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NEW YORK CHAPTER. INC.

AMERICAN INSTITUTE OF BANKING
BANKERS ASSOCIATION
FR

M. TOTTON. PRESIDENT
TH FIDELITY-INTERNATIONAL TRUST COMPANY

ERNEST T. LOVE 1ST VICE-PRESIDENT
WITH THE CHASE NATIONAL BANK

J. MARTIN TELLEEN. SECRETARY

TELEPHONE PIT.ROT 1544

15 WEST 37 STREET

NEW YORK

WILLIAM G. F. PRICE, 250 VICE-PRESIDENT
WITH THE NATIONAL CITY BANK




LOUIS H. ONLROGGE, TREASURER
WITH THE NATIONAL PARK BANK

15 WEST 37 STREET

NELSON M. McKERNAN. CHIEF CONSUL
WITH IRVING BANK-COLUMBIA TRUST COMPANY

March 23, 1923.

ACKNOVvi.EDOED
MAR 2 3 1923
Governor Strong,
Federal Reserve Bank,
New York City.

r4

Dear Governor Strong:

The Bankers Forum, as you know, is the senior section
of New York Chapter and comprises men most of whom, having
reached favored positions in banking and desiring to help the

younger men to similar success, have become"sustaining members"
of New York Chapter.

Perhaps, as a member of the Bankers Forum, you may
wish to join the ranks of sustaining members of New York Chapter.
I, therefore, enclose a relative memorandum and should be delighted to hear from you.
Very sincerely yours,

A

4-

Chairman
Sustaining Membership Committee




New York Chapter
INCORPORATED

American Institute of Banking
(SECTION AMERICAN BANKERS ASSOCIATION)

TeIC :one, Fitz Roy

1544
{ 2413

15 WEST 37 STREET

NEW YORK,

March

nov_ Btrong

Federal Reserve Bank
11I.

Y. C.

Suptaining Dues
1923-1924

$10.00

MEMBERSHIP DUES PAYABLE ANNUALLY IN ADVANCE.

192-3

March 28, 1923.

Lief,r Si r:

In answer to your letter of March 23, 1 wish to

advise that i. Strong has been a sustaining member of the
flew York Chapter of the A. I. B. for

number

years, and

:ipparently your letter was sent to him in the usual course on
-ccount of his being a member of the 3an,ers Forum.
YOut's very truly,

Secretary to
Mr. Bend.. Strong.

,

G. F. Berger,

Cnairman, Sustaining Ltembershi

American Institute of Bankiq3,
15 ieEt 37th St., New YorY City.
G.MN$




Committee,

a




The National promotion, ofa League
Citizens'
Fo7the
Sound Er--nRing System
OFFICE OF NEW YORK BRANCH

Nattottal. 0Or4atitztainn
(Ptcogo

100 BROAD STREET
TELEPHONE 4621 BROAD

Vreotbent

April 19,

JOHN V. FARWELL.
John V. Farwell Co.

JOHN BARTON PAYNE.
Smith Park Commission

(

Claim. of

Emrsottur (Santini-Mr

J. LAURENCE LAUGHLIN,
The University of Chicago

O'rrasurtr

,i7,e10Eve
APR 2 0

OFFICE

A. C. BARTLETT,

Hibbard, Spencer, Bartlett A Co

*ecretarg of0Organtgation

MURRAY S. WILDMAN,
Northwestern Universtty

liens /fork Otatr Nraoril
We/Obeid

JOHN CLAFLIN,
H. B. Cleflin A Co.

Mr. Bejamin Strong, Jr., Vice-Pres.,
Bankers Trust Company,
7 Wall Street,
New Ycrk City.

Olhatrmon of

Exrruttur lltiltrntttt re

IRVING T. BUSH.
Bush Terminal Co.

ISIDOR STRAUS.
IL H. Macy & Co.

Ortretary
GEORGE A. PLIMPTON
tsinn A Co.

Thairtonn of

314min., Qiontmtttre

WILLIAM SLOANE,
W. It J. Sloane

Btrtrtoro
CLEVELAND H. DODGE
Phelps, Dodge & Co.

JOHN C. EAMES.

H. B. Oaflin & Co.

GERRISH H. MILLIKEN
Deering, MillIken & Co.

J. HARPER POOR,

Dear Mr. Strong:
The Buffalo Clearing

House Asociation passed a resolution yesterday endorsing the National Citizens" League's campaign of
education.

Amory, Browne A Co.

Won't you be kind

HENRY A. CAESAR.
H. A. Caesar A CO.

ARTHUR LEHMAN,
Lehman Bros.

EDWARD D. PAGE,
Faulkner, Pags A Co.

WELDING RING.
Haulier & Quer.°
CORNELIUS N. BLISS, JR
Bliss, ',Van A Co.
JAMES TALCOTT.
American Hosiery Co.

HERMANN FLEITMANN
Fleitmann & Co.

JAMES H. POST.
B. H. Howell, Son A Co.

FRANK TRUMBULL.
Chesapeake A Ohio Ry. Co.

EDMUND D. FISHER.

Deputy Comptroller,
The City of Now York

NICHOLAS MURRAY BUTLER.
President. Columbia University

GEORGE FOSTER PEABODY.

Treasurer and Director.
General Education Board

JOHN P. TRUESDELL.

enough, if you can do sc consistently, and write to some of your
banker friends there, congratulating them on the action taken, as
it will undoubtedly help along
favorably their future action.

American Pig Iron
Storage ,Varrant Co.

BERTRAM H. BORDEN,
M.. C. D. Borden &Sons

Yours very truly,

F. B. KIRKBRIDE.

Eclipse Tanning Co




D/H

19-i?

REFERRED TO

National Wrgatitxattnn
tEl/ttaga

Presibratt

JOHN V. FARWELL,
John V. Farwell Co.

likr-rft6t2Irtit

JOHN BARTON PAYNE.

The National promotion ofa League
Citizens'
For the

South Park Commission

(gl!atnnan

fruit. (Committer
-I. LAURENCE LAUGHLIN.

Sound Banking System
OFFICE OF NEW YORK BRANCH

100 BROAD STREET

The University of Chicago
?IIreeisstrer

TELEPHONE 4.1 EROAD

A. C. BARTLETT.

Hibbard. Spencer, Bartlett & Co

tircretarg of (Organtottnet
MURRAY S. WILDMAN.

May 9, 1912.

Northwestern Vol reran)

Ilpu,Vork Obit, iRrattril

111..0.1
JOHN CLAFLIN.
11.11. Clotho & Co.

Milatrutatt of
Exccuttor QIumtnit:er

IRVING T. BUSH,
Bush Terminal Co.

3irraeurer

ISIDOR STRAUS.
It.

H. Nov & Co.

*erretarg
GEORGE A. PLIMPTON
Uinta A Co.

011Iatrutan

of

3Ititattre (Somali/ter

WILLIAM SLOANE.
W. &J. Sloane

Etrert ors
CLEVELAND H. DODGE.
Phelps, Dodge

Co.

Mr. Benjamin Strong Jr.,
Bankers Trust Company,
7 Wall Street,
New York City.

JOHN C. EAMES,
H. B. Clotho & Co.

GERRISH H. MILLIKEN.
Deering, Milliken A Co.
J. HARPER POOR,
Amory, Browne & Co.

My dear Mr. Strong:
You were kind

.

HENRY A. CAESAR,
H. A. Caesar A Co.

ARTHUR LEHMAN,
1,e/mmtilros.
EDWARD D. PAGE.
Faulkner, Page & Co.

WELDING RING,

HeAler & Quereau

CORNELIUS N. BLISS, JR
Enliven A Co.

JAMES TALCOTT.
American Hosiery CO.

HERMANN FLEITMANN.
Fleitmann A Co.

enough to suggest that you would.
furnish me with a letter to George
Eastman of Rochester, asking him
to co-operate 11n the National
Citizens' League movement for Currency Reform.

JAMES H. POST.
B. II. Howell, Son & Co.

I did not avail myself of

FRANK TRUMBULL,
Chesapeake A Ohio fly. Co.

EDMUND D. FISHER,

Deputy Comptroller,
The City of Nev York

NICHOLAS MURRAY BUTLER.
President. Columbia University

GEORGE FOSTER PEABODY.
Treas. General Education Board
JO'INNewP1.:oTrIcRIU'rEotSiu'eeEtte.hange

BERTRAM H. BORDEN.
M. C. D. Borden &Sons

this privilege as Mr. Eastman was
then in Europe. I understand he
is returning shortly and would
therefore appreciate your courtesy
in the matter now.

B. KIRKBRIDE.
Eclipse Tanning Co

S. G. ROSENBAUM,

Yours very truly,

National Cloak & Suit Co.

LUDWIG NISSEN,

Ludwig Nissen & Co.

HERMAN A. METZ,
If, A. Mete & Co.
GEORGE V. MCNEIR.
W. A J. Sloane

F. E. HAGEMEYER,
Hagemeyer Trading Co.

JOHN R. CLANCY.

John R. Clancy Co.
Syracuse, N. Y.

W. E. ROBERTSON.
Robertson-Cataract Co.

Buffalo, N. Y.

H. A. MELDRUM.

H. , Meldruns A Co.
Buffalo, N. Y.
CARLOS C. ALDEN.
Dean Buffalo Law School,
Buffalo, N. Y.

E. HOWARD HUTCHISON.
Buffalo, N. Y.

D. M. EDWARDS.
K. W. Edwards & Son
Syracuse, N. Y.

F. C. SOULE.

Merrell-Soule Co.
Syracuse, N. Y.

DONALD DES.
Dey Brothers A Co.
Syracuse, N Y.

K. BUTLER,
Butler Mfg. Co.

Syracuse, N. Y.

GRANGE SARD.
Rathbone-Sard Co.

Albany, N. Y.

WILLLIAM R. CORWINE.


National Association of Clothiers


DA{




te,

foz

(14e.

"elk

d'O'Aft

-

?,f401/4'4
NEW YORK STATE BANKERS' ASSOCIATIONAL 2 Ma
.

ORGANIZED 1894

\.........:FERRED
OFF

OFFICERS, 1913-14

i BERT H. TREMAN,

ITHACA, N. Y.

PRESIDENT

YORK
RDK

JAMES H. PERKINS,

VICE-PRESIDENT
ALBANY, N. Y.

LESLIE W. BURDICK,

-

GOUVERNEUR, N. Y.

WILLIAM .1. HENRY,

HEADQUARTERS

-BANKERS

TREASURER

11

PINE STREET

SECRETARY

11 PINE STREET, NEW YORK CITY

NEW YORK,

IMPORTANT

RE:

July 10, 1913.

CURRENCY REFORM LEGISLATION.

Bankers Trust Co.,
7 Wall St., City.

Gentlemen:At the Annual Convention of this Association, held at
Manhattan Beach in 1211, President Taft made the following
observation:'

u+++++++there is no legislation - I care not what it is,
tariff, railroad, corporation, or of a general political
character - that at all equals in importance the putting of
our banking and currency system on a sound basis+++++++.
This is exactly as you feelfat this moment, and especially so since Currency Legislation seems imminent. You have some
definite ideas as to needed reforms; we want these as well as your
views on the proposed "FEDERAL RESERVE ACT," and will greatly
appreciate an expression of your opinion, stated explicitly in response to the following questions:

What sections of the "Federal Reserve Act" do you approve?
What sections of the "Act" do you disapprove of? Kindly
state reasons.
What further criticism or suggestions have you respecting the "Act"?

This is your opportunity to be heard, and to be heard
in conjunction with a thousand Banks of the State.
The Officers
of the Association will very much appreciate your early consideration of this subject, as they comtemplate meeting with the Council of Administration shortly to review the replies received from
over the State and to take appropriate action.
Appreciating your anticipated courtesy and co-operation,
we beg to remain
Very truly
ecre

N. B.:
 (H/B)



TO

Copy of the "Act" will reach you u

er separate cover.

4it




4ziiaLie

0 lY
THE STABLE MONEY ASSOCIATION

Washington Bureau,
705 Colorado Bldg.
April 26, 1926.

Mr. Benjamin Strong,
Governor, Federal eserve Bank of New York,
New York City.
My dear Governor Strong:-

CONFIDENTIAL

Your letter of April 19th to Dr. Fisher has been shown to me because, as you
know, confidences on the subject of stabilization are exchanged between him and me.
I think my bulletins correctly voiced your attitude before the Committee, and
I certainly pointed out all the arguments you brought against Congressman Strong's bill.
Of course, any arguments which may appear in your corrected presentation which were not
in your verbal presentation will put me at a disadvantage.

I think I can agree with you that no bill placing a definite mandate by Congress
upon the Federal Leserve System to stabilize the general price level should be passed
out of the Committee at this time.
I have told Chairman Mc
I can even go further and say
Congressman Strong and others who have asked my opinion.
that I will be inclined to agree with you that Congress should not pass a bill which,
by its very brevity, would give the impression that this is a simple subject, or that
Congressman Strong it seeking suggestions as to how the bill
the last word is known.
should be phrased to meet this sitiption and some of the suggestions submitted to him
seem to me to be fairly satisfactory.
I think maybe I realize more than you do, and yet perhaps I am nresaming too
much, that the System is really in very considerable danger.
Maybe you noticed the
article in the New York Herald-Tribune of April 23rd in which an anonymous writer (unless you suspect I had something to do with it, I will tell you that it was a complete
surprise, and I have been very careful to avoid any suggestions of the sort) brought forward the same argument made by Mr. Shibley, and which was embodied in the report of the
hearing, that the powers of the Federal Feserve System were being used to further
political ends.
Again in the Times of this morning, a suggestion is made that the recent reduction in the rate was made for the purpose of serving speculators on the New
York Stock Exchange.
You know how the Commercial and Financial Chronicle has been
attacking the System.
Once let the demagogues get ahold of these lines of argunient
and couple it up with the low price of wheat or cotton or "putty," and, if the System
cannot show a clean bill of health with a definitely announced policy of some sort, it
will be in a very had way.
If, on top of that, it is shown that responsible members of the System have
been saying that the cat is black in order to prove that it is not white, When as a
matter of fact it is gray, the public in my opinion ( and probably rightly) would feel
that no confidence could be placed in the system, and would feel justified in destroying
it.

The only safety of the Republic lies in an informed electorate.
I um not a
propagandist and oar association specifically disallows fathering any plan.
Our program



-2-

We want the people to know the facts and we want them to know
is an educational one.
ll the limitations which there are to your powers, legal or economic, and we want them
to know of all possible plans that might be adopted, which would make it possible for the
Federal Reserve System to accomplish a greater degree of stabilization, and of all
possible limitations upOn such plans.

The most important class of people to reach in this connectionand the most
As you say, they do not understand central banking, and
difficult are the bankers.
I think it most desirable that a campaign
apparently they do not want to understand.
of education among the bankers on this subject should go forward.
I agree with you in feeling great confidence in the members of the House
Committee on Banking and Currency, and I think you did a most wise thing in coming before
I believe you should
them, as you did, with your camprehensive and frank statement.
carry this one step further and take the identical attitude in talking to the country.
As to the declaration of purpose being in the preamble or title of the act,
if this were sound then the mandate to the Board to fix the re-discount rate "with a
view of accomodating commerce and business" should go into the preamble or title.
You over-estimated the attitude on the part of the members of the ..Committee
that some farmers might misunderstand the bill and think it a price-fixing measure.
There is only one member of the Committee who has even voiced that idea, and he only dues
He is a man who has a reputation in the Committee of talking
that on his off-days.
Some people say he can't think unless he thinks out
on both sides of every question.
loud.
He himself says that he does it in order to bring out the truth.
My opinion
is that this is very far-fetched, and that, if this instruction to the Reserve System
were aiopted into the law and conscientiously followed, there would never be the slightest
ripple of wrath against the Federal Leserve System in the event that arj one commodity or
group of commodities fell off, as compared with other commodity or other groups of
commodities.

The stabilization of the purchasing power of monetary units is clearly and
definitely on the way.
We cannot prevent it any more than we could prevent the common
acceptation of the Copernican theory.
This is a logical progress in line with the
principle that government should serve the best interests of the largest number, and
everyone is interested in price stabilization, whereas fewer people are interested in the
stabilization of interest rates, even fewer are interested in the stabilization of exchange rates, even fewer are interested in the stabilization of reserve ratios, and even
fewer are interested in the stabilization of gold parities.
I want to keep this whole discussion on a very high level, avoiding impugning
motives or raising questions of personal or class interest, but it cannot be kept on a
high level unless everybody sticks to the truth, not only as to the actual wards of what
he may say, but as to the implications.
Differences of opinion may be justified, but if
anybody is caught misrepresenting the facts on so important a matter, he will certainly
be entitled to our utmost contempt.

In fact you and I see this thing so much from the same point ofview that I
believe the most effective thing that you could do would be to permit me to nominate you
as one of the Honorary Vice-presidents of this Association, and get in behind our program
with all of your great powers of character and intellect.

NIABM



Very sincerely yours,

(Signed) Norman Lombard

Apr1.1 79, 1g2,1.
CONFIDENTIAL

My detir Mr. Lombhrd;

In the stxence of Cov,trnor

tiong, ho, staled fc,r Europe on

24, I am eihd to tekrwvledge your cor,fidentiel letter ailuresed tr.: him under
di.ce of April Fe.

You refer to CevLrnor Stroup's letter of April 1P to Dr. Preher, to
whica Dr. FiElher hes elreedy replied indioating,s,mong other thin, th5J, he

cympethfres tdth it t

lazes etent sna thst ht re%lizes thP dangsrt to

which 0overncir 9treng refers.

of

th

%deed, .-Ince )3u ,ttervied pll

f tLt. m,3gitinte

iikiic hnd Currency C9m4ittee wilxn Goirernor atrtne, lice present, I pm

surP thkt y.:41 toe must be entirely ftmilii,r with his position with respeot to

the ieneinE bill as -well es hie reasons for c:Toslug it )n its pxpeent feu.
I she.31, hover, be only too Elpd tr, f-a-vierd tc

s copy cf y.Dnr letter, al-

though I an staid tbit his very etrtnusub jtinerary abroau may result In hie,
deferring

reply until rfter he returns to this country.
Ith kind per-boast regt:rdv,

I

am,

Very truLy yours,

GEORGE L. HAPRISON,

Mr. Normsn Lombprd,

705 Oclor&do Wilding,
WLshirOcn, D. C.
GLE.MW




Deputy Govaraor.

COPY
THE STABLE MONEY ASSOCIATION

May 20, 1926

Mr. Benjamin Strong,
Federal Reserve bank,
New York City.

My dear Mr. Strong:
I have the honor and pleasure of advising you that you
have been nomilated an Honorary Vice-President of this Association.
I earnestly hope that you will accept as I believe you are sympathetic
to our objects.
Your acceptance implies no obligation for the payment of
dues.

Our work is educational in favor of sound stable money.
The Association is pledged to sponsor no particular plan.

The desirability and even necessity of stabilizing the
general level of prices is becoming constantly more evident as the
evils and the social and political consequences of fluctuating price
levels obtrude themselves on the public consciousness.
It is our hope that business men, bankers, farmers,
labormen, and legislators can be brought to see this need and that
public opinion will apply the proper means to stabilize prices.




Very truly yours,

(signed) NORMAN LOMBARD
Executive Director.




tilay

25, li/26.

tiy dear Sir:

In the absence of kr. Strong, I :an taking the liberty
of acknowledging the receipt of your letter of May 20, chriain&
ttat he has been nominated as an Honorary Mice Presioent of
tt3e itbie Aon ey 600i b,t,i on
Ad 4r. Strong ie. abroad, nu will likely not return
until fall, may I euggeat trott this matter be left in abeyttnce
until his return?
Your arlicr letter, aeking for perwiesion
tenuminete r. tron, ous torwurded (te advieee by Wr. Harrison

unner Cato of April 1) but e,e; yet no reply 'nee 17,sen received.
and

kjle I eh all

be

loree,rd thie invitation at a con-

venient op;.,ortenity, I Am sure the membere of the Stable Money
itte.ocitioi 411 appreciete that un eurlier reekoaee 1 curcely

poasible unioi the oircumstancee, end that pendin Cvice from
kr. Arong, it 411 be beet if hit; ri
out .ueeo in connection vith the ro,yte,r of the ilesocifAion.
Very truly yours,

r ert. ttry to

Mr. Benj. ';trong.

Mr. 114orolan Lomburet,

Executive CA rector,
koaey Aueoolation,
TL e
104 'Fifth Avf,nu 1404 York City.

2or Immediate Release

Bulletin
THE STABLE MONEY ASSOCIATION
104 Fifth Avenue
New York City
URGES WORLD STABILIZATION
Professor Lehfeldt of South Africa Explains His Plan
New York, June 8th, 1926; Professor R. A. Lehfeldt, of the University
of Johannesburg, South Africa, urged world stabilization of prices and of
foreign exchange, at the meeting of the Stable Money Association today.
"There is no need to argue the merits of stabilization to an intelli-

gent audience", he said, "but there is not sufficient general information
on the subject of stabilization as applied to international debts.

If

England had understood the subject of stabilization she would have saved
about five billion dollars during the period of the war.
"There are two problems - one concerning the short period fluctua-

tions in the general price level and the other concerning the long period
fluctuations.

The former have a periodi6ity of three, five or seven years,

and this problem can be attached by banking policy; but the long period
fluctuations such as from 1873 to 1896, when prices fell, and the period
from 1896 up to the war, when prices rose, must be attacked through the
supply of the money metal.

These fluctuations are not so violent but they

are cumulative and, therefore, more disastrous in their effects.

During

the period of falling prices there was not sufficient increase in the supply of gold to take care of the increased demand for money, so gold became more valuable relative to other commodities and the prices of commodities fell.

During the period of rising prices, there was too great an

increase in the world's supply of gold.
and too much money and credit got into circulation.

The with gold lo
.up banks got
Such conditions al-

most certainly lead to inflation.
"In the reverse situation, that is if gold is not adequate, we come

up
against


custom and law aS to bank reserves, and bank policy is not able

- 2 L:o

prevent a fall

regulation

of

in prices.

Therefore, we must supplement bank policy by

the gold supply.

"A plan has been urged by Dr. Irving Fisher and

others, known as

the

Compensated Dollar Plan, which is sound and would fulfill the purpose,
but I doubt if

it is

not too revolutionary for a practical world.

It is

more practicable to regulate the output of gold to the world's needs.
This method has already been applied to other commodities, such as diamonds, rubber, coal and so

forth,

and there is no reason why it should

not be applied to the international regulation of gold production.
"There should be some sort of international body to buy up the gold
mines and gold bearing lands in the interests of everybody, and to

control

the gold production according to the world's needs, and so as to stabilize
its value or purchasing power.
"Then contracts could. be made in justice to debtors and creditors
alike.

In order that a just money may exist, you must either give up the

gold standard, as advocated by Mr. Keynes, or you must regulate gold by
my plan or that proposed by Dr. Fisher or some other.
"The capital cost of putting this plan into effect would only be
about one billion dollars.

This could easily be raised by the various na-

tions of the world and the utmost possible cost would be the interest on
this capital 'while the benefits to the world would be immeasurable.

"There is no immediate necessity

for

such a plan.

Stabilization' can

be secured through Sound banking policies, which is the right method for
the present, but in the meantime we should get some more complete plan under way."

Dr. Lehfeldt outlined the world situation with respect to gold,

pointing out that

if some one

individual, like Mussolini, should set the

fashion and take the gold out of the reserves of the banks and put it to
Digitized foruse, other nations
FRASER


might follow, and there would be danger of a slump in

- 3 -

.

'.---the value of gold.

He also said that there was a

great possibility of

gold decreasing in value in the future.

This would mean h

levels and unsettled social conditions throughout the world.

Dr. Lehfeldt was introduced by Dr. Irving Fisher, of Yale University, who said, "Personally, I don't care what plan of stabilization is
adopted so long as the benefits of that policy are given to the world.

I

would be satisfied if the plan bearing my name were adopted, or if the
plan proposed by Dr. Lehfeldt were adopted

I

,

substitute
or if some sound sub

In the meantime, I would favor legislation

for these plans were adopted.

which would make it easier for the Federal Reserve System to carry

out

their present stabilization plans which are the same plans as are being
used by the Bank of England.
fear that the

public would

Some who oppose legislation on this subject

misunderstand its meaning and this objection czi

only be removed by education, which is the primary function of the Stable
Money Association."

#

Other speakers included Mr. Edwin W. Kopf, of the Metropolitan Life
Insurance Company, Mr. A. Vere Shaw, an Investment Counsellor of Boston,

and Er. Lawrence Chamberlain, a prominent Investment Banker and author
of "Principles of Bond Investment."

Mr. Kopf emphasized the importance of the study of

price

levels from the insurance investment point of view.

fluctuating
He said, "In-

surance men endorse stable money in principle and base their every day
attitude toward the, security of insurance funds on the facts of decades
of experience.

Insurance men are all well aware of the fact of deprecia-

tion in the purchasing power of

the

dollar."

"Yr. Shaw urged the consideration of common stocks as an 'investment

medium, particularly during periods of rising prices, so that the investor
might profit from the decreasing purchasing

power of the dollar.

"Never-

theless," he said, "1 an sure that investing stockholders in the interest




,

I.

sv,"

-

4 -

of stabilization will unite with speculative holders in any sound measure
to reduce the losses and increase the profits of lean years at the expens:
of reduced profits during fat years."
Mr. Chamberlain warned of the danger of urging upon the ordinary in-

vestor the purchase of common stocks as an investment rather than as a
speculation, pointing to the large number of obsolete corporations, whose

common stock has become worthless, and the difficulty of discriminating
between the good and the bad stocks.

"The public is advised," he said

"by the advocates of common stocks, that 'well-chosen' common stocks should

be bought rather than bonds.

Until we have monetary stabilization I will

not dispute the letter of the argument in that form but the difficulty is
in that compound word 'well-chosen'.

The public is likely to fail to makc

the discrimination which the word implies.

Thus one recent publication

sets up eleven standards for choosing stocks, another sets up eighteen
comparisons of different stocks.

This is too involved and complicated a

process for any but the most experienced and astute investor.

In the in-

terest of sound investment and in the interest of justice between bond-

holders and stockholders, between creditors and debtors, the only solution
is the adoption of some sound plan of monetary stabilization."







.

If

(COPY)

November 16, 1916.

Pierre Jay, Esq.,
Federal Reserve Bank,
New York City.
Dear Mr. Jay:

I have been directed by a Committee of The Savings Banks
Association to revise parts of the Inyestment Section of the Banking law, so far as it relates to savings banks.
In doing,this work it occurred to me that there is no
reason in the world why savings banks should not be permitted to
I am quite sure that you will agree
purchase bdrik acceptances.
with me in this and that if we could modify the law so as to permit
this it would make a considerable market for securities of that
'character.

Before endeavoring to frame a paragraph to take care of
this situation I thought I should consult with you as to the terms
in which it should be described if we sliould make this change in
Would you suggest any further requirements than those
the law.
now used when we permit banks and trust companies to purchase them?
If so, what restrictions ought to be thrown around the transaction?
Yours truly,

(Signed)

233 Genesee Street,
Utica, New York.




Charles A. Miller.

November 10, 1916.

Charles A. Miller, Esq.,
Counsel, The Savings Bank essociation
of the State of New York,
233 Genesee street, Utica, N. Y.
Dear Mr. Miller:

I am more than pleased to

eet

your letter of November 16th as it

refers to a subject which I have had in mind for some years, and
so of late.

particularly

You will remember that some years aee we had a discussion about

tHe possibility of the New York savings banks being permitted to buy commer-

cial paper after the fashion of the Massachusetts savines banks.

It always

seemed to me that while this matter was a eradual growth in Massachusetts and

it worked extremely well, it could not suddedly be transjlanted to New York

with safety until we had some standardization of paper under the auspices of
whatever oentral bank idea Congress should ultimately work out.

As one can see it now, bankers' acceptances are just the thing.
They represent the highest type

and the moat liquid paler.

They will be an

admirable asset for the savings banks although :t a pretty low rate, perhaps
3% to 3 1/4% on the average for paper having somewhat over ninety days to run.

the present time there is not a very large volume of American bank acceptances in existence and the mar:et for them Is conseouently somewhat narrow.

If we are to have a real discount market in this country we must have many more

banks doing the accepting and many more groues of people or institutions interested in buying them.

It is only when we can take out 015,000,000e'to

50,000,000. on any day and dump them in the market without its affecting the
rate that we shall really have a market worthy of the name.




From the point

Charles A. Miller, LSq.,

#2

11/18/16.

of view of the development of the cnrket the entrance of the savings banks

into it as purchasers, and presumably fairly steady purchasers, would be
most desirable so that the gain from the legisiation you propose would be a
reciprocal one;

both the savings banks -ma the discount market itself would

benefit tremendously from it.

As to restrictions on the Lurchase of such acceptances, there are,
as yea know, no restriction', whatever on the purchase of such paper by na-

tional banks, state banks aril trust companies.

Federal reserve banks are

considerably restricted ,with regard to the kinds of banters acceptances they
may buy in an ende,vor on the part of the Reserve Board to keep finance bills

out of their portfolio. One must not forget that there will be poor banters"
acceptances just as there is poor comrercial paper, and occasionally they will
go wrong, and the kind of ones that go wrong are just those which savin3s banks

are apt to buy awing to their anxiety to got high "rates.

The buying of

bankers' accortances is a study in credits just like the buying of commercial
paper.

The only possible restriction I can think of which you might it on.

and that would not be co,por riveter/ by any moans, would be to resluiro that

acceptances purchased by savings banks should be eligible for lurchase by
Federal reserve banks under the recniatione of the Federal Reserve Board.; of
which I send you a copy.

The thing I fear is that some of the savings banks.

if loft to their awn devices, would be an easy mark for the brokers who sell
acceptances and would get landed with a lot of acceptances by small southern
banks which might prove to be doubtful assets.

Possibly you might limit the

location of the acceptor to New York State, although there are some very excellent Boston and Philadelphia acceptances which it would be a pity to shut
the savings banks off from.




I am afraid this is a very rambling letter - really thintao3 out loud.

#3

].71;q.,

11/18/16.

am going to send a copy of it, as well as of your letter, to Governor Strong,
and if ho has any auLlgestione I will send them on to you.
Very truly yours,

Chairman.

PJ/







(;tavpathil)

Jaexe

t2ipL-&
4,6t,e-x)

1//7




Rochester, N. Y.,
March 29, 1917.

To the Institution Addressed:
Enclosed we beg to hand you a copy of resolutions
passed at the conference of State Banks and Trust Companies
outside of the clearing house points, held the 28th inst. at
Rochester, N. Y.

This resolution will indicate to you what

the said institutions are earnestly working to accomplish.

Me send this to you with the request that the banks
of this' state will not do anything to weaken our position nor

hamper our efforts, but that they will continue to route their
items for collection as in the past, until our committee has

had reasonable time in which to determine what may be done in
this matter.

The interests and wishes of a great majority of national banks are believed to be identical with ours in this

matter, thus making the success of our efforts a matter of
mutual interest to all.

At least, may we entreat that we be

given fair consideration and a reasonable time before any
changes are made.

Very truly yours,
R. S. Persons,

Chairman of Committee.




RESOLUTIONS UNANIMOUSLY ADOFTED AT A CON=ENCE OF STATE BANKS
AND TRUST COMPANIES OF NE',/ YORK STATE, LOCATED OUTSIDE OF

CLEARING H)USE POINTS, HELD

.-1CH 28, 1917, AT ROCHESTER, N. Y.

RESOLVED, that the banks and trust companies represented at this meeting agree with each other not to sign the agreement
proposed by the Federal Reserve Bank of New York for performing a
service by transmitting funds to distant points without compensation for said service; and
Further RESOLVED, that the banks and trust companies
here present protest against the attempt of the said Federal reserve bank to coerce OT unjustly force state banking institutions
not underits jurisdiction, in the conduct of their business; and
Further RESOLVF.D, that a committee of five be appointed
with full power to take such proceedings, judicial or otherwise,
in cooperation with the New York State Superintendent of Banks and
the Attorney General, and if necessary, with the Governor and Legislature, to prevent such or other usurpations or encroachments on
the rights of the state banking institutions.

..)ERAL RESERVE BANK
OF NEW YORK

FINDINGS AND RECOMMENDATIONS OF COMMITTEE OF FIVE
REPRESENTING NEW YORK STATE BANKS AND TRUST COMPANIES
LOCATED OUTSIDE OF CLEARING HOUSE CENTERS

C TYY

Gentlemen:

Your Committee after careful investigation and mature consideration
find:




That the Federal Reserve Clearing and Collection
System is not essential to the accobplishment of the fundamental purpose contemplated by the Federal Reserve Act.
The Federal Reserve Banks have neither moral nor
legal obligation to receive from their members checks and
drafts drawn upon nonmember banks and trust companies.
The action of the Federal Reserve Bank of New
York in resorting to the use of the express companies in
collecting checks and drafts, is unbusiness-like, unethical, and unpatriotic at this time, since it breeds antagonism and apposition and precludes the close and friendly
cooperation that is most urgently needed in order to marshal the resources of the banks for the protection of the
commerce, industry and the credit of America during the
great crisis she is now facing.
The law and rulings of the Federal Reserve Board
have been construed to permit the Federal reserve banks to
pay express companies for their service in collecting
checks and drafts, - the same law and rulings if justly
and fairly interpreted would permit the Federal reserve
banks to pay a bank or any other agent for rendering a like
service.

The nonmember banks should stand as a unit and
should not submit to the arbitrary demand made by the Federal Reserve Bank of New York; namely, that the State
banks and trust companies shall be obliged to cover by remittance or otherwise, without fee or compensation of any
character whatsoever, checks and drafts presented through
said Federal reserve bank, regardless of the expense and
labor that may be imposed upon such State banks and trust
companies.
The Federal reserve banks have not displayed
either efficiency or economy in collecting checks and
drafts.
The manner in which they are handling this branch
of the business places unnecessary and unwarrantedburdens
upon the small banks.
The purchase and sale of exchange is a legitimate
When the resources of the banks are
function of banking.
used in an indirect way to furnish to the public the

RESERVE BANK
OF NEW YORK

-2-

C

service that is ordinarily performed through the purchase
or creation and sale of exchange, the banks are entitled
through all laws of fairness and equity to receive pay
therefor.
6.

The public should be protected against exorbitant exchange charges and should be given the best possible service at the least possible expense, but no bank
should be called upon to render a substantial service
without compensation.
(To demand and receive
labor is a right guaranteed to every citizen by the Constitution of the United States).

9.

Less than 10% of the so-called country checks
are being collected through the Federal reserve banks.
The report of the Federal Reserve Board indicates that
during the month ending with March 15, 1917, the par lists
of the Federal reserve banks show a net loss of seventyThe loss of State banks and trust companies
nine banks.
from the list during the month previous was forty-four,

Certain officials and others interested in promoting the Federal Reserve Collection System, have proclaimed the System as a success giving as
their reason that over 6,000 nonmenther banks are in it of their own volition
and are happy because of its operation.
A letter written to five banks in each State whose names appear upon
the par lists of the Federal reserve banks, bought immediate response from 156
Of this number only 75 were
banks, every State save one being represented.
receiving items direct from the Federal reserve banks; items upon the others
were being presented through the express companies or a member national bank.
Of the 75 remitting direct, 36 were coerced into making the arrangements, and
were bitter in their denunciation of the plan; 17 had remitted at par prior to
the establishment of the Federal reserve banks, and but 22 had gone into the
arrangement voluntarily and because of its merits, and were satisfied because
of its operations.
In view of these facts, we believe the following course should be
pursued:




That you do not sign any agreement binding your
bank to remit at par to the Federal,reserve bank until
after Congress has acted upon the amendment to the Federal
Reserve Act, proposed by the Committee of 25.
That you immediately communicate with all of
your correspondents and with other banks that send you any
considerable volume of checks, and make whatever deal with
them that is necessary in order to make certain that they
will continue to send your items direct to you in the us(Make these arrangements on a temporary basis),
ual way.
Write your senator and congressman a strong letter telling them in your own terns haw the unwarranted

a.SERVE BANK
NEW YORK

PT

-3-

tion of the Federal Reserve Bank of New York in using
the express company, is designed tb injure your business and may in some instances even force banks to close
their doors or come to their terms.
Urge their support
to an amendment to Section 16 of the Federal Reserve Act
which will give the banks, both members and nonmembers,
the unquestioned right to make a reasonable charge
against the presenter for the expense and service incurred in covering by remittance or otherwise, checks and
drafts that have been sent to distant points and are presented through a Federal reserve bank, or any other
agency for collection or payment.

We believe that the permanent solution of this question lies in Federal Legislation followed by concerted action on the part of all bankers to
improve their collection and clearing facilities so as to afford the most efficient and economical means of liquidating checks and drafts, and that our
interests will be best served by cooperating with the Committee of Twenty-Five
appointed by the President of the American Bankers Association and which represents 16,500 banks.
We have been in conference with Mt. Jerome Thralls, Secretary of that
Committee, and he concurs in these views.
It will be in shape
We are working on another important suggestion.
to submit to you in a day or two and coupled with what we have already outlined
will, we believe, protect our interests.

In order to get results we will need close and determined cooperation.
We therefore trust that you will promptly comply with the suggestions contained
herein.




Respectfully yours,

C. B. Benedict
P. C. Euchner
F. E. Johnson
Arthur D. Nichols
R. S. Persons, Chairman
.

RESERVE BANK
F. NEW YORK

TO THE CASHIER OF THE BMTK ADDRESSED:

A meeting of representatives of all State Banks
and Trust Companies located outside of clearing house
points will be held Saturday April 21st 1917 at 2:30 P. M.
at the Hotel Rochester, Rochester, New York.
At this meeting there will be submitted for
immediate action, the proposition on which Judge Paton,
General Counsel of the American Bankers Association has
given his opinion as enclosed herewith.
Judge Paton has very kindly consented to be
present at this meeting.

Your Committee has been advised that this method
has every probability of stopping presentation of checks
for collection through an express company or at least of
rendering Lipossible the payment of checks presented for
payment through an. express company.
You know the urgency
of the situation.
Your Committee recommends that the necessary
authorities of your institution give this subject immediate and full consideration and that it is of the utmost
importance that your institution send a representative
having authority to act for your institution to attend the
meeting at Rochester April 21st 1917.

Respectfully yours,
B. Benedict
C. Buchner
F. E. Johnson
Arthur D. Nichols, Secretary
R. S. Persons, Chairman

New York City, N. Y.
April 17, 1917.




1

AERVE BANK

"V YORK

EeT

'Or
"CHECK NOT PAYABLE THROUGH AN EXPRESS COMPANY"
Opinion -

Validity and negotiability not
affected by such provision, and
duty of drawee bank is to refuse
to pay if presented through an
Express Company.

(Copy of letter requesting opinion.)

Attica, New York,
April 14, 1917.

Thomas B. Patoh, General Counsel,
American Bankers' Association,
Nev York, N. Y.
Dear Sir:

As a melber bank, we desire your opinion upon the following:
er
A custoril/of our bank stamps on his check, 'not payable
through an express company."
What is the legal effect of such provision;
'Particularly

Is such provision valid and does it affect the negotiability of the check?
What is the duty of our bank should
ed by an express company?

such check be present-

If our bank refused to nay such check so presented, would
it incur any liability (a)
to our customer
(b) to the holder or owner
of the check?

to pay?




Could such a check be lawfully protested, upon refusal
If so protested, what would be the consequences?
(sg)

Bank of Attica

by C. B. Benedict
Prest.

C 1FT

ERVE BANK
W
W YORK

ANSWER AND OPINIUN

New York, April 16, 1917.

2r C. B. Benedict, Presioent,
Bank of ttica,
Attica, am York.
Dear Sir:

Replying to y)urs of April 14th, would say:

There the drawer of a check stamps or writes thereon a provision "not payable
through an express company,' in my opinion (1) such provision is valid and does not affect the negotiability of the check (2)
the duty of the drawee bank is to refuse to
pay such a check so presented
(3)
the bank so refusing would not incur any liability
to the drawer, its customer, nor to the holder or owner of the check and (4)
such check
could not be lawfully protested and if protested, the holder or owner causing protest
would be subject to an action for damages at suit of the drawer.
In amplification of the above would say:
1. The conclusion that a check so drawn is valid and negotiable is supported
by decisions of the Supreme Court of North Carolina and of Georgia and there are no
contrary decisions of which I am aware.
.

In Commercial National Bank v. Firet Wianal Bank 118 N. Q. 783, a check
was drawn on the First National Bank of eastoniai North Carolina and had stamped across
its face the following:
'This check positively will not be paid to the Gastonia Cotton Ifg. Co.,
the Gastonia Banking Co., or any of its agents.'
The cheek was negotiated by the payee and presented for payment by the Gaston.ta
Banking Company, one of tne prohibited parties, and payment was refused, and the court
held teat the restriction was valid and did not destroy the negotiability of tae check
to other parties than those arovided against.
The court said:
"In Thagland the system
of crossed checks has long been recognized as valid.
By that system there is stamped
across the face of the check the name of a certain banker through whom it must be presented for payment, and if presented by any one else, it will not be honored.
This dues not
destroy negotiability in any wise.
The present case does not go that far, but merely
stipulates tnat the check will not be honored if presented theouga one agency named. This
cannot be domed an unreasonable restriction of trade.
Nor is it a boycott.
There is
no evidence of a conspiracy to injure the agency named, but it is agreed as a fact that
It was an effort on tae part of the drawer firm to prevent its transactions and tne
nature ani extent of its business becoming known to a rival house by its checks passing
throu-h that channel."

In Farmers Bank of Nashville v. Johnson, 134 Ga., 486, a check was drawn on
the Bank of Nashville, Ga. "payable through the Citizens bank of Valdosta, Ga. at current
rate.'
The check was presented to the Bank of Nashville by the 2annerb Bank of Nashville
and upon presentation, the Bank of Nashville wrote on the back of the check ',will pay
when presented through the eitizens bank of Valdosta, Ga.'
Thereupon the aarmers Bank
caused the check to be proteated.
The aupreme court of Georgia held that th
making



_

ESERVE BANK

'EW YORK

-2-

C

14,

1

the check payable through a named bank was a material part of the direction; that the
drawee bank was not required to pay the check when not presented through the bank thus
named, but directly by a third bank, and that the refusal of the drawee to pay the check
except as indicated did not authorize the bank holding the check to have it protested.
The court said that the words "payable through the Citizens Bank of Valdosta" etc., formed a part of the check which the drawee bank was bound to regard and which it had no
right to disregard; furthermore, such direction required payment through the Valdosta
bank and was not merely permissive so that payment could be demanded either through that
channel or directly from the drawee bank; that presentment being required to be made
through the designated channel only, the drawee had the right to decline payment except
upon presentment in that manner and where the bank holding the paper refused to recognize such reason for nonpayment on presentment by it and caused the check to be protested,
such action was unwarranted.
I will not burden this opinion with a statement of the
discussion of the court leading to this conclusion.
In the first of these cases, it is seen, a provision that a cheek will not be
paid to certain persons is held valid, does not affect negotiability and it is the right
and duty of the drawee bank to refuse payment to such persons; in the second ease, the
restriction that a cheek is payable only through a specified bank is held valid and it
is the right and duty of the drawee to decline to pay when presented by any other bank.
In the light of these cases and of the reasoning upon which the decisions are
based, I am of opinion that where a customer stamps on his check "not payable through an
express company" the provision is valid and does not affect the negotiability of the
check.

For like reasons I am of opinion that it is the duty of the drawee bank,
should such check be presented by or through an express company, to obey the direction of
the drawer and refuse to pay same.
It has been exprqssly held that a direction of this
character is not merely permissive but that the drawee bank is bound to regard it.
The bank so refusing to pay would not incur any liability to the drawer of
the check or to the holder or owner of the check by reason of such refusal.
So far as
the drawer is concerned, it is simply obeying his direction and if it should disobey such
direction and make payment through the prohibited channel it would incur liability to
him for disregarding his instructions could he, in any case, prove that he was damaged
thereby.
Nor would any liability be incurred to the holder or owner of the check.
The Negotiable Instruments Act expressly provides that "a check of itself does not operate
as an assignment of any part of the funds to the credit of the drawer with the bank, and
the bank is not liable to the holder, unless and until it accepts or certifies the check"
It is familiar law and requires no citation of authority that a
(Sec. 325, N.I.Act).
check is a mere order on and authority to the bank to pay and prior to acceptance or certification, confers no rights upon the holder against the bank.
pay is rightful or wrongful, the sole recourse of the holder is against the drawer and
prior parties.
In a case much as the present, refusal to pay, in view of the conclusion
above announced, would be rightful.
The remaining question is whether such a check, upon refusal to pay, could
be lawfully protested and if so protested what consequences would follow.
In the North
'Carolina case first above cited, the action was by the holder of the check, which had been
refused payment because presented through the prohibited agency, both against the drawer
The court held there could be no right of action against the drawee prior
and drawee.
to acceptance by the bank and that the holder of the check could not recover from the
drawer until the check had been lawfully presented and payment refused.
As it appeared




W

RESERVE BANK
. NEW YORK

Ghat the Check had never been presented to the drawee except by the prohibited person,
the court held there was no right of action against the drawer.
In the Georgia case,
where the check was refused payment because presented by a holder other than the designated bank, the presenting bank caused the check to be protested and the action was
by the drawer against such bank for damages. The court held that the collecting bank
was not authorized to have the check protested and that its unauthorized act furniehe
acatse of action to the drawer for damages because of the wrongful protest.

It follows that where a check containing the direction "not payable through
an express company", is presented for payment by an express company, or its agent,
and refused payment for that reason, the instrument cannot be lawfully protested, that
the holder has no right of action either against the drawee or drawer thereon but, to
the contrary, the drawer has a right of action against the bank causing the protest,
for damages which he may suffer as a result of such wrongful protest.




Very truly yours,
(Signed)

Thomas B. Paton,
General Counsel.




1%,OV

.?7-e-ezt_e0`/ #31
GANIzEo

PRESIDER T
Wm .A.LAWFirst Vice-Pres.First National Ban k.Philadelphia,Pa.
VICE-PRESIDENT
JAMES K.LYNCH .Vice-Pres.FirstNational Bank ,San Francisco, Cal .
GENERAL SECRETARY
FREDERICK E.FARNSWORTH,Five Nassau Street,NewYork City
TREASURER
J.W.HOOPES,Vice-Pres.aCashierCiity National Bank,GalvestonTexas

F4tritIIAUJtWer
rrP, 6

29

TENv-Yon.4.1Feb. 4, 1915.
,LdAii(

ASSISTANT SECRETARY
WILLIAM G.FITZWILSON, Five Nassau Street,NewYork City
GENERAL COUNSEL
THOMAS B.PATON, Five Nassau Street.NewYork City

,

MANAGER PROTECTIVE DEPARTMENT

L.W.GAMMON,Five Nassau Street,N ewYork City
MANAGER DEPARTMENT OF PUBLIC RELATIONS

A.C.WELTON,Five Nassau Street, NewYork City




Mr. G. E. Gregory, Actino Cashier,
Federal Reserve Ban of New York,
New York, N. Y.

Dear Sir
Your favor of even date enclosing
an application for membership and check for
$75.00 in payment of your dues for the present fiscal year ending September 1st, 1915,
is at hand and we thank you for the same.
We are enclosing herein the follow

wing:
PAID CERTIFICATE of MEMBEBSHIP to the above date,
CONFIDENTIAL BOOKLET issued by our Protective Committee,
Under separate cover we are forwarding the following:
METAL SIGN (to be hung in some conspicuous place,
preferably your paying teller's
window)
PAMPHLET containing a list of our members.
Assuring you we are pleased to enroll
he above bank as a member of this Association,
e are,

Very truly yours,

JCS. c.
General Secretary.
Enclosures.
WGF/G

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