View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

November 2, 1917.
Dear Sire

As Mr. Strong is jusieafing for a few weeks'
vecar,ion on account of his heal he has asked me, to acknowledge your favor of the lot 1 tell you how greatly

he appreciates the book that year° sending him and which
he will be most interested in hing. He will no doubt
write you percionally at his fir opportunity.
With many thanks on M Strong' behalf, I am,

Very trplyours,

Se-etary to 14r. strong.

Reserve 3oard,
Washington, D. C.




tk14




mOutt

1917.

elano:

Thank you for your favor C the 7th enclosing
letters in connection with Mr. Chapan, which were duly
received.

Very truly imrs,

eraor.

Honorable F. A. Delano,
Federal Reserve Board,
Washington, D. G.
VCM

Denver, (lorado,

July 31,)17.

Dear I. Delano:
have been pursuing inquips in regard to Vrancis
ro I find that a .oat many things are said

A. Chapman and,

1,7

in his favor r

, thoroughly honost ,.eliablo man (Ind with con-

.rience in handling banliquidations, one man

s

in whose ju
not consi(1e

ant I have mote confidace than any other, does

that h- is =Mel tly:orceful to take charge of

a bank orga

o for:econd

iFth

man.

Libre partiau-

Charles B. Davis of the

lar information
and i link

Central Trust CO.

Comptroller's records, as

has acti as

ery probably from the

quidator

and receiver

action

of a number of banks in thi.
On the whole, I an i..

odXou.bt the wi

pointing him Chiof Executor of a bane'. The enclose
I an sending you in strict confidenc,

to which should not be quoted.
turn them to Uew Yor

Wan' you

you will obs

e good en

after L.oading,and obli,

Yours Nry truly,

Hon. P. A. Delano,
ledoral 1.:escrve Board,

Washington, D. C.

Cs.




m of
letters
e; refer-

h to re-

Denver, Colorado,

July 23, 1917.

My dear Fred:
Replyin

yours of the 16th, Ur. Francis A. Ch man
gaged In tho Insurance liUsiness I believe, and
just r
little further inaairy
o cc receitKg your letter I made a
considered to be
about him. Ip is very well refrarded here and
ghly reliable and having some
a man of r. on
ther the National or the
banking experi
n of banks in this
State Banking D
ess. 1.17 belief
duct
District, which he
is tbat he would be a bett
tant manager than as a dire
write you Tull,
further and
Ameng others whom you may consi

cc manager or assis-

n,
early date.
1

r for positio

o the matter
as

In any
directors, would not Floyd Welborn be o of the
d like to
event, if you have names under considerat
-co a little provato inquiry sovio, please telegraph and I will
do the needful. I suggent a telegram, as I am returning home

on about the 6th.

Faithfully yours,
Pen. F. A. Delano,
Aeral Reserve Board,
.azthingtozL, D. C.

B3/CC






.

Denver, Colorado,
May 16, 1917.

My dear Fred:

On reaching Denver I find the cards of invitation to your

daughter's wedding and am so regretful that it will be impossible for
me to be on hand When that important event takes place.

You may be sure that all of your host of friends wish the

bride great hapninoss, as I ao.
Very sincerely yours,

Han. F. A. Delano,

1126, Sixteenth St.,
Washington, D. C.

Denver, Colorado,
April 17, 1917.

Dear Fred:

I have just succeeded in purchasing the history of the descendants
of Elder John Strong, two volumes, which is the only genealogy of the

Strong

family ever prepared, and I believe one of the best of its type of any
American family.

These 1 ail

having

sent to ydu by express and hope that

you will extend your acquaintance with our common ancestors with
satisfaction.
'Very sincerely yours,

Hon. F. A. Delano,
Federal Reserve Board,
Washington, D. O.

\\\

BS Ice




profit and

Denver, Colorado,

April 17, 1917.

Dear Vred:

I have just returned fran a trip with the Welborne down to some
of the mining camps and find copy of your correspondence with Mr. Gordon

You doubtlees have learned that bh died very suddenly last week

Jones.

while undergoing a severe operation ,./.1d 1 doubt if he received your letter

before going to the hospital.
Since our exchange of telegrams about my return home i learn that
Lord Cunliffo will shortly reach New York and, of course, 1 am determined

to see him before he returns home. I au. awaiting word from New York as to

his plans, etc.
I hope things are going well with you and that you are not over7

working.

Very sincerely yours,

BS/CC

,/

Hon. P. A. lano,
Federal Reserve Board,
Washington, D. C.




7111,

WESTEkaiN4 UNION
-3

WESTERN UNION

4P0-

sired;

IRAM
AS A

TEL-

AM

NEWCOMB CARLTON. PRESIDENT

E.

ding telegram, subject to the terms

"tea, which are hereby agreed to

Denver, Colorado,

' April 11, 1917.

F. A. Delano,
Federal Reserve Board,
Washington, D. C.

Many thanks for 'Aro and for your interest.
Strong.

ihg. Benj. Strong,
lOO Montview Blv.




Receiver's No.

1
Check

Time Filed

ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOW.
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating offic
one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM A
in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
Vie Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED teh
received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond
for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for
telegrams.

In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery,
cause,,t by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless a
writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid based on such yak
one per cent. thereof.
The Company is hereby made thc af.ront of the sender, without liability, to forward this telegram over the lines of any other Company whet nt.
destination.
Telegrams will be delivered free within one-half mile of the Compgny's office in towns of 5,000 population or less, and within one mile of such JfficO
towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at h'sexpert,
contract for him for such delivery at a reasonable price.
No responsibility attaches to this Compa,y concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegr,m is sentto
by one of the Company's messengers, he acts for that purpose as the agent of the sender.
ff. The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telt.
Sled with the Company for transmission.
7. Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to' messages in each of such respective classes in add
the foregoing terms.
S. No employee of the Company is authorized to vary the foregoing.

THE WESTERN UNION TELEGRAPH COMPA
INCORPORATED

NEWCOMB CARLTON,

PRESIDENT

CLASSES OF SERVICE
Letter shall be delivered on the day of its date absolutely and at all
events; but that the Company's obligation in this respect is subject
to the condition that there shall remain sufficient time for the transdate during
mission and delivery of such Day Letter on the day*

FAST DAY MESSAGES
A full-rate expedited service.
NIGHT MESSAGES
Accepted up to 2.00 A.M. at reduced rates to be sent during the night
and delivered not earlier than the morning of the ensuing business day.
DAY LETTERS

regular office hours, subject to the priority of the triiismission of *regular telegrams under the conditions named above.
No employee of the Company is authorized to vary the foregoing.

A deferred day service at rates lower than the standard day message rates as follows: One and one-half times the standard Night
Letter rate for the transmission of 50 words or less and one-fifth of

NIGHT LETTERS
Accepted up to 2.00 A.M. for delivery on the morning of thnsuing
business day, at rates still lower than standard night messftge r4t4 as

SPECIAL TERMS APPLYING TO DAY LETTERS:

follows: The standard day rate for 10 words shall be charged for the tss;.n,,smission of 50 words or less, and one-fifth of such standard day rate for 10
words_ shall be charged for each additional 10 words or less.

the initial rate for each additional 10 words or less.

In further consideration of the reduced rate for this spacial "Day
Letter" service, the following special terms in addition to those enu,
merated above are hereby agreed to:

SPECIAL TERMS APPLYING TO NIGHT LETTERS;

Day Letters may be forwarded by the Telegraph Company as a
lecerred service and the transmission and delivery of such Day Letters
s, in all respects, subordinate to the priority of transmission and
elivery o rcgular telegrams.
Day Letters shall be written in plain English. Code language

In further consideration of the reduced rate for this special "'Night
Letter" service, the following special terms in addition to those

c. This Day Letter may be delivered by the Telegraph Company
y telephgning the same to the addressee, and such delivery shall be a

i
be deemed to have discharged its obligation n such eases willkyr.ospe

s not permissible.

omplete discharge of the obligation of the Telegraph Company to
eliver.

This Day Letter is received subject to the express understand that the Company does not undertake that a Day
- and agreement
D.



enumerated above are hereby agreed to:

Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
to delivery by mailing such Night Letters at destinatidn, post as.
prepaid.

Night Letters shall be written in plain English. Code lung',
is not permissible.
the Company is authorized to vary the foregoing.
No employee
of

Denver, Colorado,
April 4, 1917.
0141)It'

CONFIDENTIAL.
4,q1c.Nh.
-Vt'Tiv-

Dear Fred:

I have telegraphed to Harding, to Secretary McAdoo and to the office, indicating my readiness to return at any time.

What I should have

done was to go right back to New York, even if it only

meant a visit for

a few days there and in Washington, but possibly this letter will make

and I will ask you

clear the narticular matters which tempted me to return,
to consider it very carefully and
promote What I have in mind.
1.

to do 71Int

you can, if you think best, to

r/

My oldest son is in the National Guard, his regiment has been

mobilized and I am terribly keen to see him before he is sent off to some

inaccessible place Aare I may not be able to get at him for quite awhile.
That

is, however, but one

personal consideration, Which I

urge in connection with my return.
2.

don't want

to

f,

The second however strikes me as being exceedingly important.

You will recall the account which I gave you out here of the connection
which I had had with tboli first Englidh-French loan.

Subsequentl:, my trip

to Europe at a time when everything was most depressed over there and the
eronosals to the Ban,: of England and the Bank

relationship with my old banking

friends

of France,

developed a cordial

and some new ones over

there which

I believe would be of the greatest possible advantage in connection with any
negotiations ever undertaken for international loans for the assistance of
the allies in




which our Government would

have a hand.

Any such transactions




2.
To - lar, Delano.

April 4, 1917.

should be handled through the agencies of the Reserve Bank System and the

banks of England

and France.

After having worked on these matters now for

two years nearly, 1 do not want the misfortune of my illness to interfere

with aw going on with work which I believe my acquaintaaceshin abroad
would just WM particularly qualify me to be of some service.

It is really

the one thing we need to give the Reserve Banks the international standing
that they require -- that is to have us handle the banking end of transactions of that character.

The machinery is really all established for the

purpose and I have thought about it so much that I think the plans by which
such transactions could be handled are
mind.

already

pretty well formulated in my

fnerefore, I am writing you to urge most strongly that you find the

moans, if you can, to get this idea of the Reserve Banks acting for the
a

government

in

connection with these foreign transactions and further see

that When the time comes no sentimental or other consideration for my health
is allowed to interfere with my taking some part. in the job.

It really seems a joke to me that my son should be in the army,
ready at, any minute to c;() abrond and make any sacrifice, while 1 am out here

coddlin4Nry health, notwithstanding

that I feel- able to be of some material

service in the situation.

So far as my health is concerned, it could not be better.

been playing 18 holes of golf
time.

every day and

I have

putting on weight at the some

Last night I weighed 156 lbs., Which is a gain of 27 lbs. since I

came out here.

Dr. Sewall, with Whom I talked yesterday, said he would

have to hunt up some new argument or excuse to keep me out here any longer.




To - Mr. Delano.

April 4, 1917.

I have written to no one on the subject of this letter except to
Curtis, to Whom I am telegraphing today, and I do hope that you and the
others will not hesitate to telegraph me to come back at once ana get to
work.

I an getting so restless any way that it would probably do 20 more

harm to stay than to return.

In conclusion, let me say that I an writing you, knowing that you
will be a sympathetic audience for my complaint and, further, because you
have just been here, can appreciate in what good condition I am and how
senseless it is for me to allow a few weeks' of top dressing, so to speak,

to interfere with my getting back and tackling the work that I an really
best qualified to do.
Best regards,

Faithful* yours,

Hon. F. A. Delano,
Federal Reserve Board,
-,shington, D. C.

BS/cc

Denver, Colorado,
Larch 26, 1917.

My dear Fred:

sted I doubt if you #

Your visit was all too short but while it
realize what a great pleasure it was to me and h
ing it is to have opportunity to

talk

tremendously encourag-

things over ,ith solmone froa,

ms to me there is

About my general condition and b

no longer very much, if any, doubt that June should se
d after I have a better op-

bank and then further plans can

the way the present organi-

portunity to get personally a
zation is working.

As June let is now

,

I can only repeat what 1

stated to you perso

ly as possible, viz.-

that no important d

gard to the bank and its general

policy until a litt

refer not only to the office
fully, but as well to matters of

organizati
policy.

Just have a letter from Mr. Treman, stating that Governor

Harding
the min

inion that the stretch of two points between

d expressed the

rate of 2%

bills was
differential to not over

the maximum rate of 4"f, for the purchases of

visable and that the Boat hoped to reduce this
1% in normal times.

Hiei feelings in this re-

gard are undoubtedly the result of an initial error
of these rates which I think

should now

in

the establishment

be corrected and in such a matter

as this I really feel that my associates in New York have failed to grasp
the true significance of the suggestion.

The Federal Reserve Bank of New

lark should have a minimum rate and no maximum rate and then no question
of differential will arise.




Applying a maximum rate to our dealings in

To - Mr. Delano.

Earch 26, 1917.

bills has absolutely no bearing
vestments upon their
the

acceptoriond

merits,

Bills are purchased as in-

Whatever.

that is to say

dependent upon the credit of

endorsers, and the volume of bills

names Which happen to be offering.

or

those particular

The maximm rate can be described

poosibly by to statement that the Reserve Board feels that the Dew York
_

bank should not be authorized to buy bills which are so bad in quality

that they can be purchased at a discount rate in excess of

11), and that

\N

the Board exercises that dogma ofcontrol not over the quantity purchased

but over the quality oche

bills. This ic surely a very

unsound principle.

No one can pass on the quality of the bills we buy except those officers
Who are fully informed,

in many cases confidentially, of the affairs of

N.r

the acceptor.

If the maximum rate is applied for the purpose of limiting

the quantity, (which I cannot

conceive to

t

be possible) then it has the of-

feet of limiting the bank's activities and discretion at the

and in the very way, when they4huuld have the freest

very time

Possible

latitude,

viz.- When rates are advancing sharpely and Should be checked.
I

In this matter I really feel that it wou16. be better to let the

situation remain unchanged when

it

has wpriced very alcely for two years,

giving no ground for complaint anyWhere,

and Where experience has demon-

strated that the New York Bank can be trunted,to attend to its business
properly.

In

this and other similar matters :f you

and your associates would

be willing to defer action until my return, I would deeply anpreciate it,
and you may be sure that after

greeting

my associates in New York my first

move would be to go to ';:ashington and discuss all of

you and the others, with the utmost frankness.




these

matters with

3.

March 26, 1917.

To - Lir. Delano.

Let me repeat what I said to you a number of times while you were

here:

I recognize that relations between

the Board and our Bank have been

a little strained in some matters and this situ

an must be corrected,

While I was grog

of course, az soon as possible.

disturbed and re-

sented the announcement about the Bank of England
true that all such differences of

pared to the

wore: itself, we all

would like to malile clear to

\

importance comthing and I

ceomplish the

they want can be

methods of control, the results

of Which would be unfortunate if t

with the Board to 1

of tr

the results

th

obtained without the adoption

they were resisted.

opin on are

tter, it is undoubtedly

ucceeded and. equally Unfortunate if
therefore, for you
tters await my return

to

before

arrange
they

are pressed?

fine

It was
me a wor

of good and I

just

the situation

will

come out here to see me.

It has done

enabled you to form a clear opinion of

the benefit of
WI.

'7

thank

here and in the bank,

and that your associates

d warmest good wishes,
Faithfully yours,

Hon. F. A. Delano,
Federal eserve Board,
Washington, D, C.
BS/00
Tinfortunately the Kansas City report was left in the
and 1 am mailing it to you under separate registered cover.

P. S.




sitting room




Form 1217
OF SERVICE rF:cAREn
t Day Message

.ter

1N'ESTE431)17A, UNION
WESTERN UNION

Night Message

Night Letter
Patrons should mark an X opposite the class of service desired;
OTHERWISE THE TELEGRAM
WILL BE TRANSMITTED AS A
FAST DAY MESSAGE.

TEL41.

Receiver's No.

Check

AM

Time Filed

NEWCOMB CARLTON, PRESIDENT

Send the following telegram, subject to the terms
on back hereof, which are hereby agreed to

Denver, Colorado,
March 22, 1917.

P. A. Delano,
'Onion Pacific Train 119,
Deer Trail, Colorado.

Will meet you at station.

Am arranging for luncheon al; Denver

Club tomorrow.

Benjamin Strong,

Chg. Benj. Strong,
4100 Montview Blv.

4.

ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERIv

telegrams.-

To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for comparison. .t. this,
one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM.AND PAID FOR AS SUCH,
in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
1. The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegram, beyond the amount
received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times the Bum received
for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in cipher or obscure
2. In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telegram, whether
caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless a greater value is stated in
'writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid based on such value equal to one-tenth of
one per cent. thereof.
Company is hereby made the n^nt of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to reach its
a.
destinati
3The
.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other cities or
I towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his expense, endeavor to
, contract for him for such delivery at a reasonable price.
No responsibility attaches to this Compaxy concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to such offie44
tio by one of the Company's messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is
filed with the Company for transmission.
11

:It

1

Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes in addition to all

the foregoing terms.
No employee of the Company is authorized to vary the foregoing.

THE WESTERN UNION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
FAST DAY MESSAGES
A full-rat e expedited service.
MESSAGES

NIG

Accepted up to 2.00 A.M. at reduced rates to be sent during the night
and delivered not earlier than the morning of the ensuing business day.
DAY LETTERS

A deferred day service at rates lower than the standard day 'nesSage rates as follows: One and one-half times the standard Night
,Letter rate for the transmission of 50 words or less and one-fifth of
-

the initial rate for each additional 10 words or less.

SPECI AL TERMS APPLYING TO DAY LETTERS:
e

In farther con,ideration of the reduced rate for this special "Day
Letter" service, the following special terms in addition to those enumerated above are hereby agreed to:
Day Letters may be forwarded by the Telegraph Company as a
deferred service and the transmission and delivery of such Day Letters

Letter shall be delivered on the day of its date absolutely and at all
events; but that the Company's obligation in this respect is subject
to the condition that there shall remain sufficient time for the transmission and delivery of such Day Letter on the day of its date during
regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.

No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2.00 A.m. for delivery on the morning of the ensuing
business day, at rates still lower than standard night message rates, as
follows: The standard day rate for 10 words shall be charged for the transmission of 50 words or less, and one-fifth of such standard d*, rate for 10
words_ shall be charged for each additional 10 words or less.
'SPECIAL TERMS APPLYING TO NIGHT LETTERS;

all respects, subordinate to the priority of transmission and

Day Letters shall be written in plain English.

is, in

In further consideration of the reduced rate for this special "Night
Letter" service, the following special terms in addition to those

Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall

delivery of regular telegrams.
is not permissible

Code language

c. This "Day Letter may be delivered by the Telegraph Company
by telephoning the same to the addressee, and such delivery shall be a

'omplete discharge of the obligation of the Telegraph Company to
diver.

This Day Letter is received subject to the express understanding and agreement that the Company does not undertake that a Day
D.




enumerated above are hereby agreed to:

be deemed to have discharged its obligation in such cases with respect

to delivery by mailing such Night Letters at destination, postage
prepaid.

Night Letters shall be written in plain English. Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.

WESTELibSsM UNION
7
TEL,cr AM

.S OF SERVICE

E

Letter
Aight Message

Night Letter
should mark an X opposite the class of service desired:
OTHERWISE THE TELEGRAM
WILL BE
/Patrons TRANSMITTED AS A
FAST DAY MESSAGE.

River a No.

WESTERNUNION

at Day Message

Check

MID

Time Filed

NEWCOMB CARLTON. PRESIDENT

AiOr
Send the following telegram, subject to the terms




on back hereof, which are hereby agreed to

Denver, Colorado,
March 18, 1917.

P. A. Delano,
Federal Reserve Bank,
Chicago, Ill.

Delighted that you will be here as planned on Friday and will keep
you just as long as you can possibly stay.

If anything interferes I trould

meet you in Chicago but hope that went be necessary.
Benjamin Strong,

Chg. Rad=
Benjamin Strong,
4100 Montview blvd.

ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERM:7To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for comparison.
one-half the unrepeai ed telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND PAID FOR AS SUC1
in consideration w hereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in dip transmission or delivery, or for non-delivery, of any UNREPEATED telegram, beyond the amoun
received for sending the same; nor for mistakes or dols.ys in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times the sum receive(
for sending the same, unless specially valued; nor in any ease for delays arising from unavoidable interruption in the working of its lines; nor for errors in cipher or obscun

I-

telegrams.

In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telegram, whether
caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless a greater value is stated in
writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid based on such value equal to one-tenth of
one per ceut. thereof.
The Company is hereby made the ti,nt of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to reach its

;deesnation.

Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other cities or
owns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his expense, endeavor to
contract for him for such delivery at a reasonable price.
No responsibility attaches to this Compmiy concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to such office
by one of the Company's messengers, he acts for that purpose as the agent of the sender.
ti. The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is
filed with the Company for transmission.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes in addition to all
the foregoing terms.
No employee of the Company is authorized to vary the foregoing.

THE WESTERN UN ION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON. PRESIDENT

CLASSES OF SERVICE
FAST DAY MESSAGES
A full-rate expedited service.
NIGHT MESSAGES
Accepted up to 2.00 A.M. at reduced rates to be sent during the night
tnd delivered not earlier than the morning of the ensuing business day.
)AY LETTERS

A deferred day service at rates lower than the standard day mesge rates as follows: One and one-half times the standard Night
tter rate for the transmission of 50 words or less and one-fifth of




initial rate for each additional 10 words or less.

SPECIAL TERMS APPLYING TO DAY LETTERS:

further consideration of the reduced rate for this special "Day
rer" service, the following special terms in addition to those enuated above are hereby agreed to:
Day Letters may be forwarded by the Telegraph Company as a
rred service and the transmission and delivery of such Day Letters
:n all respects, subordinate to the priority of transmission and
very of regular telegrams.
Day Letters shall be written in plain English. Code language
t permissible

This Day Letter may be delivered by the Telegraph Company
ephoning the same to the addressee, and such delivery shall be a

te discharge of the obligation of the Telegraph Company to

is Day Letter is received subject to the express understandagreement that he Company does not undertake that a Day

Letter shall be delivered on the day of its date absolutely and at all
events; but that the Company's obligation in this respect is subject
to the condition that there shall remain sufficient time for the transmission and delivery of such Day Letter on the day of its date during
regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.

No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2.00 A.M. for delivery on the morning of the ensuing
business day, at rates still lower than standard night message rates, as
follows: The standard day rate for 10 words shall be charged for the transmission of 50 words or less, and one-fifth of such standard day rate for 10
words_ shall be charged for each additional 10 words or less.
'SPECIAL TERMS APPLYING TO NIGHT LETTERS:

In further consideration of the reduced rate for this special "Night
Letter" service, the following special terms in addition to those
enumerated above are hereby agreed to:

Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect

to delivery by mailing such Night Letters at destination, postage
prepaid.

Night Letters shall be written in plain English. Code language
is not permissible.
No employee of the Company is authorized to vary the foregoing.




Form 1217
OF SERVICE DE!Rr"
Day Message
i_etter

WESTE

N,

UNION

WESTERN UNION'
../ight Message

TEL

Night Letter
Patrons should mark an X opposite the class of service desired;
OTHERWISE THE TELEGRAM
WILL BE TRANSMITTED AS A
FAST DAY MESSAGE.

frAti

Check

AM

NEWCOMB CARLTON. PRESIDENT

Send the following telegram, subject to the terms
on back hereof, which are hereby agreed to

Denver, Colorado,

March 21, 1917.

F. A. Delano,

Pederal Reserve Bank,

Chicago, Ill.

Believe luncheon mcetin; Fridaw good plan.

omptly if i shall mR,ce

Ploase telegraph

arrangements or whether Malone is doing so.
Benjamin Strong,

Ch_. Benj. Strong,
4100 Montvica Blv.
'Phoned to ,.
11:10 L. L. jednesday.
T.3"

Receiver's No.

Time Filed

ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERN.

r this,
To guard against mistakes or delays, the sender of a telegram should order it REPEATED,
that is, telegraphed back to the originating offic
one-half the unrepeated telegram rate ischarged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND PAID FOR AS SUCH,
in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
I. The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegram, beyond the amonnt
received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times the sum received
for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for errors in cipher or obscure
telegrams.

In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telegram, whether
caused by the negligence of its servants or otherwise, beyond the suns of FIFTY DOLLARS, at Which amount this telegram is hereby valued, unless a greater value is stated in
writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid based on such value equal to one-tenth ot
one per cent. thereof.
The Company is hereby made the agnut of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to rcach its
/ destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other cities or
towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his expense, endeavor to
contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to such office
b by one of the Company's messengers, he acts for that purpose as the agent of the sender.
The Company will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is
filed with the Company for transmission.
Special terms governing the transmission of messages under the classes of messages enumerated below shall apply to messages in each of such respective classes in addition to all

,

the foregoing terms.
No employee of the Company is authorized to vary the foregoing.

THE WESTERN UNION TELEGRAPH COMPANY
INCORPORATED

NEWCOMB CARLTON,

PRESIDENT

CLASSES OF SERVICE
ST DAY MESSAGES
1A full-rate expedited service.

HT MESSAGES
ccepted up to 2.00 A.M. at reduced rates to be sent during the night
I delivered not earlier than the morning of the ensuing business day.
AY LETTERS

A deferred day service at rates lower than the standard day mesage rates as follows: One and one-half times the standard Night
Letter rate for the transmission of 50 words or less and one-fifth of
the initial rate for each additional 10 words or less.

SPECIAL TERMS APPLYING TO DAY LETTERS:

In further consideration of the reduced rate for this special "Day
Letter" service, the following special terms in addition to those enu-

merated above are hereby agreed to:
Day Letters may be forwarded by the Telegraph Company as a
deferred service and the transmission and delivery of such Day Letters
is,

in all respects, subordinate to the priority of transmission and

delivery of regular telegrams.

Day Letters shall be written in plain English.

Is not permissible

Code language

This Day Letter may be delivered by the Telegraph Company
telephoning the same to the addressee, and such delivery shall be a

c.

complete discharge of the obligation of the Telegraph Company to
deliver.

This Day Letter is received subject to the express understanding and agreement that the Company does not undertake that a Day




D.

Letter shall be delivered on the day of its date absolutely and at all
events; but that the Company's obligation in this respect is subject
to the condition that there shall remain sufficient time for the tran,smission and delivery of such Day Letter on the day of its date during
regular office hours, subject to the priority of the transmission of regular telegrams under the conditions named above.

No employee of the Company is authorized to vary the foregoing.

NIGHT LETTERS
Accepted up to 2.00 A.M. for delivery on the morning of the ensuing
business day, at rates still lower than standard night message rates, as

follows: The standard day rate for 10 words shall be charged for the transmission of 50 words or less, and one-fifth of such standard day rate for 10
words_ shall pe charged for each additional 10 words or less.
SPECIAL TERMS APPLYING TO NIGHT LETTERS:

In further consideration of the reduced rate for this special "Night
Letter" service, the following special terms in addition to those
enumerated above are hereby agreed to:

' A. Night Letters may at the option of the Telegraph Company
be mailed at destination to the addressees, and the Company shall
be deemed to have discharged its obligation in such cases with respect

to delivery by mailing such Night Letters at destination, postage
prepaid.

Night Letters shall be written in plain English. Code language
B.
is not permissible.
the Company is authorized to vary the foregoing.
No employee
of

4

Denver, Colorado,
'March 3, 1917.

Dear Fred:

Your bully letter of February 27th reached me yesterday and I
confess to some relief from a good deal of

siporim

'out recent develop-

ments, but What pleased me most of allyour prop:mak. itinerary
bringing you

to

Denver about the 22nd ..25d.

I have a om already for

you and hope you will make me a real via t, not hustlin
two as most of my eastern vial

Besides t

there a re

a

good many matters of real

t to discuss with you.

It till be so much

out face to face that I

will only refer to t

a of misunderstandings

trate in a striking
the Reserve

by

Board.

One is Harding'

He probably does not
necti

your letter, which illus-

ut the best friends he has got in con-i,,

th his work ar

spect his

gard to his treatment by bankers.'

New York bankers, who admire him and renfluences in which most people would expect

to find him m

subservient, and next to these New York bankers are the

Governors of t

Reserve Banks. Harding is the only man on the Reserve

Board Who has e

run a bank and everyone of the Governors of the Reserve

Banks when we have meetings in Washington with the Board has been made
conscious of the fact that in dealing with Harding, we are all talking 112,
the same language.

While at the time. I thought it was a great mistake

for the President to appoint Harding Governor of the Board, because I think
the office should be occupied successively by the Deputy Governors and be-

causejt appearted te-be influenced somewhat by sectionalism, I can honestly



2.

C)

-

To - Hon. F. A. Delano.

March 3, 1917.

say that so far as the Governors are concerned, Harding is the man that
can hold thorn together and in line better than any other man on the Board,

and it has distressed me to feel that it is largely his influence which is
being directed to the development of a new system that will alienate, to
some extent, the loyalty and dampen the out

I.. :

men.

S

words, Harding is guilty of a complete

.conception o

influence and the present policy will

.a.en it and he vs

In other

is position and
I

lose the very

thing that gives him such a great advan

The other cave of mis

d by your remark

'"141111)
that the Governors regard
tempt.

There isn't any re

what thefeeling is
and there, the °masons
Board is that they are a
are thoroughly honest
tell you the Governors
of th

t tell you frankly just
ere

V

1

ling of mixed pity and con-

may be an

exception here

Governors about the Reserve
nded and unusually able

bo4

ed upon to the limit.

of men, Who

As men, I can

nd of the members of the Board and proud
But the other side of theelations with
picture is quite
took their duties with no practical experience

in banking of

two years or m
met in WaShingt

kind that is done in this country, except Harding.

For

certainly for the first eighteen months, When the Governors
they have listened at times (and I may say without a smile)

to some most extraordinary statements, lectures and propositions on banking.
It was even at times worse than this - they had a big stick waived at them
in an effort to force compliance with terms Which theOmew were unsound and
dangerous so tar as their duties at home were concerned, they have frequently been standing between their member banks irate and aggressive as the




3.

To - Hon. F. A. Delano.

larch 3, 1917.

result of various developments,

and the members

of the Reserve Board

Who failed entirely to grasp the practioal difficulties.

Theme Governors

would not be human if they did not come to the conclusion that the members
of the Board had a lot to learn and that during the period When members
of the Board were getting a grasp on the d

System the Governors

Should be trusted and their opinions an
the actual physical management of thoi

commendatio

wn banks.

regarded, as to

The

at illustration

that I can give you of the causes of som

of the critici8 s among the

Governors is, possibly, the la

port to Co

an

the Board in effect states

-mendations of the Governor
prepared a plan to s
in operation.

plan by the Reserve B

work

felt was unso

ing,with t

which was

This s

stance they were force

t. s.

and credit pl.,

was adopted from the recoma failure and the Board then

stit

phrased, is read by all o

In that Report

ss.

TLOW

successfully

, Which I have of course para-

e governors Who felt that in the first intion of the immediate Debit and Credit
y did not believe in, did not think would
r eighteen months or more they had been fightwe banks, for the adoption of a deferred debit

All of a sudden the Board, as a result of your

prOp001-

tion and Hard'

s, abandoned its insistence upon immediate debit and credit,

whereupon a pl

lihich was

operation.

mutually satisfactory was prepared and put into

That sort of thing has happened pretty often.

It would be a

great deal wiser for the Board to put more dependence upon the bank officers
and at the sane time more responsibility

in

these matters, and the response

in helpful suggestions, cooperation and freer exchange of views would be
instantaneous.




4.

Hon. F. A. Delano.

March 3, 1917.

TO tell you the truth, I think pride - the pride of authorship -

miserable and trouble making

sentiment as it is, has a lot to do with

this.
7-

Your attitude in these matters has always boon so tremendously appreciated by

the Reserve

Bank officers,

ence in kooping things going, that I d
drift along without writing you.
it seems as thol01 the last few m
ought to be oorreetda.
1744;

k-

talk it

I do

pear to be disagree
rely upon them to do the

A. Delano,
servo Board,
Washingt.C.

Hon. F
Fedor

.




tthink it

powerful influ-

i.. h a

rik,

entering very
a strange sitna

to let matters

ous times and
n has arisen Which
here so that we can

over.

Above all things d

BS/CC

We al

s been

ow York Bank;

they may ap-.

your associates can always

Denver, Colorado,
Larch 3, 1917.

Dear Fred:

Your bully letter of February

27th reached

me yesterday and I

2..ut

confess to some relief from a good deal of

your propos:.

ments, but What pleased me most of all

23d: I have a

bringing you to Denver about the 22nd

am already for

hustlin.

ff in a day or

you and hope you will make me a real vies t, not

two as most of

Besides t

my eastern vim.

real

good many matters of

recent develop-

there a re

a

t to discuss with you.

Out face to face

It till be so much

will only refer to t
trate in a striking wa

that I

your letter, which illuse of mismiderstandings by

the Reserve Board.
gard to his treatment by bankers.

One is Harding'

ut the best friends he has got in con-

He probably does not
necti

New York bankers, who admire him and

'th his work ar

sleet his

4.'11

le.d

o'

nfluences in which most people would

re-

expect

to find him

sibservient, and next to these New York bankers are the

Governors of t

Reserve Banks.

Board who has e

run a

Harding is the only

man on the Reserve

bank and everyone of the Governors of the Reserve

3anks when we have meetings in :,ashington with the Board has

conscious of the fact that in
the same language.

dealing with Harding, we are all talking in

While at the time,

for the President to

appoint

1

thought it was a

Harding Governor

the office should be occupied successively

cause it appearted te



be

been made

great mistake

of the Board. because I think

by the Deputy Gover-

influenced somewhat by sectional'

Larch 3, 1917.

To - Hon. F. A. Delano.

say that so far as the Governors are concerned, Harding is the man that

can hold them together and
and it has distressed me

in line better than any other man on the Board,

to feel that it

is largely his influence which is

being directed to the development of a new system that will alienate, to
those men.

some extent, the loyalty and dampen the ent

words, Harding is guilty of a complete

conception o

influence and the present policy will

en it and he

thing that gives him such a great advan

sis

In other

e.

The other cause of mods

that the Governors regard t
tempt.

here isn't any re

e is illus

position and

lose the very

7,d by your remark

ling of mixed pity and cont tell you frankly just

1

ere may be an exception here

what the feeling is

4

and there, the consens

Board is that they are a
are thoroughly honest

It

tell you the Governors
of th

elations with

nded and unusually able body of men, Who
ed upon to the limit.

As men, I can

nd of the members of the Board and proud
But the other side of the picture is quite
took their duties with no practical experience

different.

kind that is done in this country, bacept Harding.

in banking of

two years or m
met in Viashingt

to some most

Governors about the Reserve

For

certainly for the first eighteen months, When the Gsvernore
they have listened at times (and I may say without a smile)

extraordinary

statements, lectures and propositions on banking.

It was even at times worse than this - they had a big svicx waived at them
in an effort to force compliance with terms which they new were unsound and

dangerous so far

as their

duties at home were concerned, they

have

frequent-

ly been standing between their member banks irate aud aggressive as the




3.
March 3, 1917.

To - Hon. F. A. Delano.

result of various developments, and the members of the Reserve Board
who failed entirely to grasp the practical difficulties.

These Governors

would net be human if they did not come to the conclusion that

of the Board had a lot to learn and that

during

the period when members

e System the

of the Board were getting a grasp on the det
should be trusted and their opinions

can give you of the causes of so

that

,n

operation.

phrased, is

stance

stit
o governors Who

tion of

they were force

for the adoption of a

been fight-

deferred debit

ineistence upon immediate

whereupon a p

Vhich was mutually

satisfactory was

same tine more

debit and credit,

prenared and put into

That sort of thing has happnned pretty often.

deal wiser for the Board to put more dependance

and at the

had

All of a sudden the Board, as a result of your proposis, abandoned its

great

the immediate Debit and Credit

r eighteen months or more they

tion and Hard

operation.

felt that in the first in-

did not believe in, did not think would

wo banks,

and credit pl

Board then

, Which I have of course para.,.

read by all of

ing,with t

recom-

which was now successfully

This s

felt was unso

that Report

from the

a failure and the

Plan by the Reserve B

work

among the

n was adopted

Governor

nrepared a plan to s

st illustration

of the critic

in effect states

,.lendations of the

The

port to Co7sø. In

Governors is, possibly, the la
the Board

peaks.

Governors

regarded, as to

commendati

the actual physical management of the'

the members

It world be a

officers
resnonsibility in these matters, and the response
upon the bank

in helpful suggestions, cooperation and freer exchange of views would be
instantaneous.




4.

1
I

To - Han. F. A. Delano.

.

";

Uarch 3, 1917.

To tell you the truth, I think pride - the pride of authorship miserable and trouble making sentiment as it is, has L, lot to do with
this.

Your attitude in these matters has always been so tremendously ap'

predated by the Reserve Bank officers,
ence in keeping things going, that I d
drift along without writing you.

We a

it seel..:s as thouji the last few mo

ought to be corrected.

I do

'

a powerful influ-

,41e11177714:11410.

t

think it ri

entering very

a strange situa

to let matters
:

one times and

has arisen much
here so that we can

talk it aver.
40',!

Above all things d

,,,sear to be disagree

rely upon them to do the

Hon. F A. Delano,
Feder
servo Board,. C.
Washingt

B5/CC




Iew York Bank; they may ap-

your associates can always

COPY OF LETTER FROM GOVERNOR GIRONG TO MR. F. A. DELANO OF THE FR BOARD
Denver, Colorado
February 19, 1917
Dear Fred:

You and I know each other well enough to justify our being absolutely
frank with each other, and I an sure that our motives in sticking at the
jobs we respectively hold are free from the remotest suspicion of selfish
interest, so I want to write you about some things that are in my mind
just as frankly as I would if you were here to discuss them. It would be
more natural for me to write Warburg possibly, as it was his urgency that
landed me in my present job, but I regret to say that the subject of this
letter is one over which he and I have frequently disagreed and I fear he
would not lend a sympathetic ear just now.
For some time , in fact ever since the reorganization of the Federal
Reserve Board, I have been growing conscious of the development of a policy
by the Board of actually running the Federal Reserve Banks, as distinguished
from supervising them. There is no need for me recounting the evidences to
which I refer, but even at this distance the examination of the proposed
amendments to the law, reading the Board's Annual Report, the stenographic
reports of the conferences of Reserve Agents, Governors, etc., etc., have
convinced me that a very distinct change of policy has taken place, which
is the result of a deliberate decision by the Board after careful consideration.

In fact, I can almost picture to myself the actual discussion taking
place, in which it was decided to curb the activities of the Governors,
take the reins firmly in hand and not simply guide the System, but actually
run it in detail.
This letter is not necessarily to complain about any such decision.
It is one of those matters of policy where the Board already had considerable powers and where lacking powers it can go to Congress to have them
enlarged, and, in fact, is already doing so. Such a course is all in the
direction of the development of a tentral bank, with the Board of Directors
in Washington, the banks themselves being branches subject to the governments of local bodies, the business conducted by branch managers.
If that
is the policy of the Board, it will ultimately result in a central bank
in fact though not in form, but I believe will destroy the System.

My reason for writing you this letter is because such a policy would
be quite contrary to that which I understood would prevail when I joined
the Bank and would so alter the character of the work which I have endeavored
to do and want to do in the future that I would be quite unsuited to continue
to hold a position where the detailed management of the Reserve Bank of New
York was directed from a distance of 225 miles and, if you please, by men
whose experience has not yet developed to a point where such a course would
be safe or reasonable. You must not misunderstand my saying this so frankly.
I have the greatest respect for the members of the Board, know that they
have undertaken the work as a matter of public duty and not pleasure or
profit and that it is an uncomfortable position which makes them a mark for
all the kickers. Just the same, the Governors of the Reserve Banks as a whole
have had the kind of practical banking experience which most of the members




-

M±. Delano

- 2 -

February 19, 1917

of the Board have not had. Many of the proposals of the Board have in
my opinion been unsound and impracticable, and some of them would have
been adopted were it not for the urgency of the Governors and for the
intimate discussions, etc., which result from these Governors' Conferences and generally the Governors' activities. There is no use in citing
many examples, but one or two are illuminating. Had we undertaken the
immediate credit scheme as was so strongly urged by the Board and it
had been as successful as the present plan, the Reserve Banks would today
hold about $125,000,000 less gold and would have been carrying an equal
In fact, the System was saved from a disaster in my
amount of float.
opinion by the more conservative views of the Governors, based on practical experience, which finally prevailed.

The same is true of some features of the development of the bill
In the first instance, members of the Board insisted that
business.
Reserve Banks should buy no bills based upon exports of contraband. You
will recall the anxiety which this caused me personally. Later, regulations were attempted which would have had this same effect had they not
been defeated and again proposed discriminations against non-member banks,
requirements for member bank endorsements, etc., which were wholly impracticable, would have greatly retarded the present healthy development of
Theoretical provisions in the early regulations of the
American bills.
Board which, frankly, were based entirely upon theory and very little upon
experience could be cited to illustrate the point I am making.

If the Governors of the Reserve Banks, who seak for their directors,
are to be relegated to the position of branch managers and a more arbitrary
and directory authority assumed by the Board, I believe the System will suffer
both in management and in personnel. As an illustration, I happen to know
that four or five of the Governors have been offered vastly better positions
from the point of salary than those which they now hold and have declined
them because they were interested in their present work and -because they
appreciated the dignity and importance of their offices. They have most of
them asked my advice, or spoken to me of these opportunities, and I have
urged them to dismiss them. The same is true in our own organization in New
York. Our junior officers have been picked with great care, they have made
their abilities felt in New York and some of the banks have tried to get
them away from us, without success. Confidentially, I recently heard that
Mr. Jay had received a very attractive offer, which he declined. Not very
long ago, I was asked to become a partner in a firm composed of personal
friends, where I suppose my income would have been five or ten times what it
is now, and declined it without a second thought. Just as soon as these
-Reserve Bank men lose the prestige which the Board originally encouraged them
I think
to develop, they are going to find other positions as sure as fate.
the same argument applies to the relations between the Reserve Banks and the
member banks. There was a long period in New York when it was almost the
flip of a coin whether the loyalty of our members was retained or lost, and I
do not think I am exaggerating when I say that their loyalty to me personally
had a great deal more to do with their allegiance than did their consideration or respect for the Reserve Board.




-3Just as soon as the Reserve Board permits the impression to grow
that the Reserve Banks are being run from Washington, much of the value
of the past two years 'work will be lost. This is more particularly-true
now that Mr. Wilson has been reelected and the feelings of uncertainty
and unhappiness about some features of his administration are allowed to
continue.
I want to see the System a success and I am very keen to have an
active part in developing all of the functions of the Bank in New York
and in a way so that we will not only enjoy the loyalty of our present
members, but eventually gain the membership of all the big institutions.
Frankly, I cannot do that as a clerk and without at least the continuance
of as much autonomy and independence as we have formerly enjoyed.
This matter has given me much anxiety for some time past and I would
greatly like to have it relieved. You probably realize, as I do, that
I am hoping now to be
my tenure of office is only a limited one anyway.
able to return some time this summer, spend a short time in New York,
doing some necessary reorganization work in the Bank, and then at once
go to Europe to perfect our foreign arrangements and actually see them
It had then been my thought to return home, put
operating on the ground.
in some good licks in perfecting our organization and putting the finishing touches on the work, breaking in a successor, and then asking to be
relieved. It had also been in my mind that the period of the conclusion
of the war and possibly afterwards would develop foreign transactions of
such great importance that a scheme might be devised by which I could
spend a year or two abroad as the representative of the System, providing
that met with the views of the Boards in Washington and New York. All of
these plans are really dependent upon the continuance of the status quo.
Nov, in conclusion let me say that since taking up the work in New
York I have endeavored by every means in my power to give the Bank an unselfish administration, not only as to the other Reserve Banks, but in
all matters having to do with the relations between the Reserve Banks and
the Reserve Board. We have, of course, differed at times, but have never
failed to get together. Why may I ask is it necessary now that this policy
be changed? I suppose the Board has the power to bring about a great
alteration in the relations between the Board and the Banks, but is it
necessary or advisable to adopt any such policy and what good will it
accomplish, at any rate until the country is prepared to accept in fact
the necessity of a central bank?
Won't you write me a nice, friendly letter, giving me your own views
and telling me so far as you can just what this n11 means? I do not
believe I have exaggerated the situation, but hope that I have.
I have been in bed the last few days with a cold and am up and about
again now, and am hoping to catch up some with the mass of accumulated
correspondence.
With warmest regards,


The
http://fraser.stlouisfed.org/ Hon. F.
Federal Reserve BankWashington,
of St. Louis

Sincerely yours,

[Benjamin Strong]

A. Delano
D.C.

Denver, Colorado,
February 19, 1917.

Dear

Fred:
You and I know each other well enough to justify our being abso-

lutely frank with each other, and I an
at the jobs we

respectively hold

are f

tives in sticking
e-from the r

selfish interest, so I want to write

about some thi

my mind just as frankly as I would if you
would

L

t suspicion of

scuss them.

t

--,ore natural for

that are in
It

y, as it was his

urgency that landed me in

regret to say that the

subject of this letter is

d I have frequently dis-

agreed and I fear

hetic ear just now.

For some time,

the reorganization of the Federal

Reserve Board, I have b

conscious of the development of a policy

by the Board of act

e Federal Reserve Banks, as distinguished

from upervising themr a no need Ber me recounting the
which

er, but even at

this

distance the

examination

evidences to

of the proposed

amendments

eeading of the Board's annual report, the steno-

graphic repoi

of the conferences of Reserve Agents

have convince

Governors,.etc., etc.,

that a very distinct change of policy has taken place,

Which is the r suit of a deliberate decision by the Board after careful
consideration.

In fact, I can almost picture to myself the actual discussion taking
place, in

which it

was decided to curb the activities of the Governors, take

the reins firmly in hand and not simply ,:uide the System, but actually run
it in detail.



2.

February 19, 1917.

To - Hon. F. A. Delano.

This letter is not necessarily to complain about any such decision.

It is one of those matters of policy there the Board already had

considerable powers and where lboking powers it can go to Congress to have

h

them enlarged and, in fact, is already doi

ral bank, w

the direction of the development of a
Directors in Washington, the banks th

a course is all in
the Board of

es subject to the

elves being br

governments of local bodies, the busine s conducted by if..

result in a central

If that is the policy of the

Akin fart though not in

e will destroy the system.

you this letter

My reason for triti

ch

be mite contrary to that

of the work Which I have en-

the future that I would be quite unsuited

deavored to do and want t

th by training and temperament.

to continue to hold th

a distance of 225 miles and, if you please, by

.

lance has not yet developed to a point where such a course
reasonable.

would be safe

(>

detailed management of the Reserve Bank of

a position the

men whose e

frankly.

Let me

not misunderstand mg meaning, that I could

say frankly, and I kn

New York

because such a policy would

would prevail when I joined

I understo

the bank and would so

nit

nch managers.

You must not misunderstand my saying this so

he greatest respect for the members of the Board, know that

I ha

they have undertaken the work as a matter of public duty and not pleasure or
profit and that it is an uncomfortable position which makes them a mark for
all the kickers.

Just the same, the Governors of the Reserve Banks as a

Whole have had the kind of practical banking
members of the Board have not had.
In my



opinion

experience which most of

the

Man:,' of the proposals of the Board have

been unsound and impracticable, and some of them would have

3.

To - Hon. F. A. Delano.

February 19, 1917.

been adopted were it not for theUrgincy of the governors and for the
intimate discussions, etc., Which result from these governors' conferences
and generally the governors' activities.

There is no use in citing many

examples, but one or two are illUninating.

Had we undertaken the immediate

credit scheme as was so strongly urged by the
cessful as the present plan, the reserve

/Would

$125,004000 less gold and would have
fact the system was saved fro

and it had been as suey hold about

carrying an e

1 amount of

a disaster in

opinion by the

.014.

more conservative views of the

based on pr=

cal experience,

. which finally prsvailed.
:at

The same is true of
business.

In the fir

development of the bill

:t in

he Board insisted that Reserve

banks should buy no b

of contraband.

the anxiety Which this

personally.

tencoted which would ha

endorsement

greatly re

regulations

were at-

no effect had they not been defeated and

again proposed discr
membe.,

Later,

You will recall

net non-member banks, raquirements for
, which were wholly impracticable, would have

....thiLialliKrt healthy development of American bills.

Theo-

retical provi tons in the early regulations of the Board which, frankly, were
based eetirel
illustrate the

on theory and very littleurgxperience, could be cited to

y

nt I am making.

If the Governors of the Reserve Banks, who speak for their directors,

are to be relegated to the position of branch managers and a more arbitrary
(--". and directory authority assumed by the Board, i believe the System will

9/-

i

suffer both in management and in personnel.

As an illustration, I hanpen

to know that four or five of the Governors have been offered vastly better
positions from the point of salary than those which they now held and have



To - Hon. F. A. Delano.

February 19, 19174

declined them becazzga -tenni were interested in their present work and

'oecause they appreciated the dignity and importance of

their

offices.

3y have most of them asked my advice, or spoken to me of these oppor-

2ities, and I have urged them to dismiss them.
our On

organization in New York.

,L

e same is true in

Our Junior off 4--rs have been picked

with great care, they have made their a

in New York

of the banks

have tried to get them away from us,

letially,

I recently heard tha

offer, which he declined.

five

a second thought.

ends, where I suppose my income

is now, and declined it without

or t

J

e Bank men lose the

I think the same argument applies to

s and the member banks.

en

a long p

Oa in New York

loyalty

our members wa

hen

prestige

em to develop, they are going to

find other position

geratin

ety attractive

I was asked to becane a

Not

which the Board on

the relation

Oon-

success.

had received a

partner in a firm composed of
would have been

wit

and some

I say that

There was

wheit was almost the flip of a coin whether
retained or

lost, and I'do

eir loyalty to

to do with .=ir all:ice than

the

not think I am exag-

me personally had a great deal tore

did their consideration or

respect for the

_:eserve Board.

Just as soon as the Reserve Board permits the impression to grow
r---)

that the

Reserve Banks are being run from Washington, much of

the past two years' work will be lost.
that

Mr. Wilson has

happiness about some




the value of

This is more particularly true now

been reelected and the feelings of uncertainty and un-

features of

his administration are allowed to continue.

5.

'February 19, 1917.

To - Hon. F. A. Delano.

I want to see the System a success and I am very keen to have an
sctive part in developing all of the functions of the bank in New York
and in a way so that we will not only enjoy the

alty of our present

members, but eventually gain the membership of a

he bid institutions.

Frankly, I cannot do that as a clerk and without a least the continuance
of as mudh autonomy and independence a

/PI

This matter has given me much

enjoyed.

y for some ti

would greatly like to have it re

probably realize, as I do,

that my tenure ofaffice is o

One an: way.

to be able to return some time thi

r, spend a short time in New York,

doing some necessary

the bank, and then at once

Europe to perfect o
on the ground.

t to

It

return

hone, put

in some good

touches

and putting the finishing
r and

on the war

sibly a

to

AO

actually see them oeerating

licks in perfecting

also b

I am hoping now

then asking to

be relieved.

It had

in my mind that the period of the conclusion of the war and peeelwards would do

that a

as the repro

op foreign transactions of such great
ised by Which I could spend a year or

importance

two abroad

f the System, providing that met with the views of the

Boards in 7ashington and New York.

All of these plans are

really denendent

upon the continuance of the status quo.

Now, in conclusion let me say

that since taking up the work in New

York I have endeavored by every means in my power
selfish adminsitiation, not only
matters having to do
Reserve Board.



as to

to give the bank

the other reserve

with the relations between

an un-

banks, but in all

the Reserve banks and the

e have, of have never failed at times,
but course, differed

6.

To - Hon. F. A. Delano.

February 19, 1917.

to get together. Why may I ask is it necessary now that this policy
be changed?

1 suppose the Board has the power to bring about a great

alteration in the relations between the Board an

he Banks, but is it

necessary or advisable to adopt any such policy

what good will it

accomplish, at any rate until the country is prena

fact accept in
d to

the necessity. of a central bank?
Wont you write me a nice, friend/ letter, givi

our awn

views and telling me so far as y

What this all means? I do

not believe I have exaggerate

, but hope that I have.

I have been in bed the last
about again now, and am
cumulated correspond
With warmest

Hon. F.?
MashI




Delano,
U.

s with a cold bud am up and
some with the mass of ac-

Denver, Colorado,
January 4, 1917.

Dear Fred:

i was delighted to have your bully lett
owever, did not reach me until my return from

mountains on January
pent them on top of

My two boys came on for the holi

lst.

f the 19th Which,

he shadow of

the Rockies at about two miles elevation, right
Long's Peak.

s we put up wit

It was a great

ODMO

home-

s a grand Christmas holiday

steaders who laid themselves

and they certainly succeeded
and only for your eye, as I

This letter is

Ito you quite frankly.

consider yours is
I would ha

no fear, even

t Companies were

National an

our

overloaded

for

governme

ly short-dated 5H

were

subject of the

gene

appar

tly, differentl

If ther

er reading your figures, that

any

cessive investments i

going to get

securities, particularly if these

as the proposed exchequer bills.

aracter of our

The

bank investments strikes me,

rom what it does some members of the Board.
arising from this cause, it will be from exthe securities of inflated American enterprises.

.P1,000,000,000 of bond and stocA. investments is too much for our banks

to hold, but ,)300,000,000 of securities of foreign governments, as I

view

it, is too little for them

to hold.

The latter will prove a great

safeguard in the future and none would serve that purpose to my mind so
atttaably as constantly maturing treasury bills.

Assuming that these

are all Elk;lish bills, the only objection tbotheir ownership would be




2.

t

January 4, 1917.

To - Mr. Delano.

the possibility of default. Great Britain is collecting in
have no

fiscal year $2,600,000,000 from taxes alone and I
next year this will be increased tO

this

doubt that

3,000 000 000 or 03,500,000,000.

No nation that has such tax paying power as

tau

is going to default

on a Amr hundred millions of foreign debt.

It a

ices me that the

or the Board in
-n

duty

investments tr;

the present situat on is to

f American origin,

National Banks in long time-securiti

bat to place no obstacle ia

vestments in

the

a your statement that there is

I do agree, h

ance from the bank

a difference between your drawing
invest 'in bonds and

short time

th

the total is so moderate

so long

foreign obligations, at any
as at present.

scourage excessive

to

t investment, but under

ma

ng your

in order

present condition

will come from excessive invest-

ments. as I have

tuff.

these

sury bills werroperly banking investments,

waser of default
and

a

o the former, t

seems t, most
and Mary for

that

en based upon the supposition

Your

n them. As stated, I

and that

do not agree with the latter

Board really has ignored banking history, it

tably. The Bank

of England was chartered by William

no purpose of making loans to the government, as were

all of the great government banks.

and Germany are to some

there

extent

almost

The fiscal systems of Rngland, France

based upon standing

arrangements

by which

the revenues of the government are equalized throughout the year

by short

borrowings frota the central banks, this being particularly true of the

budget system of

Great Britain.

All the great joint stock banas of Europe

have made loans of this character, not only to their

own governments and

municipal subdivisions ever since such borrowings have been customary, but



3.

January 4, 1917.

To - ar. Delano.

they ma,:e a regular practice of making similar loans to foreign

governments and to foreign municipalities.

When the war broke out the

great banks of London and Paris held -;;86,000,000 of such obligations of

I know a few securities

the City of New York alone.

Which are so abso-

lutely banking securities in every respect as are the short obligations

of governments.

They are comparable, altho

exchange drawn against comodities, becaus

upon the taxing power

of governments, vhie

bills of

otter,

eir payment r
is the

most abs

s securely
itely certain

income that is known.

does not

But as a matter of fact

interest

me quite as much as does the

nd I am mighty glad to

have you write me frankly abo

lances with Kent and

Davison, as it gives

ow just how .I feel about

that matter.

The past twenty year

picions between what we

as Wall Street on one hand and
n on Wall.Street find it impossible

Washingto on the other.

tisfactory relations with eual1y honest men in Wafhing-

to establ,

tan.

fortunately developed mutual sus-

ry is divided politically and socially in

It is be

these nutters ino two camps, and members of each ca ap

approach members

ef the other with

1 of the formality, with all the undercurrent of

suspicion and hoe

lity that makes negotiations of any kind almost im-

possible.

I thoroughly understand the difficulties that you have en-

countered in those two matters, but I must be frank in saying-that I just'

as thoroughly understand

the difficulties that Kent and Davison

felt that they encountered.




must

have

It was a mistwce for them to go to a.shington,

4.
January 4, 1917.

To - Mr. Delano.

and, while I knea nothing of Davison's visit, I had received word that
the su,gestion had been made that Kent and others go to Washington to
discuss the French credits, and at once wrote to the boys at the office
he matter.

that I thought that was the wrong way to handl
The fact is, Fred, that I an convinced t
suspicion, has had a great deal to do with this

bills and banking credits.
Board should

°le episode of treasury
understand why the

I cannot

become uneasy as to a

hundred millio

short-time gov-

its, most of which are also

of less than '100,000,000
issued under guarantees

and

of great Britain and Franc

ernment obligations, most of

and are

t timidity, as well as

greatest banks in the world.

before the war custo

secured
London

00,000 sterling of finance credits
s as big as the English system.

We have got many

ld reserve, the nation's

nearly three times

am,

wealth is

and we balk at a few hundred

ified by obligations, collaterals and
other

curities superior
Davison is some

t I agree xi

admit

to anything ever known

s very difficult to deal with.

I am

fran

to

you that had I been in New York and able to stand

g, MD such

between I

in the history of banking.

incident would

have occurred.

I don't need

to remind you of the history of the first Anglo-French loan, nor do I

need

hesitate to tell you that the evidence in your letter of a sane and

courageous attitude in these matters has done me a tremenduous amount of
good.

I have been frightfully discouraged by a series of occurrences,

which I was utterly unable to nnaerstand
of weakness i

a place and at a time when true courage and leadership should

have been displayed.



and Which struck me as evidence

5.

January 4, 1917.

To - Er. Delano.

It would do me a world of good to sec you out here, but

realize that it is a se/fish and unreasonable suggestion to ask you
to come, and beeides that it would, no doubt, c se critical comment.
, would undoubtedly

I agree with you that McAdoo, had he been on

have tempered this matter, and in such situatio

it has always struck

me that he exhibits admirable tact an
Of course I am gratified to have the Berx- of
approved

without

nd arrangement

s announeemen was a sad blow,

qualification.

rious matter that I particularly

however, and strikes me as b

refer to it here, as I unders

an,c... in New York is dealing with

the matter directly.

could explain the seriousness of
d, or may cause, Which would

some of the embar

be inadvisable
me about the amendments and I am

Warburg ha

hoping tot him
green

amendment.

about the revision of the proposed
With one exception, I think all of these amendments
but I do wish they could be changed in SOM

are

partiars, all of

has been advised to Warburg.

ences of Harding's energy in the work of the Board

and am delighted that the change is working out so well. On the other
hand, I am frank to say that your own

anpointment was the one I had looked

for -- it was logical and I was absolutely stunned when I heard that it hat
not been made.

Some much better news reaches me about Atins.
were a most unexpected development and almost
that he Is doing to get well.




finished

Those hemorrhages

him, but now i hear

6.
To

Mr. Delano,

January 4, 1917.

Once more, a great many thanks for your letter.

I wish 1

could hear from you oftener, but better still have a good visit with
you.

I look forward to your trip in Larch, if you do not make it

earlier.
With warmest regards and good wishes for the New Year, both to
you and. Iars. Delano,

Very sincerely yours,

Hon. F. A. Delano,
Federal Reserve 3oard,
Washington, D. C.

BS/CO




December 11th, 1916.
PERSONAL.

My dear Fred:

Would it be possible for you to silo
confidence the figures obtained by AlICOMMTZM

e in strict
ac to

holdings oc' foreign securities by iational banks?
would
be a good deal influenced in
in regard to
present situation if I cou
these figures,
which would be treated with su
idence as you susgest.
If the time
ou are able to slip
away for a week or

not take a look a Denver and
There are a thous
you.

Yaitkfully yours,

Hon. F. A.
Federal Reserr

Washington, D.C.

BS/VOV




oard

e and rest, why
ntally pay me a visit*

like to talk over with

\\\

.1144?.v-4111131f$17Z.4,- 3.9i6.

Bt
Hon. F. A. Dolan°
Federal Reserve Board
"Furxua,,
' Waohington, D. C.
My deal :red:
am lust advised thiA the book you were good
enough to sort! me, nicoollections of ;Ay Mother" has been
1

received at the office ard I am TAighty glad indeed to have
it. A-great many thanlm to you for your thoughtfulness.
am loafing ht,,re, endeavoring to get back
what, I lost during the last month or two and the rest and
change has benefited me tremendously already. I trust
you Can get down to soe me here, particularly as I expect
to stay some time and willbe in need of good company.
With warmest regards,

Very truly yours

)/.




4100 Uontview Boulevard,
PERSONAL.

Dem,

°0041

4641916.

My dear Fred:

I was very glad to get yours of th

7th and read the

eiht interest.
i4 own politic]. fee1i,t1i year has en terribly
it for some things he
Wileon is entitled :V
mixed.
ACCOMB to me, for things
has done and severe condemna
copy of ycur letter to President Eli6lak

had been convinced of
e wh
le has failed to do. 0
-----,
the sincerity of hi ositio'h\a of is party, I might hnve
ble to v(4. to vote for him. The Lusibeen tempted were
\
tania incident thel\at,lroa s rike incident and his persistent
,______

and groun 1, ss charges of dishonesty against the socalled money
1 could not conpower ha 'e( been alto; ther too much for MO.
him although I would in some ways regret
vote
scientiou
/

,- necessityIT voting for Hughes.
cdf course, the President 11,, made no end of mistakes
i. 4sxico, but I am not sure that any of us might not have made
the same mistalces.

am glad you are not going to publish the letter.
would do harm and J. fear make bad feeling.




-2To

Hon. F. A. Delano.
Where does the

Oct. 23
President get

effect that Wall Street is

his information to the

opposing his reelection in order to

get control of the new banking system?

Evidence of any such

effort would first be apparent in the "ederal

New York.

1916.

Reserve I;ank

of

Our difficulty there has been to get the New York

barkers to take sufficient interest in our el ctions of directors to ensure our having a

strong Board.

re

never has

been the slightest evidence since the bi1lwak assed that the
/c
New York bankers had any such design in mind.

have you been able to

trent the merits of the proposed
aught to be making progress an
give us a favorable rep
elude the arrangemen

upon the State Departorei

frrranements!

ire. Lansing and Polk will
ould be poE,Fible

Ic

to con-

London a d possibly, in Paris

at a

very early date.
ahank

e the letter.

9

------

to h

r

you when

you have time to drop me a

ccrely yours,
1om
(.,glad

'Hon. Y. A. jelano,

Federal Reserve Board,
Washington, D. C.
BS/VCM




I will be mighty

-----

_I

line.

%stes eark, Colo.,

5eptember 22nd, 1916.

Dear Fred:

Your letter of September 14th from Pulpit "arbor, all
written by hand is - tribute to friendship few men nowadays are
willing to pay.

No one after writing such a letter can be

classed as a "bum correspondent."

stec Park has heel well worth while. It
is one of the most beautiful place I nave ever visited, certainThe summer at

ly as beautiful, and more so in some ways, as Switzerland and the

air is as find as anywhere in the country.

e are currounded by

the mountains, those on the :ast being the Continental Ldvide
with elevations all the way from 10,000 to 14,000 feet. Joel now

there is ouite a liitle snow on the Divide.

e have had two or
three snowfelle up there and one down here in the Park.
he only
disadvantage here is
Looci.
:c:verything has to be toled in
come thirty-odd miles

son the hotels
ingroom.

from the railroad and during the bus; eea-

here seem uwi.ble to give good service in the din-

had it not been for that difiiculty, I would probably

have spent the Winter here.

Sut after consulting Dr. Sewall and

upon his urgent advice, I have taken

furnished house in Denver

where we have the good fortune to ,ei everything we need, including silver, linen, servar.ts, etc.




To

Hon. F. A. Delano.
Dr.

ewall tells ME thrt

Sept. 22, 1916.

gett4rg along bettor than

he expected and he seems confident of pending me home next year
in good shape.

I em going to Denver day efter to-morrow to meet rarburg

who will be there for three days, and for one dty, I expect Alfred
Aiken will join us. Warburg hos sent me the manu:cript of his
KansassCity sp.ech, which is ve-y good indeed, although I think a
little long and technical for such a large nnd miso0.1oneous audiencs ao he will hove to eddreor. It wil1 read better than it will
000nS.
It looks from the attitude of the Chronicle, Congressman
Fowler (whoee brains went un the chimney long ago end from oome

press articles on the subject, as though we were in for - real con..
troversy bout the note Josue. I-m leborino over a ne-spoper article on this subject which ''rburg and I -ill talk over lr Denver,
end if it sounds n1). right, I will try to p,e4 the 'imet or some
other good New York onper to publish it.

':he scheme iE t- have

that arpsar with some others on other features of the Federal Reserve Act.

Incidentally, I am proposing at the proper time to take
a crack at (;lase, or at any rate, at the Committees of Congress who
are suspicious of motives behind the proposed amendments.

This is
a job that Warburg wishod on to me, but will occupy the time out
here v3ry4l1.
On the firut of Ootober, Frank Vanderlip and Frank Trumbull are coming uo here to make me o. visit of a week and you can

imagine with that keen pleasure I am looking forward to getting
the last news from home from head-quarters.



Hon. r. As Delano.

Bept. 22, 1916.

My boys who have been nore for JON6 weeks nowsreturn

aet to college and 8011001 on the ;$Uths

I envy you very much your viait with Oherlie Norton.
Last Summer I made a short trip to North Haven to see McAdoo and
expected to vieit arlie's new place, but did not have time. The
fL;

surroundings are ideal and 1 would like to be able to summer up
there myself, but it looks as though my Zummere for the future
would have to be spew: in the mountaine.

Of couree, you and I have a particular attachment for
that country cince different members of the faieily
different
timae soome to have eettled all along the ()oast. We have records of veriouu members of the family having embarked in seafaring ventures all the way from the ttaine coaut down to Oyster Bay,
Long Island.
Thmr of them oerc whalers and many of them traders

in the Ocet Indies, and among some

ld loudly letteos there are
indications that no small pert of their transaetions involved hand.ling Jamaica rum and moldesoe.

Charlie is taking a very eenvible view of life and I am
*lad that he has succeeded in avoiding the infectioe of the money
bug.
It does not seen to have taken hold on him at all.
The last part of your letter about the 'Nashingtot situ.
otion interente me tremendously.

13/e are really getting along bet..

ter wit± the chock clearing matter than superficial indicationa
would justify expecting. It is a tremendous undertaking, both
as to clerical labor and readjusting a lot of arrangements that




TO

Hot. r. A. Delano.

,ept. 22, 1916.

are more habit than anything eloe. Aiken has done exceedingly
well in taking over the Poston ,',1earing house. If something
along that line is not accomplished in iew York before I get
back, I um very hopeful of being able tc bring about the same
thing with the New York Clearing house. ,de really doA't noed
three el/stoma for collecting checks in New York and the 'ederal
Reserve Bank could take vow all of that ,work when our depart..
mont is in smooth operation and not fool

The most serious problem involved1. at least for the recorve banks, is the qusstion of our gold reserve. conditions
might arise 7,vhs::*s we would lose .old at he lurk in such volume

that we wouli have to stop settling unlese the other resorve banks
would be es4Asfiod to take direct shipment of silver certificates
ancl
tome way or hor, this weakness must be cornot,
rected. So= letters are going to Lehington on that subject
-fro; ;i New York and I hoo you have a chance to consider them.

I have had a vir deep fe,:ling of sympathy for *arburg
this Summer.

He seems to havi, bean heckled on every side.

The

outcome of the fight for rotation struck we as being a complete
breakdown, except that it establisocO some particular principle.
The natural proceedure would have been to appoint you Governor and
WarburvDeputy Governor.

boats ms.

Why, or how, it was not eons really

I did not have the nerve to write you on the subject,

but did aak larburg in a rent letter to tell you for me that if
you continued to

tand by

P.0

I knew you would, it would encourage

all of uu and I hope he gave you the message.




rj,.
To

Hopt. 22, 1916.

Dont F. A. Delano.

It really is exceedingly important that the other amendments recommended by tho Board should go through at the next session of Congress. Unless there is some objection to my doing so,
I have it in mind to occasionally write Glass and Owen about oome
of these mutters and try and give thorn some good arguments to use

if they can do so.

I-have less confidence, howoven, about what

the next Congress will do than you seem to have.

Unfortunately, our boners are not educated to the idea
Of keeping their reverves with the reserve banks. They can be
forced to do so by having the reserve banks settle their Clearing
tiouce balancen for them and that we the scheme we were working
Vandenlip was rather opposed to it, but I hope
on in nen- York.

to bring him around during his visit out here. In London, where
the law hns no compulsory features no to recerves, it ic customary

for the big joint stock benke to informally consult the Bank of
ihtgland uo to the unionnt of reserve which the Bank of Frigland considers it desirable for them to keep on nenosit. They alwayr fol-

lcrx the bank'e uvicc.

When Sir 'Award nolden bought control of

the City Bank so az tn give him London cloaringeprivilegos and a

London office, he at onne went to the Bank of England, after consolidation with the Midland Bank, and asked the aovernor how much
balance he should keep.

It was a very small bank in.those days

and he wtc required to keep ZB0,000.

Today, the LO,ndoh City and

Eidland Bank rarely hae lose than 28,000,000 to 10,000,000 on deposit with the Ban% of t.igland, and sometimes much more, but I understand Cunliffe has never suggested any change in the original




To

Bon. F. A. Delano.

amount named.

Sept. 22, 1,915*

Ca n you imagine an Amerioan hank oirsuing a policy

towards the remervo banks such as indicated by th=2 aboye?

On that

basis, the iirst National Bank would nev6r carry a dollar ,ith us.
I am terribly discouraged about tho hnglish arrangement.
It looks as though Lansing wore rolling ti matter along. If he
could only Ie convinced that it is a whtter of 50Ci:',U0 importance

to the barl:ing interests of this country - much more 5erioas, in
fact, than 11 is on the other side he mihght be disposea to look

at it differently.

If yOU or Harding, or both of :you, have op..

portunity to diveues thf matter with the State DepariL,ent, I hops
YOU con toke it up wiih rank Polk, ah: well as with the crotary.
We mu.st come yea: or +her get this coroluded, or advise the Bank

of rngland that it alut7.1- await the conclusion of the war, which
would be aitchether too bed.

Of course, this ha- been gall and wormwood to,arburg.

can't help vympathing with his relhetance to soe the
chneluied before the war is over, On the ether hand, had
arrangement
there been no wa- 1 fool tht ho vould have viewed the arrangeneni
with exulttiori. It iv so Cietinctly favareble to the federal Reserve !"yeter. Or the rhcle, it mihy have been wise to take it up
with the tate Department, but I um sorry that it was thought nscessa:y to do so.
I arl fl.ad :ou had u chance to ta to Charlie about the
attitude or the Mrht Naticaaa Bank. Confidentially, I had a very
serious talk with r. aher on the subect about a year ago. In a




TQ

HoA.

. A. Deleroe

Sept. 22, lq15.

way, he has lieen ono of my very best friende down town eid T know

that he told me frankly exactly whit wee in his mind as to the future. lie believe that thie administratien in ths parson of the
President,
Secretary of the Treasury and tne Compteoller of the
ci

Currency, have a dietinct feeline of antagonism to tha New York

That the continuance of the adminietration for !leather
term of four years will be conetrued by
in authority in Washington as an endoreement by the eoentry of this general attitude
toward Nell Street, and that if the Democratic 2,1ty is reelected,
it mey make it necessary for some of the big tiew York br.nks to
bunko.

take cut state charters.

r. eaker is vere elow to make changes,
tough of oourse, he way have had a complete charge of attitude

since I lat;t taleed pith him, hut realize that in that benk, there
is ,rat denger of a revolt, and have done whet I could at different
times to persuede them to a more friendly view.

Mr, Baker has intim,ted oeco or twiee that any eviaence of politiOal management of
the Reeerve Deek of kew York evuld be juetificetion for 1,ew York

bane$ to 0 out

oace,n44 I think one reason why some of them
were ullline to whit and sea what happened was their general cone

fidence in our Doard and the officers who were selected to run the
bunk.
It would be a terrible blow to nave the eiree National withdraw, and '11,2 ceancee aeo that they would come to a decision and

conclude ,.11 oi their plene without saying a word about ii to
one.

It le, teerefore,

any

eituation to he watched, and I hope you
keep in touch wit e Charlie, particularly as election aperoaches,
for it eeeme impoeeible for me to do so at this distance. I will




To

Lon.
eon.

Sept. 22, 1916.

. A. Delano.

probablyvt,iie NI*. Baker immediately after the election and try to
draw him out. Please regatd the above as quite between cureelves.

actioh ie the
Vilson has certainly lest ground by
strike situation, probably losing many more votes than he has gained.
Until that episode, I was rather hopeless of any charee of administration. He wer relying for reelection upon his record of having
kept the country out of war and upon reeltal or te achievements
of the party un er his leadership. As I wrote 7ree Strauss, he
-

hee a very strong argument with ignorant people when he recitee

all the legislation he has forced through, claiming to hnve redeemed all the party pledger, end people fail to appreciate that they
heve been redeeeed with Chinese money that is not worth ten cents
on the deller.
have not the slightJuet one more word about Torbert:
on of his race are
cat reason to doubt his loyalty in every way.
very strongly swayed by sentiment and influereet by very active
His sentiment with regerd to the waf i neturally
imeginetie)
a difficult obstacle in the Way of come of our negotiatine and I
:::

think he is trying corecientiouely to igrere thee. Cn the dthor
hard, I car reallre that his imagination opers up s. picture of
scorn and abuse that may be heaped upon him by relatives, friends

end old countrymen, in case it becomes known that we are Jeeling
with the BWrik of 11glend, which it will be very difficult for him
to face. He probably would find it a cause of reproach in his
.

immediate family.




We are all human enough to be influenced by

To

Sept. 22, 191.

Hon. F. A. Delano.

'these considerations nd they certainly affect him much more than
they would a cold-blooded Anglo-axon. ';hat Warburg needs is the
influence of friendship and encouragement nd he will come ,,long
in fine shape. He has a very warm regard for you and I believe
you have more influence with him than any other member of the
Board.

would you mind asking

rburg for a cipy of a ltAter

wrote Gluss about the amendments and let me know if there is any-

thing further I can do in that matter:
I hope that you will return to iv,rnest tremendously invigorated by a good vacation, and with lots of i,00d wishes, I am,
Faithfully yours,

hon. F. A. Delano,
::,xt;cnth
Washington, D. C.
BB/sir;,




a

Estes Park, Colo., July 26, 1916.
Personal.
Hon. F A. Delano,
Federal Reserve Board
Washington, D. C.

My dear Fred:

It was a greatJpleasure
ur letter of
the 21st. The weather here to to receive ylk,,us - no humidity,
inc is marv40
generally a very good breeze, almost invari
cool in the
shade and the nights cool without exceptio . I did survive
the Journey but it took a lot out 4_1141 an lbly to spend a
week or ten days in bed in Denver.7 'I had
We are very comfortablya,pett

eed, having
a little 4-room cottage, onapeom ed here I 'hi've converted
which
into an office. The hotel,#tands st about at 7500 feet
elevation in a beautiful Valley
we are surrounded by
mountain peaks that run up
ximum of 14,258 feet in
the case of Longs peak,a It
ks as though I would spend
the winter here anir
retty cold, the climate is
moderated a good etd by
su
unding
that it saves a"lc of boti in aoving. mountains. Besides

In r aard t the
of England arrangement, I am
about ea
lng
; nA m which will be first sent to
the offige and then'-tot-he Board. It is not as c omplete
nor as/Well prepared as I would like to have it, but a good
deal o data beafing OR the matter is in
not
availa e to me.J1In time, the question liew York and to
is as you say
get a
ough 'Understanding of the whole situation in the
minds of
a/Wyour colleagues. The suggestion you make
about consulting some of those who have dealt with these matters
for some years past has advantages
disadvantages both.
All three of the names you mention and well posted and capable
are
of giving excellent advice, but the difficulty is
are all in one way or another interested, and somethat they
of them,
if not all, may be influenced by selfish views.
.;

The first name is the head of
that conducts the
largest dealings in gold of any firm a firm country in normal
in the
times. The second one for various reasons I would not consider at all and the third one has always impressed me as being bull-headed and narrow. On
minded and intelligent opinton the Whole, if really broadis. desired by the Board,

would strongly recommend FrankVanderlip of the City Bank, I
Fred Kent of the Bankers Trust Co. and Alexander of the Commerce. They are sufficiently familiar with the technical
features of this business to be able to give a well considered
opinion and they are all of them broad-minded enough to set

aside any personal interest or selfish purpose. The man you



2.

name first is undoubtedly the most experienced, but, personally, if I were in liew York, I would hesitate to expose my
hand to him at the present time.
Another suggestion is that Jack Morgan's opinion
should be obtained. You have that already informally, but
as he is a member of the Counsel and is probably better
posted today on the International situation than any other
New York Banker, it seems to me, if outside opinions are
to be obtained, his is essential both for valuable information and as a matter of courtesy.
Should it seem desirable to o rly out y u plan of
consulting Blumenthal and you will b good eriougi to wire me
in time, I will communicate with him by telegr 1,41 and see
if we cannot arrange a meeti9e-eltIzer hero or4n Denver.
If by any chance yo
here for a little
holiday early in August,
would be
great delight to
me and we might be ab e t oax Charl y Uorton to come too.
aBy that time I will
defd t/ronger and able to join
you in a little recre on.
..)have never been here,
this country is well w
et*60,-:
With warmest
\to you and to your colleagues,
I am,




Faithfully yours,

Personal.

June 23rd, 1916.
dear Cousin Fred:

I am very grateful to you for your nice letter just
received.

It is a sad blow to me to have to submit to the ab-

solute dictation of the doctors, but as a matter of fact, the
have said positively, 'Colorado", and not only Colorado, but

Estes Park, on account of the presence there of a particularly

If I

competent doctor who is well-known to these chaPs here.

were, for instance, in the i'Alirondacks, it weld make it a
'deal easier for us to have some visits now nnd then..

good

If it is

possible to do what you suggest next 7:41, you can certainly
count on mu doing it.

It might mean the Adirondacks but so far,

of course, i cannot make any plans at all until wn see what progress i make in Colorado.

I would have given a good deal to have heard the con-

versaticu with the "Boss".

Your report is similar to others

that I have heard of like meetings.
-arhurg has written me about the French bank acceptances, enclosing a copy of the same memorandum which you sent me,

and you will receive from him a carbon copy of my reply, which

will be dictated to-dy.

The fact that we hold 1,07,000,A0 of

bills drawn by French banks (and these are not all bills drawn
under the Brown credit), simply means, of course, that our ratss




-2have 1)een enfficeintly low
the eligible bills

6/23/16.

Hon. F. A. Delano.

to enable us to get a large port

in a purely

competitive way because these

bills have been invariably purchased. from brokers.

all as good as wheat and the

of

They are

line, it seems to me, should be de-

termined by the amount held of e,nh acceptors' obligation and not
the am-nnt which ha pens to be drawn in French or under French

credits or under any particuler French credit. Will probably
see -arburg this week and talk it over with him and I certainly
..

to have a chat with you if you are in this neighborhood.

I am planning to leave in a week.

Thanking you again

\hope much for your letter and for many other things, 1 am,
very




cincerely yours,

Hon. F. A. Delano,
Federal 7eserve Board,
C.
WashinEtok,

r.

BC Jr/VCM




May 1st, 1916.

The regular letter in regard to money rates is going to you
under separate cover.

I thought you would be

interested in knowing

that during most of last week, the rate on bankers acceptances was
somewhat below the rate for stock exchange call loans.

cult

to say whether this reflects a.-.47

It is diffi-

permanent change of attitude

in regard to the availibility of that class of paoer, but inasmuch as
one or two 'bankers have mentioned it to me, I.assume that this avail-

rbility has had soMe influence, although possible a small one in the
general level of rates.

Mile the rates in our offcial memorandum for commercial

er and nollateral time loans do not appear to disclose the sale
situation

I was nevertheless told last weeR by the president of one

of the lflrgest banks in the city that the influence was being felt and

that in some cases the highest grades of commercial paper was soiling

at a sligtly lower rate

of discount than the highest grade of

eral loans for the same period.

collat-

This, coupled with the fact that

some of the largest private bankers who accept bills are showing. a
disposition to have their

bills qualify by filing figures, would seem.

to indicate, as some one aptly
to work".

put it, th!,t "the poison is

beginning

-2To

1916.

Hon. F. A. Delano.

Figures already filed with us by some of the private bankers

indicate the extent to which acceptance credits in sterling are being
gradually transferred to acceptance credit

in dollars.

These ten-

dencies will becorfe more pronounced, .1 believe, when money rates are

firmer.

Very truly yaars,

Governor.

lion. F. A. Delano,
Federal Reserve Board,
jashincton, .3. O.
138




Personal.

t.pril 29th0 1916.
rear Vr. :Delano:

Mr. Jay hf3s just shown my his lotter

dressed ..17o you

under date of April 5th, with yodr comments .t the foot, in regard to t:y, no form of Comptroller's report cy" exnminntions o'
'he plan -7or handling- check e-liections now in courso
of development will nomewhnt reduce the importnnce to Alderal
Resat-ye Baake 0

ed.

informution of the character heretofore r Tuest-

No f, r as he guest iou o ' overdrafts is concerned,

the other hand, th,, same question

11 arise .4h-r3 banks instoad

of being rarmitted t indulge in overdrafts :Aro fafced to rediscount.

very much fear th

';

the Comytroller's a titude will

force DS to unde"tske a system or exriminatiou o' our emn which,
as yell knew, I hail always hoped to avoid.

The really im-ortant

coneVeretLon is t have the ed3ra1 leserv B- iks in a position
to servo their member hanks in an effergency ,nd Wil.;11a)t te restraint which w0111, b- cfmsed by n lf,ck ':r" knowledge rif the riem-

ber bank's affaire and qitheat t!'e delay -which. would 1)a oconsien-?d

by m,lking special recuest for in'ormItion from the Oomptro/ler's
examiners which would have to be tr-insmitted tc us through the
Federal Reserve Board and the Comptroller.




ii 29, 1916.

-2To

Hon. P. A. Delano.

I want to be on recor'. as stntinc m7 conviction that
J.:1 ono who is so short-siithted n3 to fnil to re::ncnize th,? pos-

sibilities of an emercency oomoti7e in the future, groin, out

of the war, talt2ich the resources c th? reserve banks will be
required to their utmost to protect the mlmber banks, is 6is-

tinctly unpAriotio.
Personally, i hope the 3curd will not modify its insistance one iota and oore particularly that the matter na7 be
sTJeddily decided eo that iv, may wriCre w, stand.

Very truly yours,

Govornor.

Hon. F. A. Delano,
FeC:erz21 ?oderve

Washini;ton, D. O.




Personal.

April 27th, 1916.
Pt

Dear Mr. Delano:

I hope you will let me write you personally and frankly

not misunderstand
about the new collection and clearing circular and
what I say.

Er. Jay has conveyed to you two comments made by our Board
at its meeting yesterday, (which, let me say, were developed in a gen-

eral discussion without any suggestion on my part that the plan was

particularly open

to criticism on the

points

mentioned).

I want you

and your associates to get just the impression that the circular made

upon practical bankers who are in close touch with these matters. The
following comments, however, are rather personal than official:
let.

The date of June 15th

is really much

too early and

will accomnlish nothing except later on lead to possible discussion
as to where responsibility for delay rests.

It is, I am satisfied,

absolutely impossible to arrange all the necessary achinery and get
to ena
a complete understanding between the twelve banks sufficient
ble

11121

to start the work safely and smoothly by any such date.

The

reasons for this will be explained later.
2nd.

Average Reserves.

There will necessarily at the

outset be considerable fluctuations in reserve balances, due somewhat
to the inability of member banks to time their transactions accurately.




Without weakening our position as to penalties, it ray be

7777- -2-

April 27, 1916.

To Hon. F. A. Delano.

desirable to have it understood among the reserve banks that the system of penalties at the ouiset will be applied upon the basis of
average reserves for a period agreed upon.
3rd.

Managers Meeting.

It is absolutely essential that

the managers of the Transit Departments of all twelve of the reserve

banks should hold a meeting and lay out uniform machinery, agree upon
schedules of par points and how schedules of time are to be arranged,
etc.

The successful and economical management of this business will

depend very largely upon skillful preparation of forms and employment
of the most up-to-date labor saving devices.

This will take time,

but is nevertheless absolutely essential.
4th.

Far List.

No transit plan of this character can

be started until every member bank is furnished with a par list and
every reserve bank and member bank with lists from every other reserve bank.

Such lists can only be compiled after correspondence

with both member banks and non-member banks and after a full explanation and thorough understanding of the plan has been made throughout each Federal Reserve District.

Considering the distances to be

covered in some of the larger districts, you will appreciate the impossibility of completing that work by June 15th.

Inasmuch as

every reserve bank and member bank must know all the par points of
every other reserve bank and inasmuch as the plan must be put into
operation simultaneously in all districts, you will understand that
California, for instance, must complete all of its correspondence

with all member and non-member banks in its district and furnish us
with the results, and we furnish our members with the San Francisco




-,
6

e

6,'

c1,

4

c'.1

'

N.

s

April 27th, 1916.

-3-

t4
,G>

0

Hon. F. A. Delano.

results before we can start receiving items from San Francisco member
banks.

I am not advancing this as an argument for delay, for I am

anxious to start promptly as any one, but simply to demonstrate the
impossibility of starting as early as suggested.
5th.

Non-member Bank Points.

To give the plan the best

opportunity for success, it seems to me most desirable that sufficient
time be allowed to get as many non-member bank points on our list as
possible.

It will avoid the appearance of a system exclusively for

member bank items.
6th.

The language of next to the last paragraph of the

circular it seems to me implies that member banks will not be allowed
to draw until after the date when according to the date schedule the
reserve bank will actually have received the avails of collection.

This will prove burdensome to the couttry banks and I suggest chang
ing the language so that it will read "to determine the tine at which
any item sent to its reserve bank will become available as reserve
and to meet any checks drawn.
7th.

Penalty.

As verbally stated in Washington, I am

not a believer in the provisions of the Federal Reserve Act respecting a fine or rate of interest for deficient reserves, but I frankly
admit that with this plan, I hardly see what other course could be
pursued than to impose penalties.
with this whole subject fairly.

Our difficulty will be to deal

If we grant indulgence to some bans

for cause shown, where are we to stop?

In order to have fair appli-

cation, it seems to me the penalty should be invariable and inexorable,
or should not apply at all.




April 27th, 1916.

ArHon. F. A. Delano.
Bth.

Clearing House.

The New York Clearing House Asso-

ciation has recently established a department

for country collections

which now has nearly 900 members who remit daily at par.

tion is similar in

Boston.

If we

The sitaa

start a similar service, it will

impose upon our member banks the necessity of making up two letters

and we must decide

or to endeavor to

whether to act

take

over their

independently of the
plait or endeavor

Clearing Haase

to arrange for them

to continue their plait and become ourselves a member of the organization.

I would appreciate your views as to

which

last named of course, would be the most

course is most desirable.

economical.

The

As the Clear-

ing House has more non-member banks In its membership than member banks,
it would be dif icult to arrange a plan by which we could take over
their organization.

I believe

the plan adopted, with the slight change of

suggested by our oard

is the

best

and most feasible and in the end will

to the somber banks and you
tion to make it effective in this district.
prove acceptable

may count upon our co-opera-

Very truly yours,

Governor.

Hon. F. A. Delano,
Federal Reserve Board,

Washington, D. C.
BS Jr/VOM-1




language

Misc. 34

FEDERAL RESERVE BANK

Sent by

lr NEW YORK

tr.

(SEND TO FILES)

111 45

44C'

..9.,,5OPY OF TELEGRAM
ecz`

Aprill 14, WC.

t

tiolono

eq.,

--4141wast.4W,c_rvitfr, Fodarall rinoorve fterti.

,:tiatirctcro,

tkrolks for your rbssaile

faelinti!

to shoeing yu netzt work
Chars., lifnaj .2trorserir.
62 Joiltar
8-5




eoirrz-,

we looking forlard

111111111/.1.1111.116141.
FILING DEPT.
1915
BANK
FEDERAL RESERVE

ovomber 29th, 1915.

Dear Ur. Delano:

Your memorandum on rates enclosed

with your lett r of

the 26th, has been read with much interest.

It se, ms to me that this is only open to comment in the
following particulars, which you doubtless have had in mind in conS

noction with the various

operations mentioned.

The mere raising of discount rates, either for redis-

count by member banks or for open

operate

to raise

fasrket operations, would not

general inter at rates

excent

in the reserve br-nks permitting their saner

In the

tured.

case of rodisccunt rates

operate when we have a large volume of

that it

resulted

to run off an it na-

to member banks, it

redisctunts;

will

such a large

volume of rdiscounts -7111 only arise in all probability in ti-le

of stress, consequently, the raising of our rediscount

rate would

operate more to check n downward tendency in rates than it would
to create a higher level of rates.
so much

with open market

rates.

That would not

the case

There we can influence rates

only
when we have a large volume of bills in hand, no%by raising our

rates

for bills,

but by simply declining to buy them as offered.

"aragranh (e), it se,ms to mo, is a method which no reserve bank should every employ.

are of short

All of our bills and investments

time maturity and we wculd naturally avoid the appear-

ance of weakness that would be brought about by actually offering




Nev. 2,

**)

. Delano.

Hen. F.

our paper for sale. buch n practice would. be legitimate for the

member banks, but hardly legltinate fer us, es I view it.
On the other hand, I do not think that rule

should

to government bonds, or one year government notes previded to be

issued in exchange or bonds bearing the circulation privileee.
The object of the scheme of exchange of long bonds for short notes
.es to give the reserve benks ar investment, which they could vith-

out eausine criticism, sell in

funds out of the nnrket,

the

market in order to take surplus

and there, it serene to no, vould be our

chief influence in the direction of raisng rates,

the

whole

system gathers such strength that we will be able to oeerete on a
large scale.

As to earegraph (f), I munt sey that I would regret to
sec the idea gather strength.

In past years, the Bank of :nglend

has at ti -es bo7rowed money in the market for the purpose of reduc-

ing surelus lonnable funds,

but the

in

of :eiglend is a private

instituticn, it operates with great freedom and, furthereore, its

operations have grown out of a long series of erecedent and °llama

with which the
*lene of these

-nglich,banking community is no

thoroughly fneiliar.

oustces, I Melt, are rather ineensistent.

them, hoeever, is that it never pay() interest an deeositv.

tire ever came when it van
suggested

necessnry for MB

to onerate by

One of
if the

the method

I shclad hope to see it conducted under now powers given

to the reserve banks

Which would enable them actually to borrow money

rather than pay interest an their belamccs, rhieL I

eould regard as a

dangerous Irecedent to establish and very difficult to control.




Nov.,2e, 1915.
A, Delano.

T. am in NOMA doubt as to the soundness of propositions (d).

The effect of purchasing eovernment bondu, even though the circulation is not issued against it, would probably be to reduce intereet
rates, rather than to raise them.

The level of interest rates is

affected by the extent of the supply and demand in relation to the

amoent of r serve_ hold by banks.

The purchese of goverment bonds

in-

weichare eaid for with reserve money by the reserve banks, would
crease the reserve money in the hands of member banks, although it
would reduce the amount of bank notes in circulation ultimately.

the money paid out by the reserve banks ',.ere
to redeem national behk notes, the result

for the time being until

If

imeediatoly deeosited

would be One

of contraction

the bank notes were redeemed, and

then one

of expansion, because reserve money would take the place of money

which did not serve as bank reuerves.
There are two ,,oints not mentioned in your memorandum
which are of some importance:
If, as

The first is in regard to domestic

hope will be the

Gabe, the reserve banks un-

dertake to handle the collection buainess of the country on the de-

'erred debit and credit basis, the norrei/ operation Of

collecting

checks will not involve -the locking up or releasing of reserves

member banks.

In dealing with domeetic exchange, however, we would

have the power at any time thet it seemed aevisable to take exchange

on the different centere-for immediete credit; in other words, we
would bey a certain amount of the floating checks that are unoolleCted, but eive reserve money in eaement.

This will probably be one

of the normal oeerations of the reserve /milks in tie, and they will




-4-

Nov. 29, 1915.

Hon. P. ". Delano.
take exchange on that basis

for a

consideration represented probably

by interest at the discount reite for the number of days reereeented

by the normal transit tine.

At any time that the reserve banks dis-

contInne that operation, it would be in effect a contraction, as
they would cell in the money represented by these floating checks.

The power of expansion and contraction

and the payer to raise and

lower interest rates by this operation is almost unlimited.

It would

take years to work it out, but I prophecy that in the future, after
our exchanges are scientifically handled, this will be a very considerable influence in

money rates.

The other point is in
you apply exactly
foreign

with

connection

foreign exchange.

If

the same principle to bills and drafts payable in

countries which you do

easily seen how the

to Checks payable in this country,it is

onerations of

the resorve banks will have a consid-

erable influence on money rates.
As

a practical matter, I think the most effective operation

to lower rates will be that described in (o), and the mot effective
operation

in raising rates will be to let our bills run off.

Next to

that will be the operations in government bonds and short notes, and ultimately a very effective means of influencing rates will
tions in domestic and foreign exchange.
present

time, however, nor

be our opera-

No effort can be made at the

will we be able to make any, until we have a

portfolio full of bills.

I am led to inquire whether you and your associates are in-

terested in the :Lrticles appearing tit the Commercial and Financial

Chronicle on the subject of our note issue.
ter Which I




wrote them

They published

one let-

on this subject, but still seem determined to

4111111,

Nov. 29, 1915.

n. F. A. Delano.

o

conduct a crusade of criticism on that feature of our operations.
CAinet we put all the forces at work to secure such an amendment

to the Federal Reserve :(nt as will clarify that section of the law
and make it oven more effective than it is now?

was sorry not to have had more of a visit with you 1 st
week.

Very truly yours,

Governor.

Bon. F. A. Delano,
PedorA. Reserve Board,
V;ashington, D. C.
Jr/Veg -9




"NG DEPT.
-

PERSONAL

1915

RESERVE BANK

December 2nd, 1915,

Delr 2r,

ano:

Your favor of the 1st inat'is r.ceived this ::lorning and I
am very much interfisted in your suggestion about the pos,ibility of
our making a large transaction in Government bonA,

I thin- you overlook one thing:

The minute a natio4ial

bank sells bonds Which are pledged to secure circulation, it must

retire its circulation and the credit which e would give them on
our books would naturally be used for that pur use, other:rise, they
would be dippin into their cash reserves.

Let me illustrate the operation in a tylical case:

The

rst National Bank of New York sells us 15,000,000 of bonas pledg-

ed to secure circulat:on against delivery to us of the nouero of
transfer; we credit their account with ::5,0-0,000.

Upon making de-

livery, they must deposit :001.,000 of Lawful money with the ubtreasury to comAnte the retirement of the 5,000,000 of circulation, which lawful meney,thoy withdraw from us .)robably by chock,

which we nay through the Clearing:owe.

:3io far as we are concern-

we have paid ::15,000,000 Of our reserve money for which Ye receive

000,000 of government bonds.

The t5,00u,000 lawful Money paid

to the First :;ational Book IB credited t the generAl fund of the
United Ctates, and within a period of, say, three months, the great-

er part of the ..' '5,000,000 nation:11 bank notes will be retired from




-2-

, lole.

reg.

Non. P. A. Delano.

To

circulation end the government will have peid out 5,00,0o0 of law-

ful money which counts as reserve in the hands of the benks.

This

is rcally an operation of expansion because the national bank notes

did not count as reserve, consequently, could not form the basis of

If it had any effect A all uoon
money rates, it would tend to rase rates rather than raise them so
expansion of loans an deposits.

far as the operationz of member banks amconeerned.

Wl we a large portfolio of paper i hawever, and were investing in government bands to aa extent welch would require us to

Curtail other lines of investment, we might be obliged to let
Ir5,000,000 of our paper run off at maturity, whdch would restore us
the

5,000,000 of money paid the nationel benk.

Not having a port-

folio full of paper, the only effect it hes upon our operations is
to give us an interest earning on k5,000,000 in place of our cash
vhich we have put into circulation.
In order to get the' cash bunk, we have to put our Federal
bank notes Into circulation, against which we would receive, of
course, in exchange, lawful money or gold.

This, I have no doubt

could be 4ono, just os we are now issuing Federal reserve notes, and
ultimately, our cash position would remain unchanged and we would have

the earnin power of 5,000,000 of governeent bonds.

But, of what pos-

sible advantage is tois, in connection with the present situation, except to increase our earnings?

It perpetuates the bond secured circu-

lation which has been the subject of criticism and which, finally, we
beiieve will be eliminated by the operation of the Federal reserve




ars,

It seems to me that what we should do, and this is what I

eec. 2, 1915.

-3-

Hon. F. A. Delano.

think this bank will do,

s to gradually effect complete retirement
Con-

of all circulation based upon such government bonds as we buy.

vert the government bonds into short notes to the extent that we want
to retain short notes for interest earning and sell the long 3 % bonds
which we would get in exchange for the balance.

If, as I assume will

be the ease, we can convert the one year notes at any time into 3
bonds, we would be in a position to divest ourselves from time to time
of

all

our holdings of government bonds and rely upon our normal operat

ions of discounter open market purchases and note issues to pronote
the functions for which we are really organized.

As you know, I have always felt opposed to any effort based
upon the present desire to make earnings, to perpetuate bond secured
circulation, and I have felt sorry that the reserve

banks have teen

urged'so strongly to go into the market and buy government bends in
excess of what they are require
them, serve no

to buy, Which purchases, es I view

object other than to make

earnings.

I enclose a statement showing the holdings of novernment
bonds by New York City banks.

Those which are pie god for circula-

tion purposes result in a profit approaching 1 % at the present time.

nurchases by Federal reserve banks have advanced the price of 2 s from
98 to 99?n,

:he probable effect of our conducting such operation as

you describe will be to mark the price up to par, we would not get very
many bonds and to the extent

that ne did

get them, I would personally,

feel more dispoeed to convert them and then sell them while there is a
pro alum on government 3 % bonds, rather than keep them indefinitely, and

Inter face the nossible necessity for selling them and then realizing a
loes.




rec. 2, 19/5.

-1Hon. F. A. Delano.

To

We all may be mistaken in our Judgement of the extent of

the strain which will be thrown upon our banking rosourees at the
conclUsion of the war

Many people feel that it will be severe,

possibly serious, and uo long as we are just about earning our ex-

penses, or e trifle lees, I feel great assurance that we will be
able later on to meet any situation that may arise, to make up all
deficient eareinen and eAablieh the benk fireay in the confidence
of our members.

Please enrden this lone answer to your letter.

With r ference to the laut je ragraph of your letter regarding (e), it has once or emice eeen nncessPry for the Denk of 71ng1and

under very extraordinary circumsteeces, to ese its port-folio in the
manner contemplated by your letter.

Chao occesion, was during the

or ear when the 3enk of ngland borrowed from the Benk of Prance

£5,000,000 sterling.

The transaction was very oarefully safeguarded

at the time, although it later became 7-mown.

I believe it was the

subject of considerable debate and some cA.ticism.

'. ven the great

joint stoe:. Isvalka of London never use their ere it in this way and I

doubt if, sinoo eoet of thee were organized, any madh transaction as
the one just arranged wits New York banks by which they have borrowed
upon

,000,000 wItrnant collaterJ, we id have been entertained by these
institutions for a moment.

The distinguishing feature between what

such an institution as tee 3ank of Teagland can do, or whet we can do,
and what is ponsible to tee banks which have not the exclusive power

of note :Levee, is very clear.

Lloyds benk cen only meet demends upon

it by using its reserves, the s-ue is true of the 'eationel City Bank;




5
To

Dec. 2, 1915.

Hon. F. A. Delano.

the Unk of '';:ngland, on the otIvIT hand, to a limited extent; the Bank

of PrInce to practiclly :atunlimite extent and we, to oractically
an unlimited extent, can me-t unusual demaads ia emergencies by t,sues

of note°.

We do not need to convert our :Issets when we

ere it without such ooavorsion.

011

use our

If our credit became so extended

to imoair our ratio of reserves, the operation would then consist In
letting investments run off as they matured.

I still feel that I would be very norry indeed to sty, any
of the rserve banks employ the cw)edient of selling bills, excent
they were norml rediscount oporatioas between °a-selves, which is

orovidod iu the statute,
1gnin, please pardon tA.s long letter.
.Very truly yours,

,gt. P. A. Delano,
2odert1 Reserve

shingon, L. C.

BS Jr/VC




ULv

ONAL.

REs

December 6th, 1915.

Dear mr. Delano:

\4V3\I

Your letter is just received and as I am leaving for
Washington this afternoon, we may have opportunity to discuss the

bond transaction sore time tomo,raw.

I would like, however, to

follow year wen lead and "think out aloud", so to speak, as yon
have done.

Take again the case of the First National Dank Which

May hold large excess cash reserves in addition to the optional reserve Which might be deposited with us:

The proposal contained in

your letter would likely appeal to them as being a request for them
to give us :5,000,000 of their excess reserve, which money we would

use to pay for - 5,000,000 of bonds that we would ask them to sell us,
and in addition they would be obliged to take 5,000,000 of cesh out of

their reserves for he purpose of r.tiring their circulation.
This is rather a cold-blooded answer to your (mestion, or
might appear to be cold-blooded as an answer to the suggestion we

might mdke to the First National Bank, but I believe it is just about
the answer we would get.

These mon have been trading in money all of

their lives, they would re/aize that we were asking them to give us the
money with Which to bay their bonds and I cannot help but feel that the

proposals are really separate and distinct from each other.

The de-

posit of excess reserves or optimal reserves can, in tim99 be brought



-2.

o

le

Hon. F.

Dec. 6, 1915.

Delano.

about, I believe, when we heve been established for sone years and

have gained the confidence of our member

banks tn

ft greeter degree,

and probably after they have realized a certain sense of dependence
neon us in time of emergency, or high rate of interest.

The bond

proposal, quite distinct from this, is governed by other considers-

titans.

71th the 2 s selling close to par,

is there any farther

ine

dacement for the national bank to continue the ownership of bonds

and to keep their circulation out?

At the

preseat time, there is

some profit, and the member bank is, therefore, reluctant to lot it
go daring a period of very low interest rates, sten th

margin of

profit on a large percentage of its loans is nil. Met will appeal
strongly to the bank will be to sell its bonds at a

high price, say,

close to par later on when money rata are higher and it can employ
its credit more profitably than by issuing circulation.

In this matter, as in all oar relations to member

banks,

in the matter of earnings, in the organization of a sound system of

the management of the reserve banks to-day will reoeire

examination

to exercise the kind of courage which is rarest, and yet most effective, end that is the.courgse of patience.
I am sure you will not mind my saying frankly that not-

withstanding your very persuasive argent, I still believe that our
policy

should be to conserve our

resoarces and that

Oomp,roller ehoule be to discontinue
possible, to ne-

whole, sho Id

the

the

policy of the

circulation privilege, if

national banks and that the policF of the system as a

be to eliminate natienal bank cirooletiea, eit or of

national banks or of reserve banks end depend for scientific and flex-

ible currency woe issa,s of ?ederal reserve notes.




This cm only

-

btlic. 6,

Hon. F. k. Delano.
done by having the reserve banks buy governnent bonds, convert

them into 3 s, and then sell the 3 s to invqstors.
Referring to the last 7,aragraph of your letter in re-

illbe




gard to the undesirability of selling bills, will you not ask
Mt. Warburg to shew you a copy of his letter of October 20th ad-

dressed to Sir Fe)ix (:ehuster and copy of reply dated November 3rd,
in Which is given a description of the policy of the London joint
stock banks and the Bank of England?

With best regards, believe me,

Very truly yours,

Hon, F. A. Delano,
Federal Reserve Board,
Washington, D. D.
35 Jr/VONI-

/ICE SYMBOL
O.

Blue

.er

W ESTE

CLASS OF SERVICE
Day Letter

TEL

,ht Letter
NL
one of these three symbols
.ears after the check (number of
onds)this is a day message. Otherrise its character is indicated by the

ymbol appearing after the check.

Blue

Night Message

Nite

Message

Nite

Night Letter

NL
If none of these three symbols

NEWCOMB CARLTON, PRESIDENT
GEORGE W. E. ATKINS, VICE-PRESIDENT
BELVIDERE BROOKS, VICE-PRESIDENT

appears after the check number of
words)this is aday message. Otherwise its character isindicated by the
symbol appearing after the check.

ECEIVED AT

OB

WOODS HOLE MASS 1P 26
.V C MCLAREN

t 1-257
FEDERAL RESERVE BANK NEW YORK'

'TELEGRAM RECEIVED PLEASE PHONE

DELANO

WILL SPEND TONIGHT AT

COPLEY PLAZA AND MEET HIM MARBLEHEAD AT ABOUT TEN THIRTY WILL GET
,ARTICLE MENTIONED IN BOSTON




SYMBOL

Day Message

BENJ. STRONG JR.

&talk°

fur.444e1ci
711r- icusi

ei

101

qs? Oa-J.664a Erectia

0(tuet944

titurer-14-7104--

Z---ctztvet., eca

eutor

4.1-tA

tietitex:

i.-62./..ati 7114

0-ra)

444-

/440,04

litctitak
&wed
6e-A-4

eit tut
-114(31




5tilt4e

iL`k.
LA4)




2Vtati( Rtowwf Out(

U(1-141-4.,
eemzt
KW.1244,6

afeii gklitd

16.et
9AUAL 4&n,

et&
p.

June 2nd,

1 9 1 5.
Dear Mr. Delano:

Please forgive my tardinew3 in acknowloW

ing receipt of your very kind invitation for dinnor
at the I'letropolitan Club on 7uesday, My 25th, but
it came to my attention only to-day.
I regret this delay and wish to ex9ress

mu appreciation of the courtesy extended me.

Sincerely yours,

F. A. DelaEsq.

Fedr,zsi Reserve Board,

:ashington, D. C.







February 25th, 1915.

Dear Zr. Delano:

Thank you for returning the copy of
your address made before the Baltimore Associa-

tion of Credit Llon, thich I am glad to be able
to keep for my fibb.

I have another copy of

the article sent you, and if you care to retain
it, I will be glad to have you do so.
Very truly ;ours,

F. A._ .1?,,tax.1.4,49q..*

wedora-ileserve Boaxd,
Waohington, D. O.
BS Jr/Val

.7':.r3 4 3 1915
FEDERAL RESERVE BANK




February 20th, 1915.
Dear Mrs Delano:

I read the enclosed with a great deal of in-

terest and it's all right.

just the Lort of thing that

should be put in the minds of a good many people who are in-

terested in the new banking system.

What you say on pagos

23 and 24 arpeals to me particularly.

I undemtand you

wanted me to return the copy, Which I do horein, and with

It am sending you as I promised, copy of what I said to
those boys up at Alliamotown, and apologize for it being
so elementary.

,Would you mind sending the copy back?

Very truly you

Governor.

F. A. Delano,
Federal Reserve Board,

Washington,

BS Jr/VCJ6

C.

:ebruary ath. 1915.

Dear mr, Delano:

iieferriag to our telephone conversation, I enclose draft
of a o1aue vu4estod as a substitute fez, Paragraph 0 of Lection 2 of
the proposed regulation covering the discount or purehaeo of zleceptances.

Your attention is directed to the last poragra.ah of ,00tion
13 of the Federal -fiescrve Act which contemplates that the Poder&I Reserve

3oard anal make regulations re_tricting the discount of bills receivable,
(notes), and of bills of exchange aad acoeptances, but no sadh clause appears In LoctIon 14 of the act.
To the extent that acceptances and bills of exchange are dealt
with under the provisions of :ectiou 14, it seems to me that conoiderbi,o
freedom should be pemitted unlees it Is contomplatad that the last paragraph of Section 1: referred to, ohorAd also, be made to apply to aeotion 14.

You will, also, notice that I have omitted the langunge "and
drawn for an a ount not excomang the approximate value of the goods to be
transported."
As the regulation is drawn, the burden of determining the

value of t.ogoods would rest upon the reserve bank° and the proceedure to
obtain thin infonnation would be difficult nd cumbersome. On tho other

hand., it is msro likely that th$s admonition will be ignored by the bans
, certainly it will not be wise to include a .- p revision in the regulation



To

F. A. Delano, 'Ass.

which it is anticipated will not be regarded.

Feb. 8th, 1915.
The purchase of peceptances

is based upon the credit of the acceptor, aro I hope the Joard will be willing

to omit this limitation ehich it seems to me is not a practicable one.
Your attention is, also, directed to Peragranh D of Section 2
of the regulation which would D ()elude the purchase of bills of exchange and
acceptances growing out of commerce between the United States and its depend-

encies, that is, t'orto Rico, Hawaii and the Philippines. If the phraseology
of paragraph 99 of the Act reading " based on the importation and exportation
of goods" can be construed to include commerce between the United States

and those dependencies, it might be desirable to make clear in this regulation

that bills growing out of imnorts and exports of that character might be purchased by the Federal Reserve 3aake.

M. Curtis calls my nttontion to the fact that the nupreme Ccurt of
the United-...tutes has rendered a number of decisions known as the "Insular Oases", reported in volumes 182 and 18$ of the Supreme Court reports, which can

probably be taken to indicate that commerce between to United States and its
Insular possessions may be construed as imports and exports.

Inasmuch es the

words "importation" andytexportation" are used in the Fedora Reserve Act,

this might afford ground for the inclusion of bills growing out of such conscope

merce within the bgerimom of the proposed regulation.

Your attention is also directed to Pnragraph F of Section 2, ehich
it 630MB to me does not make entirely cl ar what kind of bill is referred to.
Ordinarily, a documentary bill when presented to the drawee is accepted and

handed back to the party presenting it, minus the documents which originally

accompanied the bill, and the acceptance of the banker or of the drawee is

eubstituted for the specific bills of lading or other collateral.



Without

i,
re

V.

a.t.

I

On

M

i....

Os

ee

o
4.4.

et

Z;
',:-.+.

To

Feb. 8th, 1915.

F. A. Delano, Else.

getting a legal opinion on the point, it seems to me possible to construe
the clause so that the acceptance, minus the documents, would no longer be
secured by the lien or transfer of title, thereby subjecting it automatical-

might it not be peraible to change

ly to the limitations of paragraph G.

that paragraph so as to read as folloes:

"A bill of exchange may be con-

sidered as drawn in good faith against 'actually existing values' as under

1 (0) hereof, when it is secured by a lien on or by tranefor of title to
the goods to be transported or when the character of the bill indicates that
the document representing euch lion or

title, originally accompanied the

bill prior to acceptance. "

In conclusion, permit me to repeat

briefly one portion of the
Our merchants and

statement which I made to the Board Friday afternoons
manufacturers are now conducting a perfectly lawful trade
tomers.

A very considerable part of that trade may be with belligerent

nations and may consist of articles which are
traband of

with foreign cus-

ear.

contraband or

conditional con-

Commerce of that character is authorized by our own laws

end by international law ne6 convention.

It seems to me that any

different

rule aeplied to the credits which are extended for the purpose of conduct
that commerce should be adopted

or

with great caution and the objection which I

made to the proposed regulation was based u on my belief, first, that the
:erne rule of neutrality should aprly tot4edit as does apply to the commercial transaction; second, that any policy to be adopted by our government
in regard to this matt :r should not be made the subject of ragulatioe by

the Federal

Reeerve Board, but should be determined by the President of the

United 'etatas.




To

F. L. Delano.

Fob. Oth., 1915.

ef course, it goes withour

3C,

atatod in Washingbout

that this bank will observe wha,tovor rules aro adoptod by our isovrpmetnt

in this mottor.
Very truly youra,

Governor.

F. A, Delz-3ne, Esq.,
Federal Aeserve Board,
Washing-,on, D. C.
B;JtAVOM




January 15th, 191'3.

gy dear Ur. Delanat
1-.:.Theris the explanatio of lonf:el. steps by the tribe of 3enjanin

than by the tribe of Zbonozor Is simrly that they have longer legs.
Thiile you have tho advantN7e over mr in two goneratims of addi-

tional experience, posoibly I may cl&Jm from y(ra that raspeet demanded

by old 14iew ngland traCition of the younger to t!le older.
Ths last paitioNsph of 70t7:7 letter has caused ne much refloction.

The 41-04t tinc we met let us endeeve:. to di covr whether you have been

adopted into the councils of th
Ga

oiey Traf:t, or Whether I have been adopt-

Into the political family which io honored by yonr rartioipation.
As one of my seven bosses, I have heretefsre been inclined to

acsord you a on.tain amemt of resret, bich le not a habit in our family
JAI dealing with couo;no or ethr r?letivos.

nathing of the Not.

Hereafter, you may expect

Imay even conclude on hal:Fount of the advantage in

generation I have ov7:r you, to call you Fred or any other old thing!

any rate, success to the Strongs in starting a new banking system.

ancerely yours,

Hon. P. A. Deltlge,
Aideral Itos6VW-3ak,

Wsohington
Kijr/VCM




C.

At




Jamuary 13th, 1915.

My dear Mr. Delano:
The enclosed memorandum taken from the book

of the Ltrong family, iudicates that your descent is from

the fifth son of Elder John Strong, that is to say, Elder
Ebenezer 3trong and our branch of the family extended. from
the second son of Thomas Strong.

It lei however, a good

New Englund blood relationship, I am glad to say.

Very truly yours,

Fred. A. Del amo

Esq.,

Federal 187;w JJocni,
Washington D. C.
313Jr/VCII

The Shoreham Hotel,

'¼.

J44N1 5 7915

Washington, D.C.,
January 14, 1915.

My dear Mr. Strong:
I am indeed glad to
Greetings:
greet you as a kinsman.
However, there
is one thing I notice about the "Tribe
of Benjamin", as distinguished from
the "Tribe of Ebenezer", namely that
they seem to take longer steps.
At
any rate, according to your genealogy,
you are the fifth in direct descent
from the original John Strong; whereas,
I seem to be the seventh.
This in
spite of the fact that I was the tenth
child of my parents.
Even on this
basis, as I figure it out, I am your
fourth cousin, twice removed.
But
"removed" does not count for much when
there is five-hour train service between New York and Washington.
I reflect that if this were discovered, it would be concrete evidence
of connivance with the "Money Trust."
Greetings.

Yours very truly,

Er. Benj. Strong,
62 Cedar Street,
New York City.




THE FEDERAL RESERVE

ACT

And

THE PLACE

TO OCCUPY IN AMERICAN FINANCE.

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

AN

ADDRESS
Before

THE BALTIMORE ASSOCIATION OF CREDIT MEN




Baltimore, Md.

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

By FREDERIC A. DELANO,

February 16, 1915.

152

THE FEDERAL RESERVE ACT
AND

THE PLACE IT IS TO OCCUPY IN AiTRICAIT FINANCE.

In addressing you on the subject of "The Federal
Reserve Act and the Place it is to Occupy in American
Finance", I shall avoid as far as possible the use of
technical banking phrases.

Hy approach to the whole

subject is that of the business man, or bank customer,
rather than that of the banker, and I assume that in
inviting me to address you, your object has been to

hear the point of view of the business man rather than
that of the banker.




( 2)

The title of the Federal Reserve Act, passed
December 23, 1913, states its purposes as follows:
An Act to provide for the establishment
of Federal Reserve Banks, to furnish an elastic
currency, to afford means for rediscounting
commercial paper, to establish a more effective supervision of banking in the United States,
and for Other purposes."

However, in order to understand the place which
the Federal Reserve Bank System is destined to occupy
in the life of the nation, one must review, at least
cursorily, the provisions of the system under which
the National Banks have operated for fifty years and
appreciate the fact that, in the new Act, Congress

sought tb correct and supplement an existing system
with which nearly tao generations of our people have
become familiar, rather than to supplant it with an
entirely new system, built upon a new foundation.
Furthermore, it is important to bear in mind that

two-thirds of the banking of the country is done by
banks and trust companies chartered by the various.
states, under laws differing rather widely and in some




( 3 )

cases under charters much less strict than the Federal
law.

This feature becomes of great importance when

it is considered that the ultimate banking reserves of
the country are the reserves of the National Banks.
Reserve Requirements
It is an elementary, but important,fact that the
whole theory of banking is based on the principle of averages derived from the results of experience.

Banks rep-

resent, roughly, two classes of customers - depositors
and borrowers,

-

If a bank had to keep in its vaults

cash subject to instant demand by all its depositors,
no bank could live except by borrowing from its
neighbor-banks; and if the demand were simultaneous
the entire banking system would break down, because
there is not sufficient currency to meet the demand.
Banking, therefore, depends upon the hypothesis that
a large proportion of the funds of depositors will not

be called upon simultaneously; that somewhere between

10% and 25% must be kept on hand and on the premises,
and that the remainder can be actively employed at
interest - that is, earning something; otherwise a



(4)

bank could not earn its rent, salaries, and cost of
operation, to say nothing of a return on the capital
invested by its promoters.*

This 10 to 25% which ex-

perience has found must be retained in hand is called

a Reserve, but the term has been more or less misused
and misunderstood,

We might assume, for example, that

10% were' the minimum percentage of cash which had to

be kept

in

vault and that 25% were the amount which,

including this irreducible minimum was required for
emergencies.

This is equivalent to saying that 10% was

the minimum requirel.lent of normal conditions and that thf-

15% additional was reserves.

Under the Banking Law of

It is proper to explain that while a bank begins
doing buSaness by lending its capital and a share of
its deposits, each loan that is made goes to swell the
deposits because the loan when made is not usually paid
out in cash, but is put as a deposit credited to the
borrnwer and subject, like any other deposit, to check
by the borrower who has thereby become a depositor.
The relationship of deposits to loans and to currency
are well illustrated by the aggregate figures taken
from the statement of the Comptroller of the Currency
for June 30th, 1914, as fnllows:
(The report includes
all National Banks and 95% or more of the State Banks
and trust companies).
Gross deposits of individuals and
corporations in National Banks,
State Banks and Trust Companies:
'1318,517,732,879
Gross loans and discounts by Nat'l
Banks, State Banks and Trust Companies:
'1.5,288,357,284
Total U. S. Currency outstanding same
date,
3,402,015,427
(*)




O

(5)

1864, reserves varying from 15% to 25% were stipulated,
but unfortunately that law, (which permitted Reserve
Cities to deposit half their reserves in Central Reserve Cities, and country banks, three-fifths of their
reserves in Reserve Cities) permitted a great duplication of reserves without any elasticity.

A demand

for aurreLcy attending a panic or loss of confidence
on the part of the public invariably found the banks
carrying the minimum reserves authorized under the law,

and it would at once develop that these so-called
reserves were not, in truth, reserves - they might:

more truly be called minimum requirements, not reserve
funds, available to overcome a period of stress.
An Elastic Currency.

This subject of reserves thus became one of paramount importance, and it was recognized by many that a
correct solution was of immense importance to the
country's development.

For twenty years bankers,

business men and economists have interested themselves
in the problem of working out a remedy.

other countries were able to adjust their banking



(6)

and currency methods to the ebb and flow of business,
or even to survive considerable recessions without
complete stagnation or panic was constantly referred
to.

After much discussion it became apparent that

this question of reserves was closely associated with
that of a suitable currency; that one of the
phenomena attending every panic or business disturtance was a demand for currency which, if not satisfied, invariably led to the hoarding of metallic
money.

It wa.s pointed out that in this respect the

currency system of the United States, under the

National Banking Act of 1863, was peculiarly rigid
and inelastic - far more so than it had been under
earlier banking acts or under the central

bank

systems

common in Europe.

The currency provision of the law of 1863 was
based on the idea of compelling National Banks to
purchase United States Government Bonds and using those
bonds as collateral security for National Bank currency.

As a plan to cre-te a market for Government bonds of
which there were some three billions outstanding at
the close of the Civil War (three times as many as now)




(7)

the Act was a great success.

Under its provisions

bonds which sold on a basis of more than 77 reached
a basis of less than 21..

Nobody could complain that

this form of currency was not safe.

The complaint

came only from the economists and students of the
problem, that it was incapable of expansion and contraction with the demands of business.

If the amount

were increased to take care of maxim.ra requirements,

there was no ready'means, in periods of slack business,
of contracting the amount of currency in circulation
except by the clumsy method of returning the currency,
redeeming the deposited bonds and converting these
into cash again, a manifest impossibility on any large
scale, because United States bonds soon had acquired
a market price by reason of their circulation privilege, far above their investment value.

Our own ex-

perience in this country before the Civil War, as well
as that of European nations, pointed out a remedy in
basing the currency, not on long time securities like
Government bonds, but on short time loans of merchants,

manufacturers, and agricultural producers, based upon




(8)

and representing actual purchase and sale of raw
material, produce or commodities, or of manufactured
or partly manufactured products.

The great advantage

of such loans lay in the fact that they were self
liquidating, that they represented largely food or
other products classed as necessities of life, that
the paper was of short time maturity, that in the
nature of the case, currency based on such loans

would increase or decrease in volume directly with
the enlargement or diminution of trade requirements,
population, etc.

In order to leave undisturbed the

existing currency, with which every one was familiar,

Congress provided that the present Bondsecured
currency should remain practically intact or subject
only to gradual replacement through a period of

twenty years with a new bondsecured currency of the
Federal Reserve Banks.

This means that the notes of

twelve Federal Reserve Banks will gradually displace
the notes of 7,600 National Banks.

In addition to

this currency, plus the gold and gold certificates;
silver and silver certificates and greenbacks, already




(9)

in existence and which I have enumerated in table A;

there was created by the Federal Reserve At a new
form of currency, known as Federal reserve notes.

Table "A"

In Circulation, February 1, 1915.

Gold Coin (including bullion in Treasury)

4623,050,364

Gold Certificates

958,448,039

Standard Silver Dollars

67,621,922

Silver Certificates

452,613,274

Subsidiary Silver

160,334,776

Treasury Notes of 1890

2,321,968

United States Notes

319,711,226

National'Bank Notes

879 497 881

Total

43,463,599,450

N.B.

This table does net include any gold which is
back of gold certificates, or silver back of silver
certificates.
In other words, there is no duplication in this statement.

These notes, issued in five denominations (4

610

20

450, 4100) represent the elastic currency of the country.
In other words, the previously issued currency already
mentioned, amounting in total on February 1, 1915, to



(io)

$3,463,599,450, will easily take c-re of average re-

)

quirements, while the new currency provides an
elastic, supplementary currency.

The plan devised

and finally adopted by Congress not only meets
the requirements of az elastic currency, but meets most
ingeniously the difficulty in respect to reserves to
which I have already referred.

Depending somewhat

on the diversity of business or the dependence of a
community upon

a

single crop, there is to some ex-

tent a seasonal ebb and flow in the demands of every

communityexhibiting itself in an increased or
diminished demand for currency and banking credit.
The Act provides for substantial reduction of
reserves by country banks, Reserve City banks and
Central Reserve City Banks (as shown in table B),
but at the same time allows no duplication in its
determination: a circumstance which, in the past, has
led to a much unsettlement and lack of confidence as
to the ultimate security of the banks.




Table "E"

,

Percentage of
deposits required as reserves under
the old law,

Three
Central
Reserve
Cities

Fortynine
Reserve
Cities

25%

25% of which
one-half could
be kept in a
Central Reserve City:

Percentage of
active or demand deposits
required as reserves under
new law at end
of three years.

1

i

Percentage of
time deposits
or savings deposits under
the new law.

18%

5%

15%

5%

12%

5/
P

-

Country
Banks

15% of which
three-fifths
could be kept
in a Reserve
City




.

(12)

The Act

further provides that at the end of a

period of three years) the percentages of total demand
deposits required by the twelve Federal Reserve Banks
from member banks in Central Reserve and Reserve
Cities and in the country, respectively, shall be
7%, 6% and 5%, and at the option of member banks these
deposits may be increased to 125, 10% and 8% respectively.
These reserves, instead of being held in vault as fixed
cash reserves, subject to call on demand, are made the
basis for issuance of the new Federal Reserve currency.

At first blush this might seem an indiscreet use
to make of reserves; it might indeed strike one as a

wild project of pyramiding on assets, but a study of
the Act will satisfy the student that, if the Federal
Reserve Board does its duty, these reserves can be
used expansively as suggested, yet be absolutely safe.

At this writing with only two installments of the
capital stock paid in and with only one-third of the
total reserves in the hands of the twelve District
Reserve Banks the total
aggregate

281,373,000.

cash

reserves in their hands

The law requires a cash reserve

against deposits of member banks of 35%;
then, an aggregate cash r.;sorvo of




this requires,

399,749,000.

(13)

In respect to the issuance of currency, the law requires, first that each of these twelve reserve banks,
(except for supervision by the Federal Reserve Board)
shall be autonomous, self-contained and independent;
that it may issue currency against approved "commercial
paper" or "acceptances" *when indorsed by member banks,
dollar for dollar, provided it shall deposit as additional protection and reserve against such notes not
less than 40% of gold,

From this it will be seen that,

after deducting $99,749,000 from the aggregate cash resources of the Federal Reserve Banks as a reserve against

member bank deposits, there remains $181,624,000 which would
sustain a total reserve note currency of $454,060,000, and,
obviously, this will increase to something like three-

fold this figure when all:the reserves shall have been
paid in;

(*)

and

still further

increased if governme

By "acceptances" are meant "drafts" or "bills of
exchange" drawn upon a purchaser of goods to be delivered, growing out of export or import and accepted
by the buyer or by a banker or accepting house, acting on behalf of the buyer.




(14)

deposits are made in the Federal Reserve Banks, or if,
as is to be hoped, State banks in large numbers enter
the system.

Operations of the Reserve Banks in Ordinary Times
It might be assumed from what has been said that
these twelve Federal Reserve Banks exist solely to take
care of unusual, spasmodic, or seasonal demands of
business or else those excessive demands which
periodically come upon us at greater intervals of time.
That alone might well be called a worthy objnct to
attain, but it would have to be admitted that a pon-L

derous and costly machine had been created to serve an
occasional demand; and it might be doubted whether a

machine thus kept in comparative idleness through twothirds of the year would operate smoothly and success=
fully when the steam was turned on.
of the Act had no such idea.

They meant that these

district banks should be active undertakings and, among
other requirements, imposed upon them the duty of
earning for their stockholders (the member banks,
aggregating to begin with 7,600) not only operating



(15)

expenses and all costs by the Government for engraving
and printing of notes, the salaries and expenses of the
Federal Reserve Board and its staff of employees but,
in addition, 6% on the investment by the banks.

In

order to enable the twelve reserve banks to employ their
funds profitably in the dull seasons (the seasons of
liquidation) and recognizing that in such seasons the
member banks would not bring commercial paper to the
reserve banks for rediscount and the issuance of currency, for the obvious reason that in those seasons
the member banks themselves would have ample loanable
funds, Congress provided for the purchase and sale of
certain readily marketable investments, for example,

Government bonds, tax warrants of states, municipal.

ities, etc., acceptances, e. g., drafts or bills of
exchange, the payment of which has been guaranteed or
promised at maturity and other similar documents.

In-

vestments of this kind which must be made under restrictions of the Federal Reserve Board are, with the
exception of Government bonds, all short time paper,

the idea being that they shall mature in advance of







the active requirement of funds for crop moving,
etc.
It is impossible to foretell just what experience
will

develop, but it is probable that the rediscounting of
commercial paper and the issue of Federal reserve'

notes therefor will reach normally a minimum in the
months of January to March, inclusive; that thereafter
it will gradually rise to a maximum requirement in the

autumn and from that maximum recede again to the low
point after Christmas.

However, it is to be ex-

pected that the demands in the various districts, with
a diversity of harvesting seasons will develop a condition where there may be a scarcity of funds in one
region and a surplus in another.

7ith this possi-

bility in view, the Act nrovides that the Reserve
Bank of one district may rediscount for that of another
district.

From the foregoing it may be seen that, while the
Federal Reserve Act provides a valuable "shock absorber";
it is far more than an inert piece of machinery which
comes into action simply in an emergency.

It might

more truly be likened to an extra unit in a large power

(17)

station, revolving at all times on, say half load, yet
capable of taking on a full load at any time or, for
short periods, even a considerable overload.
In much that has been said and written, however,
it is evident that in some particulars the true functions
of the Federal Reserve Banks have been misunderstood.
These great District Banks, each representing a large
and important territory, important though they be as
the central banks of their districts
sense wholesalers

are not in any

of money to their member banks who,

in turn, dispense or retail it at a profit to their
customers.

These central banks, with whom the public

is not directly permitted to deal, are in a sense
"banks of banks" as has been frequently said, but their
gross assets really bear only a small ratio to that
of the aggregate of the stockholding banks, and, while
their powers and influence are very great, their actual
currency issuing power will represent, after all the
reserves have been paid in, only some 12% to 15% of
total loanable funds of banks in the country, National
and State.




( See foot note )

.

(17a)
Foot note for Page 17.

Stated in round figures, after deducting the rcserves required against deposits, there remains
)181,600,000 of gold on hand, which will sustain an
issuance of four hundred fiftyfour millions of
Federal Roserve Notes.
As already shown, this will
be increased in three years to, say 700 millions,
which is 4-1/2 per ccnt Of the total loans and discounts of the State and National banks of the country
on Juno 30th, 1914.
This will 'cc increased, as
on-tor the SyStem
already explained, as Siçtr
and as Government deposits arc added.




(18)

What the Reserve Banks have Accomplished.

The benefits of the ?serve Act as thus far developed are evidenced more by the indirect benefits
derived than by the actual transactions of the Reserve
Banks themselves.

For example, there was released on

the 16th of November

when the banks were declared

opened by the Secretary of the Treasury, something like
450 millions of dollars (the exact amount has not been
determined on account of the difficulty of computation
by reason of the duplications in previous methods of
calculation.)

This large fund was released to meet

the demands of business; its immediate effect was a
reduction in all interest rates in every district.
The emeriency currency issued to meet the panic conditions brought on by the European war was rapidly
retired so that, from a maximum issue of 0385,216,6551
this emergency currency outstanding has been reduced (at
the close of business on the 13th day of February) to
044,205,802, and this is in spite of the fact that a large
area of our country has suffered from a most serious setback,
due to the unexpected and sudden reduction in the demand
for their chief staple product - cotton.




As a

(19)

precautionary measure, and on the advice of bankers
quite generally) three years are provided in which to
develop the Reserve Banks to their full power.

Wheth-

er or not this was an unnecessary length of time is
a debatable subject,

but one thing is already evi-

dent and that is that the country is now demanding
results

as if three months instead of three years

had been named.

OTHER IMPORTANT FUNCTIONS OF THE BANK.

Before closing this paper it is proper to discuss
briefly some of the other functions of these, eserve
Banks.

These lie chiefly in two directions; first,

as Government depositaries and fiscal agents; second,
as clearint houses for checks drawn within their districts or, on such plan as the Reserve Board may approve,
between districts.
The Act does not abolish the sub-treasuries, but

at the same time authorizes the Secretary of the Treasury
to deposit and the Reserve Banks to receive, Government
monies and to act as fiscal agents of the Government.
It is for this reason chiefly that the Secretary of the Treas-

ury is made ex-officio member of the Federal Reserve Board



(20)

and its Chairman, while the Comptroller of the Currency
is also made an ex-officio member; thus giving the
Government a minimum representation on the Board of two
out of seven members.

The framers of the Act argued

the propriety of this representation, in spite of the
fact that the capital investment was made solely by
the subscribing banks, not in order to give the
Federal Reserve Board a political

(i.e. partisan)

complexion, but on the ground that as the Government

was to be a large depositor, it should have an influential voice in the general supervision.

The argument in favor of the Government thus using
the Feder'al Reserve Banks is strong; first, the

genefal

reason that the money of the people (the tax

payers) is retained where it will be most affective in
promoting trade and commerce; second, that it is safe,
because the integrity of the twelve reserve banks is
assured by the guarantee, individual and collective1
of all the member banks; lastly, that the function of
fiscal or disbursing agent for all Government drafts
or checks, aggregating in round figures more than a



(21)

million dollars per day, can be performed effectively
by these banks and doubtless at a saving to the Treasury
(even after allowing for the interest paid by National

banks on Government deposits) compared with the costly
and necessarily cumbersome methods of remitting from the
Treasury or sub-treasury to pay checks drawn on the
Treasurer of the United States.
The second important function of the Reserve Bank
outside of the chief functions for which it was created,

is that of its place as a collecting agency or clearing
house for checks of its respective district.

All im-

portant cities of the country have had their clearing
houses for checks of National and State banks in the
community.

These clearing houses, formed for mutual

convenience by voluntary action of their component banks,

have developed important functions quite outside of
those originally contemplated.

mentioned a system of self-examination more rigid and
thorough than that previously maintained by the Government; aEr:.,ed rules for charges for collections on out

of town checks, and, in times of panic, such as 1907

and 1914, the rediscount of paper and securities of its




Amo

(22)

members, issuing against these, clearing house certificates, which have been used not only in transac-

tions between banks but in some cases even in public
transactions.

There is little doubt that this development of the
clearing houses, adjusting themselves as they have,
through many years of experience, to the demands of

business, provided a valuable and effective suggestion
to the framers of the Federal Reserve Law.

So it is

not to be wondered at that the Federal Reserve Act,
in adopting the emergency function of the clearing

houses in the rediscount cf member banks' pnper, saw
the desirability of adopting, at the same time, the
chief feature of these clearing houses; namely, the
check clearing idea.

And so, in fact, the Act did

embody, not in the most lucid terms, but certainly by
intent, a complete system of clearings within and
finally between the districts, subject to the rules
to be framed by the Reserve Board, and, at the same
time, authorized the Reserve Board, in co-oiperation

with the Comptroller of the Currency, to raise the




(231

standard of the examination system coordinate with
the examination by the Federal Reserve Banks and by
the Federal Reserve Board.
Conclusion.

And thus briefly I have endeavored to lay before
you in simple phraseology the salient features of the
Federal Reserve Act and the place it is likely to take
in the financial structure of our country and of our
business life.

The reason the Federal Bank System is great, is
that it has been evolved by the patient study and
adaptation of our ovn best banking experience, the
experience of Europe, the clearing house certificate

plan, all ingeniously engrafted upon an existing
National Banking and Currency System with Which the
country was familiar.

The result is a system, far

better suited to American needs and American methods

and prejudices than a central bank or a branch bank
system.

We have created under this Act twelve central
banks, each as nearly as possible autonomous, but each




(24)

under central supervision of the Federal Reserve Board,
on matters of joint and common interest.

If the plan

works out in practice as well as it should;

if the

Federal Reserve Board does its full duty-

; if petty

or partisan politics are laid aside, we shall have
reached one ideal of scientific management ,: - "local
self-government and centralized supervision"; we shall
have accomplished the object of all good organization ;

-

local incentive and enthusiasm with only enough centralized supervision to compare results ; to'measure

men, methods and costs; and to ensure the necessary
co-operation on all matters where joint co-operation
is necessary, either for the good

of

the country or

of the banks themselves.

The President has drawn the apt parallel of the
relations of the various Reserve Banks to the Central

authority ( The Federal Reserve Board ) and the relation
of the various states to the Federal Government.
As a servant of the public, one of those employed

to administer the law, it is to be expected that I
should be enthusiastic as to its possibilities.

At

the same time, not having been a banker, my views as




(25)

to what this Act really does mean to the public may be
questioned.

I will, therefore, close my remarks by

quoting from the recent paper of Vice-President Herbert
R. Eldridge, of the National City Bank of New York, so
that you may know what a practical banker of large and
varied experience has to say:
"The Federal Reserve Act marks the greatest step forward this country has ever made in
its financial advancement.
much to be desired, and will undoubtedly be
subjected to several revisions, it remains the
greatest constructive measure Congress has
given us in many, many years."
The wonder is not that there are some imperfections
in the Act: but that out of the great melting pot of
conflicting opinions a problem so difficult and so

tchnical should have been successfully worked out.




Whi

FEDERAL RESERVE BOARD
WASHINGTON

444

1404)

46.

7.915

February 24th, 1915.

My dear Mr. Strong:

On my return from a short outing. I find your letter of

February 20th and I am glad to know you approve of my remarks
before the Baltimore Association of Credit Men.

It was my

intention that you should keep this speech and, assuming that
you may like to have it,

I now return it to you.

I shall be very much interested in reading your remarks
at Williamstown and, as soon as I get the opportunity to do
so, I shall return the papers to you.
Yours very truly,

Mr. Benj. Strong, Jr.,
Governor, Federal Reserve Bank,
New York City.




_4.
--e,...
-,6-

cP _/
02, --./ , __...,
()
CV,

.e."--

":4-'-'

..

.

slo .

(:). \

,

)..., '

6/

.1 _,...

, ''..' ...
-',Y\

1'

V\ '')
----N
'...''. "--/f.-.'

2,-,

\--(%(5,,,,

\

\Y

-\2

,0
Ce

k_.'

N.-''
N...'

4CC




O'''

(3'
0.-N
C..9.,
%.,-.
`....\'''

DAPT.
JU1_

FEDERAL RESERVE BOARD
WASHINGTON

1S15

June 5, 1915.

FEDERAL RESERVE BANK




CO2IFIDM721AL

My dear Et. Strong
One of the subjects which has been suggested for
the consideration of the Governors at their prospective
meeting is the matter of the Federal Reserve Banks acting
as Fiscal Agents.

I have had several talks with Assist-

ant Secretary Ealburn about this matter and It. Broughton,
of Et. Ealburn's staff, has written a report, copy of
which I enclose and which I should like to have you treat
as confidential.

The Secretary of the Treasury, although he has never
said in so many words, is, I believe very friendly to the

Subtreasury system and I imagine he thinks it would be a
mistake to get rid of it.

'If we could persuade him that

the Federal Reserve Banks, acting as Fiscal Agents in connection with the Central Clearing Fund, will relieve the
Government of a very considerable burden and will still
give to the Subtreasury the duty of looking after the Issue
and Redemotion of various forms of currency, I think he
would be willing to take the first step.
In the long run, I think the Subtreasury system will

have to give way and all of its functions be taken over




-2-

by the Federal Reserve Banks, but we need not consider
the second or third steps until we have taken the first.
Yours very truly,

DICTATED DV MR. DELNPIO

Mr. Benjamin Strolyc-,-,

Governor, Fede al Reserve Bank,
Nev; York City.

Enclosure







r

FEDERAL RESERVE BOARD
WA S H IN GTO N

,

1915.

My dear Mr. Strong:

I am giving a dinner at the

Metropolitan Club at 8:00 P.M. on
Tuesday, May twenty-fifth, to a
number of delegates to
American Conference.
Conference.

wisectwola;v4+tv,0,1:

It would

give me great pleasure if you could

be present and help me in the duty
of entertaining them.
Yours very truly,

Mr. Benj. Strong, J
Gov'r., Federal Reserve Bank,




New York.

POSTAL TELEGRAPH

COMMERCIAL CABLES

CLARENCE H. MACKAY, PRESIDENT.

RECEIN, CD AT

TELEGRAM

DELIVERY

0.

y

The Postal Telegraph-Cable Company (Incorporated)transmits and delivers this message subject to the terms and conditions printed on the back of this blank.
16Db1-541

4'



DESIGN PAT

c9

A
"444"

T No. 00529

:

POSTAL TELEGRAPHCABLE COMPANY

coNii 9,1-

THE COMMERCIAL CABLE COMPANY

C

ALASKA

IF\\
JAPAN

CANADA

tetro

PACIFIC
[I, 2 AND 16]

ENGLAND

SAN FRANCISCO

YOKOHAMA

MIDWAY
AVANP

HONOLULU

GUAM

ATLANTIC

sk **it

AFRICA

SVA

SOUTH
AMERICA

THE GREATEST TELEGRAPH AND CABLE SYSTEM IN THE WORLD.

EXTENDS OVER TWO-THIRDS OF THE WAY AROUND THE EARTH.

THE POSTAL TELEGRAPH-CABLE COMPANY ( INCORPORATED)

TRANSMITS AND DELIVERS THE WITHIN TELEGRAM SUBJECT TO THE FOLLOWING TERMS AND CONDIT!ONS:
To guard against mistakes or delays, the sender of a telegram should order it REPEATED; that is, telegraphed back to the originating office for comparison.
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND
PAID FOR AS SUCH, in consideration whereof it is agreed between the sendcr of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegram, reyond the amount
received for sending the same ; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times the sum
received for sending the same, UNLESS SPECIALLY VALUED; nor in any case for delays arising from unavoidable interruption in the working of its lines ; NOR
FOR ERRORS IN CIPHER OR OBSCURE TELEGRAMS.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-deliveryof this telegram.
whether caused by the negligence of its servants or otherwise, beyond fifty times the REPEATED telegram rate, at which amount this telegram, if sent as a
REPEATED telegram, is hereby valued, unless a greater value is stated in writing hereon at the time the telegram is offered to the Company fortransmission, and an
additional sum paid or agreed to be paid based on such value equal to one-tenth of one per cent. thereof.
8. The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary
to reach its destination.
Messages will be delivered free within the established free delivery limits of the terminal office. For delivery at a greater distance a special charge will be made
to cover the cost of such delivery.
No responsibility regarding messages attaches to this Company until the same are presented and accepted at one of its transmitting offices; and, if any message is
sent to such office by one of this Company's messengers, he acts as the agent of the sender for the purpose of delivering the message and any notice or instructions

regarding it to the Company's agent in its said office.
G. The Company shall not be liable for damages or statutory penalties in any ease where the claim is not presented in writing within sixty days after the telegram is
filed with the Company for transmission.
The above terms and conditions shall be binding upon the receiver as well .es the sender of this telegram.
NO EMPLOYEE OF THIS COMPANY IS AUTHORIZED TO VARY THE FOREGOING.


CHARLES C. ADAMS, VICE-PRESIDENT.


CLARENCE H, MACKAY, PRESIDENT.
EDWARD REYNOLDS, VICE-PREST. AND GENERAL MANAGER.

CHARLES P. BRUCH, VICE-PRESIDENT.

r17-1-7-

W ESTESZ
47,12NA

Form 260

Z

'WESTERN UNIilli

GEORGE W. E. ATKINS, VICE-PRESIDENT
RECEIVER'S No.

TEL

wv

-

NEWCOMB CARLTON, PRESIDENT

TIME FILED

BELVICERE BROOKS, VICE-PRESIDENT

CHECK

SEND

the following Telegram, 'subject to the terms
on back hereof, which are hereby agreed to

New York, July 26, 1916.

Benjamin Strong, Jr.,
Care Benjamin Strong,
Wood's Hole, Mass.
Following received from Delano:

Quote.

Due to reach Boston nine-fifty

Marblehead say ten-thirty unless it is important to arrive earlier in
which event I shall take midnight for Boston.

Please advise.

seventeenth.

read the Marsh letter in Economic 7orld of July

I telephoned him Saturday be at Marblehead Tuesday noon.



V. C. McLaren.

Have you
End Quote.

;
ALL TELEGRAMS TAKEN BY THIS COMPANY ARE SUBJECT TO THE FOLLOWING TERM'
To guard against mistakes or delays, the sender of a telegram should order it REPEATED, that is, telegraphed back to the originating office for comp.,_,sua.
For this, one-half the unrepeated telegram rate is charged in addition. Unless otherwise indicated on its face, THIS IS AN UNREPEATED TELEGRAM AND
PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:
The Company shall not be liable for mistakes or delays in the transmission or delivery, or for non-delivery, of any UNREPEATED telegram, be _,Lid the
amount received for sending the same; nor for mistakes or delays in the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond fifty times
the sum received for sending the same, unless specially valued; nor in any case for delays arising from unavoidable interruption in the working of its lines; nor for
errors in cipher or obscure telegrams.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery, of this telegram, whether caused by the negligence of its servants or otherwise, beyond the sum of FIFTY DOLLARS, at which amount this telegram is hereby valued, unless
a greater value is stated in writing hereon at the time the telegram is offered to the Company for transmission, and an additional sum paid or agreed to be paid based
on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram over the lines of any other Company when necessary to
reach its destination.
Telegrams will be delivered free within one-half mile of the Company's office in towns of 5,000 population or less, and within one mile of such office in other
cities or towns. Beyond these limits the Company does not undertake to make delivery, but will, without liability, at the sender's request, as his agent and at his
expense, endeavor to contract for him for such delivery at a reasonable price.
No responsibility attaches to this Company concerning telegrams until the same are accepted at one of its transmitting offices; and if a telegram is sent to
such office by one of the Company's messengers, he acts for that purpose as the agent of the sender.
The Compriny will not be liable for damages or statutory penalties in any case where the claim is not presented in writing within sixty days after the telegram is filed with the Company for transmission.

THE WESTERN UNION TELEGRAPH COMPANY

No employee of the Company ie authorized to vary the foregoing.

INCORPORATED

NEWCOMB CARLTON, PRESIDENT

CLASSES OF SERVICE
TELEGRAMS
A full-rate expedited service.

NIGHT TELEGRAMS
Accepted up to 2.00 A.M. at reduced rates to be sent during the

night and delivered not earlier than the morning of the next ensuing
business day.
DAY LETTERS
A deferred day service at rates lower than the standard telegram
rates as follows: One and one-half times the standard night letter

rate for the transmission of 50 words or less and one-fifth of the

initial rate for each additional 10 words or less. Subordinate

to the priority of transmission and delivery of regular telegrams.
Must be written in plain English. Code language not permissible.



Telephonic delivery permissible. Day Letters received subject to
express understanding that the Company only undertakes delivery of
the same on the day of their date subject to condition that sufficient
time remains for such transmission and delivery during regular office
hours, subject to priority of the transmission of regular telegrams.

NIGHT LETTERS
Accepted up to midnight for delivery on the morning of the next
ensuing business day, at rates still lower than standard night telegram
rates, as follows: The standard day rate for 10 words shall be charged
for the transmission of 50 words or less, and one-fifth of such standard
day rate for 10 words shall be charged for each additional 10 words or
less.

Must be written in plain English. Code language not perMail delivery, postage prepaid, permissible.

missible.

Blue

WESTE

TEL

symbol appearing after the check.
[words)

Day Letter

Blue

WESTERN UNION

NL
.ght Letter
none of thqse three symbols
Meek number of
appears after t
this is a .
nessage. Otherwise its character .s indicated by the

CLASS oF

krIN

Nile

aiessage

utuo

Night Message

Nile

PANV

AM

NEWCOMB CARLTON. PRESIDENT
BELVIDERE BROOKS. VICE-PRESIDENT
GEORGE W. E. ATKINS. VICE-PRESIDENT

NI

Night Letter
If none of these three symbols
appears after the check number of
words) this is a day message. Otherwise its character is indicated by the

symbol appearing after the check.

RECEIVED AT

IK AMG

49 GOVT

K WASHINGTON DC JULY 26 1915 1055AM
:NJAMIN STRONG JR
62 CEDAR

UE TO REACH BOSTON NINE

717

- NEWYORK

FIFTY MARBLEHEAD SAY TEN THIRTY

IS IMPORTANT TO

ARRIVE EARLIER IN WHICH EVENT

I-SHALL TAKE MIDNIGHT FOR

BOSTON PLEASE ADVISE HAVE YOU

IT

ligSS
AD THE MARSH LETTER IN




CONOMIC WORLD OF JULY SEVENTEENTH
DELANO
11AM

FEDERAL RESERVE BOARD
WASHINGTON
October 26, 1915.

AP6(

it,

My dear Mr. Strong:

P

The apples arrived and they were about the finest and best
I over saw.

The family are enjoying them.

I am going to Chicago to attend a dinner to be given to Mr.
Ripley, President of the Santa Fe Road, on Saturday night next
and shall come back via New York, arriving there Monday, November
1st.

If you and La% Jay are "on the job" that day I shall hope

to have a good chat with you and to that end I shall call at the
bank, say about 10:00 o'clock in the morning.

If you wish to

arrange a definite hour you can address me here before I go.

(I

am leaving Friday night) or at the Belmont Hotel to reach me ionday morning.

Mrs. Delano is going to be fhpre so I shall want

to keep my evening free.
Yours very truly,

Mr. Benj. Strong, Jr.,
Governor, Federal Reserve Bank,
New York City.




-.1-,---,^,RESERVE BOARD
IbLTri
NivAis,,IINGToN

October 28, 1915.
FEDERAL RESERVE BANK

My dear Mr. Strong:

Your note of the 27th is just
received and tt will give me pleasure
to follow/put the program suggested
by you.

/ My train arrives New York

at 9:20 A. M.

Yours very truly,

Mr. Benj. Strong, Jr.,




New York.

FEDERAL RESERVE BOARD

FILING

DEPTw.ASHINGTON

LIC.U4-- 1915

If

December 1, 1

?itt

\I E t)

FEDERAL RESERVE BANK
)/,

el.PJ

My dear Mr. Strong:

13

I am in receipt of your letter of 1ove4pr
LUL-

which I have read with great interest.

There is

on1V6Ig'-'

thing I do not like in the letter and that is the conclusion
you come to that we are powerless to do anything at the
present time, because we have not a portfolio full of paper.
Just because we cannot do what we would like to do

if we had

a portfolio full of paper, should not lead us to the conclusion
that we can accomplish nothing.

The suggestions I have made

were, I admit, crude and not thoroughly worked out, but I
threw them out simply for discussion.

That I had in mind when I wrote Paragraph (d) was
that the Federal ReServe Bank would call some of the big member banks together and maim substantially this proposition:
"Te will buy from you round amounts of Government
bonds with circulation privilege at, say 99-1- and give

you credit on our books for them, the understanding being that you will keep this reserve on our books as
optional reserve which you will not draw against until
the demand for money very considerably increases.

We,

in turn, will take the bonds we have bought, have Federal Reserve Bank notes issued against them, but hold



-2-

these bank notes in our vaults against the time when
there is an active demand for currency.

when that time

comes and our member banks with whom we have made this
arrangement wish to draw down their reserves, we can
pay them in Federal Reserve notes or in Federal Reserve
Bank notes.

In this way, Federal Reserve Bank notes

become an elastic currency in the strong hands of the
Federal Reserve Bank rather than in the weak hands of
member banks."

In Central Reserve cities there is a better opportunity to conduct these operations than in any reserve city; and

I'should think it would be perfectly possible in this way to
draw in National bank notqcurrency to the extent of a hundred
millions, and possibly twice or three times that amount.
In this suggestion I am not speaking for the Board,
and not even giving my own final conclusions, but am,, in a

sense, "thinking out loud."
In regard -to

(e),

I admit that it would rarely, if

ever, be necessary to sell bills, notes and acceptances, but
the ordinary process would be to allow these in our portfolios
to run off, and not replace them.
that we are in the open market,

However, when the time comes

I uee no reason why the selling

of foreign or domestic bills should not be recognized as just
as much a proper process as the purchase of them.
Yours very truly,

L. Benj. Strong, Jr.,
Governor, Federal Reserve Bank,




New York City.

/,/

1/(//

CI




FEDERAL RESERVE BOARD

FILING DEPTVAsHINGToN
Personal
D

3

1915

FEDERAL RESERVE BANK

47 December 3, 1915.
kr.
7'
0.es
c'C's

cP7,

My dear Mx. Strong:

I am grateful to you for your letter of the second
instant and I should not respond at once were it not that I
think you have overlooked the main premise upon which/My whole
thought was predicated, even though not expressed in words.
I assumed, as a fact, that the banks in New York were carrying
very large excess reserves; I mean excess over the 18% required,
and that even of this 18% five-eighteenths were optional reserves.

This being the case, and assuming that they were earn-

ing no money on either the optional or the excess reserves, they

would be willing to respond to such proposal as I outlined.

Of course, I require no diagram to see that there is
nothing in it if they Should promptly draw on you to pay for the
redemption of their notes.

And here again I am assuming that

these banks, many of them, have their notes either actually
unissued, or where they can readily call them in, so that they
can send in the notes themselves to a considerable extent.
I agree with you that the bond secured currency is
an evil which should be reduced as rapidly as it can be without
causing alarm.

If the Federal Reserve Board were to come out

with any such bald statement it might create alarm or cause a
bombardment from some sources, but I think you and I are agre



that we will

never have a thoroughly elastic currency until

a large portion of the bond secured currency is retired.

And,

incidentally, there is no doubt in my mind that a successful
country-wide clearing will diminish the necessity for currency,

but my argument is that the bond secured bank notes are much
safer in twelve hands than in some seventy-six hundred hands,
and that in twelve hands.they can be handled so as to be more
nearly and truly elastic.

Now as to the comparative merits of buying twos.

with the circulation privilege, and holding them as such,

mJ.3

conVerting them into threes, I think there is a good deal to
be said on both sides, but at present I lean to the idea that
I would rather hold them with the circulation privilege.

an investment, the rate is less, but as to giving the Federal
2eserve Bank a currency elasticity.

I think they are better.

Under the twenty-five millions provision of retirement, it would take th-irty years to retire all the Government

bonds, and it may be desirable to have the language of this
provision of the Act changed so that the retirement will not
be less than twenty-five millions per year, instead of not
more than twenty-five millions.

jithout any change in the

law, there is another way in which all the National bank note
currency could be retired in twenty years, and that is the
method suggested by Mr. Perrin, which impresses me as certainly
worthy of consideration, to wit:



as National bank charters

-3-

are renewed they be renewed without the currency issuing privilege.

I recognize that there is one very serious objection,

(in fact, it is the most serious objection that I can see) to
taking over Government bonds, and that is that it at once releases National banks of any necessity of remaining National
banks.

For that reason I would hesitate to take all the bonds

of any bank.-a7z-fe-7I note the argument in the latter part of your letter
in regard to the undesirability of selling bills, and I think
you make a very strong case.

I, of course, realize that it

would be an exceedingly rare transaction, but I think you show
why it would be not only rare but undesirable and unnecessary.

Please understand that this letter is personal in
its nature and is not intended either to represent my final
or mature conclusions or decision, or any decision arrived at
by the Board,

Yours verytruly,

Mr. Banjo Strong, Jr.,
Governor, Federal Reserve Bank,
New York City.







FEDERAL RES
WA

_

GTC N







4t,
!A

r\







FEDERAL RESERVE BOARD
WAS
July 16th, 1916.

Yr.

Benjamin Strong,
4100 Montview Avenue,
Denver, Colo.

My dear Ben:

If I have not been misinformed you are again
out in your Denver home, and I write to find out something more about Francis A. Chapman of Denver, who you
-

mentioned to Mr. Warburg.

Is he a man who is competent

to be manager of a branch bank in Denver, or would he
be a better man for director of the branch?
his business connections and experiences.
Very truly yours,

What are

FEDERAL RESERVE BOARD
WASHINGTON
July 21st, 1916.

My dear "Ben":
I hope you have had salubrious weather in Colorado; that you
survived the journey; that you have escaped the heat and that you are
laying on a few pounds here and there where they will not do you any
harm.

I have been thinking a good deal about your Bank of England prot
posal and trying to figure out how I

can overcome the difficulty that

Warburg (the only member of the Board who is really well posted upon the
subject) points out.

Finally the thought has euggested itself to me

that I should submit the plan to some high grade, disinterested man,
and have hixr/ criticize and endorse it, and that I could then use that

endorsement, not only to sustain my judgment, but to present the matter
to the Board.

I think Warburg would be willing to waive the responsibility and
to have the matter handled during his absence

say durirg August; but

I could not win the votes of my colleagues on th4Board, especially the
more cautious ones, unless I could show that some person entirely competent
and expert in such matters had endorsed the plan.

This perhaps will

explain how my mind has been running, and in casting about for some one

to consult, the names of George Blumenthal, Max May and John Gardin
occurred to me.




While I do not know much about him, my impressioPhat the first




rong (Sheet No.2.)

named is the best; but upon inquiry as to where he

was and

how I

could

get hold of him, I find that he is now out in California, traveling,
and at last accounts vas at the Del Monte Hotel, Monter4y and does not
expect to be back in New York until September first.

Hence, the thought

has occurred to me( as an alternative from my first thought) that you

might get into communication with Blumenthal and ask him to stop off
on his way east.

plain the

If he

would

do

so, and you could

situation to him, he could come here

thereby

fully ex-

and make his recommenda-

tion to me.

My present plan is to be away the first ten days of August, returning here for the rest of the month, and
September, when

Miller and

going away again

early in

Warburg will be back again "on the job".

However, I could postpone my

going away

for a few days in order to see

Blumenthal.
The merit of the whole schema(

depends, of course, upon your

views and conclusions, and I simply throw this out for you to think
over

and

advise me'.

Yours very truly,

Mr. Benjamin Strong, Jr.

MEMORANDUM

August 9, 1016,

The Wall Street Journal of August 7th carries an article
dealing with the per capita indebtedness for war costs of the
warring nations - giving two figures, one showing the per capita based on the population of the mother country alone, the
other including colonies.
Of course the population of the colonies should be eliminated from any such calculation, inasmuch as in figuring out
per capita debt one can only figure with those who are able to
carry a national debt of any size.
But it is hard to see how much of a debt France will be
able to place on her 47,000,000 of colonial population; and
the same thing applies to a large extent to the British colonies.
One may think of the story that has been told about the
man who asked a colored waiter in a restaurant ehether he could
change ten dollars. The waiter answered, "No, Boas, but I appreciates the compliment." Very similar would be the feeling
of a Dahomey negro, Ao in all his life has never owned five
dollars worth of money or property, if ha should read - if, indeed he were able to read - that the Wall Street Journal has
put him down as a fit subject for :0.03 per capita debt.
Anybody having read the Wall Street Journal during these
past two years can readily see that the only reason for that
absurd basis of comparison is to ue found in the wish to be
able to make the statement:



VMA2,=7

"The heaviest per capita war expenses are In Germany,

where they have been 4174 per capita for the home country
alone and 4143 dollars if the German colonies are included.
For Continental France they have been 4225 per capita, but
for France and her colonies, only 4103.

If British expenses

are prorated simply over the British Isles, they amount to
only 4243 per capita, but when the population

of her domin-

ions and colonies, exclusive of India, are included, it is
brought down to

9l

Russia has the loweet per capita ex-

pense of all the great nations, it being only i51."
If we strip this paragraph of the inclusion of colonies,
the fact remains that Great Britain has incurred a per capita
debt of :243; France of

25; and Germany of 4174.

All the

rest is misleading.

Then what about Russia?

To begin with, we ought to boar

e mind that what we have said about African colonies applies
in large part to the Russian population.

The 171,000,000

of Russian population includes a large percentage of people

who could hardly figure as a fit basis for substantial per capita debt.

On June 26th a Dutch paper, the Nieuwe Rotterdameclie

Courant, contained the following
the congress of bank directors which hes been held
Item:"In
in Petrograd, the Manager of the Banque Internationale de

Commerce de Petrograd pointed out the role which banks fulfil
in the industry which is working for the national defence.




-3-

The speaker stated that of the 4 billions roubles which, roughly speaking, are forming the aseets of the Russian Commercial
Ranks, 3 billions are being invested in State loans and in the
industry ehich

1.3

workine: chiefly for the military needs of the

Government.

"As far as the Banque Internationale itself is concerned,
three quarters of the total of its balance sheet represent
credits granted to enterprises which are working for the war."

the only country
ammunition factories are not paid but where the Rus-

This shows that Russia is possibly
where the

sian Banks have to carry the manufacturers to the extent of
3,000,000,000, until the

Russian

Government will be able to pay.

In addition, we know that Russian circulation has been inflated to such an extent that
about

three or four

priees have risen in Russia to

times what they were before the war.

4n

other words, the Ruesian Government haa been paying for its

home debts by

printing paper.

has been forced -Co

Moreover, no other country

purchase as much abroad in Japan, in the

United States and in Engladd ann France, as Russia.
dustries are

insufficient for

Her in-

her present needs, and the loans

that have been publicly announced as contracted for by her in
foreign countries could not possibly have paid for all she has
purchased abroad.

It is tempting,

therefore, to reach the

conclusion that either Russia must have contracted for mo
loans from her allies than we know, or that she has been




-.4-

paying by sending gold, and that part of the stream of gold
which is reaching our shores at present is coming from Russia.
It would be interesting to know, however, where this
Russian gold comes from and what are the bookkeeping methods

which enable Russia eitt_er to conceal gold holdings before
the bec;inning of the war, or to conceal her eithdrawals now.

It would not be surprising if a search light turned upon
these conditions would establish some interesting facts.
Moreover, tne investing public ought to bear in mind that in
the past Russia has been a regular borrower in France and England and Germany, but mainly in France, and that her foreign
gold credits have been annually replenished by these borrowings and thus enabled her to pay in gold the tterendoua annual
obligations for the payment of her coupons and amortization.
These foreign debts have been increasing through the war
and it is a queeti6n well worth considering how Russia after
the conclusion of the war will continue to pay these forelitn
obligations when h,e1 allies will not have the same interest
and not the same saving power as before the war, and may be

unwilling or unable, or both, to if,rant further loans to Russia.

It is all very well to say that Russia is a land of tremendous resources, but the quention is how under the present
regime can this country be developed and, moreover, even
granting the improbable ease of a future more progreseive administration for Russia, can she be developed quickly enough
to avoid an immediate catastrophe at the conclusion of the war?



izzieff

kit 2-

c%vf/

_

0

de& ,d.,7
."

2




/e0--Efet

di

/./

A,

/c-0
e_

L-i2

7&

Az

,44,ee

-

-

2

eo-ar

./
74_

>4-

e-Zig., 9 A.,

A-1
-

. .

et4-ee-i/-

10-,

/ft e


izzet"

/

4

'24\
\e




1

i

r)

\

N
'

4

'\
1

\)

\

'\1

i

ti:

-

+
\'







"1/--

h4) %t-eZ

tLj

./`.4774,7
_

XL--k ,/
zer

el"

/4(
/2{,c-7



4,.-Az

t

t/i(Ze




r

ier,42,--,-/Az-a

:7/

4,74L

N1

,LZil-7-/

6gi




zJ

'

7/-27A,z(-7-r

47.4'
777

_7/-47-77 )7 0

-7-">

6-7

z_t-,

71:

77
/47

fr-7




r 7742,




\c




1




tl

(

T-177,







COPY

September 14, 1916

Dear Ben:

Since stenographers became the fashion, my ability to write
long hand has gone steadily to the blink, and I have become what must
be admitted a "bum correspondent." I have owed you a letter for a
long time and intended often to write you, but it has taken real leiI left Washington on the afternoon of Septemsure to bring that about.
ber 1st and have been on the beautiful Maine Coast ever since. First,
I went to Bar Harbor where my family were and thereby skillful avoidance of pink teas, lunches, and dinners I had a good time. Mt. Desert
Island is a beautiful island with eight or ten rugged granite hills
1,000 to 1,500 feet high. It is threaded with paths, and I did them
pretty religiously, mostly alone I regret to say. On the 10th, I came
here, and I had a wonderful time with the Norton's. We have had wonderful fall weather, cold nights and warmish days, and we have been
exploring by land and sea. We manage to have vigorous setting up
exercises A la Muldoon at 6:30, also medicine ball, etc., then bath
and breakfast, then some all day excursion on land and water which includes at least three hours hard tramp. Charley thinks this is overcoming my Federal Reserve, and I think it is clearing some of the
cobwebs of high finance from his disordered brain. I wish you were here
for I am sure you would find it most interesting. It is the sort of
snug little harbor that it would take Stevenson or the writer of romantic
sea tales to do justice to. My father's people were all sea men and web
footed, so when I get by the sea all the inborn hunger for it seems to
come up. The automobile and the motor boat enables us to annihilate
space, and we can go to innumerable islands and inlets and explore a
region which under old conditions would have taken months to accomplish.
Yesterday, for instance, we shipped across Penobscot Bay to Camden and
spent several hours going over the range of hills known as the Camden
Mountains, 900 to 1,300 feet high, and giving a wonderfully extended
view of the archpelago surrounding it. Some shark on statistics says
it
you can see 365 islands and perhaps he is telling the truth;
wouldn't pay to employ Arthur Young to check him up. Charley Norton
learned of this lovely spot from Jimmy Curtis' sister, and I think it
is almost unique. He has bought enough land surrounding the harbor to
protect the primitive nature of the place. He has given half a dozen
or more retired captains, fishermen, and boat builders a life interest
in their homes, and he has made an old sea captain's home habitable and
comfortable with modern fixings, but without destroying the old flavor.
He has a motor boat, a sloop, a catboat, and various rowboats, etc., so the
children who are fine husky little brutes are growing up in the way they
should go.

As you know, I remained in Washington all summer, until September 1, and while I thought I was busy, I look back upon it as a rather




Page 2

wasted experience. The check clearing and collection matter is moving
along about as fast as could be expected. Aiken's District has made
the most notable success by reason of skillful handling by him of the
Boston Clearing House people. I think by the time the next payment is
made (November 16) we can call the scheme fully launched, and though it
may take a year to work out all of the kinks, I believe there will be
no reaction. Every month will show a gain over the last. P. M. W[arburg]
had rather a hectic time this summer and not altogether a happy solution
in all respects. We carried our fight on rotation far enough to prevent
the designation of Hamlin -- but we did not get rotation seniority of
terms, not by favor, as we had hoped. That was McAdoo's fine Italian
hand.

On the amendments, I think we did pretty well, even though we
lost some things we wanted. If we play our cards well, we should get
several vital amendments in the next short session of Congress. This is
true regardless of how the election goes, for it means either a Republican
victory or a reduced Democratic majority in Congress which will make the
Congress disposed, I think, to give us what we want. However, some of
the amendments we did get are good, and I think pretty far-reaching.
For example, if we can introduce the principle of having all reserves
kept in the Reserve Banks, we can drop or discard the idea of having
Federal Reserve Notes as reserves. If a member bank keeps all its
reserves with the Federal Reserve Bank, it becomes immaterial to it
whether its till money is Federal Reserve Notes, silver, gold,Bank Notes,
or Greenbacks. The Clayton Act is troubling the Board now, and they are
fully occupied with the question. I "wrestled" with it but left it unfinished!
The foreign (English) arrangement is still in statu quo.
McAdoo suggested going to the Secretary. of State, and I was the only
one left to say it was quite unnecessary. I presume Lansing will hold
the matter up till after the election -- but anyway he promised me informally not to turn it down without giving me a chance to discuss it
with him. Harding (now Governor of the Board) is strongly in favor
of the deal, and I think we shall certainly put it through, but it
does take an infernal amount of time. Your letter answering P. M.
WarburgPs objections I thought was excellent; -- butP. M. W., while
superficially favorable, is at least not unfavorable to the scheme, and
it makes it hard. I think McAdoo would have said, as he did a year ago,
that the matter did not need action by the State Department -- had it not
been that he wanted, without saying so, that it should be deferred till
after November 4th.
Saturday, September

16, 1916

I had gotten thus far when we started off on a very interesting
excursion in CDN's gasoline launch -- exploring the shore for 60 or 70
miles to the eastward. We entered numerous little harbors and inlets,
and finally went up a most beautiful tidal river, the Damariscotta, the
river of many fish or little fish in the Indian language. We spent the
night in a little village (Damariscotta) and worked our way back yesterIt was most interesting, and what with some tramping ashore and rowday.
ing our dinghy we managed to get some healthy exercise.



Page 3

Charlie let me read your good long letter of August 18th
and yours of very recent date -- September 8th or thereabouts,-.both most interesting and reassuring as to your health and vigor.
Since your letter, you have, I presume, met Hughes and also learned
of the Maine results. I have, after several weeks of consideration,
decided to abandon Wilson and vote for Hughes. I shall not be the
only one, and I would not be surprised if there was quite a Hughes
landslide. Hughes has shown some nerve in discussing the labor
situation and Wilson's bungling of the R. R. strike problem. I was
in doubt whether this would make or lose votes, but now I begin to
think it will make him votes. Furthermore, I think that labor
leaders will begin to see that Wilson's aid hurt rather than helped
them -- that the whole thing has been messed and bungled, and as I
see it, in the same way that the Mexican situation was bungled.
Wilson is personally unpopular, and I think is no politician. I
shall call him a near-statesman -- who missed greatness by a fair
margin. People more and more doubt his sincerity. They feel that
his words do not ring quite true. Perhaps that is only my view
and not a true reflection of the public view, but I cannot help
thinking that he is disliked most by people in Washington who
have seen the most of him. That is not a good sign, -- for him, -and I think it explains why he has lost in popularity. There is very
They vie with each other in
little to choose between the parties.
progressive-ism -- there are no national issues! There are good men
in Congress in both Houses and as many Democrats as Republicans.
Hughes will not please the professional politicians, -- and he has
some of Wilson's faults, but I think is more human, more of a man's
man.

I shall be back in Washington in a week, and I know [will]
feel more like hitting the line than for some time.

Harding and Warburg will probably visit you after the
Kansas City Convention.
I have had some good talks with Charley about the reactionary crowd he is surrounded by, and I have heard the arguments which
are similar to those expressed to some extent by Wing. The difference
is that Hine, Beck, House, and Co. have sulked in their tents while
Wing has used the Federal Reserve Bank of Boston and profited in the
undertaking. I say to Charley and others -- if you have fault to find,
-- arguments to advance against the System, why not spit them out, manfashion, I am willing to listen, willing to meet or try to meet honest
Sulking and damning the System under one's breath
criticism half way.
I can't endure. Here ends the paper and here this letter, too. Excuse
this rambling epistle which I shall not reread. My best wishes for
your continual improvement.




Yours always,
(Signed)

FREDERICK A.DELANO

26
The enclosed is a copy of a private
letter which I have addressed to Dr.

Eliot, President Emeritus of Harvard
University.

It is, of course, not

prepared for publication and yet,
because it deals with a public question, I am taking the liberty of send-

ing a few copies of it to personal
friends.




F. A. Delano.




1128 Sixteenth Street, LW..,
Washington, D.C.

October

rn
F,, 191;c1
1,4, 46;

My dear

bi-: Eliot:kPCOnf.-

When I saw you early in August and discussed

withWup..

the achievements of the Wilson Administration, I fully intended
to vote for Mr. Wilson. not with the same enthusiasm,it is true,
with which I supperted him four years ago, but still with the deliberate conclusion that his record entitled him to another term.
Since then, I have come to the reverse conclusion, and I feel,

therefore, in the interest of candor, that I should frankly tell
you my reasons.

Before I proosed, however, to discuss my reasons,

I

should explain that one thing which bothered me at the outset in
considering the matter was whether I was a free agent or whether,

upon ethical grounds or reasons of decency, propriety or good
taste, I should vote for the man whO had appointed me to a public office.

Without going into my reasoning in detail, I will

say that I concluded that inasmuch as I was in no sense a member of The President's Cabinet, was not a member of his "offi-

cial family", was not in his confidence, had never been consulted, indeed, had no responsible share in the conclusions arrived
at or the policies adopted, and the further fact that I accepted my appointment, not as a seeker of a public office, but




0." C.....

simply as a citizen drsfted from the ranks to perform a given
service, I was not only a free agent, but that it was quite as

much as ever my right and duty to exercise the prerogatives of
citizenship.

That phase of the case disposed of, I reviewed the

achievements of The PresidPnt's administration, - as so well
set forth in your recent Atlantic Monthly article - and in the

light of more recent events, came to the conclusion that I
could not support The President, for the reason that, however
successful he haot been as the Premier of his party in securing

legislation, he had proved himself woefully deficient as an
executive and dangerous to the country and to his party as well.
The President, perhaps more than any other President
before him, has taken charge of the Legislative Program of his
part:.

He has not only '. een recognized as the party leader,

but until now he has been stronger than his party and put even
his most able and loyal party supporters in the background.
But as President his constitutional duties as administrative
and executive head of the Government are of prime importance
and in these particulars it seems to me he has signally failed.
He seems to be actually lacking in qualities necessary to make
a good executive.

The activities of the Administration may be chiefly




-3-

classed under three heads:
Policy with relation to Mexico;
Policy wf.th relation to European nations;
Domestic policy.
Dealing with these topics seriatim, I arrive at the following
conclusions:

Our Mexican zoliLy)
Viewed from an

angle, it appears to me to have been

a failure, - not that the ideal which The President apparently
had in mind was not fine and altruistic, but because he entered
upon a policy without any conception of how it was to be carried out or whether it Was even attainable.

The conditions in

Mexico at the end of four years are worse than at the beginning
and our relations are worse.

v/hile pretending not to intervene

in Mexico, if that word Means anything we did intervene in the
case of the Vera Cruz Expedition and again in sending down
Pershing's Column.

In spite of the expenditures of men and

money, we have failed to convince Mexico of our sincerity or of
our altruistic motives.
lievable.

Conditions in Mexico are almost unbe-

The poor and downtrodden people of that land for

wham we are ostensibly intervening are dying by thousands of
starvation and sickness.

Apparently we intended that they

should have self government on a better basis than even our own
people enjoy, but, though interfering with any semblance of government they once possessed, we have been unable to set up any-




-4thing better.

Our policy seems to have no beginning nor end;

it is alike inconsistent with our attitude toward Peru or to-

ward

Haiti, San Domingo or Nicaragua.

Our European Policy:
Our attitude toward the warring nations after more

than two years of war certainly does not appear in a very satisfactory light.

This is partly due to the fact that the po-

aition of a neutral is unsatisfactory and cannot be long

maintained by a nation any more than by aman with any degree
of satisfaction and self respect.

The result is that we are

equally hated by every nation abroad, belligerents and nonbelligerents.

7re have assumed that there was no middle course

between neutrality and war, and have missed the greatest op-

portunity this Nation has ever had, the opportunity to stand
up for the rights of man, for the foundation principles of justice, for the rights of little nations, etc.
to see that if,

as

We have failed

a result of watching the struggle, we are

convinced that if one party to it should winthe rights of
man were certain to be abridged, that our relations to cur
next door neighbor, Canada, were certain to be seriously af-

fected, that we could better trust those nations which had
done the most to develop democracy than those which have
stood always for militarism and the Divine Right of Kings,
then we would be justified in saying frankly and honestly,




"7e have no present intention of taking part in this struggle, but we have no hesitation in saying that our sympathies are thus and so and our reasons are thus and so".
That would have been fine.

That would have beaten out a

new avenue, a new road of advance, and, I venture to say,
would have appealed to the great heart of the Germanic peoples more than our honeyed phrases, more than our talk of
neutrality, which they believe is unreal and insincere.
It may be argued that such a policy is chimerical because it has never been tried and that it would certainly have led us into war.

I do not concede that either

of these criticisms are valid and I believe that such a
policy would not only have made for the ultimate peace of
the world, but would have been a-fine and dignified position for a great, strong nation, "conceived in liberty",to
have assumed.

It would compare favorably with the policy

we adopted in the Lueitania case, where our actions
squared so little with our words that it made every _redblooded American squirm.

And as I write, the latest de-

velopment in the submarine warfare, as to which we have

made such brave protests in writing, appears to be that
The President has concluded that the stoppage and sinking
of belligerent, and even neutral, vessels leaving our




ports cannot be objected to by us upon international grounds.
In other words, a foreign nation, not at war with us, can

impose a partial bloce of our ports and of our commerce,
whether carried in the bottoms of nations with whom we are
not at war, but even when carried by those with whom this attacking nation is not at war.

And this it is proposed that

we shall placidly contemplate!
I need not elaborate this thought, for I have
doubtless said enough to illustrate my meaning.

Our Domestic Policy:
The President set himself vigorously to put

through Congress a long and comprehensive program of legislation.

His greatest single achievement, as you point out, was-

the Federal Reserve Act; and yet, without taking away from
The President the credit properly due him for that achievement, no fair minded man would pretend that Mr. ',"ilson or

the Democratic party, or any other party could have successfully put through so far-reaching fundamental or constructive
legislation

if the

matter had not been

very fully

in-

vestigated both in and out of Congress and the public interest awakened by a campaign of education which had been going
on for several years.

No party could have put through the

legislation single handed, and as the records show, even

President 7ilson's strong leadership, at the height of his




-7influence, was not sufficient to put through the law without
Republican votes.

Of the other legislation less can be said.

It is, in most cases, like so much of our American legisla-

tion, well intentoned but exceedingly faulty in detail.

The

President has shown himself more eager to secure quantity
than quality.

In the Army and Navy legislation The Presi-

dent's attitude changed suddenly from one extreme to the other.

The change came, perhaps by a curious coincidentcimmedi-

ately after Ex President Roosevelt's and Senator Root's strong
attacks upon the country's lack of preparedness.

71as this

change of front the result of conviction, or an endeavor to
line up the Administration with the apparent tide of public
sentiment?

Did The President lead, or did he adapt his utter-

ances to what he sensed as the swing of public sentiment?
Every thinking man will form his own conclusions, but I cannot

escape the conviction that The President's "preparedness"
speeches were insincere and hollow and deliberately manufactured to meet the public demand.

And now we come to the last, and if not the greatest, certainly the most recent blunder of The ?resident, the
quasi settlement of the demands of the Railway Brotherhoods.
On this question I confess that my twenty-nine years of railway experience may lead me to take an unfriendly attitude to




-8-

The President, but I want to be fair.

This much I do know.

The President was aware that a crisis in this matter was approaching eight months before its climax.

He either ignored

the matter or deliberately allowed it to take the course it

did. Men the crisis finally did come, there were, as I see
it, two courses open to him; he could either lay aside other

affairs of State and act as the mediator and arbitrator of
the controversy, which would have obligated him, of course,
to listen patiently and with an open mind to the contentions
of each side, or else he could properly say that he would insist that there should be no strike, at least until he had
caused an investigation of the subject by a competent tribunal.

The men in the railway service are not anarchists, nor

are their labor chiefs.

They may do

SOYf,B

"bluffing", but

they would have accepted either plan without a strike.
that I

al-L

Of

confident.

Instead of that, The President jumped at a conclusion without investigation, and then, to use a slang phrase,
"passed the buck" to Congress.

In his message to Congress

The president either showed that he had sv.ch a superficial

knowledge of thematter that he mistook a veiled demand for
a twenty-five percent increase in pay for a demand for shorter hours of work, or else he :deliberately made a statement to
Congress which wr

esse_tially disingenuous.

It is not pleas-




-9ant to choose between either horn of this dilemma:
Put worst of all, a, very serious precedent has

been introduced and will have been established if approved
by the voters in November.

Unless we havea care, the

wheels of commerce will be stopped every Presidential year
to compel some new concession from somebody.

Furthermore,

The President has not made progress in harmonizing disputes between capital and labor.
confused the issues.

He has aggravated and

The rights of the public, which in

the matter of the public service are always paramount, have
been ignored or else left unprotected.

Arbitration, which

he pretends to believe in, is discarded because he decides
in advance that the case ds not arbitrable.

Now, either

arbitration is a good thing and should be used, or it is
faulty (which I admit) and should be discarded as soon as
a better contrivance can be devised to replace it.

A pro-

nounced passivist like The President must believe in arbitration, at least until something else has been devised to
take its place, because he does not believe in "ordeal by
battle".

And What is the explanation?

"as

The President

intimidated by four men threatening a great strike?

Did

ha have so little confidence in their good sense and patri-

IR)




-10-

otism that he feared them even as he might four outlaws
brandishing incendiary torches?

And how does he square his

sudden adherence to the demands of labor, with his published
utterances of comparatively recent years?

I would have said

that as a college P-z'esident, he was rather unfair - certain-

ly unkind and unfriendly - to labor; that he not only was undisposed to give labor credit for some justice in its position, but that he showed himself actually unsympathetic.
this sudden change of front?

Thy

Everyone will have to form his

own conclusions, but, I confess, mine are not as complimen-

tary to The President as I could wish.

I imagine you will say that while these criticisms
of The President are more or less valid, they do not convince
you that Mr. Hughes will do any better.

You may say, as many

do, that The President has had more difficult problems to

deal with than any otherPresident and that it is unfair to
abuse him because he has made some mistakes.

that is that many of the questions were difficult, but that
the difficulties which gave them birth were largely of his
own making.

That is notably true of the Mexican question.

Lie mould have been justified in upsetting the Huerta govern-

ment if he had a better man and a better scheme of government

My answer to




to substitute for it.

If he did .not, he committed an exec..%

And now, how can we be sure that Mr. Hughes

utive blunder.

will do better?

True, he made a good Prosecuting Attorney,

a courageous Governor, a thoroughly capable Justice of the
Supreme Court; but even then, he may fail as President.
True, so he may:
opinion.

No one ( an tell; it is simply a matter

of

On the other hand, we do know that a vote for Mr.

7ilson is a vote of confidence and endorsement, an assurance that his actions have met with our approval.
It is sometimes said that Mr. Hughes criticizes
Mr. 711son without disclosing what he Would have done under
similar circumstances; also that he should say how he proposes to handle the Mexican or the European situation.
Some of these

suggestions

cize what was done and

are unfair.

still

Mr. Hughes

can

criti-

not be justified in saying what

he would do after March L4th if elected.

These matters are

changing daily and there is no foreseeing what Mr. Hughes,
even if elected, will find to deal with.

It is certainly

conceivable, if not plainly obvious, that foreign nations
would deal somewhat differently with us if they thought The
President was a man not easily cajoled, than if they were
dealing with a man of words and phrases rather than of action.

Soma pretend to believe that Mr. Hughes would forth-




-12-

with adopt armed intervention in Mexico or a warlike policy
towards European nations; but they justify this belief only
upon the ground that he has criticized Mr. ''ilson's policies.

One argument used against

Mr. Hughes is that he ev-

idently proposes tc, protect American interests abroad, which

means, they suggest, protecting American corporations engaged in business in foreign countries at the expense of the
entire Nation.

This argument, even though used by a party

which has been strongly urging American capital to go abroad, and especially to seek investment in Central and
South America, would be a good argument if it were based
upon facts; buteN,ven if we agree in the policy that the Amer-

ican who invests abroad must do so at his peril, and that
he should not expect American military power or diplomatic
service to sustain him in his business, yet we must believe
that he has a right to expect that his country will see to
it that treaty obligations will be maintained, and, more
than all, that his country's diplomatic attitude shall not
result in breaking down his business.

In

Mexico,

for ex-

ample, it is a notorious fact that many American corporations would have gone along very well if the United States
had not interfered.

Far from asking intervention on their

behalf, they asked that their business and the lives of

OPA




-13-

their employees should not be jeopardized and sacrificed
by reason of an effort to carry out what has since proved
an unwise and, indeed, an impossible policy.

That the

next few months may bring on is difficult to foresee, but
certainly if interiention is necessary in Mexico, it will
be because in no other way can we restore order to a fam-

ine stricken nation, not because we shall be sending
ships or troops to protect American investments which have
been worsted there as a result of years of anarchy.
Another argument, and it appeals to me, is that
there is danger of turning out a Democratic Congress and
substituting a reactionary Republican Congress.

The an-

swer to that seems to be that progressives and reactionaries are to be found in considerable numbers in each party;
and by reason of the seniority rule in filling Congressional
chairmanships, it is an unfortunate fact that many important
committees are certain to be filled by reactionaries, regardless of whether the Democrats or Republicans win.

The

President is unpopular with Congress because he has usurped
it

functions.

He has bulldozed, rather than led it, and as

a result he has not helped his party.

sons which
issues.

Furthermore, for rea-

are not easy to explain, there are no great party

Each party claims to be progressive.

Each promises




about everything and the average c itizen is therefore thrown

back upon the question, Which man will make the best President?

One of them has been tried and in that trial has ex-

hibited some serious lines of weakness.

The other promi

well, but has been untried except in less important capacities.

Some will argue that it is better to take a man with

kno= faults than an untried man.

On the whole, and after

weighing the entire question carefully, I have come to the
conclusion to vote for Mr. Hughes.
I am, my dear Sir,

FILING DEPT'

Very truly yours,

(Sigfoid) F. A. DELANO.

'r,t)tRAII 141$01, VIVO

To Dr. Charles

Eliot,

Cambridge, Mass.




oc.

112 8 SIXTEENTI-e%T t
WASH I NGTON, 11.;

7;7-214
k

144411

ej/

October 31, 1916.

Dear Mr. Delano:

Your attention has doubtless been called to the fact that
a Joint Committee of the two Houses of Congress has, by resolution
approved July 20, 1916, boon directed to make a study of the whole
subject of governmental regulation of railroads and also of government ownership of the instrumentalities of interstate and foreign
commorce.
The Joint Committee has arranged to begin its sessions
November 20, 1916, at Room 326, Senate Office Building, Washington,
D.C., and as it is a matter of the highest public interest that the
subject of railroad credit shall De adequately presented to that cominittee, I am writing to urge that you appear has a witness in those
proceedings and give your views.
I cannot yet give you an idea as to when you will be called,
but it would be a very sincere satisfaction to re and to the Railway
7xecut1ves' Advisory Committne,if you could find time to make any
preparation which you desire to make and be in readiness when the
opportunity offers.
I am taking the

libert7

of enclosing to you the following

Papers:

Printed copy of the resolution of Congress referred to.
Printed analysis made by the Congressional Committee
of this resolution.
Printed copy of a list of subjects suggested for the
consideration of bankers and investment brokers.
Printed copy of a list of subjects which economists
and publicists will be asked to consider.

From these papers you will readily gather the subjects which
to be of especial
importance to us, and I would appreci
:e you
giving such consideratioA to them as you t ink they deserve.
are eminently gnalified to rank not only as a banker but as an economIst
and publicist, I vets-Aura to hope that you will give consideration to
the subjects presented for the consideration of economists and publicists
as well as to those more especially intended for bankers.

appear




Mr. Delano

2

In addition to what is mentioned in these papers, your
awn experience and judgment will doubtless suggest other aspects
of the matter which should be covered.

I take Vie liberty of suggesting that you could perform
no greater :public service than to appear before the Congressional
Oommittee and help in the solution of this problem which fumes
world has come to appreciate as a problem of the first magnitude.
Will you kindly let me know whether you will conseht to

appear. If so, I shall undertake to keep you advised as to the

proceedings, and as to when your presence will be needed. Meanwhile, I should be glad to receive from you any suggestions which
you feel inclined to make.
Yours ver:: truly,

Chairman.

Hon. F. A. Delano,




Member Federal Reserve Board,
D. C.
Washington,

[TENTATIVE PRINT-SUBJECT TO REVISION.]

SENATE

HOUSE OF REPRESENTATIVES.

FRANCIS G. NEWLANDS. NEV.
CHAIRMAN.
JOSEPH T ROBINSON. ARK.
OSCAR W UNDERWOOD. ALA.
ALBERT B CUMMINS. IOWA.
FRANK B. BRANDEGEE. CONN.

CONGRESS OF THE UNITED STATES,

FRANK HEALY. CLERK.

JOINT COMMITTEE ON INTERSTATE COMMERCE,

WILLIAM C. ADAMSON. GA
VICE CHAIRMAN.
THETUS W. SIRS. TENN.
WILLIAM A. CULLOP. IND.
JOHN J ESCH.
EDWARD L. HAMILTON. MICH.

WILLIS ./. DAV.S. ASST. CLERK.

ROOM 326, SENATE OFFICE BUILDING,

WASHINGTON, D. C.

INVESTIGATION OF THE CONDITIONS RELATING TO INTERSTATE AND FOREIGN COMMERCE
AND THE NECESSITY FOR FURTHER LEGISLATION RELATING THERETO.

PRELIMINARY STATEMENT.
INITIATION OF PROCEEDINGS.

The initiative of the proceedings provided for by Senate joint resolution 60 was taken by President
Woodrow Wilson in a message to the Congress of the United States, presented December 7, 1915, in the
following words:
PRESIDENT'S MESSAGE.
In the meantime may I make this suggestion? The transportation problem is an exceedingly serious and pressing one in this

country.
There has from time to time of late been reason to fear that our railroads would not much longer be able to cope wit
successfully, as at present equipped and coordinated. I suggest that it would be wise to provide for a commission of inquiry to ascertain
by a thorough canvass of the whole question whether our laws as at present framed and administered are as serviceable as they might be
in the solution of the problem. It is obviously a problem that lies at the very foundation of our efficiency as a people. Such an inquiry
ought to draw out every circumstance and opinion worth considering, and we need to know all sides of the matter if we mean to do anything in the field of Federal legislation.
No one, I am sure, would wish to take any backward step. The regulation of the railways of the country by Federal commission
has had admirable results and has fully justified the hopes and expectations of those by whom the policy of regulation was originally
proposed. The question is not what should we undo? It is whether there is anything else we can do that would supply us with effective means, in the very process of regulation, for bettering the conditions under which the railroads are operated and for making them
more useful servants of the country as a whole. It seems to me that it might be the part of wisdom, therefore, before further legislation
in this field is attempted, to look at the whole problem of coordination and efficiency in the full light of a fresh assessment of circumstances and opinion as a guide to dealing with the several parts of it.

THE RESOLUTION.

Senate joint resolution No. 60 was introduced in the Senate and, after amendment by including the
It was approved by the

investigation of Government ownership, was adopted by both Houses of Congress.
President July 20, 1916, and reads as follows:
[Public ResolutionNo. 25-64th Congress.]
[s. I. Res. 60.1

Joint Resolution Creating a joint subcommittee from the membership of the Senate Committee on Interstate Commerce and the House Committee on Interstate and
Foreign Commerce to investigate the conditions relating to interstate and foreign commerce, and the necessity of further legislation relating thereto, and defining
the powers and duties of such subcommittee

Resolved by the Senate and House of Representatives of the United States of America in Congress assembled, That the Interstate Com-

merce Committee of the Senate and the Committee of the House of Representatives on Interstate and Foreign Commerce, through a
joint subcommittee to consist of five Senators and five Representatives, who shall be selected by said committees, respectively, be,
and they hereby ape, appointed to investigate the subject of the Government control and regulation of interstate and foreign transportation, the efficiency of the existing system in protecting the rights of shippers and carriers and in promoting the public interest, the
incorporation or control of the incorporation of carriers, and all proposed changes in the organization of the Interstate Commerce Commission and the act to regulate commerce, also the subject of Government ownership of all public utilities, such as telegraph, wireless,




2
cable, telephone, express companies, and railroads engaged in interstate and foreign commerce and report as to the wisdom or feasibility of Government ownership of such utilities and as to the comparative worth and efficiency of Government regulation and control
as compared with Government ownership and operation, with authority to sit during the recess of Congress and with power to summon
witnesses, to administer oaths, and to require the various departments, commissions, and other Government agencies of the United
States to furnish such information and render such assistance as may, in the judgment of the joint subcommittee, be deemed desirable,
to appoint necessary experts, clerks, and stenographers, and to do whatever is necessary for a full and comprehensive examination and
study of the subject and report to Congress on or before the second Monday in January, nineteen hundred and seventeen; that the sum
of $24,000, or so much thereof as is necessary to carry out the purposes of this resolution and to pay the necessary expenses of the subcommittee and its members, is hereby appropriated out of any money in the Treasury not otherwise appropriated. Said appropriation
shall be immediately available and shall be paid out on the audit and order of the chairman or acting chairman of said subcommittee,
which audit and order shall be conclusive and binding upon all departments as to the correctness of the accounts of such subcommittee.
Approved, July 20, 1916.

MEMBERSHIP.

Following the adoption of the resolution the following Members of the Senate and House were appointed
members of the joint subcommittee:
Senate.

House of Representatives.

FRANCIS G. NEWLANDS, Nevada.
JOSEPH T. ROBINSON, Arkansas.
OSCAR W. UNDERWOOD, Alabama.
ALBERT B. CUMMINS, Iowa.
FRANK B. BRANDEGEE, Connecticut.

WILLIAM C. ADAMSON, Georgia.

THETUS W. Sims, Tennessee.
WILLIAM A. CULLOP, Indiana.
JOHN J. ESCH, Wisconsin.
EDWARD L. HAMILTON, Michigan.

ORGANIZATION.

The members of the joint subcommittee met and organized, selecting as chairman Francis G. Newlands
and vice chairman William C. Adamson. They also appointed Frank Healy as clerk of the committee and
Willis J. Davis as assistant clerk, and designated Messrs. Galt & Hull, Southern Building, Washington, D. C.,
as official reporters.
DATE OF HEARINGS.

The date of the first hearing was set for November 20, 1916, at 10 o'clock a. m., at room 326, Senate
Office Building, Washington, D. C.
ARRANGEMENT OF HEARINGS.

It is the desire of the committee to give ample opportunity to all interested in or having any relation to
the subject matter of the proposed inquiry to express their views. But the committee would like early
notice of the subjects to be discussed by the various persons appearing before it, so that the hearing can be,
as far as practicable, in orderly sequence as to subjects. The purpose of the committee is to hear regarding
Government regulation and Government ownership the opinions of economists and publicists of eminence,
representatives of the Interstate Commerce Commission, the National Association of State Railroad Commissioners, State railroad and public' utility commissions, representatives of the railroad executives and
labor organizations, representatives of firming organizations, and farmers, shippers, and bankers, representatives of chambers of commerce, and other important business and industrial organizations.
SUBJECTS TO BE CONSIDERED.

The subjects to be considered are stated in general terms in the joint resolution and cover
FIRST.

"* * * the subject of the Government control and regulation of interstate and foreign transportation,"
including therein specifically:
"* * * the efficiency of the existing system in protecting the rights of shippers and carriers and
in promoting the public interest."
"* * * the incorporation or control of the incorporation of carriers."
"* * * and all proposed changes in the organization of the Interstate Commerce Commission
and the act to regulate commerce."




0

3
SECOND.
IL*

*

the subject of Government ownership of all public utilities, such as telegraph, wireless, cable,
telephone, express companies, and railroads engaged in interstate and foreign commerce," including
*

specifically:
"*
* the wisdom or feasibility of Government ownership of such utilities."
*
the comparative worth and efficiency of Government regulation and control as compared
"*
with Government ownership and operation."
9. GOVERNMENT REGULATION AND CONTROL.

Under this head, without excluding other questions, attention is particularly called to the following
subjects:
Whether the Interstate Commerce Commission is overloaded and whether its jurisdiction should be
confined to questions of discriminations, rebates, and rates, its jurisdiction over other subjects, such as valuation, safety inspection, etc., to be turned over to some other body or bureau to be created by law.
Whether it is necessary to make any change in the organization of the Interstate Commerce Commission with a view to prompt and efficient action; whether it is feasible to increase the number of commisAra sioners and to permit them_tcLcii,vi.cle tsueyeal departments for.the consideration of cases, and if so whether
there shall also be consideration in bank and also whether there shall be appeal from decisions in the department to the commission in bank.
Whether such departments of the Interstate Commerce Commission shall sit in Washington, or be
assigned to definite traffic areas somewhat after the manner of the judicial circuits, and whether in the latter
case there should be provision for their sitting in bank at Washington or for some central body in Washington
gE06.4.0 with the duty of hearing appeals and directing the procedure of the departments.
Whether under the present system the creditsfilaasommon carriers is assured with a view to their
71.0
securing the moneys needed for necessary improvements and extaTTOTTis -gnat e interest of the public and at
reasonable rates of interest. Whether Government regulation of the issue of securities is advisable, and if so
_444.0
whether it is to the interest of the public as well as the carriers that this regulation should be exercised by the
eit.0

National Government and whether it should involve meret_publicity or absolute control of the issue of
securities. Whether concurrent jurisdiction of the Nation and the States to control such issues is in the

,interest of the carriers and the public. What will be the field of operations for the State railroad commissions
in the interest of the public if the control of securities and the control of rates is vested in the Interstate Commerce Commission. Whether and to what extent within a period of five years it will be necessary to enlarge
eto
the facilities of the common carriers in the interests of the public and whether the present system of Governg___Atots, ment regula-frOn ISsuch as to insure the credit of the carriers with a view tp their making additional necessary
-71-0
,expenditures.
What is the effect of dual regulation on the parts of the States and the Nation of the rates of carriers.
1-11,4b41'What, if any, contradictions does it involve, and what, if any, discriminations does it involve as between States
and localities.
Whether or not any regulation is feasible of the wages and hours of employees of common carriers,
and whether or not it is advisable, in the interest of the public and with a view to maintaining uninterrupted
5uterttv.

/to,
Winaili

J- x.,

commerce between the States, to take any further legislative action regarding the adjustment of disputes
between the carriers and their employees and regarding strikes and lockouts.
Whether any national legislation is required as to the organization of carriers in interstate commerce
in the nature of national incorporation, permissive or compulsory, or in the nature of national holding cornpanies under which State corporations may be controlled and unified in their operations in the interest of
interstate commerce, and what form of natio-al le-gislation for the incorporation of carriers or for holding
t companies owning the stock of State companies, is desirable.
How will national incorporation
police powers of the States over railroads operating within their boundaries. Will it be advisable, as in the
case of the national banks, for the National Government to prescribe a uniform rule for the taxation by the
States of railroad properties and securities.




4
_ J. GOVERNMENT OWNERSHIP.

./-

7to

the wisdom or feasibility of Government ownership of such utilities" and "* *
the
comparative worth and efficiency of Government regulation and control as compared with Government
ownership and operation," including under this head:
The practical results of Government ownership both as to efficiency and economy where actually
"*

*

*

practiced.

Whether Government ownership is compatible with our system of government and what its effect
will be on our governmental institutions.
Whether a system of Government ownership will suit local needs.
A practical method of securing Government ownership whether by purchase or condemnation of
properties, or by purchase or condemnation of bond and stock issues, or otherwise.
The views of all who are interested in or have information regarding the foregoing questions are invited
by the Committee, either by written communication or at the oral hearings.
It is suggested that with a view to maintaining a logical sequence in the hearings those participating
therein classify their remarks according to the foregoing subheads as far as practicable.




/.744.1A-14.;

)tif,374.yth
Chair




FEDERAL RESERVE BOARD

FILING DEPEASHINGTON
NOV c:; 0

MU

FEDERAL RESERVE BANK

L

VovcAper',26, 1915.
c,
-3-

.

My dear Mr. Strong:

I enclose herewith a little aNalysis in

which I have tried to illustrate in a graphic sort of
a way what the Federal Reserve Banks or the Federal

Reserve Board can do in the way of influencing money
rates.

I should like to have you look it over and

make such criticisms or suggestions as occur to you.
Yours very truly,

1

Er. Benj. Strong,
Governor, Federal Reserve Bank,
New York City.

436

Memorandum showing how Federal Reserve Banks or
The Federal Reserve Board may influence interest rates in
The United States

**

They can lower rates

(a)

**

They can raise rates

By lowering theirrediscount

(a)

By raising their rediscount

rate to member banks;

rate to member banks;

By lowering their open market

(b)

By raising their open market

rates;

rates;

By lowering their reserve re-

(c)

BY raising reserve requirements,
which the Federal Reserve
Board can do indirectly

(d)

By purchasing Government Bonds

quirements;

By issuing Federal Reserve
Bank Note currency against
United States Bonds;

with circulation privilege
but withholding the issuance
of Federal Reserve Bank Notes
against them;

By actively buying bills,

)

By selling bills, notes,
acceptances, etc.

notes, acceptances, etc.

(0




By not paying interest on

(0

By paying interest on excess

excess deposits and letting

deposits (i.e., above legal

money out pretty freely.

minimum) and hoarding the
money.

(t7Th dc

0,watf fre-ml Tr,4414

tfittletuT kV), AVoYarli;-

At A
066P-11.497i'.(

nitucfc _

iiff(

@`

4f/
10-

FEDERAL RESERVE BOARD
WASHINGTON
in November 28,1.916.

hVh.
19/6
My dear h=±'d==-t
I am sending you copy of a statement
I made to the Board on the subject of the accumu-

lation of gold, and the best way to accomplish it.
I know that you do not share my doubts as to the

k

wi dom of making Federal Reserve notes reserve,
I should be glad to have you read the reasons

I give for preferring another method of dealing
with the problem.
Yours very truly,

Mr. Benj. Strong,
4100 Montview Blvd.,
Denver.

/1/1-/(-,/,




,/2

W. P. G. HARDING. GOVERNOR
PAUL N. WARBURG, VICE GOVERNOR

EX-OFFICIO MEMBERS
WI

-

FREDERIC A. DELANO
ADOLPH C. MILLER
CHARLES S. HAMLIN

'MI G. McADOO
, THE TREASURY
AIRMAN

JOHN SKELuN WILLIAMS

FEDERAL RESERVE BOARD

COMPTROLLER OF THE CURRENCY

WASHINGTON

November

H. PARKER WILLISnSc..1
SHERMAN P ALLE 91). )7 a:SA:Y ETA R Y
CR
AND FISCAL AGENT

ADDRESS REPLY TO

FEDERAL RESERVE 'BOARD

27, 1916.

To the Federal Reserve Board,
Washington.
Gentlemen:

On May 10, 1915,

I prepared for the Board a short state-

ment dealing with Governor Hamlin's brief on the subject of note
issue amendments.

I took the position at that time that there

were three amendments to the Federal Reserve Act relating to this
matter which were very desirable:
The right to issue Federal Reserve notes directly
for gold;

A consolidation or combination of the accounts of
the Federal Reserve Agents and the Federal Reserve
Banks so that we would have the responsibility of
the Banks behind the custody of the notes, and not
only that of the Federal Reserve Agent, so as to
provide that the Reserve Banks shall show all notes
outstanding in the hands of the public as a liability
and all asses held against them as an asset of the
Bank;

An amendment to Section 14, of the Federal Reserve Act
which would liberalize the law in respect to collateral
behind Federal Reserve notes by making eligible as collateral bankers' acceptances, or what is known as
"bought paper", as well as commercial paper rediscounted for member banks.
I then took the position that if these three amendments

were secured it would be neither necessary nor desirable to ask
Congress to make Federal Reserve notes legal reserve.




890

- 2 -

Since that memorandum was written the third of the above
mentioned amendments he, bee': passed bY Congress and another amend-

ment has also been passed which has a Very important bearing on the
situation, to-wit:

the atthority to Member banks to keep any part

of their reserve with the Federal Reserve Bank, instead of in their
()vim vaults

I

till believe that the amendments suggested by me on

May 10th are very desirable and that if they were passed it would not

be necessary, at least at this times to make Federal Reserve notes
available as bank reserves.

However, the proposal, so ably urged by

my colleague, Mr. Warburg, is entitled to the most careful consideration, first, as to the desirability of the object sought, and, second,
as to whether there is any better means of attaining. it.

First, as to the object sought.

It appears to be Mr. War-

burg's desire to impound in the Federal ReserVe Banks a very large
share of the country's gold supply, whereas I rather question the
desirability of going too far in that direction.

My feeling is that,

under the changes in tne law which t have suggested, we wotld have
little difficulty in accumulating in the Federal Reserve Banks half
of the gold stock of the country not in the hands of the Federal Government.

If the other half were in the hands of the public and in

those of member and nonmember banks it would be where it could serve
an important purpose as a sort of secondary reserve supply which would
be called upon in case of great need.




If our banking system was




890.

under a strong central management, and the form of our Government
was like that oi the German Empire, I can readily see where it would
be natural and perhaps desirable to act on Mr. 1.4larburg's suggestion,

but, considering the form of our Government, the temperament of our
people, and the dangers of over-expansion and over-speculation,
think

I

we should not put all of our golden eggs in one basket.
all recall that the panic

to several years of great expansion

in

1907 came as a climax

of

expenditures in all kinds

of business enterprises, a period of ten or eleven years of pyramiding upwards almost without interruption.

Six months before the

panic came many wise men thought that things lool:ed "squally", and

yet the temptation to keep on stretChing bank resources to the limit
was too strong even for them to resist.

For this and other reasons

I can not help feeling that there is danger in putting all the elasticity in the Federal Reserve Banks and not leaving a reserve of

elasticity in the banksof the country.

Of course,

I am aware it

is somewhat inconsis'tent to say that a balance with the Reserve

Bank shall be ccunted as a reserve, whereas, the notes of the Bank
can not be so counted.

I am also aware of the fact that as time

goes on bank balances are going to play a greater part than Federal
Reserve notes; that when our check clearing and collection

plan

is

fully developed, member banks will care less about drawing out Federal
Reserve notes, and more about transferring balances by drafts and

890.

- 4checks,

On the other hand, the use of Federal Reserve notes will

1

be always greatest in the parts of the country where there is the
greatest necessity for caution;

in those parts Of the country where

other credit instruments play a smaller part and where actual currency plays a larger part.

I can see that if we do not make Federal Reserve notes
reserve and if we permit, say _one-half of the gold holdings of the
country to remain in the hands of member and non-member banks, we

may sometimes reach a point where a Federal Reserve Bank has exhausted

its unpledged gold supply and can not issue any more notes.

Member banks, coming to their Federal Reserve Bank to borrow will,
in such a case, complain that "the well has run dry", but when

that time comes the Federal Reserve Bank will say to those member
banks, "If you have gold in your reserves and will deposit it with
us we can help you,
gold in the ratio of

because we can immediately expand that

1.625

to 1, and we can hold your gold to

count as reserve and still help you with currency or book credits."
I agree entirely with Mr. Ihrburg's argument

that we

should put ourselves in a position to release gold freely when the
European war is over.

For us

as a nation to have accumulated

through a favorable trade balance an enormous fund of gold and then
attempt to put the bar3up and so prevent the world's supply of gold
from seeking its natural level would be absurd and even monstrous.




890.

-.55-

Such action on our part might very properly lead to a demonetization of gold, but I can not conceive that gold will go out Of the
country except in four ways; first, by a reversal in the balance
trade;
third,

second, by the spending of money in Europe by Ameticans;
by remittances to Europeans by Americans and immigrants;

fourth;by loans.to Europe.

There are some other general reasons against making Federal Reserve notes reserve which might also be mentioned,

bad education for the public to let it imagine that
bank is reserve because Congress says it is reserve.

It is

a note of a
The fundamental

reliance of our whole structure is the gold, or metallic basis behind our currency.

/1hile it is true that the Government guarantees

the notes, every bne Of us will take the position that the notes must,

be secure, without leaning uon the Government and without even suggesting that the Government shall ever
good.




be called upon to make them

The Government supervises their issue, must be satisfied

that the security and'the reserve behind them is ample and sufficient, but it was never seriously meant that the Government was
going to tax the people to pay these notes.

690.

-

6 -

Viewed from this aspect, it isn't good ecoomics for Congress to say that "greenbacks", or any other

kind of notes that are

not based on the de-posit of 100% of gold can be called the ultimate
reserve of member banks.

The fact that we

have taken some wrong

steps in this direction in the past does not at all justify our doing
it again.

The greenback is simply the promise of the Government with

a gold security of approximately 35%; the national bank note besides
being the obligation of the issuing

bank is security of the Govern-

ment,as attested by the deposit of the United States bonds and has a
gold reserve of only 5%.

The Federal Reserve note has 100% of com-

mercial paper as collateral, and 40% or more of gold reserve behind it,
besides which it has the guarantee of the Federal Reserve Banks, the
member banks, and the Government.

No one of these three kinds

rency can properly be considered ultimate reserves, and they are unquestionably good and ought to be in every sense legal tender.

It

appears inconceivable that they should not be absolutely good at all
times and readily acceptable by the people in all sorts of transactions as a substitute for actual specie.




When it

comes

to




890.
7

international transactions, gold, or its equivalent only,

can be used, but in all intranational transactions there
is no reason why these various representatives of money
should not perform all the functions, except those of being
ultimate reserves.

The fact that state banks are Permitted

to use national bank notes and reserve notes as reserves and a
actually do so, only accentuates the necessity of keeping the
ultimate reserves inviolable.

The object which Mr. Warburg seeks to attain .of
securing a much larger share of the ultimate reserves of the
country in the hands of the Federal Reserve Banks

might be

attained in another and possibly less dangerous way if the
Federal Reserve Act were so amended as

to

state only those

reserves which member banks must carry with their Federal
Reserve Bank, stating in so many words that the specie and
currency which any b-ank shall carry in its own vault, or

till, will be left to its own judgment.

The ultimate

reserves, in other words, will be with the Federal Reserve
Bank.

The advantage of this method to the member bank

would be that the many kinds of currency in its possession,

as well as specie, would serve its purpose equally well
gold or silver certificates,

greenbacks,

national

890.

bank note currency,
Bank notes.

Federal Reserve notes, or Federal Reserve

What the reserves should be is necessarily a matter

of study and calculation, but suppose, for example, we should start
out with the proposal that country bank reserves held wi.th the Fed-

eral Reserve Bank should be 8%, the member banks in reserve cities
should hold

l27,

should hold

and the member banks in central reserve cities
In this connection it is proper to mention that

under the laws of a number of state t the required cash reserves

is left entirely in the judgment of the banker, and in European
.countries it is the custom to let bankers use their own discretion
as to the cash reserves they shall hold.

While

it

is not sug_

gested that this discretion apply to the entire reserves, it

is

thought that it can be safely applied to the bank's oeqn counter
cash and vault requirements.

This may not be the best solution of the probler,
it is at least worthy of consideration.

yet

If, on the other hand,

Mr. Warburg's plan is adopted, he, himself, admits that it would
be desirable to keep, net
but 60% or 70%.

4c:

of gold behind Federal Reserve notes,

Indeed, it is probable that it would be neces-

sary to change the law in regard to ultimate or gold reserve behind Federal Reserve notes and to raise the limit below which a
penalty, or tax, shall apply to, say 50%.




CD.4.

'4.

890-

-9There are other ways in which, without any Cohgressional

action, much might be accotplished to put the gold of the coUntrY in
the hands of the Fcderal Re:,erve 13-rlks and member banks, rather than

by leaving it where it will be hoarded by people, or used for every-

day currency; that

is, by readjusting the denominations of gold and

silver certificates and other forms of currency.

As it has been pointed

out several times, if gold certificates were not printed in denominations
less than 050, gold certificates would rarely appear as currency, and
become, as they should be, almost exclusively reserve money.
From the above, it will appear that, while I am not favorable
to the plan of making Federal Reserve notes reserve, I am not opposed
to a limited extent, at least to the object Mr. Warburg has in view,

to wet:




the greater concentration of gold in Reserve Banks.
Respectfully submitted,

F. A. DLINO.

7

I

1128 SIE
WAS

(//i/7-e-z

s

Tjr EE;d

Ii

/41.:AMPr




/7

ZeZ,e-

'44

LO,

fl



1







\

'N

t:

H

,

\













/
°°7(

ti-°1.117e67

COPY
Dec. 19th,

1916

Dear Ben:

I can kill two birds with one stone -- wish you the seasons best
greetings and at the same time answer your last letter (Dec. llth) and in
part make up for past negligence.
To answer your question first, the Comptroller's Report showed
approximately $300 million European securities held by National Banks at
the latest Report -- not in itself an alarming showing, although it can be
inferred that Trust Companies affiliated with National Banks hold considerably more. From Statements of State and National Banks in September, it
appears that the holdings of securities of various kinds (bond and stocks
which in the case/of National Banks are mostly bonds) -- all slow stuff-have increased from $2.800 million to over 34.000 million. The increase of
$1.200 million being about equally divided. We assume that the placings of
securities of belligerents and non-belligerents have amounted to at least
2,000 million and that the selling back of American securities has been,
say, $15500 million, perhaps more, but it is reasonably sure that a good
share of this $3.500 million remains "undigested" and not in the hands of
the ultimate investor. That is where the danger lies. There is a great
difference between my drawing my balance out of your bank and investing it
in the bonds of foreign countries and your Ilivesting my balance in that way.
I wish very much I could talk with you about the situation.q You realize how
Ununwilling I was to do anything that looked like a slap at the Allies.
fortunately, Kent of the Bankers in his Acceptance Circular and Davison by
his actions and methods rather forced the issue. I did my best in our Conference (6 members) with Davison, to make him see the light and suggest something reasonable, but he adhered to his original statement that he proposed
to issue the notes or rather sell them over the counter just as rapidly as
the market would take them and without limit but as he supposed half a
billion or a billion. My suggestion that I could see no objection to a
moderate issue one or two hundred million he brushed aside. He said several
times he asked no favors, wanted no approval, simply came as a matter of
courtesy. He was too proud, I dare say, to suggest that he wanted to be
guided by our advice, but I think he would have succeeded far better 12 he
had taken that attitude. He called on the President and we suppose told him
much the same story but perhaps more briefly and with less questioning. He
returned to N.Y. and at once the papers were full of the grand plan which
was to save us the great embarrassment of taking so much gold -- the yellow
peril having been previously ipictured as a serious menace. The inference
was natural, and Davison certainly did nothing to avert it, that Davison
had consulted the F.R. Board and the President and his plan had been approved.
Q' Fortunately, for the Board, the Advisory Council met in Washington on the
Monday after Davison's visit (which was Saturday). We had intendedddScussing
with them the French revolving credits about which we had wired and written
the F. R. Banks, but in view of the situation we took up that and the English
Treasury Notes. They cvnsidered the matter and brought back the unanimous
recommendation (10 members present) counselling caution and advising that the
Board issue a carefUl statement to the member banks. I strongly urged printing
the statement only in the Bulletin and I think that course would have prevailed
if J. P. M(organ) and Co. had not again forced our hand. In response to a
phone request from Harding, Lamont speaking for Davison said they could not
delay their plans, that they were proceeding with their circulars, etc.
instanter. I can see that if you had been in N.Y. on the job you could have
acted as an intermediary and held Davison in check and at the same time satisfy
There is no
I say fears of the Board advisedly.
the fears of the Board.



-2 doubt that four or five were really alarmed and the rapidly advancing
prices of necessaries of life, and the hue and cry that aroused, all
tended to fuel the flames.
So much for that. If McAdoo had been here, I think he would
have tempered things a litte -- but I am not too sure of that either.

McAdoo sat with the Board today for the first time since August
9th or 10th! We passed a Resolution authorizing the arrangement with the
Bank of England, without qualification about transacting no business.
We tailed long and exhaustively about Amendments which we are
in hopes to get in final shape tomorrow.
I am afraid I must stay here till March 4th, but after that I
hope I can slip out to Denver as you suggest, thence to Dallas, etc.

Aiken gave us good accounts of you, and we had a fine meeting
with the Governors, as well as with the Reserve agents, the week previous.
Harding is a great improvement as Governor and things are really going
better.

We have 6 inches of snow here and 20 degrees F.
think it is winter.

So you see we

hemorhage of the bowels, so
We have very bad news about Kains
Perrin wires! The first we heard a month ago was a dilated heart, suddenly
this!
Jay is on the sick list with bronchitis.

He looks badly.

Mrs. Delano joins me in warmest good wishes, and I am
Yours very sincerely,
(Signed)

P.S.
The hour is late.
reading.




FREDERIC A. DELANO

I will ask you to excuse mistakes and want of proof-

FAD

4E-ga;



fee,^L.42-4,
FREDERIC A.DELAMO
288 TREA URY BUILDING
WAS

February 27, 1917.
MAR 3

1917

I duly received your letter of February 19th on

my return from a week spent in Chicago, where I went
to testify in a railroad law suit.

The only reason

I am dictating a reply to you now is that I am afraid
that if I waited to rIve you a longhand reply.

I might

keep you waiting too long.

To put the thing very briefly, while I think
that there is some reason for your feeling as you do,
the facts and conditions do not really justify it.
I think that there have been some influences at work,

both inside the Board and outside the Board in the
direction you very naturally object to.

I think

likely that I am the most extreme person of the Board
on your side of this question.,
on the other side is //

The most effective

However, in taking

the view he does on this question he is very largely
affected by the treatment which he has receivgdAfrom
bankers since he has been on the Board and by the
attitude of some of the Governors in their letters to
would

him.

agreed absolutely with you.
5

I think, say tilat he

I think he does in theory.

a

4,1-

A-4-0

/114-4-44--1

In practice and by nature he likes to have his finger
in about every pie and likes to more or less run the
fr

Le

undoubtedly

Banks.

c= "Ze

annoyance for

the other members of the Board.

Jut, speaking very frankly. I want to put your
mind at rest as to the ultimate result of the development of things.

I think it will be that there will

be twelve Federal Reserve Banks, each entirely autonomous, and the

only connection to secure cooperation

and uniformity of methods will be
'




cooperation

brought about through the Federal Reserve Board.

At

times men connected with the Board have argued, and

even stated publicly, that the Federal Reserve System
was in fact a central banking system, with twelve
important branches, but I do not believe that the

Federal Reserve Board itself can be so constituted as
to perform the functions of a central bank and I think.
if it could, it would be dangerous and lead to vicious
attacks in Congress.

Some unfortunate things have happened in our
relations with the New York Federal Reserve Bank.
AL-C-1- .4;6)-o X "--47".1/47/6-e-4-e-4
was very largely responsible for them,

but I think the officers of the Federal Reserve Bank
were also to blame, not the least, perhaps, our mutual
friend




-3-

The Governors have, individually and collectively,

been very severely criticized at different times, and
there is an impression that the Governors regard the
Board with a feeling of mixed pity and contempt.
suppose I have, more than any other member of the Board,
opposed that view.

At the same time things have

happened which have been difficult for me to either explain or defend.

I would say, without hesitation, we have greatly

missed you in New York: I think you would have had a
better appreciation of the situation, and could have
adapted yourself to it more readily.

f feel also that

it has been unfortunate for us that you have naturally
had to get your impressions of what the Federal Reserve
Board was doing very largely from reports of your
Bank officers.,

I have not written as often as I would

have liked to simply because I didn't want to dictate
letters, and couldn't seem to find time to write longhand.

Of course, the war situation and the general excitement due to that has been one thing which has
effected seriously the normal development of the Federal Reserve System.

I believe though that we are

going to make progress, and I want to see you still
associated with that progress.

There is a good deal




-4-

that I could say if I were talking with you which would
throw light on the whole matter, which I couldn't
say in a letter, and unless matters connected with the
war make it impossible. I am planning to leave for
the West about the middle of March to visit Chicago,
St. Louis, Kansas City. Denver, Dallas. Atlanta. and
Richmond.

This would probably bring me to Denver

about the 22nd or Urd of March.

/
/

/(-c

FREDERIC A. DELANO

288 Treasury Building
Washington, D. C.

February

27, 1917

My dear Ben:

I duly received your letter of February 19th on my return from a
week spent in Chicago, where I went to testify in a railroad law suit.
The only reason I am dictating a reply to you now is that I am afraid
that if I waited to give you a longhand reply I might keep you waiting
too long.
To put the thing very briefly, while I think that there is some
reason for your feeling as you do, the facts and conditions do not really
I think that there have been some influences at work, both
justify it.
inside and outside the Board** in the direction you very naturally object
I think likely that I am the most extreme person of the Board on
to.
your side of this question. The most effective on the other side is
Harding. However, in taking the view he does on this question, he is
very largely affected by the treatment which he has received (or imagines
he has received) from bankers since he has been on the Board and by the
attitude of some of the Governors in their letters to him. Warburg
I think he does
would, I think, say that he agreed absolutely with you.
In practice and by nature he likes to have his finger in
in theory.
about every pie and likes to more or less run the Banks. The fact that
he is very influential undoubtedly causes some annoyance for the other
members of the Board.

But, speaking very frankly, I want to put your mind at rest as to the
ultimate result of the development of things. I think it will be that there will
be twelve Federal Reserve Banks, each entirely autonomous, and the only connection to secure cooperation and uniformity of methods will be through cooperation
brought about through the Federal Reserve Board. At times men connected with
the Board have argued, and even stated publicly, that the Federal Reserve
System was in fact a central banking system, with twelve important branches,
but I do not believe that the Federal Reserve Board itself can be so constituted as to perform the functions of a central bank and I think, if it
could, it would be dangerous and lead to vicious attacks in Congress.
Some unfortunate things have happened in our relations with the New York
Reserve Bank. McAdoo's playing politics was very largely responsible for them,
but I think the officers of the Federal Reserve Bank were also to blame, not
the least, perhaps, our mutual friend Jimmy Curtis.
The Governors have, individually and collectively, been very severely
criticized at different times, and there is an impression that the Governors
regard the Board with a feeling of mixed pity and contempt. I suppose I
have, more than any other member of the Board, opposed that view. At the

**

E.g., Harding, McAdoo, Williams -- probably Willis and certainly Glass;
Hamlin acquiescing; also in a different way Miller.




- 2 -

same time things have happened which have been difficult for me to either
explain or defend.
I would say, without hesitation, we have greatly missed you in New
I think you would have had a better appreciation of the situation,
York;
I feel also that
and could have adapted yourself to it more readily.

it has been unfortunate for us that you have naturally had to get your
impressions tif what the Federal Reserve Board was doing very largely from
reports of your Bank officers. I have not written as often as I would
have liked to simply because I didn't want to dictate letters, and couldn't
seem to find time to write longhand.
Of course, the war situation and the general excitement due to that
has been one thing which has affected seriously the normal development of
the Federal Reserve System. I believe though that we are going to make
progress, and I want to see you still associated with that progress.
There is a good deal that I could say if I were talking with you which
would throw light on the whole matter, which I couldn't say in a letter; and
unless matters connected with the war make it impossible, I am planning to
leave for the West about the middle of March to visit Chicago, St. Louis,
Kansas City, Denver, Dallas, Atlanta, and Richmond.
This would probably
bring me to Denver about the 22nd or 23rd of March.
LONGHAND ADDENDUM: Take my word for it and keep cool.
should not be blamed for everything. Even the pending amendments, for
example, foreign branches, is not the Board's but McAdoo's.

With sincere good wishes, I am




Your friend,
(Signed)

FREDERIC A. DELANO

The Boa




FEDERAL RESERVE BOARD
WAS
March 15, 1917.

My contemplated trip, unless interfered

with by the European war or a railroad strike, will
begin tomorrow the 16th.

I am

at Chicago, St. Louis, Kansas City, and shall reach
Denver on Union Pacific train No. 119 at noon Friday, the

23rd.

Of course, I am liable

to be

called

back at any time, so you may not see me, but, if all

goes well, I shall spend Friday and Saturday with
you, leaving for Dallas on Colorado and Southern
train No. 8 at 11:15 Saturday, the 24th.

Yours very truly,

Mr. benj. Strong, Jr.,
Denver, Colo.

OF SERVICE SYMBOL
Message

otter

Blur,

Night Message

Nits

NL
Night Letter
none of these three symbols
pears after the check number of
,rdsfthis is aday message. Otherse Its character Is Indicated by the
mbel appearing after the check.

W ES4,TeLN
w,
TEL!k
';'t4

-CLASS OF SERVICE SYMBOL

ezr

Day Message

Day Letter

Blue

Night Message

WESTERN UNION

NIte

NL
If none of these three symbols
Night Lotter

appears after the check (number of
words)this Is aday message. Otherwise Be character is Indicated bythe

NEWCOMB CARLTON, PRUIDNT

symbol appearing sitar the check.

ECEIVED AT
1917 MAR

A507KS' 68 GOVERNMENT

TZUFB0::
JELICA
KANSASCITY MO- 430P 20

Foned to

1150

BENJAMIN STRONG JR

A100 MONTVIEW BOULEVARD DENVER COLO
SHALL

20 PM 3 49

to b

REACH DENVER UNION PACIFIC' TWELVE TWENTY NOON FRIDAY PERIOD/

MISTER MALONE DIRECTOR HERE ANXIOUS' TO HAVE MEETING OF PRESIDENTS
rOF' DENVER NATIONAL' BANKS'
I

HAVE TOLD HIM HOWEVER THAT

OF'M D THATCHER PUEBLO PERIOD
I

WOULD LEAVE THIS' ENTIRELY TO YOUR

'JUDGMENT IN CASE YOU THINK A LUNCH MEETING FRIDAY ADVISABLE
F'A DELANO:.







._.L.

Blue

Night Letter

Day Message

Day Letter

TEL ....724:, .
elf
W4V47

If none of these three symbols
appears after the check number of
werds)this is a day message. Otherwise Its character is indicated by the
symbol appearing after the check.

BIN

NL
If none of these three symbols
Night Letter

appears after the check number of
words)this is aday message. Otherwise its character Is Indicated by the
symbol appearing after the check.

NEWCOM B CARLTON, PRESIDENT

RECEIVED AT

Blue

Night Message

WESTERNUNION

Nits
NL

Night Message

CLASS OF SERVICE SYMBOL

WESTEr.

SYMBOL

asap.
Lett(

1917 MAR ?I

58 Gu\drAIPT2IC4'.

OF TLLEPHOEED

4

PM 3

TELLGRAM

KANSASCITY MO 415P 21

MIN STRONG JR

-972
RR,

41V MONTVIEW BLVD IENVER COLO
MESSAGE MALONE HAS MALE NO ARRANGEMENTS BUT WILL BE ON TRAIN WITH
ROM HERE

TO

DENVER PERIOD WILL LEAVE MATTER ENTIRELY IN YOUR HANDS

or IT IS SUGGESTED THAT IF DENVER BANKERS ARE INVITEE
SHOULD BE INCLUDED
1-

A DELANO,

M D THATCHER

..:DER IC A.DELANO
288 TREAsuRY BUILDING
WASHINGTON.D.C.

a,g.ter.
April 2, 1917.

APRG

1917

I got back yesterday forenoon, after
The journey to
my somewhat strenuous trip.
Dallas was somewhat slow and tedious, but I
spent two days very satisfactorily at Ft. Worth
and Dallas - two thriving towns thirty miles
apart.

The increase in wealth in the Middle
years has been something
West in
stupendous; the banks that used to be large
borrowers are now actually lending money to
others less fortunate.

the last five

However, no part of my visit was more
satisfactory than my visit with you in Denver.
I hear that your Mother is here in Washington
and I shall give myself the pleasure of calling
on her tomorrow and giving her the latest news
All the members of the Board are
about you.
very pleased to hear the good accounts I had
to give them of you, and they were glad of the
prospect of seeing you back on the job in June.
This is always providing you don't overstrain
yourself on the golf links and find that you
have to stay longer.

Mr. Benj. Strong, Jr.,
Denver, Colo.



laiLk
APRi 7 1917

My dear Mt. Jones:

April 10, 1917.

.

I beg to acluaoa,ledge receipt of your letter of
the 6th inetant, just received, and I note your suggestion.
this matter of allowing smaller banks to charge
exchange has had a good deal of consideration, but the
feeling has been very generally expressed that it would be

very difficult under the law to give this privilege to
small banks and not thereby give it to all. The business
world would be up in arms if one-tenth of one yereent
v.ere charged on all checke, although they might cheerfully
acquiesce if this charge were made on small country checks
only.

It is sometimes argued that if a law was passed
allowing one-tenth of one percent to be charged as a maximum,
only the small bankers would avail themselves and that such
action would compel the large bankers to absorb this expense.

On the other hand, I am not at all sure that this is true,
as we have had an instance in St. Iaul and Minneapolis
where bankers who have never charged anything to their
customers are now charging five, ten and twenty cents on
various checks, and basing this charge on the strength of



-2-

the service Charge of li9( per item, made by the Federal
ileuerve Banks.

The theory upon which the Board is proceeding

in this mutter is that a cheek is an order to pay currency
at the eounter of the bank; that if the bank is reioaburced
for remitting currency to the Federal Reserve Bank. it
cannot complain.

If it elects to relit offsetting items,

it has been granted scLething in the natur$. of a privilege,

and it does co because it freers to dc that rather than
to ship curranoy.
There io another wioy of looking at this matter:
The check system of he W:kited otates ie a strictly la.erioan
development, avoiding the expellee and cumbersomeness of

iscuini= baul notee. If we did business as it has been
done for yeeas en the uuntiLutit of Eurol-,e, and an individual or corIoration havine anaucount with you would
go to your bank, cull ur,on you for a certain eum of bank

notes, with which to pay current aouovaltb and bill, you
would deliver the bark notes, bearing all he e.orense 3f
printing, and after those notes had performed their function
In payilver bills, they would promptly flow b..ok to your
bank for redemption. This process is not only less convenient to the bueinees man, but is more ex:oensive to the
bank than is the bank check; and so true is this that both



Prance and Germany today are doing everything in th.sir

power to encourage the use of the bank checksP2sag1and,
as you knew, has long used the cheek system, although

even in England it is not used to anything like the extent
to which it is used in thie corntry.
Banks suffer one form of lose through eharging

exchange, the extent of which it is

1mpose:1.1de to maVe

even a guess at; that is, the lose due to the

unwIllinv7ness

of business men to keep accounts with such banks. I believe this loss is so important that it would go a long
way towards making up for the diminished profits eue to
not charging exchange.
Pt the Tresent time IL Washingto-,
D. c., T am administering a special fund which I have to
keep, at some inconvenience to myfi,elf, in Taw York, because
checks drawn upon 7sehinEton are not accepte at 'par in
ether cltiec.. Andust, the banks in Nashirzton, 'hi 10
on the one band charging exchange, art, on the other hand,

doing all they can to solicit accounts.
There is one fefAure of the amok collection 2yetem
in the past in which the Pederal aeserve Board is trying to
bring about a reform, That Is the mLtter of drawing t.g.ti.inst
°hooks before therj have been collected and before the funds

are available.

If, instead of opposing. the Federal eserve
Clearing System, the banks and bankers of the country- would



get behind the Board in its campaign of education and try-

to get the state banks to co-operute, it would, it is
true, out off eome slight profits in exchange, but as
against this we rould introduce safe and better banking
I refer particularly to the custom of nearly
methods.
fifty yoar, of counting checks in transit in the mails
as 'bank reeerves" and the practice which is also common
with depoeitors and heretofore permitted by banks, of
drawing against uncollected funds. The Board has made

a sharp distinction in its circulars on this subject
between "Immediate credit" and "immediate availability".
If I deposit miscellaneous checks to my account today, I

want to be given credit for the deposit at once, but I
ought to recognize that if 1 begin drawing against funds
represented by some of these checks before the bank has
had a chance to get returns on them, I should be penalized
foro doing. But this is not an.exchange charge; it is
a penalty for drawing against uncollected funds.

Yore very truly,
(Signed) F.
Cy:

Mr. btrong.

Mr. Gordon. Jones, President,
he United States National Bank,
Denver, Colo.



.belano.

The United States National Bank
of Denver,

April 6th, 1917.

Mr. F. A. Delano,
C/o Federal Reserve Board,
Washington, D. C.

Dear Mr. Delano:

Recalling our most delightful luncheon at the
University Club when you recently honored Denver with a
visit, and your request for information regarding the
attitude of the banks generally in the matter of state
banks joining the Federal Reserve System, beg to add to
the remarks made by me on the occasion, that I have taken
considerable pains in inquiring of those who are in
position to know the attitude of the state banks throughout the far west and feel quite sure if the law is
amended so as to permit a maximum charge of say 1/10 of
1% as exchange to be made by member banks that a large
number of state banks would join the system.
Not only
that, but I believe the banks would generally favor
amendments in such states where the laws now are prohibitive.
It seems to me that exchange is a legitimate
source of earnings of a bank.
Even the Government itself charges for tr'ansferring money from one point of the
country to another by means of post office money orders.
I hope you will see your way clear to support
the idea of permitting member banks to make an exchange
pharge along the line suggested.




Yours truly,
(Signed)

Gordon Jones,
President.

POSTAL TELEGRAPH - COMMERCIAL CABLES
CLARENCE H. MACKAY, PRESIDENT.

TELEGRAM

RECr 'ED AT MAIN OFFICE
AN.

CRAMMER UMMI.
)1TTH STREET

DENVER. COLO.

TELEPHONE: MAIN 4600

DELIVERY NO.

The Postal Telegraph-Cable Company( Incorporated)transmits and delivers this message subject to the terms and conditions printed on the bk ot this hrsink.
16D-40696

DE8161I PATENT INA. WAN

544CM1 26 GVT 35:3P
To

KITS}DT DC APR 10 I?

BEN J

:

e _.....

By

STRONG JR
4100 MONTVIEW BLVD
DENVER

YOUR LETTMRS FOURTH AND FIFTH RECEIVED AM TAKING UP BOTH MATTERS HOPE
FOR SUCCESS




DELANO

r

POSTAL TELEGRAPH-COMMERCIAL CABLES

TELEGRAPH AND CABLE SYSTEM IN

EXTENDS OVER TWO-THIRDS OF THE WAY AROUND THE EARTH.

THE POSTAL TELEGRAPH-CABLE. COMPANY

(INCORPORATED)

TRANSMITS AND DELIVERS THE WITHIN TELEGRAM SUBJECT TO THE- FOLLOWING TERMS AND CONDITIONS:
To guard against mistakes or delays, the sender of a telegram should order it REPEATED; that is, telegraphed back to the originating office for
comparison. For this, one-half the unrepeated telegram rate is charged, in addition. Unless otherwise indicated on its face, THIS IS AN UNRF.PEATED
TELEGRAM AND PAID FOR AS SUCH, in consideration whereof it is agreed between the sender of the telegram and this Company as follows:I. The Company shall not be liable for mistakes or delays in the trangfsiission or delivery, or for non-delivery, of any UNREPEATED telegram, beyond the
amount received for sending the same; nor for mistakes or delays In the transmission or delivery, or for non-delivery, of any REPEATED telegram, beyond
fifty times the sum received for sending the same, UNLESS SPECIALLY VALUED; nor in any case for delays arising from unavoidable interruption in the
working of its lines; NOR FOR ERRORS IN CIPHER OR OBSCURE TELEGRAMS.
In any event the Company shall not be liable for damages for any mistakes or delays in the transmission or delivery, or for the non-delivery of this
telegram, whether caused by the negligence of its servants or otherwise, beyond fifty times the REPEATED telegram rate, at which amount this telegram. if
sent as a REPEATED telegram, is hereby valued, unless a greater value is stated in writing hereon at the time the telegram is offered to the Company for
transmission, and an additional sum paid or agreed to be paid based on such value equal to one-tenth of one per cent. thereof.
The Company is hereby made the agent of the sender, without liability, to forward this telegram err the lines of any other Company when necessary
to reach its destination.
Messages will be delivered free within the established free delivery limits of the terminal office. For delivery at a greater distance a special charge will be
made to cover the cost of such delivery.
No responsibility .regarding messages attaches to this Company until the same are presented and accepted at one of its transmitting offices; and if any
message is sent to such office by one of this Company's messengers, he acts as the agent of the sender for the purpose of delivering the message and any notice or
instructions regarding it to the Company's agent in its said office.
The Company shall not be liable for damages or statutory' penalties in any case where the claim is not presented in writing within sixty daysafter the
telegram is tiled with the Company for transmission.
The above terms and conditions shall he binding upon the receiver as well as the sender of this telegram.
NO EMPLOYEE OF THIS COMPANY IS AUTHORIZED TO VARY THE FOREGOING.
CHARLE,

. ADAMS,
VICE-PRESIDENT.




CLARENCE H. MACKAY, PRESIDENT.
EDWARD REYNOLDS, VICE-PREST. AND GENERAL MANAGER.

CHARLES R. BRUCH,
VICE-PRESIDENT.

THE FASTEST TELEGRAPH SERVICE IN THE WORLD

OPERATOR'S NOTATIONN

TIME SENT, ETC.

EPAG A.DELANO
IREAS,RY BUILDING
WASHINGTON.D.C.

November fir st

Nineteen seventeen_

riLINO DEPT.

My dear Ben:-

NOV 3 -

I am sendingmu, WIIRtANK

RANit

arate cover a copy of the book
which I was showing you and which
I have had rebound for you.
This is a rather interesting
narrative of my maternal grandmother, written by one of my aunts.
She and her husband lived at
Northampton, Massachusetts, where
some of your forebears came from,
and the story, which is told in
letters dating from 1820 to 1850,
gives a rather interesting picture
of the early days in Massachusetts.
Very sincerely yours,

Mr. Benj. Strong, Jr.,
New York City.




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