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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 Citizens' League Fo7the promotion, ofa 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 Citizens' League For the promotion ofa 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. Digitized forNational FRASER 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 McFadden as much and also 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. The banks got loaded and too much money and credit got into circulation. .up with gold 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, FRASER other nations might follow, and there would be danger of a slump in - 3 - . '.---the value of gold. He also said that there was a gold decreasing in value in the future. great possibility of This would mean higher price 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 pay for his 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 YORK W 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 the provision 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. Whether a refusal to 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 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