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PRIVATE. Estes Park, Colo., August 3, 1916. Brien Cokayne, Care of Bank of England, London, England. Dear Jr. Cokayne: I regret very much that my illness delayed replying to your kind lettex of 15th. s necessarily I am spending some month- -here in dice touch Colorado, where I have a littlein and my absence The managemethe Bank. ho ver, dur Treman, Deputy ober be in the hands of 14r: ernor of the Bank, who\h s b-e' one of our directors ce the bank was organize 'Park, , . ,e Unfortunate sage of the aM ements has arisen as to the "ederal Reserve Act at , session of iC ngress, t an effort will be made to ain a favourab e opiniottiof Counsel covering the matter days of race\ nd I ai ' hopeful that means will be found vereti th hat' ,/ / The basis_ ear-marking gold at the Bank of suggesfild by the Governor, seems to Lao to be enl satisfaet5iry. Mould not the same rule apply to e arkint 'of gold for account of the Bank of England he era Reserve AssumingLevi an Bank of as York? ustration that you remitted to us say ,5,030,000 of Lew Exchange and occasion arose for ear-marking that amount old. The price which the ollars cost you expressed sterling would not affect the operation of ear-marking in Lew York. You would have %5,0D0,000 credit either our books or possibly invested in bills. Upon your inuctions, we wauld convert that creOit into gold upon basis of the table of charges provided by the Assay ice circular, which took effect April lLth, of which I you a copy. Assuming that the gold was ear-marked in ndard bars, you would receive the exact equivalent in d, less the assay office charge of LO/ 8.4000 for bars v5I00O in value and over. Were we unable to obtain (sold s, we would ear-mark gold coin at its bullion value, less charge of LO/ a4.000, which is made for bars, the effect g to set aside e sufficient quantity of gold to consume amount of your balance, with a deduction only of the rge of GO; a vlDDO which is made for gold bare. , 2. practical operation the Bank of England I assume would never buy dollars and establish a balance in View York, except under conditions which would show a profit in imThose porting gold from Jew York, or at any rate no loss. conditions would necessarily imply a sufficient discount on dollars in London below gold parity to enable the operation to be conducted without loss on the exchange and possibly at a profit when tho account was liquidated. In other words, fluctuations in exchange would not interfere with the successful operation of the gold account, as gold would be ear-marked by the debtin itution for institution the creditor institution only when the eredi was buying exchange and remittinf, it/to the de or Institution, at rates which insured no loss( o the or ditor on exchange. of 1.4 to tile--,ear-marking The above siL2gestio /1Aconsi drati'611, and just as is tentative for y shington as to our soon as I learn o f the de i ion in proposals, I will write y uk more fully and definitely. o / the 'llvithr- he press reports of Your letter, t Amertean-securities, as well as the success in a;_sembl lotation of iumerican Foreign the completely sucoes ,cent. notes, furnishes con :Acurities Company with which the problem vincing evidence o de= t"with on your side. Of course e is bei, of exoh sensitigindition of our money market indithe reo cated th )lecessity-for prompt and thorough measures to protect the- -- exchanges, and I believe that your large shipments ; bad-have ,:one much to ease our market which was tempor lily affected by large payments of taxes to the Treasu y. Government expenditures from now on will be very he ty and I expect to see the continued disbursal of the Gov rnment's funds contribute somewhat to the further ease of money until the Fall. All you kindly give riv best regards to the Governor and to your associates. Thanking you for your letter and with assurance of my esteem, I am, Adthfully yours, AI.0 Montview Boulevard. Denver, %.iolorado, October -0th, 1^,16. bear r. Your favor of the 28th of :leptember r aches me at this to which address, together with one from Norma have already r soli ed. wha Let me try to make el in my mind in regard to methods of handling gold:< n credit on our books rhich It the Rank of ';ngl-n it desired to convert o e d, there would be two ked methods nosnible of o taininz t p gold. My one method we would present rvold certifi n es at t e oubtreeury in Mew York end with------- This draw ;:old sof ight not he full weight, an the limit ;old coins are paid out by of tolern s the ury so lon noquently, if r *ion doom not exceed that porcentage. eon- marked AlPrie%n coin ei itn bullion value, we woulJ or necessity incur the lose between the bullion value end the abraded leyil tender value of the coin. In trnsactions, withallother institution, we hwve so for been successful in obt -in- ing from the fAibtreasury nely 'Anted coins, thus avoiding any abrasion lone, but we winnot tawny, roy u,on getting unabreded mein, ,211 eu,;1.1 withdrawals, there is no ohnrr,e mnde by the Treasur:,. The second method would be t' withdraw United States standard hare, that in, bare containing 99 7f. fine golfi end 1 per alloy. For sue!. bare, as sthted i> cop- paragraph 6 of the enclosed Oct. 20, 1916. To 'irian ",.:okayne, Ego. table of charges, the mints and Assay Offices of the United States 111 IP make a charge of 50 cents per :;11000, cnd we woulc receive nnd sorm^rk for you gold bars of the nominsl value of tf.e amount of 4.;,e Assay Of- your credit to be earmarked, lees 1/20 of 1 letter of August 3rd could not fice charge for standard bars. have er this clear. This charge of 50 cents, by the way, it is f treating claimed by our Asia; Office exactly cover gold end turning it out in that form, tegtr, etc. exchange, how- This charg" really fi To over, r.ther than in the valu as we view it. rou!hly illustrate how 'the ac k it J.* necessary to at what of 11 ff 'the Rank of En61:nd muot became necessary, the &old ould bur dollars sc that, in o be landed in London w' o he .o los . / ',he following hypothetical ca l- sulation will illustra e p int: .8555 g(Aci parity iS Lo nn 'due to insurance, freight, mpo n .b osion, interest and sundries, we .0525 1 esti:I.As ( h s is above tho normal in ordi- nr The &early Cities charge of 50 cents per $1,000 far standard bars is the sovivalent per pound of Total .00245 $4.92145 7,0 if tho Bank of Kngland purchase.). dollars n rnte exceediu: !4.92145 ar. t th,, Federal Reserve Rtink of row .ork earmarked tf.r th:llars in standard gold bore, the Rank of tInglend 4 TO Brian Coknyno, Zeq. Oct. 20, 1916. would bo in position to bring the zold to London without 1o!ls, Ain case (iollars declined in your market, r.nd withdrawal beOnne necesmary for any reason. The importnos of en errangerent of the character proposed between the 'lank of rnglnnd and tho Fedel noserve ',sinks ill illustrated by what would transpire i.f thn xchangon miter declined or advanced below or above your ace coot of Should dollars sell in Lonlon at '4.90, the no nt could be liquidated et a profit without roving the gold mould dollars nell i Other han.i , he laid down in 1.ondon witnou of moving the gold 'vac to 2 cents on the poLn either tom, would operat of course, all in thr: lost l minuted, thin owing would amount eve or below the gold our ,4.8655 r me, the A 8 C of how the dollar account 'coke. "'hr exact reverse oould be true; of the sterlir!g soc unt carried on our hooks. In that case, the dif- ference botgeen 77 n. 10+ d, your mint price for of The saving we of profits earned form the diocount of bills. n 4091119 t the finn'47 ; ;old cc.uld Id renrssont tns ?refit on the uc- 7 nnd the aount,-e-f-ithat count, exc at 64.95, the On the red insted of chipped, and 0 ti riske in normal times with ndon. e thor party. to ha effncted by the arrRngeme 4.91145. .:ngl'ind proti ni old, cnd 77 F. 9 d. which preeumebly ,;old would be oarm%rked for our account, is the equivalent in purpose An, onnunt of our Assay iJffice charge of !')') cents per ;:1,000 for bars. T. Sri n ,okayne, Esq. it i Oct. 20, 1916. tai correct, wish you buy Collars iv London you would einOw in the rate of exchange for the 11_0 of 1 for charged ;(11,,i bars and when we bought sterling in New York we viould allow in the rats of exchnge slightly more than 1/20 of 1 for tple (merge made by the jaw( of :Alglnnd for imr,:ediato credit in order to avoid loos in rise either of uu s ro Id import the ;;old, u order it earmarked. On the general question of inc, of I realize that the creditor inotitviion understanding ate to a limit, m 'lace debtor institution for a large previous ate b .1uncos with the Aritan would care to furniuh in uation was generally without a tne debtor institution seems to Le taiLt rod i r di desion. isuct. a sit- The debtor in- stitution in 0-Ch ih t ice WOUlj ie expected to advice the: creditor institution by cable ---- ate. ':xpe he 1 to wnich it eau willing to o7)er- ce will guide in this mutter better than hard end fret rules on coca ions when exchange ear- moving very otrongly one way or otoer e would doubtleme unJortake transactions only after an excnenge of cables which would agree upon specific limits to the *mount to be handled. As I wrote NorLatn, it is always in my mind thht the con - elusion of the war will gradually bring about a reversal of the ex changes, the burden of furnishinf, gold for expert largely fall upon the, federal i.eaervo Banks and the demand will largely come frro :.onion the other leg. that the arrangements proposed wiLl find tho boot on .5. To Brian Ookhyne, Esq. Oct. Hi, 1916. At present, if, or When, necessary ap rev is of the plan 40 I are obtained, the account would be o crated in eterlif.g the Fed. srol hederve Bunke would be buying bills in London wish but slight Occacion to hhve gold earmarked during are ootua!_ly fluctuating between 70 f perie6 when our reserves precticelly all in end 60 gold. 'oince 1 last wrote you, i;ongres idont nen signed the bill amen...J.11g Secti p 14 of th and the treeederal Leserve Act so that it now reads an followo: "Every- Federal reserve &nail wer, with the consent of e fiord, to Res open and mointnin ace is in f gn countries, apnd eetabl n agnncioo in such point correepon:lents countries; Aereroever it mr,y dee ent for the purollecting bills of pose of purchesi g, s ink;, t th or without its exchnnge, epondents or agencies, indorsement, thro bine of exchange ri ng out of actual commercial of more than ninety day@ to transactions hi "Taco, alv! which bear the run, exclusive rce,o-wible pn4tieut signature of the consent o he t d al leserve Benrci to oncn and nte for suoL foreign, correepo* V.I. banki a en 2ASIWILls that this rliminntes ell difficulty as You :ooncin usance n bills end will permit the rederal hsserve flank -07 York to r c ive froon the dank of nialknd without e inconvenience of earmarking gold, en; in thegr) too rondo:ate e terl:s of the memorandum Jreiareci when 1 any_. in Ion or can now modifie. e I cm gled to sly thst thin 11,4,nerful and the reset everythinc and more than coul1 be ex,,ected io restore my alth. To Brian Cokayne, gicie Oct. 20, 1916. 1: he war newo must inused give you c,11 arat 6ncourage- mert and I hope contributes to your satisfaction in the past two years of hard vork and anxiety. *ill you be boon enouo, to include the Governor in the warm regards carried by this letter, any belie Very sincerely yours, Brian .,;ckqyne, Keg., Deputy Governor, Bank of Fnglan London, Tngland. 143/Yev SECRET MF,710RANDII!! OF 7.ARCIT 1916 redrafted in accordance with letter from the Federal Reserve Bank of New York dated January 18, 1917, and further amended by the Bank of England. The following points confidentially and tentatively agreed upon for submission and ratification by the rennective institutions, with a view to being put into operation after the conclusion of the war: - 1. The Federal Reserve Bank of 7ew York to act for itself and for such of the other eleven (11) Federal reserve banks as join the account. 2. ACCOUNTS. The ?edeml Reserve Bank of `'err York to maintain an account with the Bank of England and vice versa. 3. The accounts respectively to be kept free of charges and °omission - except as regards actual outof-pocket expenses. 4. BILLS. The Bank of England to purchase, as and when so requested, prime sterling bills for account of the 2ederal Reserve Bank of New York, for the payment of which, at maturity, the Bank of England will be responsible. These bills to be such as are believed to arise out of actual commercial transactions, to have no more than ninety (9')) days to run, e:Iclusive of days of grace, and to bear the signature of two or more responsible parties. The Federal reserve Bank of 7ew York, likewise, to purchase prime dollar bills of a sinilar nature for account of the Bank of England, and to be responsible for their payment at maturity. Inch bills to be at the absolute disposal of the institution for whose account the purchase is made in either case. (a) The -?ederal Reserve Bank of ':err York would pre"er that bills purchased for its account by the Bank of England should consist so far as possible of those bearing- .") the names of American drawers, or indorsers, no long as this requirement does not involve the acceptance of other than prime bills which are eligible for discount at the Bank of England, and a sinilar policy would be pursued by the Federal Fescrve 'lank of .!Tew York in purchasing bills bearing the names of Fnglish draers, or indorsers, for the Bank of Fngland, shonld it be possible to do so. (b) It is expected that nurchases of bills either institution for the other will be at the current market rates. 5. .021 :REST. When balances vrith the Bank of England cannot be invested in bills, the account of the :lederal Deserve Bank of 7ew York nay be dealt with on an interest basin, at rates to be agreed upon. An the Federal '"eserve Bank of 7ew York is not authorized by law to allow interest on balances, balances at the credit of the Bank of rngland, if they are to earn interest, must be invested in bills. 6. GOLD. Subject to Clause 10 and an below stated, the debtor institution will, at the request of the creditor institution and so far as it conveniently can, set aside and earmark gold on a bullion basis representing balances due. Such gold to be clearly identified as to ownership. (a) The Bank of 7ngIand to earmark and set aside refined gold bars for the Federal -eserve "-lank of row York, when so requested, and charge its account at the rate of 77 shillings 10 1/2 pence per rnglish standard ounce, eleven -twelfths fine, or (b) When standard gold bars are not available, the lank of nngland to earmark and set aside eagles for account of the New York bank at their bullion value, at that rate of 77 shillings 10 1/2 pence per ounce, for the equivalent of the English standard of fineness, or (o) The Bank of rngland to earmark and net aside sovereirns at their bullion value, at the rate of 77 shillings 10 1/2 pence per ounce. (d) Gold bars, or gold coin, so earmarked but not shinned, to be taken by the Bank of Pngland (if returned to the credit of the !Tew York bank) at the sane value at which they were earmarked in the first instance. (0) It should be understood that the Federal Reserve Bank of :Jew York cannot require the lank of Fngland to earmark eagles at bullion value In order to Irport then anti reaftlze the profit between the bullion value and face The right to value of American coin. determine in the event of shipment whether American coins shall be shipped or not to rest with the Bank of England. The 1.ederal Reserve Bank of '.:sew York to carmark vnd set aside gold for the Bank of England when so requested and charge its account on the following; basis: (f) Refined gold bars at the rate of t18.604651 per United States standard ounce of gold nine-tenths fine, nlus the Assay Office charge of 50¢ per "1,000 in value if and when incurred, or (g) 'Iovereigns at their bullion value of ^18.604651 for each ounce of gold of the 'United fltaten standard, nine-tenths fine, or (h) eagles at their bullion value of "10.604651 per ounce. (1) Gold bars, or gold coin, so earmarked but not shipped, to be taken by the 2ederal reserve bank (if returned to the credit of the lank of rngland) at the same value at which they were earmarked in the first instance, excluding the Assay Office charge above-mentioned which will be borne by the Bank of England. ) It should be underst;od that the Bank of England cannot require the 'z'ederal Reserve Batik of New York to earmark sovereigns at bullion value in order to import then and realize the nrofit between the bullion value and face value of English coin. The right to determine, in the event of shipment, whether English coins shall be shipped or not to rest with the 2ederal Reserve Bank of New York. 7. Subject to Clauses 6 and 10, the debtor insti- tution to ship gold to the creditor institution, on request, at the cost and risk of the creditor institution. (Mere gold is shipped by one institution of its own accord to the other and not at the rcquest of the other, such shipment to be at the risk and cxpense of the shinning institution.) 8. Gold bars earmarked or shipped by either insti- tution to the other must be suitable for coinage purposes, alloy to be copper, and an all.mance made for any variations in gold contents above or below the standards specified above. 9. The earmarking and shipment of the gold coins of any other nation nay be undertaken unon the basis of the 'glue of the Tint 7n1ft captained in such coins, with deduction -4- of an allowance to cover the cost of conversion into gold bars of 7nglish or Anerican nint standard respectively. 10. The intention of the arrangements is that all transactions in gold (other than earnarked gold) bet-:eon the two institutions shall be voluntary and upon exactly equal terms as to each. 11. TVOTTATIOTT. It is expected that informa- tion will be exchanged by correspondence resnecting credit matters and financial conditions. 12. DURATIOr. The arrangement to be subject to cancelation by either institution, in whole or in part, except as to transactions in process, on notice by letter or cable; it being understood that any unliquidated balance either way may be settled in gold if no agreed. If circum- stances require or justify commercing operations before the conclusion of the war, a summation to that effect may be made by either institution. 13. It is hoped that the Pederal Reserve Bank of New York will eventually reach an arrangement on similar lines with the sank of France, to which end negotiations are already in progress. 14. ro announcement directly or indirectly to be made regarding the contents of this memorandum without the explicit consent of both institutions. 2nd ''arch, 1917. 4 Denver, Colorado, February 2, 1917. Dear Mr. Cokayne: Your kind letter of January 15th is just r ived and by the time this letter reaches you my official letter and that in great part covers some of ioned in your letter just received. As you say, all the appar les seem to have boen smoothed away and I am now can conclude our arrange- meats promptly. eived from your other You have undoubt correspondents on re in regard to that announcement by th rd. to comment When I touch di It is difficult for me quarters and so much out of t is goi ee, however, with much that you titularly as to the dangerous character of some of the ex- say, nansi. which has takeh develop e in connection with purely domestic te. If the xceedingly tense situation with Germany develops as it well may, all of these difficulties to which you refer and particularly those of the foreign e;:changes will be promptly resolved. Will you be good enough to thanc the Governor for his which I heartily reciprocate, .nd take this moans of convoying the same to Norman and your good self. Yours sincerely, Brian Cokayge, Esq., Bank of 1)agland, London. BS/CC ood wishes, Denver, Colorado, :Jay 19, 1917. PERSONAL. Dear Mr. Cokayne: Your recent communications addressed to New York have been read with great interest and official reply will be sent forward by early mail. I am writing to express to you personall:: the gratification which the conclusion of this arrangement has afforded me and which feeling is shared by all of my associates in New York. )f course the complete value of this close alliance will not develop until after the war, unless war emergencies later develop which will make the services of our respective institutions of importance 1_ connection with government financing. Never- theless, you may be assured that we here regard this arrangement between the Bank of England and the Federal Reserve Bank of New York as simply one manifestation of the growth of the strong feeling of kinship between your neople and ours, the fruits of which I trust we will all be able to enjoy to the fullest possible extent. With warmest regards to you and your associates. I am, Very sincerely yours, Brien Cokayne, Esq., Deputy Governor, Bank of England London. BS/CC January 21, 1918. Dear Sir: This note will be presented to you by my friend, Mr. John T. Pratt, who is just leaving this country to accept a position of importance in the American Red Cross, Field Service, in France. I hope that Mr. Fratt's duties will permit him opportunity to present this letter to you, as he is a very warm friend of mine and I am sure you will be glad to know him. Anything that you can do to facilitate his work or his trip will be greatly appreciated by me. Faithfully yours, Sir Brien Cokayne, Bank of England, London, England. 73:-.11IAB 44, January 21, 1918. Ly dear Sir Brien: I have taken the liberty of giving a note of introduction addressed to you, to my friend, Mr. John T. -)ratt, who is sailing for France this week. Mr. ?ratt is a well-known New Yorker, the son of Mr. Charles Pratt whom you doubtless know al, one time con- nected with the Standard Oil Company. ince the outbreak of the war he has been engaged in some important work in the De- partment of Labor, in Washington, and has now resigned to take up work in France. He is a very warm personal friend of mine and a delightful fellow in every way, and I hope his engagements abroad permit him opportunity to meet you. can do to facilitate the objects of his trip will be warmly appreciate a. 7,ith kindest remembrances for the New Year, and thanking you in advance, I beg to remain, Sincerely yours, Fir Brien CokaynaBga-dr-grigland, London, England. B8/LRR Aprib 27, 1916. ;Sy dear Sir Brian: This may appear to you a rather belated note which is intended to convey to you my congratulations and hearty .;ood wishes upon your accession to the Governorship of the Bank of .gland. Durinc the last year I have begun in a small way to realize what a tremendous responsibility you gentlemen of the Bank management have had to carry since the outbreak of the war, and that fact is so thorouhly realized in London, that it seems to me no higher compliment can be paid to a banker than to achieve the position which you now occupy. I am sending you the warm wishes of the youngest member of the Central Bank fraternity that your administration will be one of great achievement and success and will bring honor to the bank and to the new Governor. With warmest regards, I am, Faithfully yours, Governor. Sir Brian Jekayne, --767ernor; Bank of England, London, England. BS*VOlt t\ ;* Air April 16, 191, PERO OLAL: Dear air Brien: For some time I have toping to send you a little account of how things are going with us, bOrcontinued absence in -:ashington has made it difficult for me to keep 74 with my correspondence. I am sending you a cable to-day, as per enclosed confirmation, which explains itself. The last forty-eight hours has witnessed one of those curious somersaults in opinion which now and then, in fact all too frequently, occur in this country. There has been a widespread demand for a 5 loan of some sort when the Government again appealed-to the money market, everyone apparently overlooking the fact that with the war ended our Treasury could probably work itself into position to reduce its borrowing demands to a descending scale, instead of continuing the ascending scale while the war was on. It has been found possible to do that; in conscluence the amount of the loan Las been limited to four and a half billion dollars (of course one must smile when speaking of a loan limited to four and a half billions) and this decision, coupled with the terms announced, which are described in detail in the enclosed statement, has afforded such relief, particularly to the Liberty Loan Organization, that the satisfaction is complete and widespread. I have no doubt the loan will be a great success. Our aim will be to effect the widest possible uistribution of the 4 3/4,: notes, which enjoy exemption from normal taxes, upon the i.heory that there will be very large subscriptions for the notes which are tax-exempt from those who pay heavy surtaxes; that those sub- scriptions will be the ones to be cut down, and the subscribers will be forced into the market to buy the 4 3/4;_ notes and convert them. The mechanical difficulties of r r en.aoka handling this loan will be tremendous, but, barring that, it presents advantages uciiirs have not been possible in any previous loan and are only made possible by the approach of that time when our Government will no longer be a borrower. luch perplexity was caused in our bank councils by the disparity in rates between the various issues of Government bonds and notes created in this offering. Our bank now makes fifteen-day advances upon the collateral of Treasury Jertificates of Indebtedness or the Government's bonds at and we discount subscribers' notes, for periods up to ninety days, when indorsed by our member banks at 4 l/4, being the coupon rata on the old loans. Inasmuch as the Treasury certificates, which run for short periods, bear 4 112a., the old issues of Liberty isonds, with one exception, 4 1/4%, and the new issues bear a 3/4`a and 4 3/4,.:, we will face a situation of much difficulty. This has been somewhat exaggerated by the fact that many of our national and state banks made commitments to subscribers for the Fourth Loan to carry them for a year at. the coupon rate, and we were reluctant to make an advance in rates Which would penalize the banks that wore still carrying those loans. The solution of the problem was easy, however, when the amount of the next loan was limited to f.ur and a half billions as our position is still so strong that we feel justified in maintaining our rates unchanged at their present level, Of course it invites the possibility of considerable expansion should our conclusion be arong that the loan can be placed without much employment of bank loans. We have notified the bankers privately, however, that we reserve entire freedom of action to enable us to deal with any situation that arises, and I am hopeful that the general feeling of optimism will result in good distribution of the notes without excessive demands upon as, This, in brief, is our new situation, and I am optimistic of a satisfactory outcome. It was somewhat due to my own oversight that there arose some possibility of a misunderstanding of our action in maain6 that small cable transfer to our credit on your books and I should have written you and explained the situation. 4/1r/19. air Srien Jokagne 3 We attach grout importance to the understanding which,we now have wit. The settlement of the earmarked gold account might have you vreat institution. appatred to jou, and.to us, as indicating that the agreement was a formality rather thicis an actuality and so I asked to have this transfer made simply that the accouut might be maintained under your eyes as an active reminder of something that exists /and is not forgotten. We have no expectation of asking you to ship gold, in fact, for us to aocumulate exchange at this time and put the agreement literally into operation would be the last thing that we would consider except you yourselves proposed gold shipments and desired to have 112 join you in the arrangements under which they would be made. And while on that subject, may I suggest the advisability that we keep each other closely informs', of developments along this line? Of course your action in discontinuing support of exchan,e? makes the gold embargo effective positively, rather than passively. shall do about our embargo. Our problem now is what we There seems to be some doubt as to the powers conferred by the Trading with the Ememy Aot and as to how long they continue. Our belief is that the Act intended that the President should continue to exercise this power after the war ended so that determination of our course as to gold exports will be upon grounds of policy entirely. I am wondering what your own views are as to what we should do and would be glad to hear from you about it. No doubt it would be un- wise to na.o any change until after this next loan is placed as there is a possibility of a considerable exodus of gold to neutrals at once the embargo is removed and we do not wish to create an unfavorable sentiment as to our reserves while the loan is in course of being placed. It seems to me that the important thing just now is for us to exchange information as fully and freluently as possible on this important subject. All you not give my best regards to your associates, and the same to your good self. Faithfully yours, Sir Brien Cokayne, Governor, Bank of http://fraser.stlouisfed.org/ England, London, Federal Reserve Bank of St. Louis England, PO 0 PER 3 Jli : Dear :fir brim: Your letter of flay 2d has been read with a great deal of interest. I am hoping in the near future to send you a fairly complete report on conditions over hare and write you more fully than I have yet been able to in regard to this difficult subject of the gold embargo. By good fortune our friend drenfell is on this side and i hope to-day to have a rather full dis- cussion with him on this subject, the santance of which he doubtless con- voy to you. I agree with much that you sad in regard to our own position. \7e Dow, substantially, what tae possibility of gold demand may be, with the ex.-ceptior. of India aad egypt, those being the only real danger spots with the possible exception of Japan, *1.o has accumulated very large balances in this country as doubtless she has with you, a considerable part of which balances has been temporarily invested in our ireasary Jertificates of Indebtedness. I have all along felt that whatever action was decided to be taken in regard to our embargo on gold exports should, if possible, be coupled with an arrangement between the Bane_ of Lgland and this bank so as to bring our policy into harmony. I am writing jr. Strauss on the subject to-day and will write you further. You doubtless have on hand a copy of the Trading with the 2:new Act and will observe that that paragraph relating to the embargo on gold exports does not seem to be limited to the period of the war, as do other sections of the bill. It may be, therefore, that the President's power to exercise this contimal will continue until definitely terminated by executive act. IP If opportunity occurs, I will cable you something of our plans about the gold embargo as soon as known. ;1th kindest regards, believe me, Eaitilfully yours, Brien Jokayne, an of :eland, London, Rneland. BS/113B Hotel Astoria, Brussels, August 5, 1919. My dear Sir Brion: With this I am enclosing to you copy of a dispatch which I am sending throw;h the American 'imbaseador at London in order that it may be transmitted through the Embassy code. In exTJlanation of this te.egram, I find that it will ne difficult me to ma e such arrangements as would seem to be necessary to ensure the prompt dispatch of the gold held by the Banque Natioualo de Belgi7ue to the Bank of Eng_and because of our having no organization near at hand to ta-a charge of it. The Governor of the Banque was good enough to explain to me the method which you had am)loyed, which has led me to ma':e the suggestion which I 4M transmittirv; by te1egraph. Please be assured that if you find it possible to comply with this request it will be very greatly appreciated and I shall certainly make it ray business to reetrtotate at the very first s:),portanity. I beg to remain, Faithfully yours, Sir Brien Cokayne, Governor, Bank of Eng and, London. Bs/v TELEGRAM August 5, 1919. URGENT 404 Alli.,:RICANAnASSADOR, London Benjauin Strong Governor Federal Reserve Bunk of New York desires following message transmitted promptly as ,o:-,sible to Governor Bank of England quote On arrival Brussels I find approximately two hundrel and ninety million marks gold could be shipped at once to !onden for treatment us discussed with you but considerable difficulty will be experienced in effecting trank,ortation without "ecessury arrangements being first uade in London as was done with shipment recently made by you stop Would it be possible for Bank of England to handle this gold in behalf of Federal Reserve Bank of New Yora by same method stop In this event National Bank of Belgium would be instructed to act upon direction of Bank of England in arranging details of transportation stop Also could Bank of England arrange for insurance cover in London preferably through Chubb and Sone to cover all risk and payable in dollars in New York stop Federal Reserve Bank_ would of course ex:-:ect to pay all costs and service charges and would greatly a;preciate courtesy stop Kindly telegraph reply both to Brussels care Banque Nationale and Amsterdam care Nedorlandsche Bank unquote STRONG TELEGRAM Amsterdam, August 8, 1919. GOVERNOR BANK OF ENGLAND London Many thanks for your telegram stop The total amount both Brussels and Amsterdam probably four or five million pounds less than amount mentioned your telegram stop About one third of this is in Brussels and two third here stop Would appreciate your telegraphing me oare Nederlandsche Bank advising if arrangements for shipment can cover Amsterdam as well as Brussels STRONG S acs. MKT. aiLs awe, sirs. ?wait r to ostireto day VMS witewsistimi of your tologre Sot SIMMilesd MAW* that yew will be helPIV to smog, shipmate fronts* desterdne sari r- Brussels end edit pialomee ambled to hew York lag tile kW lama. asst.. I preemie that the sable to Smelts* pastes to imeersewo emi repot to Wows 3es tam* t alresily roger Sr risers. Chubb S sees bray ryes% tMt inworisse I s d011en re be *Mori for wore the tor willion dollen ow way sr riposart. Was *dog to the nerosity for re7 Wise bort for ablest Saar weeks, possibly orsibet law, I bum nroseted kal. '. Kent to dialer *Mb ,you the -- arreeponest of the details for noving the ennunt of gold to be shipped ahleh will be tar the present as ODUOVet Frost Basesele to Lomas 1110.1100.8011 larks, leaving 90.004).(100 Warta fir the peeled with the Ilatiosal lien* of sigh. These 7/80/01.1/011 Melo I hope pee eon anent. to ship for as y fir sees welbot "kWh yes par seed with y3ar or shipmate dollars by cable to Two gosh. will discos ell details. 418.4111061/ MM insossee Cesommeles this, Sr. iOnt At Millieriat t homes sartipsi that limy doll erploto es err sommt and right of 101,000,000 SOSIVA gold narks, the shipest sf ebletkeeneet well be erreeged entil my return in sky event. This bases 240,040,006 not all Germs eels bat La pert bars, dome oaks sea scam severeigne es well possibly as other gold este *hide I hiss *sweep& with the Nalerlseessbe Desk to weigh in the ege and report directly to Dew York, sad it is this annual AMA I veal& hits to hare shipped is iseden as pile as it ens be arranged by the ammo Mrs sidled ibises sr weir with your or sorring by imeeeseee le dialers. Airiest seed 10111aVie boa soppy also kid yo.; the oithowisstiom Morel looervo Book owoorksig MY this matter obLah I Intended to of this letter will twiddled ow b the poem to doe' with Immo with $ oo fwevious17. i WA With sees limbs for year sesietaleo mmter which is deeply epreoistso, t beg to ressine Whitt lailz Jews, r:o tha Gowengor of the Bast of *161.,.11.1 noto1 Ritz, :saris, August 18, 1919. The flovernor of the fInnit of Nngland, Lonon, -11731and. j)es.2. ir: Thin not will be -:resented to you b7 r. V. I. rent, who has -wawaponied me to Furore to assist in vnrious matters, including the arrangenent for the shi-onont of Old from ,:alsterdam and Brussels to London. Iwime to n7 expected absence of a few weeks I am aelariR )(r. rent to Pe is thoroughly famili5:r with carry on the intier luring my absence. it ,and 11..s the necessary code snd chock words to enLble him to communicate prom qtly ,Ath the /Federal reserve Pik. It is not intended in ;-ry way to alter the arrangements that you may mite for effecting the shipment of this gold from Brussels and :dasterdam to London, but Yr. rent will ect in my place during n absence so that we may have someone on the -round with whom to communicate. Again with m.ny thrmks for your courtesy, I beg to remain, Paithfully Troure, .131v Paris, August 19, 1919. TELEGRAM i Governor Bank of England London Replying your telegram regarding insurance I am just advised by Federal Reserve Bank that Chubb quote rate about ::even ,,ad one half cents per hundred dollars covering all risks from Brussels to London stop No rate yet arranged from Amsterdam stop Also advised if entire Amount placed in America none elsewhere probably possible to insure seven million five hundred thousand dollars one conveyance and possibly might increase to ten million dollars one conveyance stop They cannot now guarantee this amount but requeit advice if business is likely to eventuate and will then advise rate definitely stop Am cabling New York t ere will be ten or more shipments of maximum amount and to quote definite rate both Brussels and Amsterdam direct to yousto) Kindly advise Kent STRONG Hotel Ritz, Paris, August 1::), Dear Sir: I am just in rectei:'t of confirmations of cables ;-sassing between us, dated the 12th Augu t, over the signature of your Deputy Chief Cashier, and beg now to confirm the receipt of the telegrams mentioned, together with the following: August 12. Your telegram of Path received stop Will be ha-2,py to arrange shipments both Amsterdam and Brussels stop Have cabled New York respecting business (insurance?). 1. 2. Augu 14. Learn from New York insurance can be arrnaged terms unknwwn to Bank but understood cabled you direct. 5. August 1. soon as authorized. We are ready to Lend to take delivery at both centres .4.0 rte await terms upon which to insure :rich Chubb. I now beg to confirm the advisees sent to you with :Ir. I?. I. Kett that I have abandoned for the present my intention of visiting Constantinopl, but will greatly appreciate Mr. Kelt's assistance in arranging the details of the gold shipments hile he is in London. I also beg to confirm sending you today the following telegra:.: 'ReAying your telegram regarding insurance I am just advised by Federal Reserve Bank that Chubb quote rate about seven and one half cents per hundred dollars covering all risks from Brussels to London stop No rate yet arranged from ALsterdam stop Also advised if entire amount placed in America none elsewhere probably possible to insure seven million five hundred thousand dollars one conveyance and possibly might increase to ten million dollars one conveyance stop They cannot now guarantee this amount but request advice if business in likely to eventuate and will then advise rate definitely stop An cabling New York there wi 1 be ten or more shipments of maximum amount and to quote definite rate both Brussels and Amsterdam direct to you stop Kindly advise Karat" The amount of gold to be included in the present shipments consists of approximately 2-o,nomono marks out of a tote- of 290,9^0,000 marks now held y the National Bank of Belgium and ap.roximately 240,00(),,00 marks out of a total of 440,000,00' marks hold by the Nederlandsche Bank. B. of E.- 2 The The gold held in Bruosels, I am advised, is entirely German coin. "320,999,299 following: gold held in Amsterdam is reported to consist of the roubles, s, 1,7'54,500 sovereigns, 16,300,000 Austrian crowns, 5,500,01N") bars, fine weight 21,837 kilograms, or a total of 40,000,00C gold marks The 2ev),f100,00P marks to be left for the 2reseat in Austerdam will consist entirely of German gold coin and the gold to be shipped is to include the balance of the marks and the other coin and burs. I am just advised by the United States Treasury Department that it may be necessary to make 44 payment on behalf of the United States government of a:proximatoly St0,000,000 to the Bank of Spain in Madrid, and Mould other arrangements for making this payment prove impossible within the limited time at our disposal, would the Bunk of England be willing to set aside out of tho gold to be held for our account an amount of a,Jproximately $10,000,000, cslaua-ekina it for account of the Bank of Spain pending the completion of other arrangements? I shall endoavor to oaks a diroct dhijment to Uadrid out of the balance of the gold held in Amster&m,or Brussel s, but, failing that, would greatly appreciate being able to conduct the transaction through your good institution. .lay I also ask that you be good enough to show this letter to Mr. Kant, who will be glad to do what he can to facilit.am the armngements. Again thanking you for your iany courtesies, I bog to remain, Very truly yours, The Governor the Bank of England, London, England. B8/7 Hotel Ritz, Paris, August 22, 1912. Dear Sir: I am this morning in receipt of your telegram of the 21st instant, reading as follows: Our re:2resentatives have "Received your letter 19th stop We aro in touch with otarted for Brussels and Amsterdam stop Kent and await his completion of insurance with Chubb before Shall be hup?y when you definitely arranging shipment stop when held on your account to so direct to transfer a portion order of Bank of Spain.", and much appreciate your assistance in arranging matters with Mr. Kent. With this I beg to enclose confirmations of telegrams as follows: August 4, 4-'9. 19, 1919. " I beg to retain, Faithfully yours, The governor the Bank of England, London. BS/V (Two enclosures) Hotel Rita, Paris, August 23, 1919. Dear Sir: Since my letter to you of August 19, to make the shipment of 240,000,000 marks in receipt of more precise information as to be moved and Am now writing to know if asking that you be good enough from Amsterdam to London, I am to the amount of gold required this can be increased to a total of 360,000,040 marks, leaving 80,000,000 marks in four lots of ':!',:TO,c,'")0 each,whiCh have been exactly counted, weighed and examined, for eafekee2ing with the Nederlandsche Bank. Dr. Viecering, of the Nederlandsche Bank, is being advised by me to this effect, and I have asked him to inform your representatives who are now in Amsterdan, but they will undoubtedly desire instructions direct from you, Which I will greatly appreciate your conveying to them as well. Mr. Kent probably explained to you the possibility or our being I am under the necessity of moving some gold to Paris or Liadrid. awaiting cable instructions in this matter and have decided that it would be more convenient to make the shipment from Brussels than from either Amsterdam or London, if it is possible to arrange it, and it may be that I shall telegraph you and the Banque Nationale de Belgique making some change in the -mount to be shipped before that shipment is completed, which T trust will cause you no inconvenience. I um sending a copy of this letter to Mr. Kent at Claridge's Hotel, London, in order that he may be informed, and again wish to thank you for your courtesy in this matter 7hich has relieved me of conoiderable anxiety and is very greatly appreciated. Very sincerely yours, The Governor the Bank of England, London. wi Hotel Ritz, London, September 8, 1919. The Governor of the Bank of Ehgland, London. Dear Sir: With this I am enclosing transcript of a resolution passed by the directors of the Federal Reserve Bank of New Tork, under the authority of which I have been acting in arranging for the dhipuent of the gold which you have been good enough to handle in our behalf, and which you may desire to place on file. I um today in receipt of a cable from the Bank containing the following: "we have increased insurance to a total of 41j45,0:7,C,C(7, and further that it is understood and agreed that in cases whore elipmenta by two vessels arrive at porta in England and both or parts of both of these shipments should go forward by one train or otherlland conveyance to destination in London the (clause in policy?) as limit of liability is waived as regards these shipuants while so conveyed by land to London". A later cable contains the following: "We have covered insurance 44t),-r-,-77 aar::s from Amsterdam and 2'-`c,-0:',-m() marks from Brussels", and a still later cable, dated September 5, states: "Chubb has succeeded increasing insurance from 16,5010,00 to of on and after September 8th". It has been decided to move all of the gold, that is, 440,000,00C marks held in Amsterdam and 29c,^ -r, -,c marks held in Brussels, to London, and from the above you will observe that it will now be possible to .lake shipments from each point of a total of 37,50(,),m" by each separate conveyance, advice of which I would appreciate your conveying to your representativeo in those places. The total docowIt If ii.eurance must again be increased to cover the 9P,(10,-^e: marks addai.ional to 1-4. -hipped from Brussels, and I am cabling to the Bank asking that http://fraser.stlouisfed.org/ cable advises to me, of Which I Federal Reserve Bank of St. Louis this be arranged ,t once-, wtth-temmtd-.4111-__ will advise you on receipt. I am also asking that an effort be made to increase the total amount covered on one shipment to 31-,^","',(-r, as the time required to ship the entire now to be moved will, I fear, cause you cmsiderable inconvenience. With much a)preciation of your courtesy, I be ti Faithfully yours, (1 enclosure) to remain, London, So.:Umber 11, 1919. The Governor of the Bank of England, London. Dear Sir: I am Just in receipt of a cable from the Federal neserve Bank of New York asking if I will arrange with you to send a cable to the Bank on Saturday of this week advising the total amount of the German gold which has actually arrived at the Bank for our account up to date. Of course, I understand the impossibility of getting an exact statement upon the responsibility of the Dank, but I presume it will be possible to send a cab:e indicating the amount reported by your representatives to have been shipped in each lot, and consequently the amount understood to have been received. I am asking. whether any further special cable advIces of the arrival of ahipments are needed and will advise you of the rojy. Thanking you; I am, Very truly yours, &3/V London, Se.tember 15, 121-, Deur Sir: I be to thank you for your note of the 12th insult informing me that the Bank expected another shipment of 27,000,000 marks on the 13th instant. Yours very truly, E. M. Harvey, Esq., Chief Cashier, Bank of England, London London, Se teabfts 16, 1919. My dear Sir Brien: Replying to your letter of the 12th instant, it will suit us admirably to deliver to you iziGcT,^7 in sovereigns now held for our account in Ameterdt.m, receiving in exchange the corresponding value in London. The Nederiandsche Bank reports holding bags reported to contain sovereigns 1,5,4,50n, of which they estimate the weight at kilos 12,413.607. My understanding is that these sovereigns have been weighed in the small canvas bags in which they are packed and sealed and an allowance made for the weight of the bags and seals, so that these weights may not be accurate within some small percentage. In other words, I am unable to deterLiine the quality of the sovereigns and suggest that an account be made of the exchange no that I may be able to include it in the accounting required of us in connection with the total gold received from the Germane. Thank you for the suggestion to exiedite the cam,,ietion of our shipments. I am just advised by cable from Lle Federal Reserve Bank of New York that the total amount of insurance has been increased to $184,325,-, Which ia supposed to cover the allowance of one per cent. for shipping costs, but I am not certain, even after allowing for 15608,^00 which will not now be shipped, whether this total is sufficient to cover the entire amount. If it is not, may I ask you to be good enough to advise me, or if I have already sailed, to advise the Federal Reserve Bank of New York by cable. I 412M also advised that so far it hasbeen impossible to increase the amount of insurance above /7,5'',0,00r for any one conveyance. Tours very truly, Sir Brien Cokayne, Governor The Bank of England, London. London, Setember 1E, 11:. My dear Sir Brien: In response to a cable addressed to the Federa_ Reserie Bunk suggesting an arrangement by which the Indian goverwdent wou_d accept gold in London inst'ad New Ye* against e..ies of council bills in New York, I am advised by the Federal Reserve Bank of New York that the arrangement meets the approval of tho Bank, but, under the conditions still maintained relating to gold exorts, it wilL be necessary to obtain the further approval of the Gold Committee of the Federal Reserve Board. In case no advices reach no prior to my sailing on Saturday, I shall take the matter u2 on arrival in New York and advise you of the outcome. Yours very truly, Sir Brian Cokayne, Governor The Bank of England, London. BS/V ti London, September f!, 121"). My dear Sir Brien: I am this mornin, in receipt of a cable from the Federal Reserve Bank of New York asking if I will arranle with the Bank of Englund to send cable advice, of arrivals of _old, in addition to those advised last Saturday, whenever they aggregate an amount approximating 100,000,-00 marks, in order that the necessary entries This I trust you may be able may be madeon the books in New York. to do without inconvenience. It seems desirable that all of the gold received should be melted and reduced to bars, with the exception of the sovereigns wld such of the gold as may be in fine bars, the value of which is known to the Bank and would in the usual course be acceptable without remelting and assaying. We would also greatly appreciate receiving advice. from time to time of the actual values ascertained after melting, to include a report of the actual fine gold value of sovereigns, whether those originally received or the equivalent in gold bars,which you ma deliver to us in exchange for sovereigns. You will also, I understand, in due course submit to us a statement of the charges and disbursements incurred in handling t;_is matter for us, Lich may be charged to our account or which we will remit, as you may prefer. We great4 appreciate your Good service in this matter. Faithfully yours, Sir Brien Cokayne, Governor The Bank of England, London. BS/11 ti London, September 19, 1919. My dear Sir Brien: I am advised by the Federal Reserve Bank of New York that the New York agent of the Bunk of n:,ntreal has offered to deliver the gold received by them in payment for rupees sold in New York for account of the Indian goverr7ent, in exchange for an equivalent amount of gold held by the Bank of England for account of the Federal iieserve Bank of New York. This we understand to be pursuant to the arrangement which we have discussed, and the amount involved is, I 4M advised, about $3,500,000. In reply, I 412 advising; the Federal Reserve Bank that the proposal made by the Bank of ':ontreal should be accepted If approved by the Gold Committee of the Federal Reserve Board, and that I understand the Bank of England will acoept the equivalent value in gold bare, allowing g cents per $100 for fine bars, being the equivalent of what such bars would cost if obtained from the mint or assay office in the United States. I take the liberty of suggesting, however, that any English bars which may be received direct froze Amsterdam and which you are willing to accept without remelting, at the values at w.i.eh received, should not be subject to the charge of gg per If, upon further consideration, this arrangement seems to require revision, I am sure you will not hesitate to suggest it, and we will do the same. Faithfully yours, Sir Brien Cokayne, Governor The Bank of England, London. BS/V October 6, My dear Mr. Governor: You will, I am pure, understand what a great pleasure it was to rde to spend a few weeks in London in such delightful association with you ans your fellow associates and directors in the Bank of England. I am writing now to advise you of my safe return home after a most comfortable trip and one of great enjoyment on account of the oportunity which I had for seeing quite a little of Lord Grey. Almost immediately upon my return, Mr. Albert Rathbone, an Assistant Secretary the Treasury, sailed for Europe to undertake 50120 work for the Treasury, going, I believe, as financial adviser to the Peace Organization in Paris. I am anxious that you and your associates should know Mr. Rathbone, and, although he left on too short notice for me to furnish him with a letter of introduction, I am sure that when he calls you will recognize him as one of my intimate associates in the work of the Treasury Department during the war period. By profession Mr. Rathbone is a lawyer, a partner in the firm of Joline, Larkin Rathbone, and enjoys the reputation of being one of the foremost corporation lawyers in the city. He gave up his practise in order to assist in the work of the Treasury Department and has Lno so solely from patriotic motives. Mr. Rathbone is a man of the highest character and of much ability. I um anxious that you should know him well enough to understand the high purpose which has actuated him in all of his work for our government, and I am sure that you can assist him when he is in London, in any matters where he is brought in contact with your own Treasury officials and other officers of your government. You will also, I am sure, not object t my having asked him to call upon you for advice and information :hen he needs it. Assuring you of my appreciation of anything you are able to do to facilitate the object of Mr. Rathbone's trip, I beg to remain, Faithfully yours, Sir Brien 044,01ae, Governor The Bank of England, London. BS/V England, Bank of S FRIVtTi: November ij, 1919. My defer Eir rien: It wa a rEit ideri:ure to have your letter of October 2Jth and to get all of the interesting news tar_t, it contain:Z. was really more than a plea,ure, it Ofa. My visit vita you an education, and I profited a great deal by it. Mr. R...tiitone oxpects to take tue first o;portunity to d_..11 at the Lank, but I an sure that he has been very busy in Paris and probably unable to ra_ch LoLoori without, serious interference to his work. You will observo the slight change in our rates, concerning which I wrote Norman, and 1 litre, likewise, read with interest of your own rate increase. It sews :; as though we wsre Loth moving along in the same direction althouzU I confess that our own position is still somewhat cramped, as I think it should not be, by the views of our TreaLury. On th whole, however, we have t: ken a -trong ,te, in the right direction and if further must be done we will find a way to do it. cur trouble here ju,t now i. an excessive Inc aangeroui: speculation which ap liee not only to stocks, but to rea' eAate and commoditieL to one extent, and the country is bein fiocded with pro- motons of all kinds, guod, bad and indifferent, the cunesuence:, of which, E.E. you realize, are the hnevitabl t :duches.a I am di;i,ap-ointed by the privN.te informAion which hs in regard to the distribution of your new lo.n. come to me The loan is most attractive Aid I should 6uee,-, that in course of time it will b, well absorbed, but, at the moment our people ::eeta Lo tae preoccupicd with a peculative m_nia which it Prien Cokayne 2 11.1..).19 makes the task of the bond distributor a difficult one. which ha:. been, us you realize, toward hope thA our hiwber money rAes, ie not embarrassing your own policy in regard to foreign The aewsper account,: would indicate that th, se are being dr:Arn b,ilances. home, but Heavy may hay that the haze ex-erience is being felt here. balanceh heretofore carried by neutrals are being checcd upon, which is a natural onough develoollent with exchange as it Li and only adds, to my con- viction that credit from now on will be an exi:ensive commodity, for which the world is going; to Lid high ,ricas. A few cli,.ing. enclosed will possibly u,oa this. general subject. be of interest Takin the Germ.,n gold into ohr reserve, unfortunately, f4 done durini, my abence, in fact while I was on the ocehn, and once done cannot I think it c.! to chanced. a aist,_ke, but, As we are handling this matter for all of the twelve reserve bans I su, o ,e they had some riLht to adopt their own policy. taare any prospect of your paying un a visit? it would be a grai,t plea.mre to have you aere, and we would make a very detrmined effort to have it a profitable trip. 'nth kinde:.t regardi. mzny th nk: to me, I am, yourL, Sir Brien Golca no, d, g Tha hank o Throdnoedle EAre,t, London. B7.4SE ?nc. for your many courtesies FERE-ONAL AND CONFIDENTIAL; December 4, 1919. My dear c_ir Brien: Your note of Nover:ber 5th in regerd to the gold aocount re;ched me by the Ee.me mail bringing, a most intale,eting ioteer from Norman, whice I believe you reed before it elis dispatched. He tells me.thet he is leeving for the Louth of Frence eo I ehall take the liberty of writing you in redly to both letters enc kocsibly you will Ld good enough to chow him my letter on his return, or before. kb you have ob:erved, we were eecceeeful trting rate advences in the Federal Reeerve Fyotem eerly ie Nuvember, Cut our efforte to ering about further chanee, which I, perecnally, sLrougly Le.Lieve ehoula Le done, have eo far not met with fever en Washincton auu iL nu further increaee will looks as tho.k01 no e poesiLle until after the Lurn of the yeer. This I greetij deplore, becaueo the oodetry eeeme to be abeoreed in a riot of extravagance end ,peculatlon such as I have never before witnessed, end I of nothing which eill check it by the r.eJerve ranks. now FO effectually 5'6 a etrcng rate ,olicy The difficulty, as you eiay ecurmi. c, otill restL with the ire.eury, whoee officers feel that much higher retee pill force severe declines in the Government's war bond_ end necessitete t. .eying much higher rater for their ,recent short borrowings. Ae shell ho,e in duo ceur.e, how- ever, to reconcile our views end policie; and the Treaeury's, end, if we do not eucceed in doin, so, I Peer that ye will not succeed in checking further prize edvances, a recurrence of the speculetion which was temporarily checked by our previous action, end, of cuuree, e. further reduction in our reserve percentages. I may eay to you suite confidentially that this Eank eubeitted it 'erien Cokayne IL.e.l. r' higher rate.. for Ai rov .1 by the Federal Reeerve Loare a little over a week 3.6o they Aere dieap,rowed, although this *a never announced. There is mucn diecuseion of the - position of the foreign exchaagee and peceie ere tonderine nether teere is eny bettoe. I pereonaliy, cannot imrovament in .preent conditicns, in feet, believe they may grow nurse unless etees are tekon to re.i:erict ,urchaeee in thi_ country which are not of an eseential character; thie sii make financieg of food stuff:_, raw materials and neceseitiee much ee,ier for you and ue. erogrese eeem In the meantime, little to to made in the way of any gener,i, orgenized credit arrenge- ment for Euroee. The Treasury seems op,oeed to Govrnment credits, sibly wit: jood rfe,on, s..nd the genrel condition, of the it difficult, on .nn e merket makes nob, to elece foreign loans at anything' ike reeeon,.:: e r_tes. Yhet cal I eey in ree_rd to the anfortunete situation about the treaty? It is diets,_ ins to mny of U6 mho feel that our country should be exerting every means in its ,ower to give goral and material aid to Furoees cut a :sell body of determinec men era the Senate h..ve wed , revet ehice has been eucceeeful so f_r In ereventin, retlf_c tioe seem to re f.tel to I do net tneut reeervLtone eaich erovieione of the eaegue of nations covenant. ook for the pasesgc of ny risolution ceclerine the ..ter ended, ouch ae h_s been discussed, and stiII have come no th :.t a comeromiee &ill be arrived at, alt.:lough I fear the reeervetione *h_ch will to required for any such comromise will still be rather severe. ',that ha:: trenee.re.:1 in our money merket is rather curious significant. . Tee e,aculation in stock& follot,ing the slight .td-..nce in oer retee nd used dangerous proportioe , .nd, u in November, we uadertoot tc caution the benkere in the, cite tett our feeilities must not be emelojeo for furnishing credit for the.e eeeculetive oeerations. They neve snot down: retn.r ehar,ly on the ,-,tock exchange borrowing:, with the re:xit that 0 hed a Le/ 12.4.19 r Erien Cokayne 3 considerable likiuidation and a rather ,anicky collapse in etock values, but, after all, the difficulty la only in small t=art the stock exchange ioali ac- The demand for every kind of goodir, and particuirly those of a luxury character, with the accompanying advance:, in ixices of hll kinds, has c?,used constant expansion of the loan account of all the hunk:, of the country. This is Fu,,ortud, of cous:-(0, by increa in, demands 1.n tho h7,sorve Banks and is reflected 171 Vie 6nal decline in our ra*srvs3. this extrav- 7o lonz a agance continuo.., wa ars building 111.1 a structure of oreit which 60M6 day will have to come rioon eee to 'o -,n! I derlore dnlay in eound a.aasurss to chock it. There feeling also that our tax laws operate to prevent li,,uidation of account, in whioh large book ercfite ars carried but which cannot. Le realized without incurring liability for heavy excess rrofit. ,ayments, ma, on the other hand, ar insistent selling of thess ecouritie:. There loreos, if realized, will reduce tax iajments, such, for ih.tince, as ilinz; of our oar fond:. Cur Tre%a- ury is alive tc the danger of this :.itu_tion and Secret- rj Glass's r-csmmendationa just sub.citted t.) Conesesh for Cu:Lagos the tax law ar aimea to romeuy the difficulty. I wish u;r2 :moil that ;ou could came and visit us. The views you neve ex..ressed to me, which I assure you havo b& n greatly ap,rsoiated, might well be eiteresiied to others in our councils. and, I believe, qould do ua all much good. Finally, don't think too harzhly of us over here because of Lllia unfortunate trety muddliJ. It will work out in Lama way or oth.Jr and I think the heart of the country is all right, tut just a bit misled just now. Vith kinceet regrth, I am, Sincerc.dy yourL, Fir -rien Cokalna, Bank of En.land, Thre.dneedle ;;treat, London. December 10, 191. My dear Lir Erien: Since writing you last week, I have received your meet interesting letter of November 19th, which is only pertly answered Ly whet I have written. Our situation is very eimiier to yeer own, tut, of ccuree, you have been able to advance your r:, tee to e levae which has given you a sontrol of the m,rket somewhat beyond anything which *e can claim here, our rotes for edvencee upon Treasury certificetae of indebtedness remaining at 4-1/4% slid 4-1/2%. There is a great bulk of horrowing from our benk in the form of short &dvancee secured by these obligations (of ehich there ie over three and one-half billions outstanding) so tte.t it eill rek_uire still further rate advances by both the tame emd the Treasury to enable ue to obtain control. My own feeiing is that chile your higher rate would ordinarily help the exceengee, end, in the long run mill do so, much difficulty mill, neverthelesappersi:t so long as unregulated imports continue ty Europe and so long eE our on mone, merkets must remein oL high L..c: no*, or oven higher. The reiorts of our export trade indi- cte where the difficulty lies and it may re,-,uire even low ratee for eteriin, and frence to erect the barrier th-t is reeelired egeinst luxuries. ehet I, pereoe lly, deplore is the iossibility that your importers may be enterin, into contr cte, ne one poeeiLly for e very large amount, but the aggreg-te being considereble without, hav- ing exchange cover in hend, and, when p.ey dey comes, dollere must be had et any price on your Ade, or sterling sold at any tation for eterling reeultimg. rice on this eide, with a conetently lower quo- If your importers ere buying for cesei end selling on cr.eit, tee eituetion is by ao much the worse! Your policy in regard to logic., credits masquerading as 90 day bills is site similar to our own, send, of course, causes ,ome comeleint porters. rnong our tenkere oh ex- 2 12.1e.19 What you say about the reoerve de.letion it intereetine, becel.ee I remain,- her the discueeion at luncheon one day when sume ono, I think it was Kindereley, ad- vanced the theory that loss of sold in itself caused a contrction in credit. be ver I will much dierseeointed if your policy of eddine cov r to the currency note:_ out of your o*n nete rer rve, eith resulting lower reserve. end rreseure to maintain e high bank rete, does not, in the lone run, effect the check lion both credit and note expansion which tecomes imperative when your reserves decline. eil: not cl.eck our conntent exien. ion. we c-.nnot check it. is first mede. not attrect gala, but, I fear, ica, but 1 feel very confident rve Ea.nkB, eember banks Bill stomere to borrow from thee, end , together cith lo.er ericee in- e. I mu.t any that new e are peeking phenomenal profits ke "hot cekes" whenever offered. ile not Le earmanent, or, pos- oductive ineustrie, broeeet a- ontact. .re, in me oeinion, now in ouch till:: erotic:, nlikely at the moment of Aritine ees until next January t the My own position it that without rite advances If .e do advance rtes, Anice is the first end fundementel steee eretion of the rate and ,Dolly t aggressively to But the rate ie ;diet I have Leen confronted bare with the insistent ergument th-t reteu alone doer_ it emonstrance with cur eeeke, ive etocke, Eir Brien Cokayne 3 Sir Erien Cokayne 12.1:).19 en.rliebt. 4 e are much interested, but personally I as not deeply concerned at the moment, soy Le rize in silver. Cur silver dollar ilver re_che. tomething above 4.33. o,n .e melted and export 1.; her They are now le.vinp, the country for toe East, but 1 ho,e in the near future to :es an arrangement mad by which thin int.vemeut will to regulated and the rP.tes for exchsr.ge in Chins brought under some control. Our subsidiary coin n t become endangeret, until silver reacne ,Lt ;1.4c or somowh.t abow3, the exact melting point, I tmlieve, being about1.3b8, witnoot allowing for mtradon snd expen,:es. diver after t,3s to tay %11 t may or miy not happen in reoont i-,pootaoular performance, tut I Phould hoe th,t, ,ith Lie large reserve of silver dollars still in the country t.:-,era would be little iikellhoOd of our eutsidilry coinage being endangered, /.t, r .te for a long time to como. Wean- wors,:; things could happen to us than to ,,Ly for ,ur im,..rta from ths E. st by melting. silver lol.rr. and selling the silver at better than k1.3'O1 Possibly you :.ill to good enough also to she:, this letter to Norman hos you have opportunity .L :.sink equally addreEted to him, no give my marme,A re- gards, ..hich I also t.end to yoU. hope Norman gets a good rest bsfore taking on the responsibilities of govsrnon,hip of your gre...t institution, ,And I certainly have hed in -your adminiAr ten. sincerely yours, FAr rion Cok.yne, c/o The Lank of England, ,:ceet, ..ondon. Threadneedle P.3.311E, him such a success as you FEDERAL RESERVE BANK OF NEW YORK MISC 4 OFFICE CORRESPONDENCE Tollh Mr. Case Date H Jan. 3, 1920 Subject : Benj. Strong (telephoned) From \\SVIK11 Will M . Case kindly read attached cable from Sir Brien Cokayne --)li and my reply, .n Harding? B'3.MSB ommunicate both privately and confidentially to Governor h4iPc. 35 12:20 noon FEDERAL RESERVE BANK OF NEW YORK Sent by TELEGRAPHED IN CIPHER nu ry LOAEON OGX1iIN 2&ny thacb for cable Saw Paiah yeeterd,4 tta sitution fhklyA i!ENj. STRONG A-4 Phoenix, Arizona, March 30, 1920. Sir Brien Coyne, 0/6:Bank of England, London, E. C. En::land. Confidential Iy dear Sir Brien: Your letter of February 2nd only reached me yeoterkty on eccourt Qf my two m-nt-e.rA)esnoe on our oning trip, and I hasten to Flalswer it quite persowli4 an,17 confidentially because I am returning the letter to our Mr. Jay pith the reluest 1-Jat-he write you fully on Nrrioue matters whioh it contains. In 7eneral, I = anxious that you and NoriLan feel tt cvory care is exercised to keep you posted as to our devalofrente and particularly az to the devolopnont our policy, and fAarthermore, that -los and lettere whioh you ar.;.gsod en(Air,h to send-me reach the oyez (%f a very rmited nu tor of leoo21e, and will be coupeci vat?, such safeguards as you youraelf feel should eurround tehm, It ,sae been t;:.; gratest possible help to Ea an:: to my associates to h;:vo the benefit et thee,; and unreoerved cxeringes of views, and I sincerely hope that notLing will be a:lowed to interfere pith the for the bens, fit cf yourself and your successor, if it ie a bonefl t, us you are gcct enough to certainly for my own assistance) in whioh it h been invaluable. Nritinr to you a., I do without my teserve, I feel justified in explaining that it iL; very difficult for ee f my aseociatee in this country tf understand the tritIons and for wvnt cf a better word, may I say, the peculiarities of your .:re!.:t bank. We, here, aro inclined publish everything i)rol%dcae*, as you have probably notices if you have elv,:r taken the time to glance through the Fc:deral Pezherv:! bulletin. PoscJibly, I e also justified ia in behalf cf my aczcoic,tes tl:A tAnv hz,mc none of tholl had the oprortur*ty of vinitin7 you in London as I have, ana until they do, which I hope ::111 be t%e orze before long, my absences .ay sonctimee nakc you feel reluctant in continuing our correa, ondence. You need have no such feeling, however, a I think Mr. Jay, after reading my letter, will have a better.underatn.nding of our C O Y. EHIVATE. Bank of England, 15th June, 1916. Dear strong, she Governor is taking a short holiday and asks me to thank you for your letter to him of the 23rd Lay. You seem to have pretty nearly surmounted the difficulty about the days of grace, and we shall no doubt hear from you before long either that the amending Act has been passed or that your Counsel found it unnecessary. the basis for earmarked Gold and for Gold shipments is more difficult to arrange, especially in such unsettled times as these, for we have seen that even Gold can be at a discount, as in :Dweden at the present moment. probably we shall, as you suggest, have to establish some tentative basis to start with and see how it works out, and we see no reason why all the Gold should not be dealt with on each side on the actual value of the Gold contents. The fixed price at which this Bank is compelled to buy all s Standard Gold (11/12ths fine) is 77/9 d per ounce, which is a s fairer standard of value than the -int price of 77/10, as the former represents the price that can be obtained directly Gold is deliVered while fmm the latter has to be deducted the varying cost of waiting till the metal, at the good pleasure of the Mint, is turned into coin. The Governor suggests s d that this fixed price of 77/9-should be the basis for such ear 2. marking as was contemplated by the :emorandum. It would no doubt be a very convenient figure for the earmarking on this side as it would represent the price at which the earmarked Gold could always be turned into cash at a moment's notice. But I do not myself see how, in view of possible fluctuations in the Exchange, we could fix a sterling price for earmarkings in hew York. It seems to me that the basis price for such operations should be the American counterpart to our price of 8 d 77/9, i. e., the prompt cash value in dollars of the United States :Ant price of the Gold contents of the earmarked Gold. ,e are much pleased to see that your associates favour the general plan we discussed. I do not think the Governor intends to discuss it with his colleagues here until we hear from you that you are ready to act. Our purchases in America in the coming A no doubt be very heavy and will have to he paid for largely out of Capital, either in the shape of American Securities, which is the most convenient form, or otherwise - e. g., in Gold. So that the course of Exchange will probably depend, as you say, more on the extent to which we can collect these Securities than anything else. (There seem, however, to be plenty of them left here and we have taken in some 120,000,000 worth a week since the surtax was threatened). It is wonderful how the patriotism of our holders of Americanshas been stimulated by a little fillip of additional taxation: With very kind regards and hoping to see you here again before long, Yours faithfully, (Signed) Brien Cokayne. Benjamin Strong, Esq. 0c 186 attic of (Ifultlanb, ' 28th September,1916. Dear Mr.Strong, Thank you for your letter of the 3rd August, in which you need not have expressed regret for delay in writing, firstly, because there is really no hurry at all and, secondly, because you will see that with less excuse I am just as dilatory in answering you. I see that I had misunderstood the suggestion in your letter of the 23rd May that we should try to establIsh "a definite Price per ounce at which gold should be earmarked in "both institutions". I took this to mean that you wanted the same price to rule on both sides of the Atlantic, and that is why I suggested on the 15th June that the London (sterling) price could hardly be made apnlicable in New York. We quite agree with what you narwrite,viz., that any dollars which vie may hold with you should be converted into their gold equivalent in New York if we wanted to earmark gold. But did you not make a slip of the pen in writing that we should receive the equivalent in standard bars less the Assay Office charge of 50c" per 11,000? I gather from the table of Assay Office charges which you kindly sent us that 50es.per 1,000 less than the nominal value will be paid by that Office for 41; for standard bars tendered, so I suppose that you would earmark bars to the nominal value of $100,000 for us against a 40111 credit of t99,950. Is that right? On the general question of the mutual earmarking of gold, Norman has already mentioned to you the fear which I expressed to him the other day that circumstances might - though not very probably - arise in which it would not suit the debtor institution to earmark unlimited amounts of gold. So I will not go over that ground again, but confine myself to passing on the Governor's answer to this point,viz., that the ear-marking of gold should not be obligatory though in 99 cases out of 100 any request to earmark would be willingly complied with. I do hope you are quickly regaining your health and will soon be as well as ever again. The war is going satisfactorily and we seem to benin the straight° now, though we cannot tell how far off the winning post is The Governor sends his best wishes, in which he is cordially joined by Yours .very truly. Benjamin Strong, Esq. il3mth FEB of 60110 15th January, 1917. ,? Dear Ur. Strong, I am heartily ashamed of my delay in answering your letter of the 20th October (t) but we have really been up to the eyes in work, and I knew you would understand and forgive. Your letter most fully and clearly explains the bearing of the 5 cents charge on bars. The reason why we did not understand it before is that we thought it was a charge on taking standard bars and giving current coin for them, whereas I now see that it is a charge for providing such bars. I am glad to see that you have got rid of the obstacle of the °days of graces and have got powers to open accounts, both at home and abroad, with foreign clients; also that you thoroughly appreciate the fact that unlimited earmarking might be inconvenient and that the extent of it would have to be determined by mutual agreement. All the apparent difficulties seem thus to have been smoothed away, and there anpears no reason, except lack of the necessary time, why the matter and its expediency expediency should not now be discussed with our colleagues. Other difficulties will no doubt crop up, but as you most it truly say actual experience is the only sure guide. 40 The premature announcement of your authorization to appoint us ns agents did not really do the faintest harm. The Governor particularly wishes one to thank you for your courteous telegram on the subject and to say that he quite realized what must have happened. fact the announcement, though premature, was probably useful as it tended to allay the feeling of soreness which had been caused by the Federal Reserve Board's warning against taking either long or short loans of the belligerents. We ourselves, while declining to regard that warning as intentionally unfriendly, are still somewhat at a loss to divine its real purpose. I almost wonder that the Board, when it saw that millions of money were being invested in ephemeral works to supply the enormous temporary requirements of the Allies did not issue a warning in time to check such dangerous expansion. And if it had done so a year or two years ago it would have benefited not only the United States but also perhaps. indirectly, ourselves by forcing us to become more selfsupporting. When however the huge outlay had been incurred and the gigantic orders placed, it did seem rather odd that a warning should have been given against facilitating the raising a kraising of funds with which to pay for them. However we realize that, as the Spaniards say, everyone is master in his -own house, and that we have no right to enquire the motive for your internal warnings and regulations. Fortunately the American Exchange position, which has given us plenty of anxious thought, seams easier now, and I hope that if money rates keep low on your side it may continue so. We have still a fair amount of gold to spare in case of need and our good friends the Japanese are helping us to a good many American dollars. But the War is not over yet in spite of all the peace talk. ----- The Governor in wishing happiness in the New Year and above all complete restoration of your health and strength. Yours sincerely, Cltadv(t_.2, Benjamin Strong, Esq. C-4e161-7 7 / BANK OF ENGLAND. 11110 *i(5-Cott' -eg&Ord, SCAKale ca-tv-zysio (e2.4k-tr ttise-v Qte/644'f (- It MEMORANDUM, ?-4-4 t TcrtevC;a1/0-&°,,, VERY PRIVATE AND CONFIDENTIAL. (grot° A Bank, as the term is understood in this country, may be broadly described as a firm or institution whose main business is to receive from the public monies on Current Account repayable on demand by cheque. The Committee are of opinion that the present system of registration must be abolished and that no firm or institution should be entitled to describe themselves as Bankers, as a Bank or as a Banking Company, unless (1) Their main business is as described in the definition above, (2) They register according to Board of Trade requirements. The Committee recommend that the Board of Trade requirements include the publication of an audited Balance Sheet by all Banks, Bankers or Banking Companies, and also the publication of the number of the Shareholders ; in the case of a private partnership, or proprietorship, outside the scope of the Companies Act, the names of the partners must be disclosed and, in the event of the death or retirement of a partner, such death or retirement must be reported to the Board of Trade and be by them duly advertised. The Committee are of opinion that Balance Sheets must be published at fixed periods either yearly or, preferably, half -yearly ; owing to the congestion of business at the half years ending June and December, it is suggested that such Balance Sheets, one of which shall be audited, be published in April and October. The Committee are of opinion that the Board of Trade should also have power to withdraw, at any time, their permission to any Bank, Banker or Banking Company, to describe themselves as such. The Committee recommend that all Banks, Bankers or Banking Registration of Banks. Companies be registered in one of the following five classes. All British Banks, Bankers or Banking Companies whose main business is in the United Kingdom, their Head Office being in the United Kingdom. CLASS 2. All British Banks, Bankers or Banking Companies whose main business is abroad, their Head Office being in the United Kingdom. CLASS 3. All Indian and Colonial Banks, Bankers or Banking Companies with Head Office in the United Kingdom. CLASS 1. CLASS 4. CLASS 5. All Indian and Colonial Banks, Bankers or Banking Companies with a Branch or Branches in the United Kingdom but with Head Office in India or the Colonies. All Foreign Banks, Bankers or Banking Companies with a Branch or Branches in the United Kingdom. Banks, Bankers or Banking Companies who would be included in Class 4 or 5, must not be allowed to register unless properly constituted and recognised as a Bank, Banker or Banking Company under the laws of the country where such Bank, Banker or Banking Company is domiciled. The published Balance Sheet must be in the standardized form Publication of Balance Sheets. A annexed ; no Profit and Loss Account need be shown. In the case of Banks, Bankers or Banking Companies in Class 2, 3 or 4, the Balance Sheets must show, in the standardized form, the position of the Head Office or the Branch in the United Kingdom. (In the case of Banks, Bankers or Banking Companies having more than one Office in the United Kingdom, the accounts of such Offices must be consolidated). In addition to these Head Office or Branch Balance Sheets, such Banks, Bankers or Banking Companies must publish in London each General Balance Sheet of their Bank, copies of each general Balance Sheet to be lodged with the Board of Trade, or other Government Department, within reasonable time after publication. In the case of Banks, Bankers or Banking Companies in Class 5, the Balance Sheets must show, in the standardized form, the position of the Branch or the Branches in the United Kingdom ; the Government to enact that British Government Securities to the extent of x per cent. of the liabilities of the Branch or Branches in the United Kingdom shall be lodged with the Bank of England, or other approved institution, the amount of such Securities to be adjusted according to the liabilities disclosed by each yearly or half-yearly Balance Sheet, as may be determined. (In the case of Banks, Bankers or Banking Companies having more than one Office in the United Kingdom, the Accounts of such Offices must be consolidated.) In .addition to these Branch Balance Sheets such Banks, Bankers or Banking Companies must publish in London each General Balance Sheet of their Bank, copies of each General Balance Sheet to be lodged with the Board of Trade, or other Government Department, within reasonable time after publication. In addition to the yearly or half-yearly Balance Sheet, all Banks, Bankers or Banking Companies must publish a Statement at the end of each month (signed by a qualified Officer of the Bank) in the standardized form B annexed, the figures of such Statement to be the average of their weekly Balance Sheets during the month ; in the case of Banks, Bankers or Banking Companies in Class 2, 3, 4 or 5, the figures to be those of the average of the weekly Balance Sheets of their Office or Offices in the United Kingdom. Auditing of Balance Sheets. Each year one Balance Sheet in the standardized form must be audited by either ( I ) Members of the Institute of Chartered Accountants, or (2) Members of the Society of Incorporated Accountants and Auditors. The average Statement published at the end of each month need not be audited. Detailed instructions must be drawn up, both for the guidance of Banks, Bankers or Banking Companies in compiling the Balance Sheets and Monthly Statements and for the guidance of the Auditors in auditing the Balance Sheets, as to the class of item which may be included under specified headings. The Committee consider that the following instructions should be laid down :( 1 ) The items under the heading of " Money at call and at short notice " must not include money placed at more than a month's notice. (2) The items under the heading of "British Bills of Exchange" must include only Bills payable in the United Kingdom, drawn on, and accepted by, British persons, British firms or institutions domiciled in the United Kingdom, and Banks, Bankers or Banking Companies included in Classes 3 and 4. (3) If account is taken of "goodwill" it must be set out as a separate heading in the Balance Sheet and in the Monthly Statement. (4) Any operative charge on any of the Assets must be disclosed in the Balance Sheet. (5) Such contingent liabilities as, in the opinion of the Auditors, it is essential to disclose must be shown in the Balance Sheet. (6) A Bank, Banker or Banking Company holding 25 %, or more, of the Shares in, or Stock of, any other Bank, Banker or Banking Company must give full particulars of such holding in the Balance Sheet on a separate line between the headings "Loans and Advances" and "Other Assets." Crossed Cheques. The Committee recommend that only Banks, Bankers or Banking Companies comprised in Class 1 be entitled to present " crossed " cheques for payment over the counter. The Committee are aware that, under their proposals, certain firms or institutions, such as Discount Houses, would not be entitled to register as Banks, Bankers or Banking Companies, and that certain hardships might he inflicted on them because, with regard to assessment of Income Tax, they have hitherto been classed with Banks, Bankers or Banking Companies. The Committee recommend that, with regard to such assessment, the special nature of the business of such firms or institutions be taken into consideration by the Inland Revenue Authorities, independently of the question whether they are entitled to register as Banks, Bankers, or Banking Companies. The Committee recognise that an Act of Parliament will be required before effect can be given to the foregoing recommendations and they are of opinion that the Act should provide that Banks, Bankers or Banking Companies who have been established for at least five years at the date of the passing of such Act shall be allowed a period of twenty - four months, calculated from the date of the passing of the Act, before such Bank, Banker or Banking Company is required to conform thereto. 28th February, 1918. .0) Form A. (NAME OF BANK). BALANCE SHEET as on 19 LIABILITIES. ASSETS. Capital :- Cash :- Registered Subscribed (1) Coin, Bank and Currency Notes, £ £ and Balances with the Bank of England . Xeil (2) Balances with London Clearing Agents and with other Banks. Bankers or Banking Companies in the United E Kingdom Paid up (3) Reserve Fund . Domiciled Bills Balances abroad . Acceptances obligations . . Money at Call and at Short Notice British Bills of Exchange Foreign Bills, Foreign Bank Bills and Current, Deposit, and other Accounts Endorsements, . Items in transit . Investments :- Guarantees and other (I) Securities of, or guaranteed by, British Government Indian and Colonial Government Securities. British Corporation Stocks. British Railway Debenture and Preference Stocks . (3) Other Investments (2) . Notes in Circulation Loans and Advances Other Assets Bank Premises . Liabilities of Customers for Acceptances, as per contra . Liabilities of Customers for Endorsements, Guarantees and other obligations, as per contra .E Number of Shareholders (Signed) . Form B. (NAME OF BANK). S Statement of the average figures of the weekly Balance Sheets during the month of LIABILITIES. 19 ASSETS. Capital :- Cash :- (I) Coin, Bank and Currency Notes, and Balances with the Bank of England . (2) Balances with London Clearing Registered with other Banks, Bankers or Banking Agents Subscribed and Companies in the United Kingdom . (3) Items in transit Paid up Reserve Fund Money at Call and at Short Notice . British Bills of Exchange Foreign Bills, Foreign Bank Bills and . Current, Deposit, and other Accounts Domiciled Bills Balances abroad . Acceptances Endorsements, Securities of, or guaranteed by, British Government Indian and Colonial Government Securities, British Corporation Stocks, British Railway Debenture and Preference Stocks (3) Other Investments (2) . Notes in Circulation . Investments :- Guarantees and other (I) obligations . Loans and Advances Other Assets Bank Premises Liabilities of Customers for Acceptances, . as per contra . Liabilities of Customers for Endorsements, Guarantees and other obligations, as per contra . . . Vault of Ch100 FILM! t,74:; FEDERAL My dear Mr.Strong, bEPT. 8th February, 1919. r 11) RESER vz nANK Thank you so much for sending me Mr. Kenrierer's pamphlet about the Federal Reserve System which I have never thoroughly got into my head though I often wish I had. I believe that this little book will help me to do so and if it does I shall be very grateful. I was extreriely sorry to hear from Mr. Strauss, who was with us yesterday ion a fleeting visit, that you have had to go off again to the country to recruit. I hope you will take a real good holiday and set yourself up for good. I hope the visit of Mr. Strauss and Mr. Lar".ont to Paris means that the Peace Conference are going now to devote more thought to the great financial questions which are so vitally important to all of us. Yours sincerely, Benjamin Strong, Esq. C;) Q !.;e. MAt ,4 3 19i9 Dear Mr. Strong, 0 LI B RA RY FanitMAY 2nd May, 1919. FEDERAL RESERVE BANK I have to thank you for two letters, one from Lake George of 5th February and the other from New Yo?i of 16th April. I cannot help thinking that the inflation in America to which you refer in your earlier letter must he relatively so insignificant, compared with that of Europe, to be almost negligible. Here it is unfortImately still increasing, and although, as you say, it is ossible to settle down seriously to house -cleaning till the Government stops borrowing, I hope we shall before long remove one of the special contributory causes, viz., the comparatively low level of money rates here. We are much interested in all you writ e about your somewliat complicated Liberty Loan and I have no doubt it will be a great success. I only hope that we too may soon be able to raise a good loan to pay off a large Dar. of the swollen issues of Treasury Bills and advances to the Goveranent. Thank you very rinch for all you write about our agreement with you and about gold exports generally. I I was quite sure you had no intention whatever to expose our nakedness by making large demands on us for cold, but as the agreement would strictly have entitled you, after buying sterling exchange in your market to any amount, to ask us to earmark or ship the equivalent in gold, I thought it more businesslike to o'ive previous notice (as provided for in the agreement) that vie should not be prepared for such large demands. This we did, you must remember, before our Government prohibited exports of gold except under licence, and indeed before we thought there was any likelihood of such a step being taken. This prohibition has of course deprived us meanwhile of the power of implementing our aree-Ient with you unless we can get the corresponding licence to export or eaxilark the gold. The prohibition rude wonderfully little stir because 90 people out of 100 believed that geld exports were already prohibited by law. I had a little talk with Mr. Strauss when he was first here about your embargo on gold shipments and then told him that I should rather have liked our two countries to open their free gold market simultaneously. At that time I hoped that the question of Great Britain's huge debt to the United States would be quickly settled in Paris and that we should take early steps to protect our Exchanges by bringing our money rates at least up to international level. But But nothing has been done about our debt to America, and our Government, whose 31% Treasury Bills really make the market Ali rate for money, has not seen its way to nut up rates; so that there does not seem to be any prospect of the Exchange righting itself sufficiently to allovrus safely to reopen our free gold market yet awhile. Although, therefore, I should still like our two countries to act simultaneously in this latter. I cannot honestly pretend that we ought to ash you to wait for us. I am really rather sceptical about the "considerable exodus of gold to neutrals" which is however, as you say, possible when your embargo is removed. I do not believe that neutral Europe requires any appreciable amount and I doubt whether she would even consent tr) receive any large quantity. South America might take a goodish lump but not more than you could comfortably afford. The only real danger snot, I believe, as I told Mr.Strauss, is India whose digestive powers for gold seem to be boundless. I fancy that at present no imports of gold into India are allowed except to the Guvermeqt, and although that maybe only War legislation I daresay you could make some arrangement with the Indian Government to prevent India from absorbing (if she can afford to draw It) too large a quantity of gold which, if left to herself, she would siraply waste by hoarding it in the earth from which it cane. I think Mr. 111111 Mr.Strauss was to see the India Office here to enquire wheer any such arrangement could be rade. Egypt is also a hoarder of gold to some extent but I do not expect she would be a ilk real danger. I am interested to see that you think your embargo on gold exports could, if thought well, survive Peace. There is little doubt that ours would lanse at the end of the War (thou* that may only mean the Ratification of the Peace Treaty ;which right be many months ahead) and would require fresh legislation for its revival. In confirmation of what I said above about neutral Europe, I have just heard that Sweden is enquiring at what rate she could ship gold either from here to Arierica or from Sweden via London to the United States. I shall be very much interested to hear what you decide, or think of doing, about your gold embargo. I hope you are keeping well. and will not overwork yourself again in pushing the new Loan. Always yours sincerely, Benjamin Strong, Esq. (4eceived at "'aria August 16th London, August 1C, 1919. 1JAMIN STRONG Governor Federal Reserve Bank, Care Nederlandsche Bank, Amsterdam. Bunk will be happy to make all arrangements for transport to London of not exceeding the thirty five million pounds you mentioned verbally stop The amount mentioned in your telegram is mutilated stop Bank will also attend to insurance if possible in the manner you desire. Governor Bank of England London 0-89-15/8-4/15 London 13824 67 21 18H58 Governor Strong Federal Reserve Bank Ritz Hotel Paris Received your letter 19th stop Brussels and Amsterdam stop Our representatives have started for We are in touch with Kent and await his completion of insurance with Chubb before definitely arranging shipment stop Shall be happy when you so direct to transfer a portion when held on your account to order of Bank of Spain. GOVERNOR BANK OF ENGLAND 4---reirn- /Fir BANK OF ENGLAND, 7tS 2-eA4W.%* Q-ts4 J Ure44C. <A6e c9GeLrpe-ts /eArral+.%. pt fream.4" A, 4-ea, e-C/St-4 das P1L-Ge Pro-A ,tuvZ ank of bislane 9th September, 1919. 0 Dear Mr. Strong, instant, enclosing transcript of a Thank you for your letter of the 8th Directors of the Federal Reserve Ba you full authority to act on their with the gold now being shipped fro I note that the been provided for with the exceptio in Brussels and that each shipment equivalent of r7,500,000. We have our representatives in Brussels and :1,000,000 by each boat: allowing rep equ mor the tog Ben 1, llt" near 't..(lu' o to7lber, 1910. 7. I '-r:mr, s7 '-on to 3rArernot, ritronl abefelt riOrardnit? 3n1 without the -,rItter t nrynt'Ioned t, 7.,r411 ro3rIxtrig any de "Isvite promise on br.',a2.11 of Ilia, 'Ian- (1,".o seed, no reo.son vitly Pedoral :7;edlervo fa-.-1!.. of /low The-) they :Mould not be, as villincr to rrf.ve you gold n Ltmlon as gold in .,°1-1-erina. You ruy noreforo 3147r70fit to your V-at in fauVIve x:11.en t`-ey represent a ivnn in Il 11 for pold tlley should propose that delivery W7 it be r,,ILle in London and neamittilo 7.1r,"tronr, vrill tell is Bar* t?" at tl%is ,5pronoso.1 will 7-rob r bly be ru.:.le Yours very truly, (Sd.) 13:1IET COKAYNE. O 14.11. SGuthey 111-i. C. S. 1. 0. S lank of thvlane 12th Septembe 1919. 111 Briefly, you may like to know that we ha Dear Mr.Strong, received Mks.94,000,000 from Brussels and the equivalen In reply to your letter of yesterday we say, Mks.87,000,000 in a mixture of Bars, Austrian Crow shall be very pleased to send a cable to New York to-morrow and Roubles from Amsterdam: we shall not get any more stating the approximate total value of gold we have at before the close of business to-morrow, and so these fi As present received on your behalf from the Continent. will be what we shall cable. you say, we cannot of course give any exact statement at I take this opportunity of mentioning th present. we were under the necessity of shipping £680,000 in Sovereigns from London to Brussels ova The National Ban Belgium, but having in mind your Sovereigns in Amsterda we thought it would be a considerable saving to all con cerned to offer the National Bank of Belgium £680,000 f your Sovereigns for delivery in Amsterdam, while in exc we proposed to set aside for your Bank's account here the corresponding number of Sovereigns we had previously earmarked for Belgium. By this means you 11 will of course save both freight and insurance on the £680,000. The National Bank of Belgium have rcadily agreed to the proposal, alld we are now making arrangements to carry it through. Yours ver A. Benjamin Strong, Esq. truly, i3 auk of 640anb 19th September, 1919. Pear flr.Strong, I have received your letter of yesterday and shall be pleased to nake arrangements for your wishes to be carried out -with regard to 1. Cabling advices of arrivals. O. Melting all the gold, except sovereigns and such fine bars as the Bank of England would ordinarily accent wit'iout re-,,eltincr and assaying. 3. Advising you from time to time of the results of melting and reporting rarticulars of the bar gold exchanged for sovereigns. 4. Sending you a statement of charges and disbursements in due course. Yours very faithfully, Benjamin Strong, Esq. iDAA OF ENG.LANP_. - : 20th October, 1919. . :4. dear %Ir. Strom;, ThElik j6U very much fur your farewell note with its kind meeeaEes to us all which I pasFed on to my col1eeEues. you that your visit wLs e real treat both 1 can assure (icialiy and financik'ly to of us and 1 ho e it will not be lonE before you pay us another. tli It seems an aLe already since you were here. I hkvs Cleo to thank you for a telegram about your Lold in Ho'.1and which is beinL f r a received this murninE intru,..uci!L . Rathbone .ehom I am letter of the 6th anxious to meet ae I had of u_Alrse, eir-udy heard much of him. 1 shkll be on y too delighted if I can be of kny use to him but at ire:sent he is in Par Yours sincere-.y, 1,_:1ed) B You will have seen that the Chancellor of the Exchequ spell and raised Treasury Bill rates to 4 1/2% and 5% for 3 a tively, which move has brought our Bank Rate at last into har rates. But if it is true, as I have heard rumoured, that Bel from her long pending loan in the United States,x"because she money cheaper here", it is evident that we shall have to raise protect our position and even our reputation for sanity. The should, in our present situation, undercut the United States i Europe is preposterous. On the other hand I hope our Government will soon get any other country than America. There is very little outstand T You will have seen by the time this reaches you that s from Canada to Japan, and not the least attractive feature of of this arrangement is that I expect it will suit your book very well. I see that you are gradually taking into your Reserves all the gold which we are receiving for you here from Holland and Belgium. I hope the new loan which Morgans are bringing out for our Government will be a success and that the exchange option will before long be so largely availed of that the obligation will become a purely sterling one for our Government. The only other early debts of our Government to the American public are the $150,000,000 maturing in two years' time and that awkward AnglO- French Loan due next year which will be a difficult problem to tackle. I Ash I could see some way by which we could "shoot our half of the camel." Translation of Incoming FEDERAL RESERVE BANK OF NEW YORK CABLEGRAM From No. C >1 MNSIA.LLION OF J_L:. LI, 1920 3, 1920 3njamin Strong, Esq., 1.--ic,,deral Reserve Bank Hew York. Press telegram from 1.I.merica indicates that Paish is advocating hugh loan to teat Britain (stop) For your private information he ;r..s no connection m ission from authorities here and in advocating any such loan does not at all represent their views, COIL:1XE. or TELEGRAM SENT TO BENJAMIN STRONG, ESQ., ON THE 3rd JANUARY 1920. S Press telegrams from America indicate that Paish is advocating huge loan to Britain. For your private information he has no connection with or mission from authorities here and in advocating any such loan does not at all represent their views. BANK OF ENGLAND. LONDON. E.C. 2 Ord January, /920. countries of Europe, or were even to request us to join heAl, I consider we should be justified in doing so to a reasonable extent. As a natter of fact I believe, as I told you, that however much we at this Bank ray set our faces against lending to Europe, a certain amount of exporting on credit does and will go on. As regards further borrowing by this country, we were startled to see reports from America in our papers yesterday implying that Sir George Paish was applying for a loan of £3.500,000.000 to Great Britain and Europe, and I at once sent you a confidential telegram, of which I enclose a copy, to say that our Government had no connection with Paish and desired no loan for themselves. I see I need not have made my telegram confidential as the Treasury openly disowned Paish who also appears himself to have contradicted the report. I have very little doubt that poor Sir George, who is honestly and sincerely concerned about the destitution of parts of Europe and was probably trying to enlist your country's sympathy-therewith, has been either deliberately or unintentionally misrepresented. (See P.S.) I have been greatly interested in all you tell me about your money rate policy and the points of similarity with our position add to its interest. The Government's reluctance to pay more for its borrowing - the irritation of Bankers and others at the depreciation in their securities and the taunts that the poor silly old Bank seems to think it can attract gold - are all part of our dafly bread. Your remark that A that while dear noney may not by itself effect a cure no cure is possible without it, puts the whole question in a nutshell. 41 I see you have now fixed an all round rate and see your way to nalring it effective, so that I hope you may not need to raise rates further. There is no doubt that if your rate were to come up to ours and remain there we should be forced to go uo again and we are anxious to avoid as long as Possible exceeding a 6% Bari!- Rate as anything above that bears hardly on legitimate borrowers. But I agree with you that credit is likely to be a costly commodity for some time to come. Just at present the plethora of money created by the ridiculous uwindow dressing" of our Banks at the end of the year has rendered our rate completely ineffective and the Banks are eager buyers of January bills at 4Y: But I think this ease, though it may last a few weeks, is only temporary and the activities of the tax-gatherer will be on our side before long. Thank you for your kind remarks about my visiting America, but much as I should enjoy it there is no chance of my being able to get away durinz the three months that remain of my Governorship, and after that I must really lie fallow for a bit and then resume my duties to my own partners who have carried all IV burden as well as their own for the last five years. You will see that our Position here shews some signs of tnendinR. The recent Revenue returns were distinctly encouraging and the labour sitqation seems a bit more hopeful. Above all I think we are just about at the end of fresh Government borrowing. borrowing. Indeed if Revenue comes in fast we may quidilat the end of it, and if your plan (of which I am always thinking) for settling international Government indebtedness could API arranged I think we should really begin to see daylight. Since I last wrote to you the Treasury have put into force several more of the Currency Conrittee's recommendations. Thus the Bankers' gold, something like forty millions sterling, is gradually to be transferred to our vaults, but as they will no doubt take Bank Notes in its place it will not increase our Reserve. Then again the maximum of the Currency Note fiduciary issue for the present year has been fixed at Z320,600,000, being the maximum attained in the early part of last year. The Currency Note Department hold £28,500,000 of gold and £4 millions of Bank Notes. So that any Currency Notes issued in excess of £353,100,000 according to the weekly published figures will have to be covered round for pound by Bank Notes. Now I look forward with some confiden e to a slight and gradual deflation of credit as a result of the cessation of fresh Government borrowing and the probable commencement of repayment of Government indebtedness about the end of this quarter. But if by any chance such deflation should not take place and on the contrary further inflation of credit were from any cause to occur, then Currency Notes would expand again and the effect of withdrawing Bank Notes as cover for the additional issue of Currency Notes might be to deplete our Reserve to such an extent that penal rates for money would would be imposed. CONFIDEN2IAL. BANK OF ENGLAND. LONDON. E.C. 2 2nd February, X19 20. that rest; you u arriv treat am ma matte lette about Bank subje not y accor Banke are e relyi even two o Banks of it mitigation of the ridiculous "window dressing" which now takes All place at the end of every year. You will also observe that the Coromitteehave not speci2ied what percenta=ge of their liabilities the branches of foreign Banks should hold in British Government securities 'out have left this to the Government to settle. I understand however that something in the neighbourhood of 20% was in their minds. The matter was allowed to sleep for some time (I fancy under the impression that the Currency Committee would take it up) but I have quite recently obtained the promise of the Board of Trade, in whose province it lies to propose the necessary legislation, to push the matter on again. The other subject on which I want to say sorie- thing unofficially to you is your telegram received to-day in reply to our enquiry of the 27th about your money rate policy. I hope you will not have thought that we were asking too much in inviting your opinion on such a matter, and I need hardly say that your kind reply is very greatly apnreciated, for although it does not give us any clear guidance as to your rresent policy I quite understand your difficulty in giving it. I was surprised, by the way, to see that your telegram arrived in plain language. Would it not be better that any messages we may exchange on such subjects should be put into code? It is extremely difficult to see even a short way ahead in these days, but ire are ho 'in=' that our present rates will nrove more efficacious at this time of year when revenue collections collections are heaviest than they could possibly have proved in 101 the autumn. increase in money rates will cure. Thus But there are several evils which no reasonable the pr (on paper) by exporting on credit are such as t "shaded" by interest at 10% per annum. I do not believe there is an amount of speculation here on borrowed money. avoid the present heavy taxation by investing f appreciation rather than for a certainty of inc as to create an unwholesome demand for speculati Indeed this is carried to such a pitch that lar shares are believed to have been placed here re and American sellers. Can we wonder that, with thi tion to the demands that we have to meet, both for our Allies, on the American Exchange, the d continue to appreciate in sterling? I am not the fall in the American Exchange, and only hop continue to be spared an actual breakdown in th reaches a level at which it will provide its ow anxious, as I have already said, to give presen fair trial, but the one thing which would to my a further rise would be that your rates should Hence our anxiety for some guidance as to your Always yours sincerely, Benjamin Strong, Esq. 41L 11\ 1 If ,141-11 4-(4y!eiii f.1.1 9 Feb 1920 COPY B-nk of England