issues which their holders




may feel re,iuired to sell in order to subscribe for the new issue.

- 6 -

.advices have been sent to the chairmen of all committees throughout the district that
73'11q"

they 41,1, upon request made to their district chairman, be furnished
with lists of subscribers to former loans.
These subscribers ,.re so obviously interested in the terms of this tax exemption
that it is desirable for local comnittees to obtain the lists and

bring the matter personally to the attention of each subscriber to
former issues.

[600.

coo, 000

F
io few people read the details of statutes passed by congress that the effect of
0 0 ( C 2

-

this most important modification of the tax provisions ai,xlying to

Liberty Bonds will not be Pally felt, nor will the Government enjoy
all of the benefits which it should enjoy from the adoption of this
new program,unle,ss it is brought by you to the attention of everyone.

Too great emphasis can not be given to the matter in connection with this campaign.

As in the case of former loans, a description of the terms of the

t.'ourth Loan,

including a description of this tax exemption, will be furnished

to all committees at an early date, together with tables illustrating the income value of bonds of the ?wart' Loan When considered in
connection with the tax exemption.

But we must not overlook the urgent injunction which has now been spread broadcast
for all owners of the Government's bonds to retain them.

Emphasis should be laid upon the necessity of making no sales of present holdings

of bids unless it is imperative for the holder to do so in order to
secure the benefits of the tax exemptions now provided.

We can not expect to have tne bonds of the Government sell at their real value if
large numbers of people are induced, or even dragooned into buying
them with the expectation of immediately selling; them in the market.

The 4uestion is repeatedly asked, how may subscriptions be made by those who are




pressed to subscribe but who have not sufficient ready cash.

There is but one answer!

Those who must borrow money to make their purchase should do so in the expectation
of paying their loans out of funds accumulated by the practice of
rigid economy, rather than by selling their bonds.

The greatest difficulty now encountered by our organization in selling bonds is
caused by the failure of the people of the country to practice thrift
sufficiently.

I am confident that the only thing now needed is that everyone should know specifically and definitely what he is expected to do in this matter;

what

his patriotic duty is, and he will promrtly do it.

We were told that the Government needed gasoline for war purposes and that we should
not drive automobiles on Sundays.

Hardly an automobile is to be seen on the streets of Pew York city, or in the country,
on Sundays.

The response was a fine exhibition of patriotism.

But, after all, a Sunday drive is not essential to health or war efficiency, so
we must not over-value the self denial.

We are told by Mr. Hoover that the economies practiced by the American people
released food supplies sufficient to meet the recent crisis abroad.
People were told what to do and they did it.

We are now asked to economize in sugar, and the result will, doubtless, be a relief
in the sugar shortage.

If we are told definitely and specifically what to do;
is shown to be necessary;

if what we are told to do

and if it applies alike to rich and poor,

it will be done, and the time has come to tell people definitely and
to get it done.

I shall not burden you with the details of the mechanical operations re.luired to




prepare and deliver the millions of bonds which are issued for these
huge loans.

- 8 -

Most of the delay and consequent inconvenience in delivering bonds in the earlier
loans was due to the universal demand for coupon bonds.
The machinery of the Treasury Department and of the reserve banks is now developed

to meet an enlarged demand for registered bonds, and for effecting
prompt transfers of ownership.

It will be a great economy to the Government, a saving of labor and material, if
those subscribing to the Eourth Loan are, generally, induced to take
registered, instead of coupon, bonds.

The organization throughout the district should ask subscribers to indicate on
the subscription blanks that they are willing to accept registered
bonds.

In this form bond holders receive a greater protection against theft and loss than
in the case of coupon bonds, and they avoid the inconvenience of
collecting coupons, as checks for the interest will be mailed to them.

A

of the honor flag plan has been adopted for the next loan, of which
you have been duly advised.

The development of the honor flag seemed to have had two effects in the course of
the last bond sale, to which reference is necessary.
In some cases it led committees in certain communities to relax their efforts as
soon as their quotas were completed.
This was a serious mistake.

It would result, if possible of exact application taroughout the country, in no
oversubscription.

We must not set out simply to fill fjuotas, but to exceed them by the largest possible margin and to continue selling bonds until the close of the
campaign

Another development was the tendency to divert subscriptions to places where they




would not naturally be made.

- 9

quota plan, as I stated at our last meeting;, is based upon the thoroughly sound

principle that as the Government receives payment for bonds by
transfers of bank balances from the credit of subscribers to the credit
of the Government,

Therefore, the minimum amount to be subscribed, that is the laotd of each section or
community, must be based upon bank resources.

It is desired that subscribers file their subscriptions where their bank accounts
are maintained, and out of Which the bonds are to be paid for, and,

if the sibscAber has more than one account, that the subscriptions be
divided in proportion to the balances meaintained in the resrective
accounts.

It is also desired that the subscriptions of amployes of industrial and other
establishments shall be made in the places -Where the men work and
live.

Failure to observe these rules causes an undesirable shifting of funds throwout
the country and an unnecessary strain upon the money market.

The local pride of suburban communities, necessarilw, results in considerable
numbers of subscriptions being made there by residents who carry
their principal bank bal,,:nces in near-by cities.

Local pride and the enthusiasm of local organizations should not, however, result
in the piling up of huge subscriptions, of many times the local

quota, at the expense of the cities which are deprived of these subscriptions and Which are not able to fill their ..u.otaa, so that

possibly, in consequence, the banks must be called upon to subscribe
for their own account.

Looking toward a greater and more efficient development of the two financial machines




Which have been created by the Treasury Department, ',Secretary McAdoo

has undertaken to bring about a closer relationship between the Liberty
Loan and the 'Iar 3avings Organizations throughout the country.

- 10 -

This is a new task Which will confront us When this loan is sold.

In the meantime, all branches of the two organizations in this district have been
asKed to join hands in a great partnership to make the Liberty Loan
a success.

I am hopeful that it will be possible to create in our district, throuell the agency

of these two existing organizations, the greatest and most efficient
army for financing a Government in time of war that has ever been
created.

Its rurposes will be two in character -- one to broaden the foundation for rasing
money for the Government by developing organized savings, as the War
4,ivings Organization is now doing;

--

the other, to effect the

bale of all forms of Government securities so that these savihs,
as accumulated, are swept into the Government's treasury.
We mu.t reach the rich and the poor -- the corporation and the individ11.31!

In imagination I can picture the growth of an irresistable movement under the
influence of this army of workers which will capture public attention;
educate the people to a better understanding of what the Government

erects them to do;

and enable us, as remired, to furnish even more

funds than the Government calls upon us to provide for war purposes.
.a.felito

The members of our organization have been asked, and are exiected, to accomplish
things Which before the war would have seemed to be suite impossible.
They have exceeded expectations in what they have accomplished.

The explanation is not hard to find,and should give us confidence in the success
of this next great effort.

We have sons, brothers, husbands in the army in ?ranee:

Thirteen million Americans have just registered for military service, and many of




them will soon be in training camps.

-n Our part in the war is to 1,_eep them supplied with everything that they need to

enable them to xill and capture Germans -- and to do it at once -and thoroughly.

The supplies for that army will be created, ships to transport them will be built;

and that army will grow just as rapidly as the resources of the
country can be converted into ships and war materials.
We must raise the money to pay the bills.

But our work depends upon the effect the new draft will have upon the members of

OVIZ-

tittlrorganization .vino have registered for military service.

Explicit directions have been sent to the chairmen of all committees in this district
describing what they should do in this matter, and these directions

have been prepared in conformity with a general direction sent to us
by Secretary LicAdoo.

It must be remembered that while commonly described as a draft law, the statute
is, in fact, entitled "The Selective service Act."

The purpose of the act is to insure that the men needed for military service are
promptly available, but e:Lr.idly important, that those needed in

their present occupations shall be retained.
We have felt that it was raJjlired of the members of our organization to claim, or

waive claim of exemption on personal grounds according to their own
consciences.

We have also felt that it was our duty, as an organization, to see that the luestion
of exemption on occupational grounds for the organization as a jhole
was fairly and intelligently presented to the proper authorities.

That has been done and a policy has been adopted which is designed to protect the




integrity of an organization essential to the prosecution of the war,
and, at the same time, which. will not depriVe the military branch of

the Government of the services of those who are needed, and can be
spared, for the army and navy.

- 12 -

I have referred at sone length to the possible effect of the draft upon our organization for the purpose of emphasizing one thing in your minds.
There is but one American Army!

A part of it is privileged to fight in iranue -Another, and an essential rart, must work at home.
Each depends upon the other!
We are of the home army.

10t

72-0- /01CURAr6taCe- o-w ' (0-e-r/G ,

Do you realize the significance of what is now taking place in 2rance end what these
dollars whiuh our army is raising are really doing?
The first wholly American Army is facing the German frontier;

that frontier is

opposite Metz!
Metz stands on soil that was r'rench until 1671.

My conception of the mission of the American Army in Erance is that of a victorious
army marching through Alsace-Lorraine, and never leaving until those
provinces are "rench soil again.

I can not believe that the people of this country, much leas our home army of
finance, will tolerate the return to Germany of any tart of Erance,
the soil of which is made sacred to us with American blood and our
soldiers' graves.

'Alen the work of that army is accomplished (and you will have had a part in it)

there will be illustrious American names as sacred to the memory of
the 2rendh as with us are the names of Rochambeau and Lafayette.

BSAISB




This is an opportunity WhiCh tempts me very much to tell you something about the
Treasury Department of the United states, and, particularly,
about the secretary of the Treasury.

I shall, however, deny myself what would be a very great pleasure if I were to

tell you something of four years' experience in close association
with the work of Secretary' McAdoo's department.
It really needs no recounting:

On every hand we hear the comment that the performance of the Treasury Department
has been 1005.

At the risk, however, of private admonition after this meeting, I shall say one
personal word about Secretary McAdoo.
With many others who have been associated with him during the past four years,

we entered upon our duties with the feeling of respect which one
naturally accords to a chief.

He is, himself, responsible for the change which has taken place in our feelings,

for we now regard him with the affection which one feels for a
trusted partner and friend.

I have the honor

BS/LIBB.



ADDRESS BY DENJ. STaUNG
AT LIBERTY LOAN MEETING

AT CRNEGIE HALL
SEPTEMBER 25, 1918.

Z.ir.

Secretary, and Fellow Members of the Liberty Loan Army;

This is the second convention of our members.

It is again my duty to

remind you of the size of the undertaking entrusted to us by stating, as I did
at our last meeting, that hardly 2% of our members can be accommodated in this
building.

The magnitude of the task of financing the creation and maintenance of
our military aim{' is indicated by the size of this financial army.

But the im-

portande of the work must be measured by other standards:
Success will be another battle won and failure will be a retreat.

These are not dys, however, when American Armies are retreating.
Our experience in handling three loans has given us a better understanding of the work;

has brought about a more harmonious and effective operation; and,

in the minds of us all, a better knowledge of the technic.

I shall not, therefore,

as at our last meetinF:, review in detail all of the various technical matters with
which we are now so well acquainted.

During the next four weeks, we are about to undertake the greatest transaction in the history of finance and it is important that certain general rules
which must governrour work should be frankly discussed and understood.

These have

been deliberately adopted in this distridt after careful consideration, and, in
the opinion of experienced men, are best designed to bring success.

We believe that successful sales of bonds of the amount required must be
based upon a thorough understanding by the public of the war;
which we are fighting;

patriotism of the people

of the purposes for

and that this loan will be successful in proportion as the
stirred and aroused.

Impetus must, therefore, be given to the campaign by publicity of the
highest order, designed to reach the mass of the people through every possible
avenue.
It



is upon this preparatory work of education that a campaign for voluntary

2

subscriptions rests.

The selling organization, through various agencies, must undertake to
reach every individual and corporation, the methods varying according to the size
and character of the community.

In this city maw methods must be pursued.

In

some communities an individual canvass of every resident is possible and frecuently proves most successful.

But

so long as we employ publicity, and depend

upon the understanding, sympathy and enthusiasm of the public, we must confine
our campaign of solicitation to those methods which make the individual value
the fact that he is a

voluntary subscriber.

He must, however, be shown his

duty,.

Eve y person who subscribes by free choice, for patriotic reasons, is a
better subscriber, more satisfied with his investment, and more contented to keep
his bonds than one who purchases bonds under duress and whose first impulse, once
the bonds are paid for, is to sell them.

Our program, therefore, contemplates an

intensive, dignified, and impressive publicity to reach every person, no.matter
what may be his means or what the ayuntry of his birth.

We must not, however, lower the standard of a dignified campaign by permitting ourselves to indulge in sensational displays, extravagant statements or by
employing methods calculated to arouse ridicule cr bring reproach upon the organization.

The enthusiasm of the members of the organization should not lead them

to employ devices wnich will associate this serious undertaking with the methods of
a circus or of a lottery.

Performances of that character on the street-

in the theatres and in

public places can not expect a sympathetic reception from those who have relatives,
or who have lost relatives, in the battles in France.

It is impostant to maintain

enthusiasm at the highest pitch, and, at the same time, to restrain it within the
limits required by the seriousness of the great enterprise in which this country
is engaged.




You are aware that bonds of previous loans, bearing the same rate of




- 4 --

amount of bonds of the 1,curth Liberty Loan originally subscribed for and still

owned by him at the date of his tax return;

The old bonds to which the exemp-

tion applies are all of those outstanding, including those arising from conversions, exceptin_, of course, the 3 1/2 % bonds of the first issue.
3.

The exemptions provided in the bill are to continue during the

period of the war, and for two years after the date of the termination of the war,
as fixed by proclamation of the President.
To Summarize:

In addition to all tax exemptions now provided by law,

any original subscriber to bonds of the Fourth Liberty Loan will be exempt from
surtaxes and excess profits and war profit staxes on the into es fro
ing

not exceed-

30,000 principal of bonds of the Fourth loan, and, if he retains his bonds

may gain similar exemption on the income from one and one half times that amount
of the old bonds;

the exemption to continue for the period dr the war and for

two years thereafter.

You will observe that the passage of this law will have the following
effect, provided it is thoroughly and widely understood:

First, as to a holder of the existing bonds who is now liable to income

surtax - He my only enjoy the exemptions from taxation provided in this law in
case he purchases and retains bonds of the new issue in the proportion provided
by the law.

Therefore, every holder of bonds of the second and third loan, and

of those received through conversions will find it absolutely essential, in order
to enjoy this exemption, that he shall buy and retain new bonds.

Next, as to an intending subscriber to the Fourth Loan - It is plainly
to his advantage, if he does not already own the necessary proportion, to purchase
such an amount of bonds of the old issues as will enable him to enjoy the maximum
tax exemption allowed.

One may suggest that it is not desirable for an intending subscriber to
purchase the old bonds, when he might, in fact, be induced to purchase only the
new bonds.



It must be borne in mind, however, that the holder of the old bonds

- 5 -

who sells them does so in order to subscrihe to the new issue and therebz., gain tax

exemption on the bonds which he still has left.

The effect of this new plan of exemption from taxation should, therefore,
as it becomes generally understood, bring abou
of existing bonds.

a large subscription from holders

It should, likewise, provide buyers of bonds of the old issues

which their holders may feel required to sell in order to subscribe for the new
issue.

Advices have been sent to the chairmen of all committees throughout the
district that they will, upon request made to their district chairman, be furnished
with lists of subscribers to former loans.

These subscribers are so obviously

interested in the terms of this tax exemption that it is desirable fee localcom-

mittees to obtain the lists and bring the matter personally to the attention of each
subscriber to former issues.

So few people read the details of statutes passed by Congress that the
effect of this most important modification of the tax provisions applying to

Liberty Bonds will not be fully felt, nor will the Government enjoy all of the
benefits which it should enjoy from the adoption of this new program unless it
is brought by you to the attention of everyone.

Too great emphasis can not be

given to the matter in connection with this campaign.

As in the case of former loans, a description of the terms of the Fourth
Loan, including; a description of this tax exemption, will be furnished. to all com-

mittees at an early date, together with tables illustrating the income value of
bonds of the Fourth Loan When considered in connection with the tax exemption.
Dut we must not overlook the urgent injunction *hich has now been spread broadcast
for all owners of the Government's bonds to retain them.
Emphasis. should be laid upon the necessity of making no sales of present

holdings of bonds unless it is imperative for the holder to do so in order to
secure the benefits of the tax exemptions now provided.

We can not expect to have

the bonds of the Government sell at their real value if large numbers of people



- 6 -

are induced, or even dragooned into buying them with the expectation of immediately selling them in the merket.

The question is repeatedly asked, how may subscriptions be made by those
who are pressed to subscribe but who have not sufficient ready cash.

There is but

one answer:

Those who must borrovirmoney to make their purchase should do so in the
expectation of paying their loans out of fluids accumulated by the practise of

the greatest difficulty now

rigid economy, rather than by selling their bonds.

encountered by our organization in selling bonds is caused by the failure of the
people of the country- to practice thrift sufficiently.

I am confident that the only thing now needed is that everyone should
know specifically and definitely what he is expected to do in this matter;

what

his patriotic duty is, and he will promptly do it.
:e were told that the Government needed gasoline

that we should not drive automobiles on Sundays.

war purposes and

Hardly an automobile is to be

seen on the streets of New York City, or in the country, on Sundays.
was a fine exhibition of patriotism.

The response

But, after all, a Sunday drive is not essen-

tial to health or war efficiency, so we must not over -value the self denial.

We are told by Mr. Hoover that the economies practiced by the American
people released food supplies sufficient to meet the recent crisis abroad.
,.ere told what to do and they did it.

People

We are now asked to economize in sugar, and

the result will, doubtless, be a relief in the sugar shortage.
If we are told definitely and specifically what to do;
told to do is Shown to be necessary;

if what we are

and if it applies alike to rich and poor,

it will be done and the time has come to tell people definitely and to get it done.
I shall not burden you with the details of the mechanical operations
required to prepare and deliver the millions of bonds which are issued for these
huge loans.

Most of the delay and consequent inconvenience in dblivering bonds in

the earlier loans was due to the universal demand for coupon bonds.




The machinery

of the Treasury Department and of the reserve basks is now developed to meet an
enlarged demand for registered bonds, and for effecting prompt transfers of ownership.

It will be a great economy to the Government, a saving of labor and
material, if those subscribing to the Fourth Loan are, generally, induced to take
registered, instead of coupon bonds.

The organization throughout the district

should ask subscribers to indicate on the subscription blanks that theyare willing
to accept registered bonds.

In this form bond holders receive a greater protec-

tion against theft and loss than in the case of coupon bonds, and they avoid the
inconvenience of collecting coupons, as checks for the interest will be mailed
to them.

A modification of tne honor flag plan has been adopted for the next loan,
of Which you have been duly advised.

The development of the honor flag seemed

to have aad two effects in the course of the Ia.t bond sale, to which reference
is necessary.

In some cases it led committees fn certain communities to relax

their efforts as soon as their quotas were completed.

This was a serious mistake.

It would result, if possible of exact application throughout the country, in no
oversubscription.

We must not set out simply to fill quotas, but to exceed them

by the largest possible margin and to continue selling bonds until the close of
the campaign.

Another development was the tendency to divert subscriptions to places
where they would not naturally be made.

A Quota plan, as I stated at our last

meeting, is baed upon the thoroughly sound principle that as the Government receives payment for bonds by transfers of bank balances from the credit of subscribers
o the credit of the Government.

Therefore, the minimum amount to be subscribed,

that is the quota of each section or community, must be based upon bank resources.
It is desired that sub scribers file their subscriptions where their bank

accounts are maintained, and out of which the bonds are to be paid for, and if the



- 8 -

subscriber has more than one account, that the subscriptions be divided in proportion to the balances maintaiaed in the respective accounts.

It is also desired

that the subscriptions of employes of industrial and other establishments shall be
made in the places where the men work and live.
Failure to observe these rules causes an undesirable shifting of funds
throughout the country and an unnecessary strain upon the money market.

The local

pride of suburban communities, necessarily, results in considerable numbers of
subscriptions being made there by residents who carry their principal bank balances
in nearby cities.

Local pride and the enthusiasm of local organization should not,

however, result in the piling up of huge subscriptions, of many times the local
euota, at the expense of the cities which are deprived of these subscriptions and

which are not able tJ4.11 their quotas, so that possibly, i4onsequence, the banks
must be called upon to subscribe for their own account.

Looking toward a greater and more efficient development of the two financial machines which have been created by the Treasury Department, Secretary McAdoo
has undertaken to bring about a closer relationship between the Liberty Loan and
the War Savings Organizations throughout the country.
confront us when this loan is sold.

This is a new task which will

In the meantime, all bra:wins of the two organ-

izations in this district have been asked to join hands in a great partnership to
make the Liberty Loan a success.

I am hopeful that it will be possible to create in our district, through
the agency of these two existing organiz-tions, the greatest and most efficient army
for financing a Government in time of war that has ever been created.

will be two in character - one to broaden the foundation for raising money for the
Government by developing organized savings, as the Vlar bavings Organization is now

doing; - the other, to effect the sale of all forms of Government :ecuribies so that
these savings, as accumulated, are swept ihto the Government's treasury.
reach the rich and the poor - the corporationand the individual!



i.e must

- 9 -

In imagination I can picture the growth of an irresistible movement
under the influence of this army of workers which will capture public attention;
educate the people to a better understanding of what the Government expects them
to do;

and enable us, as required: to furnish even more funds than the Government

calls upon us to provide for war purposes.

The members of our organization have

been asked, and are expected, to accomplish things which before tne war would have
seemed to be quite impossible.

They have exceeded expectations in what they have

accomplished.

The explanation is not hard to find, and should give us confi,lence in the
success of this next great effort.
in France!

We have sons, brothers, husbands in the army

Thirteen million Americans haze just registered for military service,
Our part in the war is to keep

and many of them will soon be in training camps.

them su)plied with everything that they need to enable them to kill and capture
The supplies for that

Germans - and to do it at once - and thoroughly.

be created, ships to transport them will be built;

1.-qy will

and that army will grow just

as rapidly as the resources of the country can be converted into ships and war
materials.

Vie muwt raise the money to pay the bills.

But our work dep nds u)on the effect tile new draft will have upon the

members of this organization who have registered for military service.

Explicit

directions have been sent to the chairman of all committess in this district describing what they should do in this matter, and those directions have been prepared by conformity with a general direction sent to us by Secretary licAdoo.

It must be remembered that while commonly described as a draft law, the
statute is, in fact, entitled "The 'elective

ervice Act."

The purpose of the act

is to insure chat the men needed for military service are promptly available, but
equally important, that those needed in their present occupations shall be retained.

We have felt thtt it was required of the members of our organization to claim, or
waive claim of exemption on personal grounds according to their own consciences.



We have also felt that it was our duty, as an organization, to see that

- 10 -

the question of exemption on occupational grounds for the organiation as a whole
was fairly and intelligently presented to the proper authorities.

That has been

done and a policy has been adopted which is designed to protect the integrity of an

organization essential to the prosecution of the war, and, at the same tie, which
will not deprive the military branch of the Government of the services of those who
are needed, and can be spared, for the army and navy.

I have referred at some length to the possible effect of the draft upon
our organization for the purpose of emphasizing one thing in your minds.

There is

but one American Army:

A part of it is privileged to fight in France - Another,

and an essential part,

must work at hom-.

Each depends upon the other:

We are

of the home army.

Do you realize the significance of what is now taking place inFrance

and what thee dollars which our army is raising are really doing?
wholly American Army is facing the Germqn frontier;
Metz:

The first

th at frontier is opposite

Metz stands on soil that was French until 1871.

My conception of the mis-

sion of the American Army in France is that of a ViCbCaiDUE ally- marching through

Alsace-Lorraine, and never leaving until those provinces are French soil again.
I can not believe that the people of this country, much less our home
army of finance, will tolerate the return to Germany of any part of France, the
soil of which is made sacred to us with American blood and ou. soldiers' graves.

:hen the work cf that army is accomplished (and you will have had a part
in it)

there will be illustrious American names as sacred to the memory of the

French as with us are the names of Rochambear and Lafayette.




(Inset in Governor Strong's speech)

In the 'Third Liberty Loan, every banking town in this district (with

one exception) won the honor flag, and over 75% of the tams without bnks won
honor flags.

As in the past loan, this flag will be awarded to those towns which subscribe their full quotas.
subscription of 505.

In addition, a blue star will be awarded for each over-

Accompanying the honor flag will he a penant for those commu-

nities of which 2E% of the population subscribe to bonds, and an additional penant
will be awarded for each additional 10% of the population that adoscribes.

The industrial honor flag, used with great success in this city during
It will be awarded to those

the Thiie Loan, has been adopted for the whcle country.

organizations which secure subscriptions from 75% of their employes.

If a larger

percentage subs ribe, it will be indicated on the penant.
At the suggestion of Mrs. Filson, the names of communities showing the
largest oversubscriptions, and showing the largest percentage of population subscribing, will be given to new ships to be launched and to new tanks being built for the
army.

Ten ships and ten banks have been assigned to this district.

governing the designation of the communities will shortly be published.




The rules

NEWS

LIBERTY LOAN COMMITTEE
IQUITABLE BUILDING TWRNTY-FOURTH FLOOR

PUBLICITY DEPARTMENT

120 BROADWAY

BNINPWMEJOIMIS

NEW YORK

Amino:It Mostar la charge Press Boma

4 No. 111.
MORNING PAPERS,
WEDNESDAY,
Sept. 25, 1918.

INSERT GOV. STRONG'S SPEECH WHERE HE INDICATES,
In the Third Liberty Loan, every banking town in this district (with one exception) won the honor flag, and over 75% of the

towns without banks won honor flags.
As in the past loan, this flag will be awarded to those
towns which subscribe their full quotas.

In addition, a blue star

will be awarded for each over-subscription of 50%.

Accompanying

the honor flag will be a penant for those communities of which 25%

of the population subscribe to bonds, and an additional penant
will
be awarded for each additional 10% of the population
that subscribes.
The industrial honor flag, used with great success in this
city during the Third Loan, has been adopted for the whole country.
It will be awarded to those organizations which secure subscriptions
from 75% of their

amployes.

If a larger percentage subscribe, it

will be indicated on the penant.
At the suggestion of Mrs. Wilson, the names cf communities
showing the largest oversubscriptions, and showing the largest per-

centage of population subscribing, will be given to new ships to be
launched and to new tanks being built for the army.
Ten ships and ten tanks have been assigned to this district.
The rules governing the designation of the communities will shortly
be published.



END INSERT

17

NEWS

LIBERTY LOAN COMMITTEE
EQUITABLE BUILDING TWENTY-FOURTH FLOOR

PUBLICITY DEPARTMENT

120 BROADWAY
NEW YORK

JOHN PRICE JONES

Assistant Director is charge Press Bureau

GOVERNOR STRONG'S LIBERTY LOAN
SPEECH AT CARNEGIE HALL

MORNING PAPERS
WEDNESDAY,
SEPTEMBER 25, 1918.
4 No. 110.

At the Liberty Loan meeting in Carnegie Hall last night
(Tuesday) Benjamin Strong, Governor of the Second Federal

Reserve District, and Chairman of the Liberty Loan Committee
for this district, spoke as follows:

Mr. Secretary, and Fellow Members of the Liberty Loan Army;
This is the second convention of our members.

It is again

my duty to remind you of the size of the undertaking entrusted to
us by stating, as I did at our last meeting, that hardly 2% of
our members can be accommodated in this building.
The magnitude of the task of financing the creation and
maintenance of our military army is indicated by the size of
this financial army. But the importance of the work must be
measured by other standards'

Success will be another battle won and failure will be a
retreat.

These are not days, however, when American Armies are
retreating.




-2-

4 No. 110.

Our experience in handling three loans has given us a

better understanding of the work; has brought about a more harmonious and effective operation; and
knowledge of the technic.

in the minds of us all, a better

I shall not, therefore, as at our last

meeting, review in detail all of the various technical matters Aitil

which we are now so well acquainted.
During the next four weeks, we are about to undertake the

greatest transaction in the history of finance and it is

important

that certain general rules which must govern our cork should be
frankly discussed and understood.

These have been deliberately

adopted in this district after careful consideration, and, in the
opinion of experienced men, are best designed to bring success.

We believe that successful sales of bonds of tne amount
required must be based upon a thorough understanding by the public
of the war; of the purposes for which we are fighting; and that thia

loan will be successful in proportion as the patriotism of the
people is stirred and aroused.

Impetus must, therefore, be given to the campaign by
publicity of the highest order, designed to reach the mass of the

people through every possible avenue.

It is upon this preparatory

work of education that a campaign for voluntary subscriptions rests.




4 No.110

-3-

The selling organization, through various agencies, must undertake to reach every individual and corporation, the methods
varying according to the size and character of the community.
In this city many methods must be pursued. In some communities
an individual canvass of every resident is possible and frequent
ly proves most successful.

But, so long as we employ publicity,

and depend upon the understanding, sympathy and enthusiasm of the
public, we must confine our campaign of solicitation to those
methods which make the individual value the fact that he is a
voluntary subscriber.

He must, however, be shown his duty.

Every person who subscribes by free choice,for patriotic
reasons,is a better subscriber,more satisfied with his investment,
and more contented to keep his bonds than one who purchases bonds
under duress and whose first impulse, once the bonds are paid for,

is to sell them. Our program, therefore, contemplates an intensive,

dignified, and impressive publicity to reach every person, no
matter what may be his means or what the country of -his birth.

We must not, however, lower the standard of a dignified campaign by permitting ourselves to indulge in sensational displays,
extravagant statements or by employing methods calculated to a -

rouse.ridicule or bring reproach upon the organization. The enthusiasm of the members of the organization should not lead them
to employ devices which will associate this serious undertaking
with the methods of a circus or_of a lottery.




-

4 No. 110

Performances of that character on the streets, in the
theatres and in public places can not expect a sympathetic reception from those who have relatives, or who have lost relatives, in
the battles in France.

It is important to maintain enthusiasm at

the highest, pitch, and, at the same time, to restrain it within the

limits required by the seriousness of the great enterprise in which
this country is engaged.

.You are aware that bonds of previous loans, bearing the same
rate of interest as those now to be sold, are selling at less than
par in the market.

I shall repeat, with less fear of contradiction

now than when I male the same statement at our last meeting--that

with over a million and a half of our American boys in the fighting line in France, whose victory depends upon the success of these
loans, the American people will not subject their patriotism;

their

resblutibh tO support that army, to be measured by a rate of interest or by a pr

,um or discount on the bonds of their Government.

But an important change has just been made in the investment position
of Liberty Bonds by Act of Congress, to which I must refer in some
detail.

Since the last bond sale, Congress has been asked and

doubtless will increase revenues from taxation from $4,000,000,000
to $8,000,000,000 a year.

As the income from all but the 3 1/2%

bonds of the first issue is liable for surtaxes and for war profits
and excess profits taxes, an increase in those taxes, naturally, reduces the net return on the bonds now to be issued.

Congress, has,

therefore, passed a law increasing tax exemptions, the provisions of
which should be brought to the attention of every intending subscriber
as well as to the attention of every subscriber to the first three
is6uee.



-5-

4 No. 110.

I shall read a summary of the act, which it is important
that all should understamd.

All of the exemptions originally

applying to the earlier issues, of course, remain unchanged.
1.

The interest on not exceeding n0,000 principal of

bonds of the Fourth Liberty Loan shall be exempt from graduated
additional income taxes, cciLmenly known as surtaxes, and excess

profits and war profits taxes, now or hereafter imposed:
2.

The interest received after January 1,1918, on an

amount of bonds of the earlier loans, excepting the 3 1/2s of the
first issue, the principal of which does not exceed 345,000 in the

aggregate, shall be exempt from such taxes; Provided, however, that
no owner of such bonds shall be entitled to such exemption on an
aggregate principal amount exceeding one and one-half times the
principal amount of bonds of the Fourth Liberty Loan orginally subscribed for and still owned by him at the date of his tax return;

The old bonds to which the exemption applies are all of those outstanding, including those arising from conversions, excepting, of
course, the 3 1/2% bonds of the first issue.
3.

The exemptions provided in the bill are to continue

during the period of the war, and for two years after the date of
the termination of the war, as fixed by proclamation of the
President.




4 No, 110

6

To summarize:

In addition to all tax exemptions now Pro-

vided by law, any original subscriber to bonds of the Fourth

:

Liberty Loan will be exempt from surtaxes and excess profits
and war profits taxes on the incomes from not exceeding $30,000
principal of bonds of the Fourth loan and, if he retains his

bonds may gain similar exemption on the income from one and onehalf times that amount of the old bonds;

the exemption to con-

tinue for the period of the war and for two years thereafter,
You will observe that the passage of this law will have the
following
FIRST:

provided it is thoroughly

widely understood:

As to a holder of the existing bonds who is now

liable to income surtax - --He may only enjoy the exemptions from

taxation provided in this law in case he purchases and retains

bonds of the new issue in the proportion provided by the law,
Therefore, every holder of bonds of the second and third loan,

and of th'se received through conversions will find it absolutely
essential, in order to enjoy this exemption, that he shall buy and
retain new bonds.
NEXT:

As to an intending subscriber to the Fourth Loan--It

is plainly to his adVantage, if he does not already own the necessary proportion, to purchase such an amount of bonds of the old
issues as will enable him to enjoy the maximum tax exemption
allowed,




4 No. 110.

- 7 -

One may suggest that it is not desirable for an intendirz
subscriber to purchase the old bonds, when he might, in fact, be
induced to purchase only the new bonds.

It must be borne in mind,

however, that the holder of the old bonds who sells them does so
in order to subscribe to the new issue and thereby gain tax exemption on the bonds which he still has left.
The effect of this new plan of exemption from taxation
should, therefore, as it becomes generally understood, bring about
a large subscription from holders of existing bonds.

It should,

likewise, provide buyers of bonds of the old issues which their
holders may feel required to sell in order to subscribe for the
new issue.

Advices have been sent to the chairmen of all committees
throughout the district that they. will, upon request made to their

district chairman, be furnished with lists of subscribers to
former loans.

These subscribers are so obviously interested in

the terms of this tax exemption that it is desirable for local
committees to obtain the lists and bring the matter personally to
the attention of each subscriber to former issues.
So few people read the details of statutes passed by
Congressthat the effect of this most important modification of the
tax provisions applying to Liberty Bonds will not be fully felt,
nor will the Government enjoy all of the benefits which it should
enjoy from the adoption of this new program unless it is brought
by you to the attention of everyone.

Too great emphasis can not

be given to the matter in connection with this campaign.




-8-

4 No. 110.

As in the case of former loans, a description of the terms

of the Fourth Loan, including a description of this tax exemption,
will be furnished to all committees at an early date, together

with tables illustrating the income value of bonds of the Fourth
Loan when considered in connection with the tax exemption. But

we must not overlook the urgent injunction which has now been
spread broadcast for all owners of the Government's bonds to
retain them.

Emphasis should be laid upon the necessity of making no
sales of present holdings of bonds unless it is imperative for
the holder to do so in order to secure the benefits of the tax
exemptions now provided.

we can not expect to have the bonds

of the Government sell at theirreal value if large numbers of
people are induced, or even dragooned into buying them with the
expectation of immediately selling them in the mLrket.
The question is repeatedly asked, how may subscriptions be
made by those who are pressed to subscribe but who have not
sufficient ready cash.

There is but one answer:

Those who must borrow money to make their purchtlse should

do so in the expectation of paying their loans out of funds accumulated by the practice of rigid economy, rather than by
selling their bonds. The greatest difficulty now encountered by
our organization in selling bonds is caused by the failure of the
people of the country to practice thrift sufficiently.
I am confident that the only thing now needed is that every-

one should know specifically and definitely what he is expected
to do in this matter; what his patriotic duty is, and he will
 promptly


do it.

-9-

4 No, 110.

We mere told that the Government needed gasoline for
mar purposes and that we should not drive automobiles on Sundays.
Hardly an automobile is to be seen on the streets of New York City,
or in the country, on Sundays.
of patriotism.

The response was a fine exhibition

But, after all, a Sunday drive is not essential to

health or war efficiency, so we must not over-value the self denial.
We are told by Mr. Hoover that the economies practiced by
the American people released food supplies sufficient to meet the
recent crisis abroad.

People were told what to do and they did it.

'!:e are now asked to economize in sugar, and the result ill, doubt-

less, be a relief in the sugar shortage.

If we are told definitely and specifically what to do; if
what we are told to do is shown to be necessary; and if it applies

alike to rich and poor, it will be done, and the time nas come to
tell people definitely and to get it done.
I shall not burden you with the details of the mechanical

operations required to prepare and deliver the millions of bonds
which are issued for these huge loans.

Most of the delay and con-

sequent inconvenience in delivering bonds in the earlier loans was
clue to the universal demand for coupon bonds.

The machinery of the

Treasury Department and of the reserve banks is now developed to meet
an enlarged demand for registered bonds, and for effecting prompt
transfers of ownership.

It will be a great economy to the Government, a saving of
labor and material, if those subscribing to the Fourth Loan are, gen.

erally, induced to take registered, instead of coupon, bonds.

The

organization throughout the district should ask subscribers to

cate on the subscription blanks that they are willing to accept reg


-10-

4 No.110.

istered bonds. In this form bond holders receive a greater protection
against theft and loss than in the case of coupon bondE;, and they a-

void the inconvenience of collecting coupons, as

checks fcr the

interest will be mailed to them,
A modification of the honor flag. plan has been adopted for the

next loan, of Aiich you have been duly advised. The development of the
honor flag seemed to have had two effects in the course of the last

bond sale, to which reference is necessary. In some cases it led COErittees in certain communities to relax their efforts as soon as the,ir

quotas were completed. This was a serious mistake. It would result,if

possible of exact application throughout the country,in no oversubscription. We must not set out simply to fill quotas, but to exceed
them by the largest possible margin and to continue selling bonds until the close of the campaign.

Another development was the tendency to divert subscriptions to
places where they would not naturally be made. A quota plan, as I
stated at our last meeting,is based upon the thoroughly sound principle
that as the Government receives payment' for bonds by transfers of bank

balances from the credit of subscribers to the credit of the Govern ment. Therefore,the minimum amcunt to be subscribed, that is the quota
of each'section or community,must be based upon bank resources.
It is desired that subscribers file their subscriptions where

their bank accounts are maintained,and out of which the bonds are to
be paid for,and,if the subscriber has more than one account,that the
subscriptions be divided in proportion to the balances maintained in
the respective accounts, It is also desired that the subscriptions of
emPiolres of industrial and other establishments shall be made in the

places where the men work and live.



- 11 -

4 No. 110.

Failure to observe these rules causes an undesirable
shifting of funds throughout the country and an unnecessary strain
up6n the money market.

The local pride of suburban communities,

necessarily, results in considerable numbers of subscriptions being
made there by residents who carry their principal bank balances in
near-by cities.

Local pride and the enthusiasm of local organiza-

tion should not, however, result in the piling up of huge subscriptions, of many times the local quota, at the expense of the cities
which are deprived of these subscriptions and which are not able to
fill their quotas, so that possibly, in consequence, the tanks must

be called upon to subscribe for their own account.

Looking toward a greater and more efficient development of
the two financial machines which have been created by the Treasury

Department, Secretary McAdoo has undertaken to bring about a closer
relationship between the Liberty Loan and the War Savings Organizations throughout the country.

This is a new task which will con-

front us when this loan is sold.

In the meantime, all branches of

the two organizations in this district have been asked to join hands
in a great partnership to make the Liberty Loan a success.
I am hopeful that it will be possible to create in our district, through the agency of these two existing organizations, the
greatest aid most efficient army for financing a Government in time
of war that has ever. been created.

Its purposes will be two in

character -- one to broaden the foundation for raising money. for the

Government by developing organized savings, as the War Savings Organization is now doing; -- the other, to effect the sale of all

forms of Government Securities so that these savings, as accumulated,
are swept into the Government's treasury.
and the poor-- the corporation and the individual!



re must rea

4 No. 110.

-12-

In imagination I can picture the growth of an irresistible
movement under the influence of this army of workers which will

capture public attenion; educate the people to a better undertanding of what the Government expects them to do;

and enable us, as

required, to furnish even more funds than the Government calls upon
us to provide for war purpose's.

The members of our organization

have been asked, and are expected, to accomplish things which before the war would have seemed to be quite impossible.

They have

exceeded expectations in what they have accomplished.

The explanation is not hard to find, and should give us confidence in the success of this next great effort.

7e have sons,

brothers, huebands in the army in France!. Thirteen million Amer-

icans have just registered for military service, and many of them

will soon bein training camps.

Our part in the war is to keep

them supplied with everything that'they need to enable them to kill
and capture Germans -- and to do it at once -- and thoroughly,

The

supplies for that army will be created, ships to transport them
will be built; and that army will grow just as rapidly as the resources of the country can be converted into ships and war materials.
Te must raise the money to pay the bills.
But our work depends upon hhe effect the neq draft wil7 have

upon the members of this organization who have registered for military service,

Explicit directions have been sent to the chairman

of all committees in this district describing what they should do

in this matter, and those directions have been prepared in conformity with a general direction sent to us by Secretary McAdoo.




-7.5-

4 No, 110.

It must be remembered that while commonly described as a

draft law, the statute is, in fact, entitled "The Selective Service
Act".

The purpose of the act is to insure that the men needed for

military service are promptly available, but equally important,
that those needed in their present occupations shall be retained.

We have felt that it was required of the members of our organization to claim, or waive claim of exemption on personal grounds
accorcling to their own conscience.

7e have also felt that it was our duty, as an organization,
to see that the question of exemption on occupational grounds for
the organization as a who;e was fairly and intelligently presented
to the proper authorities.

That has been done and a policy has been

adopted which is designed to protect the integrity of an organization essential to the prosecution of the war, and, at the same time,

which will not deprice the military branch of the Government of the
services of those who are needed, and can be spared, for the arm?.
and navy.

I have referred at some length to the possible effect of

the draft upon our organization for the purpose of emphasizing one
thing in your minds.

There is but cne American Army!

A part of it

is privileged to fight in France-- Another, and an essential part,
must work at home.

Each depends upon the others

We are of the

home army.

Do you realize the significance of what is now taking plact:

in France and what these dollars which our army is raising are

really doing? The first wholly American Army is facing the German




- 14 -

frontier; that frontier is opposite iletzi
was French until 1871.

4 No. 110.

Yetz stands on soil that

1y conception of the mission of the American

Army in France is that of a victorious army marching through AlsaceLorraine, and never leaving until those provinces are French soil
again,

I can not believe that the people of this country, much
less our home army of finance, will tolerate the return to Germany

of any part of France, the soil of which is made sacred to us with

American blood and our soldierst graves.
Mien the work of that army is accomplished (.and you will
have had a part in it) there will be illustrious American names as

sacred to the memory of the French as with us are the names of
Rochambeau and Lafayette.




xxxx0xxxx

-f,(-----,
DURING the next three weeks the people of this Second Federal Reserve
District must pledge themselves to furnish their Government

with not less than 4,800,000,00J for the prosecution of the
war.

IT IS our share or .,6,000,000,000, and

IT WILL be forthcoming.
THEY will be the dollars of democracy -- Whicli have had peaceful employment

in agriculture, industry and commerce, in education, art and
science.

FROM NOW ON they must be dedicated to the service of the army and the navy,
FOR THEY will be militant dollars;

WHEN this war is

LALe4k

,

but

these dollars of democracy must be rededicated

to works of reconstruction and mercy.

BUT the mission of these Liberty Loans is not simply the raising of money.
WE COULD say to every resident and every corporation in this district,
"Your share in this loan is so much,"and ask, or maybe require.
them to take it.

BUT BY that method we would lose the moral and spiritual forces which
are behind the loan, behind the war, and behind our men in France.
WE MU3T not only sell bonds -- we must sell the war to all the people of the
United States.

THIS IS a mission of the libert Loan Organization which is of greater
importance than simply raisins money.



-1 -

,..
,

r-,,

WE SHALL NOT be wholly successful in our work unless every citizen
becomes a bondholder, and every bondholder becomes a more
devoted citizen.

SO IN EMBARKING to-morrowupon this new and larger undertaLing, we must
eop

/T/14\,V

have clearly in mind whel4.4e to be accomplished for ourselves

at home, as well as what these loans must do in their capacity as
fighting dollars in France.

ONE Or` OUR organization called

a little farmhouse in the hills over-

looking the Hudson River to inquire if the owner could not buy
some Liberty Bonds.

HE WAS MET by a woman, to whom he explained his errand.
SHE SAID that sue lived there alone, that she owned a cow, and some
pigs;

that she had some potatoes and vegetables in the cellar,

and that she was usually snowed in through the winter, and
could not get to the village, and so had little use for money.

Shh WAS GLAD of the opportunity, however, of subscribing all that she had -and she gave the canvasser ,;4.00.

AFTER THANKING him for the opportunity of helping, she explained that she
was a widow and her three sons were in the American Army.
THIS ILLUSTRATES what is taking place in the nation to-day.

THAT WOMAN, who is snowed in in the winter, was thankful for the privilege
of doing something more - 


and she had given her three sons!

NO ONE at this meeting can make as large an investment as she did.

WHEN we have examined our accounts, figured our income and expenses
and decided the amount we shall take - let us at least
double it.

IN THE THIRD LOAN we were asked in this district to raise nine hundred
million dollars, and raised eleven hundred million.

IN THIS LOAN, we are asked to raise eighteen hundred million dollars - twice the amounts

WE MUST make the sacrifice, whatever it involves, of doubling what we did
last time.

IN NEW YORK it is necessary that the literature distributed by our
committee shall be printed in eijiteen different languages.

MEETINGS are held at which speakers deliver addresses in almost every
tongue spoken in the city.

IN THE THIRD Liberty loan, 836,000 people in New York Jity alone subscribed
448,000,000 for 450.00 and 4100.00 bonds, to be paid for 41.00
and 42.00 a week.

THESE PEOPLE were largely of foreign birth or parentage.

WE NOW HAVE a great office in 44th street, Where 350 clerks are employed
keeping the accounts of that transaction.
THE STATR251NT has been made to me that the sale of liberty Bonds by this
instalment method is too costly.



- 3 -

ONE MIGHT as well say that in time of war it is too costly to run the
public schools.

IT '4UULD BE BETTER for this country, if, within the next three weeks, we

sold 46,000,000,000 of bonds to 60,000,000 people than if we sold
460,000,000,000 of bonds to 6,000,000 people.

THE BURDEN of paying the ultimate cost of this war must not fall unjustly
upon any class.

THESE GREAT bond issues must some day be repaid out of taxes.`49)
IF POVERTY follows in the train of destruction,

HOW MUJH BETTER that those least able to suffer are aided in preparing themselves to bear it
IT .;OUi...) be a calamity were this nation to create a preferred and favored

class of rich creditors, Who, in the time of the nation's need,

received insurance against the losses that should be shared by
all in proportion to their means.

IT I$, therefore, desirable and just that those of small means should enjoy
exemptions from taxation which those of large means do not need.

THIS PRIN0IPLE is established in the graduated income taxes, and applies
equally to graduated exemption from taxes.

A GREAT THING is taking place in our midst, which may have escaped general
observation.

MANY of the people who buy these ,;50.00 and ,100.00 bonds came to us from
 foreign


lands;

4

SOME of them came to escape conditions which made them unhappy.

THEY DOUBTLESS came to this country with some suspicions of their new
surroundings.

THEY HAD BEEN accustomed to close Government supervision and military
regulation in most of their daily affairs.

HERS, in this free country, they have, until now, had little contact with
their new 2eovernment.

THEY RECOGNIZE the authority of the policeman on the street, who protects
them from injury and restrains them from doing wrong, and
THEY KNOW the postman who brings their letters.
BEYOND that they have had too little contact with their Government.
IT HAS NOT sufficiently influenced their thoughts or lives.

THESE PEOPLE came here to better themselves, they have made homes, they
believe in this country, and are happy here.

WE ARE NOW assdng them to invest in their new country, and to become even
more worthy citizens.
THIS IS A PART of the w-orm of the Liberty Loan.
*

BUT the mission of the Liberty Loan is not only at home.
THE EFFECT of this great enterprize must also be felt abroad.
GERAANY, without provocation or warning, swept over Belgium and into France,
leaving behind her armies
A TRAIL OF HORROR and desolation too sad and terrible to describe.



-5 -

THE MOST SAJRED cities and buildings in Belgium and 2ranoe, historical
monuments, farmers' cottages, and crops are destroyed.

ONE 02 THE MOST precious possessions of the 2rench peasant, his fruit
tree, for Alich he cares as a part of his family, has been out
down in wanton rage.

THE EXTRWP: of devilish ingenuity has been aprlied, not only to the
destruction of property, but to the infliction of needless
anguish upon a helpless civilian population.

THESE ARE the sights now being witnessed by the great army of democracy
which we have sent to France.

LET US CONSIDER the spirit with which our men view this awful spectacle
and see whether it boars not some resemblance to the spirit of
that woman on the banks of the Hudson.
I HAVE just heard that spirit described.

A FEW DAYS AGO I asked an army officer what impression our men made in
France.

HE IS a grizzled old soldier, Who has seen thirty years' service, a captain
now in a section of the French Army Which makes small claim to
sentimentality

- -

the Foreign Legion of France.

HIS REPLY epitomized the spirit with which this country entered the war.

HE SAID, "Of course your men fight magnificently, in fact they have not
yet learned When it is time to stop fighting."

AND THEN he described the great thing they have done in capturing the hearts
of the French peasants.




MIEN THESE REFUGEES returned to their homes in sections now occupied
by American Soldiers, they ::ere met by our men whistling and

singing, Who, with smiles on their faces, tossed the children
on to their shoulders;
infirm;

took up the bundles for the old and

pushed the barrow loaded with household goods;

patched the fences;

cleaned the wells;

and helped to straighten

up ruined cottages.

THESE MEL, hastily assembled and trained, with new and strange weapons in
their Lands, have smashed German troops that have been forty
years in the training.

OUE BOYS: do not learn readily when to stop fighting!

IN THEIR SPARE TIME they are employed in bringing joy and hope to hearts
that for four years have been filled with misery and despair.

THESE are the soldiers of democracy, raised in the same spirit in Which
we are raising dollars of democracy.

THE WORLD has been awaiting the test of the permanence of democratic
governments ever since the Eranco-Prussian
THE DAY of that test has now come.

OUR ARMY, hastily raised, under the provisions of the most democratic statute
ever passed by the Jongress, faces Prussian armies which have been
educated and trained for the purpose of destroying the only power
that Germany fears -- the power of enlightened and free peoples
of whatever race.



- 7

THIS ARMY OF OURS, once characterized as ridiculous, is there to meet the test.
AND IS NOW on its way to Berlin!

THE TIME is coming hen our great military effort will be crowned with
victory.

THE WORK of a great army (of men and of dollars) in the military sense will
be concluded.

WHEN that day arrives, there will then be disclosed to the world at their
true value those motives and purposes which, in the excitement and
anxiety of war have not been wholly apparent.
OUR OWN purpose can be made unmistakably clear.

AN UNSELFISH, generous people can well afford their share of help to rebuild
a devastated

urope.

THE SORRJWS of this war will not disappear until cottaes are rebuilt,
farms are put under cultivation, and fruit trees are replanted.
CITIES must be restored and the opportunity afforded to those Who have
suffered the severest penalties of the war to return to their
peaceful occupations with some hope of contentment.

OUR IMMEDIATE task is to raise money to win the war.
THAT we must do.
BUT WE CAN also show our people the bitterness of su.'..ering

which we have

escaped and others have felt.

OUR 70RK has a loftier purpose than military victory alone --




-8 -

GERMANY AND AUSTRIA have made many and vital mistaii.es, but their crowning

achievement in stupidity was in their misjudgment of the
people of this country.

THEY MUST have analyzed our character by some intellectual formula whidh
they use for a study of the German mind.

WHAT they diould have used was a stethoscope, and they might thus have
discovered the American heart.

ON APRII 6, 117, this country entered the war, not as a military nation,
not with a great army and navy, but with a moral force that is
greater than either.

AND WHAT we are doing now comes from that heart that Germany failed

to

discover.

GREAT ARMIES and great loans are being raised;

ships built, and the business

of the nation reorganized for war.

TEIS is being done in the spirit of a righteous crusade.

AND IN TEE SAS SPIRIT our nation is taking world leadership for humanity,
and it is again in this same spirit that the war will be won.
WE HAVE BEEN LED' through a maze of uifficulties into the presence of a
greater and nobler nation.

WE HAVE DISGOVEREs that the altruism of America can survive the brutalizing
effects of war.

AND THIS great .onception of an unselfish people and of a nobler America
 has been revealed to
http://fraser.stlouisfed.org/
the United states.
Federal Reserve Bank of St. Louis

us by the unerring vision of the iresident of

AND OUR APPAL is no less to the heart than the purse.
THIS IS THE message of the Liberty Loan ,:ommittee to the people of this
district.

THE PEOPLE of this great district have not failed us in the past, and will
not do so now!

WREN THESE THINGS that I have mentioned are done, the mission of the
,i.merican Army, and of the liberty Loan, will have been gloriously
accomplished.

B4sB.




- 9 -

AN APPEAL TO BUY BONDS
ADDRESS AT MASS MEETING
(Also Addressed by President Wilson)
at Metropolitan Opera Housd, September 27, 1918

Mr. PreFldent, and Fellow American Citi7ensa

Daring the next three weeks the people of this Second Federal Reserve
District must pledae themselves to furniah their Government with not less than
$1,800,000,000 for the prosecution of the war.
and it will be forthcoming.

It is our share of $6,000,000,000,

They will be the dollars of democracy - which have

had peaceful employment in agriculture, industry and commerce, in education, art
and science.

From now on they must be dedicated to the service of tea army and

the navy, for they will be militant dollars;

but when this war is ended, these

dollars of democracy must be rededicated to works of reconstruction and mercy.
But the mission of these Liberty Loans is not simply the raising of
money.

We could say to every resident and every corporation in this district,

"Your share in this loan is so much, "and ask, or maybe require, them to take it.

But by that method we would lose tae moral and spiritual forces which are behind
the loan, behind the war, and behind our men in France.

We must not only sell

bonds - we must sell the war to all the people of the United States.

This is a

mission of the Liberty Loan Organization. which is of greater importance than
simply raising money.

We shall noi. be wholly successful in our work unless

every citizen beComes a bondholder, and every bondholder becomes a more devoted
citizen.

So in embarking to-morrow upon this new and laraer undertaaking, we must

have clearly in mind some things to be accomplished for ourselves at home, as well
as that these loans must do in their capacity as fighting dollars in France.

One of our oraanization called at a little farmhouse in the hills over-

looking the Hudson River to inquire if the owner could not by some Liberty Bonds.
He was imet by a woman, to whom he explained his errand.

there alone, that she owned a cow, and some pigs;

She said that she lived

that she had some potatoes and

vegetalles in the cellar, and that she was usually mowed in through the winter,
and could not gat to the village, and so had little use for money.



She was glad

2

of the opportunity, however, of subscribing all that she had - and she gave the

canvasser 0.00.

After thanking him for the opportunity of helping, she ee.elainad

that she was a widow nd her three sons were in the American Army.
what is taking place in the nation to-day.

This illustrates

Taae woman, liho is alowed in in the

winter, was thankful for tue privilege of doing something - and She lied given her
three eonsi

No one at teis meeting can make as large an investment as she did.

When we have eeamined our accounts, figured our income and expenees and decided
In the third lean we were

the amount we shall take - let us at least double it.

asked in this district to raise nine hundred million dollars, and raised eleven
hundred million.

In this loan, we are asked to raise eighteen hundred million

dollars - twice tae amounti

We must melee the sacrifice, weatever it involves,

of doubling what we did last time.
In Nee York it, is necessary that the literature distributed by our com-

mittee snail De printed in eighteen different languages.

Meetings are held at

which speakers deliver addresses in almost evew tongue spoken in the city,.

In

the Third Liberty Loan 8 6,000 people in ileir York City alone subscribed $48,000,000

for $53.00 and $100.00 bonds, to be paid for $1.00 and 42.00 a week.
were largely of foreign birth or parentage.

Thee people

7ie not have a great office in 44th

Street, where 3 50 clerke are employed keeping the accounts of that transaction.

The statement has seen made to ma tette the sale of Liberty Bonds by this instalmeat
method is too costly.

One might as well say that in time of war it is toc costly

to run the public eencole.

It would be better for this country, if, eithin trip

next three weeke, we sold V,000,000,000 of bonds to
sold $60,000,00J,000 of bonds to 6,000,000 people.

0,000,000 people char if we
the burden of paying the ultimate

cost of this war mot not fall unjustly upon any class.

These great bond issues

must some day be repaid out of taxes and if poverty follows in the train of destruction, how much better that those least able to suffer are aided in preparing them
solve

to bear it

It would be a calamity were this nation to create a preferred

ama favored class of rich creditors, who, in the time of the nation's need, received



- 3 -

insurance against the losses that should be shared by all in proportion to their
means.

It is, therefore, desirable and just that those of small means should

enjoy exemptions from taxation Which those of large means do not need.

This prin-

ciple is established in the graduated income taxes, and applies equally to graduated
exemption from taxes.

A great thing is taking place in our midst, which may have escaped general observation.

Meny of the people who buy thesd $50.00 and $100.00 bonds came

to us from foreign lands; them unhappy.

some of than came to escape conditions which made

They doubtless came to this country with some suspicions of their

new earroundings.

They had been accustomed to close Government supervision and
Here, in this free couotry,

military regulation in most of their daily affairs.

they haves until now, had little contact with their new Government.
the authority of the policeman on the street, who protect

They recognize

them from injury and

restrains them from doing wrong, and they know the postman Who brings their letters.
Byond that they have had too little contact with their Government.

sufficiently influenced their thoughts or lives.

It has not

These people came here to bettor

themselves, they have made homes, they believe in this country, and are happy
here.

We are now asking them to invest in their neer county, and tohecome even

more worthy citizens.

This is a part of the work of the Liberty Loan.

But the mission of the Liberty Loan is not only at home.
this great enterprize must also 7)e felt abroad.

The effect of

Germany, without provocation or

warning, swept over Belgium and into France, .leaving behind her armies a trail

of horror and desolation too sad and terrible

o describe.

The most sacred cities

and buildings in Belgium and France, historical monuments, farmers' cottages, and
crops are destroyed.

One o.

the most precious possessions of the French peasant,

his fruit tree, for which he cares as a part of his family, has been cut down in
wanton rage.

The extreme of devilish ingenuity has been applied, not only to the

destruction of property, but to the infliction of needless anguish upon u help,




4

civilian population.

These are the sights now being witnessed by the great army

of ahlocracy which we have sent to France.

Let us consider the spirit with which

our men view this awful spectacle and see whether it bears not some resemblance to
thespirit of that woman on the banks of the Hudson.

A few days ago I asked an army officer what impression our men made in

described.
France.

I have just heard that spirit

He is a grizzled old soldier, who has seen thirty years' service, a cap-

tain now in a section of the French Army which makes small claim to sentimentality the Foreign Legion of France.
country entered the war.

His reply epitomized the spirit with -thich this

He said, Of course your men fight magnificently, in

fact they have not yet learned when it is time to stop fighting."

And than he

described the great thing they have done in capturing the hearts of the French
peasants.

When these refugees returned to their homes in sections now occupied

by American soldiers, they were met by our men whistling and singing, who, with
smiles on their faces, tossed the children on to their shoulders;
bundles for the old and infirm;
patched the fences;
tages.

took up the

pushed the barrow loaded with household goods;

cleaned the wells;

and helped to straighten up ruined cot-

These men, hastily assembled and trained, with new and strange weapons

in their hands, have smashed German troops that have been forty years in the
training.

Our boys do not learn readily when to stop fighting!

In their spare

time they are employed in bringing joy and hope to hearts that for four years
have been filled with misery and despair.

These are the soldiers of democracy,

raised in the same spirit in which we are raising dollars of democracy.

The world has been awaiting th

te: t of the permanence of democratic

governments ever since the Franco-Prussian War.

The day of that test has new come.

Our army, hastily raised, under the provisions of the most democratic statute
ever passed by the Congress, faces Prussian armies which have been educated aLd
trained for the purpose of destroying the only power that Germany fears - the
power of enlightened and free peoples of whatever race.

This army of ours, once

characterized as ridiculous, is there to meet the test.

And is now an its way


to Berlint


- 5The time is coming when our great military effort will be crowned with
victory.

The work of a greae army (of men and of dollars) in the military sense

will be concluded.

When that day arrives, there will then be disclosed to the

world at their true value those motives and purposes which, in the eecitement and
anxiety of war heve not been wholly apparent.
takably clear.

Our own purpose can be made unmis-

An unselfish, generous people can well afford their share of help

to rebuild a devastated Europe.

The sorrows of this war will not disappear until

cottages are rebuilt, farms are put under cultivation, and fruit trees are replanted.

Cities must be restored and the opportunity afforded to those who have suffered
the severest penalties of the war to return to their peaceful cccupations with some
hope- of contentment.

Our immediate task is to raise money to win the war.

That we must do.

But we cei also show our people the bitterness of suffering which we have escaped
and others have felt.

Our work has a loftier purpose than military vict

Germany and Austria have made many and vital mistakes, but their crowning achievemeat in stupidity was in their misjudgment of the people of this country.

They

:list have analyzed our character by some intellectual formula which they use for
a study of the German mind.

What they should have used was a stethoscope, and

they might thus have discovered the American heart.
On April 6, 1917, this country entered the war, not as a military nation,

not with a great army and navy, but with a moral force that is greater than either.
And that we are doing now comes from that heart that Germany failed to
discover.

Great armies and great loans are being raised;

business of the nation reorganized for war.
righteous crusade.

ships built, and the

This is being done in the spirit of a

And in the eame spirit our notion is taking world leadership

for humanity, and it is again in this same spirit that the war will be won.

We

have been led through a maze of difficulties into the presence of a greater and
nobler nation.

We have discovered that the altruism of America can survive the

brutalizing effects of war.



And this great conception of an unselfish people and

- 6 -

of a nobler America has been revealed to us by the unerring vision of the President
of the United States.

And our appeal is no less to the heart than the purse.

This is the message of the Liberty Loan Committee to the people of this
district.

The people of this great district have 11,)t failed us in the past, and will

not do so novel

When these thing-. that I have mentioned are done, the mission of

the American Army, and of the Liberty Loan, will have been gloriously accomplished.




0

upon to make large advances to the governments which are allied against
Germany, but no one know, or could estimate, how rapidly the funds appropriated by Congress could be spent by the various departments of the
Government, so that, necessarily, the borrowing policy of the Treasury
could only be mapped out in a tentative way until experience disclosed at
what rate war materials could be produced and money be actually spent.
Since late in 1917, advances to allied governments ens our own
expenditures by the army and navy dopartmente, have become more stable and
regular.

Those who are raising funds can estimate with more certainty how

much will be disbursed over a given period;

in fact, the Government's

financing has developed a rhythm which permits a fair judgment of requirements for periods of from four to six months in advance.

Assuming teat ex-

penditures will shortly amount to 32,000,000,000 a month, and that it is
possible for Congress to levy taxes which will produce a total of, say,
38,000,000,000 for this fiscal year, there will still remain $16,000,000,000
to be raised by borrowing.

The success of these borrowing operations will

depend primarily upon the extent to which our people are willing to economize
and then upon the extent to which they are willing to turn over the fruits of
their economies to the Government.

Unexpended income is generally repre-

sented in this country by unused balances in the bank.

The Government

needs those idle bank balances and asks its citizens to hand them over to
the Treasury in exchange for interest bearing bonds.

Therefore, euccoesful

borrowing by the Treasury will depend upon the amount of those idle bank
balances and upon whether their (milers will be willing to exchange them for
Government bonds.

The bonds recently issued by the Government, known as the .bird
Liberty Loan, bear interest at 4 1-4% and were offered at par.

it was,

therefore, quite natural that anyone having idle funds in bank should ask hime.




- 2-

1J

C:111,1 LIBZRTY BONDS, OR MORE INCOME?

BY
3,;NJ, STRONG

There are undoubtedly thousands of Americans who are to-day
puzzled in endeavoring to determine how many Liberty bonds they should buy.
It is not intended in this article to formulate rules by which one may accurately decide his duty in this matter.

That decision must be made by

each individual according to his ability, his personal needs, and his
patriotic impulses.

But some light may be thrown on the subject by present-

ing various &enacts of the question which may not have occurred to tho
reader.

The question certainly involves perplexities which many who are

unacouainted with the relations of Government finances to the security markets
find difficulty in solving to their own eatisfoction.

t:eedless to say the

financial officers of our Government are confronted trite: like perplexities,

only from quite a different standpoint.

The individual is considering his

own comforts, or, porlsibly, what he believes to be his necessities.

His

viewpoint is a narrow one compared with that of the secretary of the Treasury,
who is charged with the duty of borrowing a large part of the money required
for the prosecution of the war but who, at the same time, must so shape his
plena, within the limits imposed by Congress, so that the

business of the

country which is essential to winning the war, may proceed and even be extended without being hampered for lack of capital.

3ut the money must be

raised:

In the early months of the war, the Treasury was required to provide funds without any accurate measure by which the amount could be determined.
Congress was appropriating billions for war purposes.




7,4 were promptly called

self the question, - Is it my duty to buy a 4 1 -4,. Government bond at par when

i can buy other good bonds and stocks which will pay me a return of

or 8p;,

or even more
L]ach investor must be his own judge in deciding between his duty

to his Government and his on real needs in the way of income.

It is not dif-

ficult, however, to state some simple examples which may be an aid in arriving at a decision, and the importance of the decision will be appreciated
when one realises that the sum of all of these decisions by all of the investors
in the country is what will make war loans successes or failures.
Possibly the first point to consider in choosing between a subscription to Liberty bonds or the purchase of other bonds or stocks which pay a
higher return, is whether an investment in some other security may aid or
hinder the Government in the prosecution of the war.

There is no choice

whatever between investing in the war bonds of the Government or in new issues
of securities made by enterprises which ars engaged in operations which are of
no assistance to our war activities.

At this time no citizen has a right to

divert surplus income to the creation of nonessential industries when that income is needed by the Government for war purposes.
been answered by our Government for every investor.

That question has already
Capital Issues CoiSmittees

have been appointed, pursuant to Act of Congress, to determine whether it is or
is not in the public interest to allow any given issue of new securities to be
offered to the public.

When bankers offer bonds or stocks which are advertised

as having been submitted to the Capital Issues Committee and approved by that
Committee as not incompatible with the public interest, it may clearly be under
stood by the investor that our Government has passed upon tho question as to
whether investments in such securities will aid or injure the Government's war
finance nrogram, and, so for as tho investor is concerned, he need make no
further inquiry as to whether that particular security is or is not suitable for




investment at the present time.

Its issue has received the Government's ap-

He may feel justified, because of his own needs andthose of his

proval.

family, in purchasing securities of that class on the ground that it affords
indirect aid to the prosecution of the war.

There are, however, few in this

country who

indr;ase theif."savihrc, fur.

this time

able by:predtteitWedonory
'

10ihlalot,lse.efforfittle

ae

trifling sacrifice of additional income

involved through the purchase of Liberty bonds rather than some other in-

vestment, and their satisfaction in rendering direc. aid to the Govemnent
But this floes

will certainly more than offset the eliglit loss in income.
not answer the investor's queutio,I. tie to whether he way no

purchase 150214

existing security which pays a higher return than Liberty bonds.

Here a

nice question arises which will be discussed later.
Another example may be used to illustrate the state of mind of en
investor who must consider his own personal necessities.

He may be a poor

man who has been dependent upon a small ahlary or a small income from a nest
egg of investments accumulated after long years of toil;

he may have saved a

small part of this income, or, possibly, some of his investments paying a high
pate of interest may have been repaid at maturity.

He is conscious of the

fact that it costs him more to live, with prices at their present high level,
than it did before the war.
4

7ust he make the sacrifice involved in accepting

interest instead of a higher rate, possibly even C or 8,.; which he may

have been receiving until his old investments were repaid:

This is neces-

sarily one of those doubtful cases where each man must decide according to his
present needs, as contrasted with the needs of his Government.

If economies

can be practiced which will not interfere with the maintenance of his health,
or that of his family, or wit: the education of his children, or with continued
efficiency in his work, he is justified, aad, possibly, required as a matter of
duty to forego a larger income in order that his Govermlent may have his support.




By this sacrifice he assumes his share of the burden of the war.
- 4

On

the other hand, if it really involves impairment of health, or efficiency,
or the lose of education for hie children, such a person is, doubtless,
warranted in making investments of a character that D111 pay a higher return
so an to maintain the stendard of living that is earential for the welfare
of that individual, and of his family, and, through thorn, of the nation.

But, in selecting an investment which pays a higher return, it ie desirable,
if possible, to pick out some new issue and, of course, a sound security,
which hoe received the stamp of approval of the Capital Issues Committee,
ne thereby he given support to some enterprise which is engaged in work that
directly or indirectly promotes the prosecution of the war, and ethich needs
new capital.

If this is a fair statement of the position of a man with

an income of, say, twenty -four hundred dollars a year, who is able to save
two hundred dollars;
from the Government.

it is still hard to justify withholding his savings
Two hundred dollars invented at 4 la4A produces

a tear and at 7 1 a2% $15.00 a year.

.501

Vs foregoes an additional income of

'6.5O per annum, which even the poorest man can afford, and it must not be
overlooked that the income from his new investment is free of any taxes ',hate
ever.

This may seam an insigrificent contribution to the Government's war

effort, but

10,000,010 people making en investment of this size can furnish

the Government with .12,000,000,000, which is one -third of the probable

amount of the Fourth Liberty Loan.

A third class of investors, now a much larger ono than is realised,
comprises those patriotic men and women who have abandoned business or professional occupations to enter the army or navy or Rod Gross, or other branches
of the service, in censequence of which their incomes have been greatly reduced
and often the good -will of a business or of a professional practice jeopardised
for all time;

frequently, in fact, not withstanding that these men and women

may have dependent children to support.




La us take an an illustration a

successful young lawyer who has built up a practise which has boon paying him
$10,001 a year;

he has accumulated, say, $10,000 by economy and saving;

has a wife and children.

he

In surrendering his practice to enter the Govern-

ment'e service, his income may be reduced to a salary of 32,000 a year or less.
His income from his seourities may bring this up to ;71,700 a year.o In winding
up his practice ho collects outstanding bills fro - his clients totaling 410,000

and must decide whether to spend this money in maintaining his former standard
of living or to invent it in some security paying a high return zo an to help
mitigate the herdship of enforced economy, or to buy Liberty bones.

A man of

strong chrracter, with a family loyal to the purpose for whicY) he has made the

sacrifice of his practice, may be able to readjust his plan of living to an income of t2,700 a year, plus the $425. additional income from the Liberty bonds
that he buys, and still be perfectly happy and comfortable and feel that he is
doing his duty both to his family and to his Government.

On the other hand, he

may be tempted to believe that in order to educate children who are at school
and collage, and to maintain his own health and efficiency, it is necessary
to obtain a larger income than is possible by the investment in Government
bonds.

There is certainly no reason why that man should be condemned for

risking the future of his family, the education of his children, or even his
own health, by declining to make the additional sacrifice of income involved
in the purchase of a 4 1-4:,f, Government bond.

But ho had already made a

sacrifice of great proportions and while the nation can roll afford to insure
his efficiency by permitting him to obtain the largest income possible from
an investment in some security issue Eby a corporation which is engaged in ear
work, the chances are that one who makes such sacrifices as this can be relied
upon to make the small additional sacrifice of income involved in purchasing
the war bonds of




Government.

A fourth type to consider is the men of large income who spends but

a fraction of it and has large amounts to invest every year.

This man should

have little difficulty in his decision - if he is engaged in some business
directly promoting the prosecution of the war, which requires for its neces-

eery development the employment of increased mounts of capital, he should not,
of course, limper the efficiency of his business by withholding from it the
capital which possibly be, alone, can furnish by so employing a portion or all
of his surplus income.
particularly.

This applies to the manufacturer of war materiala

On the eerier hand, if he is a retired capitalist, with an in-

coral beyond his needs, it is unquestionably his duty to the nation to invest

every dollar of the surplus which he accumulates in the bonds of the Government, beyond, possibly, a moderate amount in new security issues bearing the
stamp of approval of the Capital issues Committee, which ho may consider
safe.

These are only a few of a great variety of types of plssible invectors who face a decision which is vital to the nation and they are referred
to simply for illustrative purposes.

There are, however, principles of groat

importance underlying the whole question of the purchase and sale of securities
by investors in these war times, which should be considered by every investor
before he decides what he shall do with his savings.
When oue buys a security in the security market, it may be that tha
seller, in turn, will invest the proceeds in Government bonds.
hand, it may be that the person belling the securities desires funds for some
purpose not at all releted to the ear, or, in fact, to waste in quite unnecessary living expenses or extravagances.

The buyer can hardly stipulate with

the seller as to how the letter shall spend the money, but can he take the
risk of the seller's intentions!

Of course the existence of a security market

where investment securities are bought and sold is a facility which in many ways
aide Government financing, and, deprived of that facility, the Government would




O

4

encounter difficulties which would not arise if a security market die not
An native market where the ownership of eecuritiee can be promptly

exiet.

ehtftnd frog one Person to another is one of the means by which those who
deftiro to buy Government bond!, and are willing to sell exietine investments

for the purpose, are enabled to do so rithout delay and often without ereet
lees.

Net every sale of inveetment bonds end etocks is, honever, inspired

by that deriro, although these constant transfers of investments do to some
unknown extent result in the trensfor of bank balancee from those who have
accuuleted then without expec..etion, and, possibly, without ability to buy

Government bonds, to the ownership of those who are able and *thing to do so.
When the Government nieces a Liberty Lorin, ell those who have money to invest
are brought under the influence of s greet oaproalgn of education, which is,

in fact, a great selling onmpaign.

Those who have accumulated the bank bale

tree,' by selling their investments are Just as subject to the influence of the
',emitter se are those who in the first instance accumulated the bank balances

by thrift or otherwise and later transferred them to other persons in exchange
for securities.

It can hardly be elnimed, therefore, that the gleanable in-

vestment fund of the nation is reduced as the result of such transfers of
securities.

The important thing is to reach all owners of idle bank balances,

however those helencee may have arisen, with the Liberty Low propaganda and
induce them to buy Government bonds;

those who can not afford to in

rate securitiee making it possible for others who can afford to do so by pure
chasing from them the securities which they are willing to sell.

Io .11ustrate

this loint, if we ass one that the total eal..e of all investment securities in

this country aggregatet350,0009000,000 at the time of a Liberty Loan offering;
that at the sane time the total of idle bank balances in the country aggregates

$6,0,010000;

and that the Government is inviting subscriptions to

6,OOO,000,000 of Liberty bonds, it makee no difference in the result whether
in, O6sOr10,100,000 is turned over to the Treasury in exchange for Liberty bonds




by those whe originally accumulated the $6,000,000,000 cr by others who have
acqaired those bank bailee:ea by rolling the portion of the $50,000,00:4000

of recurities which they formerly owned.

This process of shifting of owner-

ship betwoen inverters, as stated above, doer, indeed, to aeme extent, facilitate the Government's borrowing operations.

But there ie another aspect of the

security markets, which boars on this matter, where influences may arise which
aupposs

could be highly dttrimestal to the Government's borrowing program.

a large number of people with ilia funds beoeme interacted in the market in a
speculative

way, rather than simply as purchasers of investment securities;

and because thoy believed that stocks and bends woele advance, were led to use

their surplus income as aargin for the purchase of securities which they could
not fully pay for, and, in consequence, borroeed heavily from the becks in
order La carry them.

Such a movement might gain speculative headway and result

in a general advance in security prices, particularly those of e speculative
neturo.

People in this country only too readily develop an insatiable appe-

tite to buy securities "for a rise."

The result of suc

a greet inoreane in bank loans; - speculators can borrow more money on stocks
as they advance in price, and generally do;

bank credit would, as a result,

be absorbed and the surplus earnings of many individuals, whioh night have
`en applied to the purchase of Government bonds, would be used as margin in
speculative °aerations which would serve only to clog the banking machine.
This would clearly be a diversion of investment funds from legitimate
illeeitimate purpose= -:',on it is considered that

needs those funds.

to

the nation is et 'xar and

It may, in general, be said that the existence of a se-

curity market, where investment esouritios may be readily bought cad sold, is
a Bond thing, nrobably even an essential thing in order to proeeeeethe stability of financial affairs during war time; - but that on the contrary, the oxietenas of o speculation which attracts capital to speculative operations is




an unessential and often a tnnnenoue 'hing. ;1's stunt not overlook the fact

treat the existence of a market for securities enables thousands of investors

to use their eecerities as the basis for quite legitimate borrowings, frequently when funds are desired in order to subscribe for Goverment bonds in antici-

pation of expected savings, also when capital is required to develop industries

that are essential to the prosecution of the war and when credit is needed to
pay off existing debts, as well as for many other valid purposes. "Athout
market ror securities, banks would be reluctant to land on them and billions

of dollars of investments in the hands of the people of the country, which
might be usefully employed as the basic of necessary and desirable credit, would

be renaered unliquid and unavailable as eecurity for bank loans. Nor can we
fail to overlook the existence of a great mass of loons now hold by our banks,
which are secured by bonds and stocks, and which have no relation to specula-

tive operations whatever, where the protection of tho lending banks, as to the
value of the collateral, depends upon the continued existence of a market

where securities can be liquidated if need arises.
ho financial officers of our Ceovernment are confronted with a

difficult situation which they do not control end which, under our system,

they have power to influence to only a alight extent. Ii:xpennitures are
mapped out by the various departments of 4.30 Government, the largest now be-

ing by the sr r and navy departments; they are submitted to Congress and ap-

propriation bills result, which authorise the expenditure of tho various
amounts demenued by the departments, an finally approved by Congress. At no

point have the Treasury Officials any legal standing to control, and they can

but slightly influence, the amounts of these expenditures, outside of those
relating to the administration of their ownddepartment.

The Treasury, there-

fore, is coiled upon to raise money, the amount of which it has no voice in
determining, and the expenuiture of which it has no means of controlling.
Its policy must be governed, under the archaic nrocedure which our Goverment




-

follot, by very simple rules. hound financinL: of the i:overnaent requires that
as large n proportion of liver exponditures as possible be rei:ed by taxation,
but not so large an anount 113 to impair business enterpriee, and particularly
those enterprises whio~ must be developed to high: speed in order to prc.luce

goods rewired for war purposes.

if, therefere the Treasury is provided

by Con Irrees with A giver. propbrtion, tay, on-third, of the expected Goverment

outley from taxation, whatever else is spent must be raised by the 6ocretary
of the Treasury through veriour foie of borrowing authorized by Congress ut
hie roouent.

11.ght here the attitude of the people of the vountry, 07311

more than the lecicions of Treasure Officials,

doveloptaents in

future yours which will be of vast importance to our welfare. if we are able

to pursue e policy of gradually increased taxetion as industrioa zre able 'to

boar it, but never rain taxes to the point where essential business is
injured, and if vie eon raise the balance of our war expenditures from voluntary

subecriptions to bonds and the bonds ere paid for out of savings, the country's

financial condition after the ear is over will he eubstantially unimpeireci

and certe.inly vastly better than that of some other belligerents. On the
other hand, if those voluntary subscriptions are not, or can not be muds, no
one for a moment would &estate that on that account we mutt atop fighting,.

The wa.rmunt be won end the funds must be raised to win it, oven if bona

issues fail.

The failure of L. bond issue simply MOLLS that other methods

must bo oneloyed, possibly methods lase sound in principle and certainly isms

palatable in aenlication than those which are now being pursued. The choice
of methods can not be said to rest any tore upon Government Officials than
upon the decision which must bo made by each individual who nee possibly Ano,
nosed upcn himself rigid economy so an to be able L..) buy the maximum aruount
of Covernment bonds.




No patriotic citizen, whatever his =wino, who can afford to pule.

Afr

chase hie Government's bar bonds can afford to take the rill!". that the hard

von rrults of hie economies will be wasted by eame other individual to whlis
no delegates this decision.

That is what he does when he turns the product

of his etonomy over to some one 8195 in exchange for some other kind of an
investment, because that ether individual rIty eoe tit to waste it.

aur success in financing the war from now on will rbsolutely dopond upon the extent to whien people are willing to economise.
doubt as to the results which 4an be achieved by such eoonomios
they be voluntary or enforced.

There is no

whether

they can be made to produce, in this country

of weal'..h, extraveiturue eau wz.eIe, a sufficient fund of savings to absorb all

the war bonds which the Government must issue in order to win the war.




DRAFT
/1

This is a very informal meeting - but with a very specific object.
And I shall take little time for the few remarks that I have to make as we are
anxious to hear from Secret aryplass, and, afterwards, if possible,
to havea general discussion

.

In April 1917, just as soon as Secretary-McAdoo decided jai:oak° extensive use of the

reserve system in carrying out his war finance program, he was good enough
to accept an invitation to attend a luncheon in New York, to Which we
invited a number of the bankers of the city.

It afforded opportunity for a very frank discussion of plans and purposes and laid
the foundation of an understanding between the Treasury Department and the
banking fraternity in this city Which has been of inestimable advantage
I believe both to the Treasury and to the banks,

Secretary McAdoo has frequently expressed that to me, and my own observations justify
the statement as to the banks.

Commencing with that meeting, the relations between the Treasury Department and our
bankers have steadily grown more intimate, more personal, and the relationsh
one of greater mutual confidence and respect.

It is with just that object in mind that we have invited you here this evening

To have a similar discussion, and, above all things, to perpetuate that
understanding of mutual confidence and respect.

unately been a fact that for many years, almost during the entire

iod of my own life in Wall Street, that the men of the street and the

eet as an institution have been the object of abuse and vilification

m other parts of the country.

loped7to the financial men of this city based upon superficial eviden




-

of *hat sometimes took place without any understanding or regard for the
40

causes.

Wall Street as an institution was the victim of a banking system started in the time
of the Civil War which provided for the classification of banks in our
cities by ouch a system as resulted in the banks in New York being the
ultimate dumping ground of the reserves of the banks of the nation.

These reserves flowed into New York and out of New York in great tides according
to business and other conditions, causing at times superabundant ease
and at other times acute shortage of loanable funds.
But that was the least of the ill consequences.

When money became over-abundant in New York, it became the object of exploitation by
financial schemers, and many indeed were the deals and transactions of

questionable character which seemed to justify some of the abuse heaped
upon the

men

of this district without regard to whether they were the

beneficiaries or victims of the system.

New York became the Mecca forlinancial adventurers of the country.
A
Men of large fortunes and small morals came to New York from every part of the countr
to promote questionable schemes;

they bought banks anu wreckod them.

And unintelligent observers, without discrimination, charged these performances to
an institution, 'without discriminating between individuals.

These were positive occurrences, Which attracted attention and caused comment.
We are all too prone to permit our minds to be influenced by things that happen,
and to overlook the influence of events that do not occur.

Looking over the past four years, you must admit how singularly immune Wall Street
has been from talk of the character I have mentioned, for, with one or
two negligible exceptions, it has been absent.
There has been fault on both sides.

Wall Street has been guilty of excesses;

of speculation;

of promotion.

It has been the victim of sweeping and indiscriminating abuse, in some cases not


Illiimmommm0

inspired by pure motives, but by selfish political advantage.

_ _

_

It may be claimed that the greatest achievement of the Federal Reserve System has been
its successful functioning as fiscal agent of the Government.

But I believe in the long future it will be agreed that the greatest achievement of
the System has.been -

or in time will be -- the elimination of this

sectional feeling and abuse, and a better understanding and better feeling
throughout the country as to the function of the financial center of the
United States.

And I devoutly hope that the record of the future will prove this statement to be true

But whether we regard the real achievement of the

system to have been war finance

or the promotion of the better understanding to Which I refer,
We must all agree that for this system;

for the protection it has afforded the bankers

for the service Which it has preformed for the country and for the particular
service Which it has performed for the bankers of this city, we are indebted
more to the present Secretary of the Treasury than to any other man.
I know with what indefatigable energy ho devoted himself to the preparation and
passage of the original Federal Reserve Act, and with what sympathy and

encouragement he has turned his mind to the various measures suggested
for the perfection of the legislation and for the development of the
system itself.

No bankers of the country can be more sensible

of the debt which all owe to Mr.

Glass than those of Wall Street.

Our banking machinery would have completely broken down during the war without the
Federal reserve banks,

And I am very confident that the

blame for that break -down would have been promptly

laid at the door of Wall Street.

Now a singular thing, and what seems to be a most appropriate thing has happened.
The man who was most largely instrumental in legislative authority for this advance




in

American banking has come to be the Secretary of the Treasury, in *lie

position his fiscal operations bring him into the most intimate relationships

0 with the system,
And as Secretary of the Treasury he becomes chairman of the Federal Reserve Board,
and at the head of its direction and supervision.

We have entered upon a new era of banking and finance.

If Mr. Glass was responsible for designing the plan, he now accepts a large share of
the responsibility for its execution.

And another most appropriate development results from this fortunate change, for, in
the nature of the circumstances, he becomes the largest customer of these
Tall Street banks.

He is the largest depositor in them, and he is the largest borrower from them.
So, indeed, it is fitting that he should be here with us to disease, as a customer
would with his banker, or as a father would with his child, the operation
of this great machine -- the Treasury Department and its coordinating
agents the Federal reserve banks and the depositary banks.
-

-

This meeting affords opportunity for me to say in behalf of the bankers of this city
to Secretary Glass, that re welcome him as Secretary McAdoo's successor.
We pledge him our unqualified friendship and support.
We wish him a happy and successful administration.
We have confidence in his wisdom and courage to make sound decisions,

And we hope that he rill enjoy a long and prosperous life so that in later years he
may see his policies and decisions vindicated.4




e

414A

The Liberty Loan
and Bank Deposits
A Discussion of the Movement

of Funds during the Flotation

of Government War Loans

Issued by the

LIBERTY LOAN COMMITTEE




Publicity Department
Second Federal Reserve District
120 Broadway, New York

Extract from a Speech Delivered by
Benjamin Strong, Governor of the Federal Reserve Bank of New York, before
the American Bankers Association, At
lantic City, September 28, 1917.




t

WERE I asked to gate in the fewest words the functions
of the Reserve System in relation to government financ-

ing, I would say that the reserve banks keep the books
of bank reserves and of government credits for the entire country. In a banking sense they run the general ledger.
The amount of banking accommodation required in any
well-organized country may be said roughly to correspond to
the volume of the country's business. As business increases,
bank loans and deposits increase in somewhat like proportion.
As business declines, liquidation takes place, bank loans and
deposits go down and the proportion of reserve to deposits increases.

As an illustration of this formula, take our own

experience in the past few years. When the war broke out,
after a short period of disturbed business we were flooded with
war orders, and at the same time flooded with gold. Business

became increasingly active. Bank deposits and loans increased
along with a rapid increase in our gold reserves. The production of our mills had to be speeded up to meet these increasing

demands, so at the same time, the circulation of credit had to
be speeded up to finance an increased trade. Now our government has entered the war and is making further demands upon
our productive capacity. The volume of these demands may

be guaged-roughly, it is true, but still with a fundamental
accuracy-by the amount of the borrowings and increased tax

collections of the government, and we must again speed up the
machine of credit to keep pace with the machinery of production. The reserve banks form the center or hub of this credit
machine, and I will briefly describe how the conduct of their
operations is actually accelerated when the pressure is applied.

Credit Balances Withdrawn From New York
When the government makes an offering of securities,
whether of long term bonds or short term notes, the banks of
the country immediately realize that their customers or clients
will subscribe to the offering, and that they, (the banks), will
be called upon to make the payment on the subscriptions in
their respective localities. Banks located outside of New York



3

City, practically all of which have money on deposit there, prepare for this by drawing on their New York balance or calling
in their New York loans, and withdrawing these credit balances
to the interior. As a rule they do not take cash but take credit

on the books of the reserve bank of their district or of their
local reserve agent. This is the first spin of the wheel. The
Federal Reserve Bank of New York receives from the other
eleven reserve banks a vast sum of New York exchange for col-

lection and remittance in advance of each loan being placed.
It must settle with the other reserve banks every Thursday
through the Gold Settlement Fund maintained in Washington.
This results in a pull on the reserves of all the banks in New
York City. The checks we collect from them reduce their
reserve balance at the Federal Reserve Bank of New York and
cause the wide fluctuation in excess reserves shown by the New
York Clearing House statement. To meet this drain the member

banks in New York come to the Federal Reserve Bank and

borrow money in one form or another. Sometimes other means
can also be employed to recoup their reserves. For example,

at the time of the last loan, the Federal Reserve Bank of New
York purchased from the British Government $120,000,000 of
gold in a period of two weeks, and in addition received payment
international obligations
$50,000,000 which matured on June 20th. All of this gold came

to the Federal Reserve Bank of New York but was for the
credit of a large number of New York banking institutions.
Their reserves were immediately built up and, to that extent,
the drain was offset.

Building Up The Reserves

A further means of relieving the loss is to offset it by
transfers of government deposits from these sections of the
country which have drawn so heavily on New York that their
own reserves have been increased to an amount unnecessarily
large. These transfers are accomplished by telegraph through
the Gold Settlement Fund, and start currents flowing in the
opposite direction, so that the movements between New York
and each of the other Federal reserve districts largely offset
each other, leaving only net amounts to be transferred.
Still another method has been provided for achieving the

desired result with a minimum of delay: Every Federal reserve

bank has adopted a resolution authorizing its officers to rediscount its portfolio with any other Federal reserve bank.
This procedure is authorized by Section 11 of the Reserve Act
which gives the Federal Reserve Board, upon the affirmative



4

vote of five members, the power to require such rediscounts,
and authorizes the Reserve Board to fix the rates. At first this
appears to be in the nature of a borrowing operation, but in

point of fact it is really not so at all. The Federal reserve bank,

in this case, New York, which loses its reserves through the
Gold Settlement Fund, is usually simply paying out to the
other reserve banks the reserve money which has been deposited with it by its own member banks whose accounts are

depleted by these drafts from the interior. The reserve accounts

of the members in New York are restored by the New York
bank rediscounting their paper. If any considerable amount of
reserves is moved to the other reserve banks and the amount

of these discounts becomes sufficient to impair the reserve

position of the Federal Reserve Bank of New York, then it can

simply turn over its portfolio in part to those reserve banks

which are correspondingly strengthened. Expressed differently,
instead of settling balances through the Gold Settlement Fund
with gold, we would in that case settle our debit balances by
the use of paper out of our portfolio, apportioning it with due

regard to the reserve position of each of the other reserve
banks. This plan for speedy and almost automatic transfers
of credit has not yet been put into operation, though in the
future it may become a resource of vast strength.

Co-operative Use of Reserves
This explanation seems necessary to make clear that the
normal function of the Reserve System expressly authorized
by the statute and very wisely provided with regard to just such

a situation is simply being exercised for the benefit of the
member banks as a whole. The statute provides for the cooperative use of reserves and credit facilities of the twelve
reserve banks in time of emergency so that their combined
strength may be as effective as though they were one bank
instead of twelve.

Reserve Bank Book-keeping
To return to our chronology: the next step in these financial operations, after the subscriptions are closed, is their actual
payment into the reserve banks by the banking institutions of
the country. The preliminary readjustment of credit to enable
them to do so, you will observe, has already taken place. The
payments as made are credited to the government on the books
of the reserve banks, in some cases actually, in other cases only
constructively. Where actual payments are made, the reserve
banks, acting as fiscal agents of the government, at once re


6

deposit these payments with the national and state banks where
they originate. Where the payment is constructive, it simply
means that the bank originally subscribing (either for itself or
its customers) for the government securities, instead of making
a remittance to its reserve bank, merely credits the government

on its books with the amount to be remitted, having pre-

viously furnished the government with collateral. At this stage
the government has hundreds, and possibly thousands, of accounts on the books of banks throughout the country. It is
now in position to make disbursements either for its own

purchases or for loans to the allied nations.

But as these

payments must principally be made in New York at the present
time, it becomes necessary for the reserve banks gradually to
withdraw

these deposits and shift them through the Gold

Settlement Fund to New York. Then a new set of entries must
be made in what we may call the general ledger. The deposits
in other districts are drawn down and remitted to New York
through the Gold Settlement Fund. As this may reduce the
reserves of the banks that held the government deposits throughout the country, the reserve banks of those districts must stand
prepared to discount the paper for them to the extent necessary
to make good the reduced reserves. This was done in a small
way when the last loan was placed, and is being done to some
extent, although very moderately, to-day as a result of withdrawals of deposits now arising from sales of certificates of
indebtedness. As these funds are withdrawn to New York
from the interior reserve banks they are immediately dis-

bursed by the government in New York and increase the deposits and reserves of the New York banks generally. The
New York banks can then repay the advances which they have
received from the Federal Reserve Bank of New York which
builds up its reserve. It can then in turn repay to other reserve
banks any paper which it previously might have delivered to
them if rediscount transactions had taken place between Reserve banks. Gradually the whole set of entries arising from
the preliminary withdrawals from New York will have been
reversed and canceled as a result of the ultimate disbursements
of the Government. The reserve banks have stepped into the
breach simply to make some temporary advances. They have
provided the machinery to move a great mass of credits rapidly
from one part of the country to another and back again. In
a sense the placing of these huge government loans is like
moving a crop. When we have a large crop, the credit machinery must move faster. These large government borrowings

make it necessary to speed up the credit machine, and that is
exactly what the Reserve System is doing.



6

Credits Return to Their Points of Origin
It appears as though at this point the ultimate effect of
subscriptions to government loans, the withdrawal of their
proceeds to New York and their disbursement in New York
by the Government, has resulted in a permanent loss of deposits,
and consequently of reserves by the banks of the interior. The
fears many bankers have expressed to me on this score would in

some sections appear superficially to be well grounded, but
the effect will not be permanent. If it were so, that section of
the country which suffered a permanent loss of deposits would

suffer permanently a corresponding contraction of savings
realized from its productive capacity whether it was in manufactured goods, food stuffs, the products of mines or of forests,

or what not. This great credit fund being expended by the
government, with the exception of the pay of soldiers abroad
and of negligible purchases abroad, is being expended in this
country in the purchase of materials of great variety, and the
amounts loaned to our allies are almost entirely being spent
here as well. It means that in all sections of the country these
credits must inevitably move back to their points of origin,
directly or indirectly through government purchases. New
ships, oil and coal, and products of mills, mines and forests in
every part of the country now go to the government and each
pulls back a share of this great fund. Even those sections which
do not directly receive government contracts indirectly receive
the benefit. Purchases of materials of various kinds in one part

of the country either develop demands for raw materials or
create a vacuum of goods which must be supplied or replaced
from other sections. The intricate commerce of the country

is so interwoven that it is difficult exactly to trace these movements, but the result is inevitable, and in those sections where

this movement does not reach, it means that production and
saving have been arrested, since the amount subscribed in any
locality for loans to the government is measured by the amount
which that locality saves out of the profits on what it produces.
It must be admitted that our agricultural products, which

are one of the chief instrumentalities for bringing about this
readjustment, are in the main marketed at one short season
of the year. Its the interval, withdrawals of bank credit from

those sections of the country will leave vacuum somewhat longer

than in manufacturing sections where production and market-

ing are continuous the year around.

But when crops are

moved and paid for this credit will move back inevitably to the
agricultural sections so long as profitable crops are produced
there.




7

What the Reserve Banks Are For
I refer to this particularly and emphatically because of
the fears which some bankers entertain which might induce

them to withhold their best efforts from assisting the government in placing the next loan. The last work of assurance on
that point, very properly must come from the Reserve banks,
for during the interval between the marketing of one harvest

and the next, when banks in the agricultural sections must

both finance the farmers and assist in financing the government,
reserves must be bridged by reasonable accommodation at the
reserve banks. That is what the reserve banks are for. They

expect to be used, and no time like the present will ever arise
in our history when this use of our new banking system will
be so important to every citizen.

Speaking of these matters from the standpoint of the

reserve banks themselves, I fear you may have heard careless
discussion of their possible intention to attempt arbitrary control of these money matters. Only one kind of control is required, and that is self-control. The reserve banks should not

be expected to tie up their reserves in permanent financing

for the government or anybody else. Their function is to make
these temporary loans during periods of strain, whether occasioned by war and government financing, by domestic diffi culties or by any other cause. The exercise of self-control in
these matters means that the reserve banks will see to it that
the expansion which they afford to our banking system is that
temporary expansion which is represented by a portfolio containing self-liquidating bills and loans which mature within
a reasonably short time and which Congress has wisely fixed at
ninety days and no longer.




8

CHERISHED GRAVES IN FRANCE

A Visit to One of the Little Cemeteries
Where Our Soldier Dead Lie Buried

By BENJAMIN STRONG

Governor of the Federal Reserve Bank
of New York

Reprint from the New York Times
Sunday, April 18, 1920.




S

INCE the war ended articles have appeared from time

to time in the daily papers relating to a project to

bring home the bodies of American soldiers who were
buried in France. I had wondered how the plan had originated, and have been told, although it may be that the statement is somewhat exaggerated, that there is some element
of commercialism in the suggestion. Difficult as it is to
believe, it is said that this agitation comes from some who
hope by reason of their business to gain for themselves some
commercial advantage or profit.

It has led me to think that it may be of some interest
to the parents and relatives of these boys who gave their
lives in a great cause to read of an experience which I had
last Summer in motoring along the front in France.
Before sailing for Europe, I had received a letter from
an associate whose only son, a Lieutenant in the Aviation
Corps, was killed in the region of Chiteau-Thierry in
August, 1918, asking if I could conveniently visit the cemetery where his boy was buried and advise him of the conditions which I found there.

I left Paris on August 2, 1919, driving up the valley
of the Marne to Chiteau-Thierry. After passing through
a part of this beautiful country, just beyond the city of
Meaux, we left the main road to make a short detour to the
village of Jouarre, where my friend's son is buried in the
grounds of the Château de Pereuse. It is a peaceful and
lovely spot, on high ground, overlooking one of the most
delightful scenes in France. The château had been occupied by the Germans before the Battle of the Marne and
used for military purposes. It was not damaged perceptibly and was recovered by the French, who used it as a
hospital. My friend's son was brought there after being
shot down and died at the château.
I was particularly interested in satisfying myself that
the parents of our boys who lost their lives abroad need
have no anxiety as to the respect and affection with which
these burial places are cared for by the French. And what



I found at the Château de Pereuse I found likewise at three
other cemeteries that Y visited.

We were met at the gate by the daughter of the caretaker of the place (the family being away). She took us
at once to a little field on one side of the château, which I
judge had formerly been an orchard, and here were buried
72 French soldiers, 19 American soldiers, 1 French officer
and 1 American officer-the boy whose grave I went to see.
This little graveyard was laid out with the most painstaking care. Gravel walks surrounded each grave, and each
group of graves, and had newly planted borders of boxwood.

At the time of my visit the flowers were in bloom and
every grave was covered with a mantle of flowering violets.

The graves of all the French soldiers were grouped at
the left, the American soldiers at the right, and between,
lying side by side, were the graves of the two boy officersFrench and American.
grave of Over the
Lieutenant
Gal land was a cross, with the Tricolor and a little tablet
bearing the following inscription :
Sous Lieut. Galland,
Theodore,

174th Infantry,
5th Coy.

Mort pur la France.
And over my friend's son's grave was a cross made of
the blades of the propeller of his machine, to which was
affixed the American colors and a small aluminium plate
bearing the following inscription:
Lieuten ant

Pilot
1st Aero Squadron.
Killed in Action
August 1, 1918.
We took a number of pictures, but the real impression I

brought home was that given in a conversation with the
caretaker and his wife and daughter.
As we were leaving they asked us to step into their cot-

tage for a few minutes' visit. I thought it was a simple



act of courtesy with no other object. My companion,
however, who had been an officer in the French Army, after
a few minutes' conversation with them drew me one side and

asked if this boy was a relative of mine. I explained that
he was the son of a warm friend. He then went on to say
that these good people were alarmed by my visit, fearing

that it evidenced an intention to disinter the boy's body
and take it home. They then told me that this little graveyard had been laid out by the peasants in the village; that
every scrap of the work had been done by them on Sundays;

the grass had been planted and cut, the walks had been
built, the box planted and the flowers had been planted and
cultivated by these people. who found this the only means
of expressing their appreciation of what our boys had done
for France and their affection for the country from which
they came. They explained that to the French a grave is
sacred. They regard the graves of these American boys as

a sacred trust; they want to keep them there, and they will

be grievously hurt and disappointed if the bodies are
brought home.

My own son was two years in France and fortunately

is safely home. Parents may view this subject differently,
but after my own experience I believe as between the satisfaction of having a son who had given his life for his coun-

try in France, buried in his own soil or left in France, I
should instantly decide that my greatest satisfaction and

happiness would be to have his grave serve as one of those
ties which perpetuate and immortalize international friendships.







CHERISHED GRAVES IN FRANCE

A Visit to One of the Little Cemeteries
Where Our Soldier Dead Lie Buried

By BENJAMIN STRONG

Governor of the Federal Reserve Bank
of New York

Reprint from the New York Times
Sunday, April 18, 1920.

I found at the Château de Pereuse I found likewise at three
other cemeteries that I visited.

SINCE the war ended articles have appeared from time

to time in the daily papers relating to a project to

bring home the bodies of American soldiers who were
buried in France. I had wondered how the plan had originated, and have been told, although it may be that the statement is somewhat exaggerated, that there is some element
of commercialism in the suggestion. Difficult as it is to
believe, it is said that this agitation comes from some who
hope by reason of their business to gain for themselves some
commercial advantage or profit.

It has led me to think that it may be of some interest
to the parents and relatives of these boys who gave their
lives in a great cause to read of an experience which I had
last Summer in motoring along the front in France.
Before sailing for Europe, I had received a letter from
an associate whose only son, a Lieutenant in the Aviation
Corps, was killed in the region of Chiteau-Thierry in
August, 1918, asking if I could conveniently visit the cemetery where his boy was buried and advise him of the conditions which I found there.

We were met at the gate by the daughter of the caretaker of the place (the family being away). She took us
at once to a little field on one side of the château, which I
judge had formerly been an orchard, and here were buried
72 French soldiers, 19 American soldiers, 1 French officer
and 1 American officer-the boy whose grave I went to see.
This little graveyard was laid out with the most painstaking care. Gravel walks surrounded each grave, and each
group of graves, and had newly planted borders of boxwood.

At the time of my visit the flowers were in bloom and
every grave was covered with a mantle of flowering violets.

The graves of all the French soldiers were grouped at
the left, the American soldiers at the right, and between,
lying side by side, were the graves of the two boy officersFrench and American. Over the grave of Lieutenant
Gal land was a cross, with the Tricolor and a little tablet
bearing the following inscription:
Sous Lieut. Gal land,
Theodore,

174th Infantry,
5th Coy.

Mort pur la France.
I left Paris on August 2, 1919, driving up the valley
of the Marne to Chiteau-Thierry.
After passing throughAnd over my friend's son's grave was a cross made of
a part of this beautiful country, just beyond the city of
the blades of the propeller of his machine, to which was
Meaux, we left the main road to make a short detour to the
affixed the American colors and a small aluminium plate
village of Jouarre, where my friend's son is buried in the
bearing the following inscription:
grounds of the Château de Pereuse. It is a peaceful and
Lieuten ant
lovely spot, on high ground, overlooking one of the most
Pilot
delightful scenes in France. The château had been occupied by the Germans before the Battle of the Marne and
1st Aero Squadron.
used for military purposes. It was not damaged percepKilled in Action
tibly and was recovered by the French, who used it as a
August 1, 1918.
hospital. My friend's son was brought there after being
We took a number of pictures, but the real impression I
shot down and died at the château.
brought home was that given in a conversation with the
I was particularly interested in satisfying myself that
caretaker and his wife and daughter.
the parents of our boys who lost their lives abroad need
As we were leaving they asked us to step into their cothave no anxiety as to the respect and affection with which
tage for a few minutes' visit. I thought it was a simple
these burial places are cared for by the French. And what







act of courtesy with no other object. My companion,
however, who had been an officer in the French Army, after
a few minutes' conversation with them drew me one side and
asked if this boy was a relative of mine. I explained that
he was the son of a warm friend. He then went on to say

that these good people were alarmed by my visit, fearing
that it evidenced an intention to disinter the boy's body
and take it home. They then told me that this little graveyard had been laid out by the peasants in the village; that
every scrap of the work had been done by them on Sundays;

the grass had been planted and cut, the walks had been
built, the box planted and the flowers had been planted and
cultivated by these people. who found this the only means
of expressing their appreciation of what our boys had done
for France and their affection for the country from which
they came. They explained that to the French a grave is
sacred. They regard the graves of these American boys as

a sacred trust; they want to keep them there, and they will

be grievously hurt and disappointed if the bodies are
brought home.

My own son was two years in France and fortunately
is safely home. Parents may view this subject differently,
but after my own experience I believe as between the satisfaction of having a son who had given his life for his coun-

try in France, buried in his own soil or left in France, I
should instantly decide that my greatest satisfaction and
happiness would be to have his grave serve as one of those
ties which perpetuate and immortalize international friendships.

4

4


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102