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eiffie-ae 7 Az

June 20th, 1916.

Dear Mr. Strong:

The trouble is the boys talk too much.
have been very uncomfortable for about a week but it does
not come from any strain, as I am/quite sure that I have
not hurt my back again.

I guess it is simply a letdown

y nervous system.

I thank you very sincerely for suggesting that
I see your doctor and will do so should it be necessary. I

feel very much better today and an sure that by resting as
much as possible, it Will only be a question of a few days
before I will be all right.

You need have no anxiety regarding my being
here and I sincerely hope that you will get away at the earliest possible, moment, and I am sure that my worry over you

is more or less responsible for the trouble with
Faithfully -ours,

Mr. Benjamin Strong, Jr.,
903 Park Avenue,
New York City.




June 19th, 1916.
Uy dear Hendricks:

The boys tell me that your back has not been
behaving well and 1- am writing to urge that you get at
it right away, 6 d energetically. Do not forget that

you and some of the others at the office have been preach-

ing to me about taking care of myself ad 1 think it is
appropriate and fair that 1 should take a list at you now.

generally do not believe in recommend-

ing doctors to one's friends, if you are not having good
attention, do not hesitate to call on Dr. '7.. Halsted Kyers,
49 West 50th Street.

He has straightened my liack out on

this last attack with just a few pull r and punc:les lnd he
may be able to do the same for you.
I feel rather anxious about going away if you
are not there and put it on selfish graounds, as well as
Sincerely yours,

L. H. Hendricks, Esq.,
604 Riversioe Drive,
hew York City.


604 Riverside Drive, New York.
September 10,1916.
Mr. Benjamin Strong,
The Lewiston,
Estee Park, Colo.

Dear Mr.Strong:

Enclosed you will find a copy of a letter that was sent to a friend
of mine by Mr.Lyford which I thought might interest you.
Do not know if the Tribune published it or not.

Sincerly, I

Why do the immix State banks refuse the oft repeated invitation to join the Federal
Reserve system?

Some of them acknowledge that its note issuing powers insure stability of financial conditions, but say that they do not see any reason for contributing toward the
cost- the National banks are taking care of that.
Does not the ques*ion thus arise, what are the National banks paying for the
privilege(?) of membership in the Federal reserve system, and for stabilizing
financial affairs?
The system has taken from these commercial banks so far over $600,000,000. the
larger share of which was income producing, not less than 2%, so the first cost
os the loss of about $1,000,000. per annum to the banks, is it not, and is it not
also an economic loss to have several hundred millions of dollars idle?
It is admitted that the country banks are suffering a loss under the par remittance rule, some claim 20% to 30% of net earnings.What are the figures on that?
Reports of the Comptroller of the Currency for 1913 show net earnings of
National banks about 3160,000,000, for 1915, $113,000,000. a very large decrease, 80
large that no one cab blame the banks for protesting against a rule which adds largely to the decrease of profits, especially when it means no pa* for actual service
rendered and the doing away with a legitimate charge, can they?
What will the loss of exchange figure?
There are over 7000 country banks and some 500 or more city banks, assets of
the two classes not differing much, so it would be fair to claim that the country
banks are earning about one-half of the net profits as showm by the Comptroller's
reports, or $50,000,000. to $60,000,000. annually. Instead of figuring 20% or 30%
loss, suppose we call it 10% or $5,000,000. or $6,000,000. would that not be fair?
These losses of
by member banks, as
the Federal reserve
would double, would

interest and exchange must increase as more money is paid in
required under the Act, ans as more business is done through
banks, and if State banks should enter the system the loss
it not?

Under the Aldrich-Vreeland bill, which held us safe for six years and in 1914
quieted one of the most seriaus financila disturbances we have ever had, the cost
was about $126,000. or a little over $20,000. per annum.
Compare the figures.

Republican ideas as expressed by the Aldrich-Vreeland bill cost us $20,000.
per annum for a term of years; Democratic notions under the Federal reserve act
costing us $15,000,000. per annum, and more to follow as the years roll by.
As an insurance proposition isn't the rate far beyond reason and absolutly
Will some one tell us if the other features of the Act are io valuable for
business needs that we should continue to pay every year $15,000,000. and more
for them?



N.Y.Tribune 9/6/16




Es'es Park, Colo.,
September 11th, 1916.

Dear Mr. Hendricks:
The stetement of eeptember 51h just reaches me, showing balances due through the Gold Fettlement


tql the other bnnks,


Fund of '32,750,000.

Cleveland, Philadelphia and

Richmond apparently have sent us unusuelly large
York exchange, resulting in

amounts of New

our piling up $27,000,000 of legal

nnd silver certificates.
I take the liberty of suggesting

that this situation

desreves a warning, unless, as mny prove to be the case, some

special circumstances

it is due to piling

nave brought about this result.

up exchange


in New York in order to pay for

'rench and Xnglish

Has apt the time come when we should be advised dnily
or frequently,

or quotations for Lew York

exchange at the


reserve bank cities?

Since writing Mr. Treman on t is subject a week ago,

it might be a good

it occurs to me thet
the 'rreasury

weakness of

our whole

time to give
demonstration of the

pin some

people a practical
S ituation

currency adamWxWURSUOM by asing them to

of tnis "chicken feed"
You would hear a great howl, of course;
in gold certificates.
and I only sugust it for discussion, believing teet it may
eome day be necessary to pursue this course in order to force
consideretion of this weak spot in our system.
redeem ten, fifteen


twenty millions



L. H. Hendricks, Esq.

Sept. 11, 1916.

I would not hesitate to try and work up a plF,n with
the big banks in New York by which you can get round amounts

of exchange on the other Federal reserve cities from time to
time and vend some big offsets and see what effect that would
Always hear in mind that the arrangement should not
be a permanent one as otherwise, we would be liable to accumulate too much flont.
I hope you all keep well at the office and not too
Pleas give all the boys my warmest regards and tell
them I am thinking of them constantly.
Sincerely yours,

L. H. H4ndricks, Esq.,
Assistant Cashier, Federal Reserve Rank,
Equitable Building,
New York City.


Estes Perks Colo.,


My dear Mr. Hendricks:

lt was mighty good of you to telegraph me in sply to

A. later letmy letter about the Geld Settlement operations.
ter to T. Jay will indicate that I was not actually worrying
about this matter, although, as you know, it baz always given
I am sure it will straighten up and as you
me some concern.

it is a seasonal movement,..poscibly combined with some

speoial transfers in connection with the big foreign loans just

Lyford's questionnaire, which I think it is doubtful
the Tribune could have publiened, will give those attending
the Kansas City Convention an opportunity to prepare in advance

for the line of alteck which he and some of his associate kickers will likely bring to bear.
Don't you think it would be a good plan to send a copy
of this to all the Governors who propose attedding the Convention, suggesting that they post themselves on these particular
questions and be ready for Lyford and his pals when they let
Of those with whom I am in correspondence, I find, that
Wold and McDougal and, of course, Yiller, will certainly be there.
Aiken is considering going and 1 believe some of the other banks



L. H. Hendricks, Esq.

September 15, 1916.

will likely send representatives. I suggest writing a confidential letter to each of the barks likely to eend representatives, telling them of the origin of the article and eez,Eeoting
that they melte some preparation ulong the line 01 these ques-


won't make any euegestione in this letter as the answers are all too obvious. It is well to bear in mind"however,
on certain special points that the loss of exchange will be made
up; that the tax paid on the Aldrich-Vreeland notes amounted to
nearly 4,000,000; that the difference between the earnings of
1913 and 1915 have no relation whatever to the rederel Reeerve
Act and cc e be readily explained by other lectors and that the
probable earnings of 1915 are the greetest in the history of
banking in this country; that of the f600,000,000 held by the
reserve banks, the greater piert never earned any intereet, etc.,
etc. It strikee me that the whole article is ridiculous in the
exteeme -in e in the hand' of some one understanding these:matters,

could be made to reflect very eeriouoly upon Lyfcrd's intelliI think the matter is vortt following up only for use
et the Convention, in case oeportunity arises.
With best regards,
Sincerely yours,
L. B. flendricks,
iederaReserve Bank,
New York City.

604 Riverside Drive, New York,
September 17,1916.


Mr.Benjemin Strong,
Estes Park, Colo.

stp2, 0/6



My dear Governor:

Your letter was most welcome and it is no wonder that you were
disturbed at the large drain on us through the gold settlement fund.
It may be that having been present at Washington when the drain on New
York was discussed so many times and from every angle was the reason I did not
share the view held by many in the office that our gold holdings were about to
disappear and it seems to me to have been rather unfortunate that we held up
the other banks last week when our statement of the 15th shows very little silver
or legal certificates on hand.

The Morgangold and large purchases of investments took all our clearing
house certificates.

It seems to me be a good thing for us to have from 115,000,000.

to $20,000,000. of clearing house certificates on hand as our transactions with
the clearing house are pretty sure to be large

As it stands now we will have to

pay in gold or exchange with some other bank, the result as far as we are concer-


being the same.

As long as we cap keep the larger part of our assets in gold a few millionL
in "chicken feed" is of email moment.

It was probably a good thing to hold the

other banks up as a warning of what might happen and it may slow some of them down
a bit in their purchasing of New York exchange.
So long as our exports continue to be so large and to be paid for here
in gold is thereany way to prevent a large part of this gold going to the other
parts of the country and is it not equally true that should our imports be very
large, much of this same gold would find its way back to New York?
We are issuing all the Federal Peserve notes called for and are requiring the banks to give us gold for all new notes furnished and our expense account
is on the rise.

The Treasurer of the United States sent us abill of$12,-000Todd


being cost of redeeming our notes and we will have to cancel and ship to Washington this week about 500,000 bills.

The check collection department is certainly doing a land office business
as we are handling about 40,000 items daily and we feel that we are making progress in the organization but the things that 35 women can do to you

are plenty.

A Baltimore bank sent us acheck on Pittsburgh with a notation on it that
it was immediately available as it was stamped collectible through the clearing

This was a $25,000. check and we returned it with advise that it was not

available and came within the restriction placed on items on other districts
endveed by banks situated in still another district.

This part of the work of

the department has been much neglected as it has been impossible to give any
attention to these matters.
my attention


As soon as the department is running as it should

be given to these other and more important matters for undoubt7

edly many items are going through that we should not accept and we should work
out some direct routing for the large items.

Am leaving for Kansas City on Saturday of this week and feel a little
guilty of shirking some of the work but on the other hand think I sould go for
many reasons.

Will try and write you from there.

Keep up your courage and patience for we are all looking forward to
your return.

With warmest regard, I am, as ever
sincerely and faithfully yours,


Estes Park, Colo.,
15eptember 22nd, 1916.

Dear Adr. hendricks:

Thank you for your letter of September 17th.

It is

a poor way to spend bundays, althougn 1 am deiignted to get

your leiter, if it does not

burden you to write them.

The serious thing about the movement of gold to the

West through the Cold Settlement

Fund has not yet really devel-

While the foreign exchanges are favorable to New York

and it is impossible for gold to move abroad, there will be little difficulty comparatively speaking, in working off our silver

and legal tender noteo whnever they happen to accumulate, because the domestic exchanges do not always aning in one direction.
As we have repeatedly observed, with gold cGming in and with other
large operations going through the various accounts, we always get
out of the hole some way or other.

But suppose sterling


was adverts and London wao taking gold from New York in sufficient
volume to cause high money rates throughout the country, and under
those conditions New York exchange is almost always at a premium

Chicato, Philadelphia and other important poinqithe most economical method of settling exchanges with the interior being through
the Cold Settlement Yund, the Federal Reserve Bank of ;iew York

would be constantly shipping gold to the interior at the same time
it was furnishing gold to the big banks and banknrs of New York



L. H. Hendricks, Fsq*

Sept. 22, 1916.

for shipment to Europe.

There would be no possibility og getting out of accumulating silver certificates and U. S- notes,
except by presenting them to the Hubtreasury for redemption. I
figure from the statements sent no that since the 8th of August,
the weekly adverse balances in theft 1-o" accounts have totalled
over 40,000,000, all of whLch, of courno, have not been settled

but which tight have bean settled had every dollar been ┬░ailed for.
Your inquiry about the change in the balance of trade
boars somewhat on this point, but I cannot 300 that it would leave
any accumulation of gold in New York.

It would likely give rise

to the very conditions I have delcribed.
Would you mind asking the boys to send me a memorandum

of -the Y.sderal resorvo notes outstanding, divided according to denominations!

I an very much interested in the detsile contained in
your letter, particularly about the organisation. I an surprised
thet things havn. gone ac well as they have, with over 40,000 items
a day going through. It is a big job and has certainly been well
done, thanks to the hard work and loyalty of the men.
Sincerely yours,

L. H. Hendricks, Esq.,
Federal Reserve Sank,
Equitable Building,
New York City.


Denver, Colorado,
March lb, 1917.

Dear Mr. Hendricks:
Thank you for yours of the 7th.

I had a long talk

was in Chicago,

McDougal and McKay about this Seattle sit
and am satisfied from what they said t

this experience by all of the Reserve
be anparent.


her, that

Banks have got to be caref


for items sent for collec


steps to have all the f
well as opinion of c

Let me suggest that you take
shape for discussion at that meeting, as

week spots in our collection plant

e roundabout

n the inter-district service where all


Reserve Bank to another, instead of by shorter

routes which til ght in some cases be possible.
sending of it
third weakness

districts, as In

which they accept

ubject of the liabilities involved.

is that th


Federal Reserve

ubject of special consider-

ation at the next G

items go

n prompt for-

cannot be followed up too

dilligently to sati


Two thingeem to me to

One is that somewhere the e is negligence

warding and presentation of i

My belief

be drawn from

a lesson is

The second weakness is the

direct to the banks on which tye are drawn.



And the

inexact timing of items on the remoter sections of
instance recently cited by Mr.


in the Richmond

These occurrences lead me to urge that we go very slow



ing that plan for furnishing member banks with Federal eserve exchange.
Very sincerely yours,

L. H. Hendricks, Esq.,

Federal Reserve Bank,
New York.- City.


Denver, Colorado,
March 30, 1917.

Dear Mr. Hondricks:

It was a

great pleasure to have your letter of the 24th ana;

another on the 26th.

First about that

expense item, you must never forget that I have

endeavored consistently, both as to my

expenses and my

salary, to avoid

anything Which would subject the bank or myself to criticism and at any

that is the thing to do. The choice was zjven to me to put in a

bill for all of my expenses and I preferred myself not to do so.

I do not understand your refereace to Harding's speech, which 1

would like to see if you have a copy available.
I was particularly pleased and touched by your looking up Grandin.

He is a bully boy, none better, and I can understand how keenly ho appre-

ciated a party with

you for he has written me most enthusiastically.

oldest boy started for a mobilization can

today as he is


in the National

Guard at Princeton.

1 am playing golf at last and it has set mo up so that I feel
like a fighting cock. Thera seems now little
home around June first and I can hardly wait

doubt that I will start for
for the time to come.

I have written Mr. Treman about the Clearing House

and hope we will

not make a mistake by taking in some

out. If most of them Come in, we no doubt


With best


and raw thanks

and leaving

the others

can coax a few recalcitrants into

for your letters,

Faithfully yours,
L. H. Hendricks,
New York City.


Federal Reserve Bank of St. Louis, One Federal Reserve Bank Plaza, St. Louis, MO 63102