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CABLE ADDRESS"WHITECASE

WHITE S, CASE
14 WALL STREET

a

November 10,1914.

NEW YORK

GBC- -KVC

NOV 10 1914

Mr. Benjamin Strong. Sr..

62 Cedar street,

New York City.

Dear Ben:

I have your letter of November 10th. We haven't
done anything about looking up the question of the legal
method of calculating discounts in this state, because it
was my unde?iiraEding-that-U-Were going to send over a

memorandum which would describe just what you wanted, and

the reason of the difficulty experienced. I said at the
time, you will remeTaber, that I didn't know anything about

it and wanted to be a little clearer as to the precise point.

Will you have somebody do this and we will be
glad to do what we can?




Very truly yours,
cT73

CABLE ADDRESS FARMTRUST.

If4Winia.a-oxwy /yol4«

,(27/)?

/of

/*/(w8-21-74:&40/,Wee,4

EDWIN S. MARSTON,PREsioeN7
SAMUEL SLOAN,VicE PRES,
AUGUSTUS V. HEELY, VIcePwss,&
WILLIAM B. CARDOZO,Vrcc P,S7.

BRANCH OFFICES
NEW YORK

475 FIFTH AVENUE.

xff-4,10/Z

CORNELIUS R. AGNEW, Vtcm. PRES,
CASE, Vtcm PwEs,.
J. HE

LON DON

15 COCK SPU R STREET, S.W.
26 OLD BROAD STREET, E.G.
PAR IS

HORACE F. HOWLAND. Ass, Sc'.e
ROBERT E. BOYD, Ass, Scey.

4-1 BOULEVARD HAUSS M AN N.
BE
56 UNTER DEN LINDE N,N.W., 7

WILLIAM A. DUNCAN, As Sec,
EDWIN GIBBS, ASS, Srev.

FREDERICK GELLER, ArroRtm-e.

May 18, 1915.

Hon Banjamin Strong, Jr.,
Federal Reserve Bank of New York,
62 Cedar Street, New York City.

44,1,
-a

Dear M. Strong:I am taking the liberty of handing you with this a copy of an
address which I delivered before the New Jersey Bankers, Association L45,480 in f i lc

May 3, 1912, on the general subject "The Desirability of con

r'

as a Bank Investment - An Analysis". As this was prepared a long time
:Mta,
before the inception of the Federal Reserve Bank Act, I have just a little
feeling of pride in that some of the ideas therein expressed were sound
enough to be incorporated in the Act itself.
you will accord this a place in your library.
Very truly yours,

Enclosure.




I should be very glad if

CABLE ADDRESS: FARNITRUST.

t_WZX-ofx S,4-ed/X11/
weg,2174:eta, /54ge

EDWIN S. MARSTON,PPEstoENT

BRANCH OFFICES
NEW YORK

SAMUEL SLOAN,Vice PRE.,

AUGUSTUS V. H EELY, VICE PRES, & Sm,y.

475 FIFTH AVENUE.
LONDON
15 COCKSPUR STREET, SW.
26 OLD BROAD STREET, E.G.
PARIS

,JZ

WILLIAM B. CARDOZO, VICE PRES,

effrj(*0

CORNELIUS R. AGN EW, VICE PRES.T.

J. HERBERT CASE. Vice Pwes,
HORACE F. HOWLAND, Ass-rSsc,
ROBERT E. BOY 0, ASS, Src,..
WILLIAM A. DUNCAN, Ass, Sec,

4-1 BOULEVARD HAUSSMANN.

BERLIN

56 UNTER OEN LINDEN,N.W.,7

EDWIN GIBBS, Ass, Svc',

FREDERICK GELLER, ATTORNEY.

1l5.

May
.4%
19,4

Jr.,

Hon. Benjamin Strong,
Federal Reserve Bank of New York,
62 Cedar Street, New York City.

Dear

mr.

/or

.Ar

er

6
A

&

w 494,

strong:I was very glad of the opportunity of listening to your very

able address before the New Jersey Bankers' Association at the opening
session last Friday.

The stand taken by the Federal Reserve Board and

emphasized by you, that all oomaeroial paper to be eligible for rediscount

must be predicated upon quick assets having a proper ratio to current debt
and the proceeds thereof used for commercial purposes, is, I think, absolutely unassailable; moreover, I believe that this ruling will do much
toward standardizing commercial paper and tend to place it on a much higher
plane than it has heretofore had.




Very cordially yours,

FEDERAL RESERVE BANK
OF NEW YORK
February 10, 1919.
-

Benj. Strong, Esq.,
The Cluneden,
Lake George, N. Y.

1.14,1 3

191)

rD7'11A1., RESERVE PINK

Dear Yr. Strong:

I am in receipt of your letter of the 6th instant relating to the subject of having commercial paper payable at the office of member banks rather
than at the office of the commercial paper dealers through Whom the notes are
sold.

This matter was taken up by us, at the suggestion of several of the note

brokers; and in order that you may have a complete picture of just what has
taken place, I am enclosing herewith a copy of a communication sent to the fifteen commercial paper dealers who were represented

t the informal conference

held here on January 27th.

When the regulation

of the New York Clearing House became

effective,

on August 1st last, (a copy of which is hereto attached) we adopted the practice of charging one day's extra interest on all commercial paper payable at

brokers' offices, which could not be collected or cleared through the exchanges
at the clearing house on the day of maturity and, consequently, created one
day's "float."

When this clearing house regulation became effective I under-

stand that many of the clearing house banks insisted on an allowance, from the
note brokers, of an extra day's time upon this type of paper,

Which has,

of

course, tended to reduce greatly the volume of such paper offered.

During the past month a number of note brokers have called here to ask
if they could not arrange to take up such paper on the day of maturity by means
of a Federal Reserve Bank check, Which would do away with this extra charge of

one day's interest and put all paper sold in the open market on an equal footing,




FEDERAL RESERVE BANK OF NEW YORK

Benj. Strong, Esq.

2-

2/10/19

Upon discussing the subjectwith the dealers it developed that they
considered the matter of having the paper made payable at their offices more
or less of a nuisance anyway, and that they would be glad to be relieved of
the details connected with the payment of the notes at maturity; further, that
they would work to bring about a change that would do away with this practice.
The matter was, of course, discussed among the officers of the bank,

and the unanimous opinion was expressed that we should follow the course sug
gested.

Er. Ardrey, of the National Bank of Commerce, who was informally discussing clearing house matters with me a few weeks, ago, alluded to the clearing

house arrangement as to the clearance of notes and bankers' acceptances, and
said that the only possible criticism he had to make was purely from a selfish
standpoint; that, While this plan enabled his bank to get the payment one day
earlier on all paper which they held in portfolio, they, in turn, had to pay,
one day earlier, all paper payable at their bank, and that the latter represented a larger amount than the former.

I received the impression from him

that on the whole he thought the plan a very good one, eliminating, as it does,
a large force of messengers heretofore used for presenting notes by hand.

In view of the fact that the dealers have unanimously agreed to bring
about a change in this small volume of customers' notes made payable at the

brokers' offices, do you still consider it desirable to talk with Ir. Alexander
about it?

I shall await an expression of your views on Friday.
Very truly yours,

pvti,

7/4.;> foreo.z,) f
JHC/HAB
Encs. (2)




1114--/f0,--'ee

i,5ezz-071

-

Deputy Governor.

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This article is protected by copyright and has been removed.
The citation for the original is:
“J. Herbert Case is Dead at 99; Headed Federal Reserve Here.” The New York Times (New York, NY),
August 5, 1972.




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NEWCOMB CARLTON. PRESIDENT

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FIR ST VICEPRESIDENT

ECEIVED AT 20-22 NORTH CENTRAL AVENUE_ PHOENIX; ARIZONA
1920 FEB

io PM 5 24

A2538 63
0, NEWYORK NY 628P 20
1

BENJAMIN STRONG
IPHOENIX NAT-Mat BANK PHOENIX AR IZ
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DISLIKE TO BOTHER YOU ABOUT PERSONAL FACTOR SO, STRONG SUBMIT FOR

SUGGESTIONS AS TO PROCEDURE STOP LETTER VAN. DER REST BRUSSELS
.

REFERRING YOUR - V I SIT AND PERSONAL KNOWLEDGE DESIRES YOUR INTERVENTION

WITH BOARD BEHALF , FAVOR ABLE CONSIDERATION ONE YEAR EXTENSION
THEIR FIFTY MILLION CONSORTIUM ACCEPTANCE OBL I GAT ION STOP SUGGESTS
YOUR TELEGRAPHING THEIR. AMBASSADOR WASHINGTON

AND REQUESTS ABSOLUTELY CONFIDENTIAL TREATMENT UNTIL FURTHER NOTICE

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STOP WIRE Mt
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NEWCOMB CARLTON. PRES/DENT

CLASS OF SERVICE SYMB0
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GEORGE W. E. ATKINS. FIRST VICE.PRESIDENT

symbol appearing after the shedl

RECEIVED AT 20-22 NORTH CENTRAL AVENUE: PHOENIX, ARIZONA

NL 1/8C
1920

V PLAINSFIELD Nj FED 19
STRONG

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PHOENIX NAIL BANK PHOENIX ARIZ
E ATTENDED

TO ALL MATTERS REFERRED TO IN YOUR RECENT LETTER

NDisSTAND FROm DAY THAT YOU HAVE ACCEPTED RESERVATIONS ON US NILE

SAILING APRIL TENTH RATHER THAN TO SAIL MARCH THIRTIETH ON KOREA

ARU

STU WILL FORWARD INTRODUCTIONS AND OTHER PAPERS IN A DAY OR

TWO STOP DIRECTORS RAVE APPOINTED COMMITTEE ON NEW DEPUTIES STOP
I

THE FOLLOWING

IN ORDER NAMED ARE THE MOST PROMISING SUGGESTIONS

ARTHUF, M HARRIS RAY MORRIS J Y G WALDER EDWIN G MERRILL STOP CROSS
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NATIONAL CITY




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NEWCOMB CARLTON, PHE.,06.NT

GEORGE W. E. ATKIN,. FIRST VICE-P,

CLASS OF SERVICE: SYMBO!
Day Message

Day Letter

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RECEIVED AT 20-22 NORTH CENTRAL AVENUE. PHOENIX, ARIZONA

SHEET 2/94

NK FORMERLY DEPUT KANSASCITY BANK PROFESSOR KEMMERER OF

NCETON AND KENZEL ALSO SUGGESTED STOP -FARNUM NOT HIGHLY SPOKEN
Y FEDERAL RESERVE BOSTON THEY ARE ALSO IN MARKET TO REPLACE
SPENCER WHO GOES WITH FIRST NATIONAL BOSTON APRIL FIRST
STOP mAY

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HAVE YOUR FRANK VIEWS ON THE FOREGOING ALSO YOUR'OPIN1ON

IC DESIRABILITY OF APPOINTING TWO OF THESE MEN

IN ORDER THAT

E MAY FULLY ROUND .OUT OUR 04ANIZATION,AT THE TOP STOP EVERYTHING
PROGRESSING WELL AT THE BANK HOPE YOU ARE ENJOYING CAMPING TRIP
_

JAY JOINS ME IN SENDING BEST REGARDS
CASE.

111110111

FEDERAL RESERVE BANK
OF NEW YORK
February 21, 1920.
Dear Mr. Strong:

I was very glad indeed to receive your recent letter and to know that you
I judge from this
are about to embark on horseback for e six weeks' camping trip.
that you are feeling physically fit and I certainly hope that the trip will do you
I shall never forget a
good and that you may get a good deal of fun out of it.
It is still a very
month that I spent in the Colorado Rockies a few years ago.
pleasant thing to look beck upon.
As this is my first letter to you since you went away you will see that I
have taken you at your word and have avoided troubling you so far as possible with
matters that relate to the operations of the bank.
As I indicated in my night wire to you Thursday, everything thus far is
running along smoothly here at the bank although, as contrasted with the war period,
there are many widely divergbnt views as to what the policy of the Federal Reserve
System should be.

A week or two ago our directors appointed a sub-committee on new officers
The committee
and I wired you Thursday night the names of several possibilities.
feels that, just as soon as practicable, the organization should be further strengthWe both felt, however, that
In this view Mr. Jay and I concur.
ened at the top.
we would like to have your reaction on the names that were under discussion.
I was obliged to send you a further night letter yesterday reporting the
substance of a communication just received from Mr. Van de Rest, governor of the National Bank of Belgium with regard to the maturity of the $50,000,000 Belgian acceptance credit in June, in which he asked if you would be good enough to negotiate
The tone of the
with the Federal Reserve Board the matter of a one year renewal.
letter rather implies that it would be exceedingly embarrassing to Belgium to retire
I assume that I shall hear from you on this in due
these obligations at maturity.
course.

The Treasury
The certificate of indebtedness program is in good shape.
has at present only the followhas retired all outstanding loan certificates and
ing four issues of tax certificates outstanding, March 15, $847,627,000; June 15,
$726,130,000; September 15, $657,469,000; December 15, $703,026,000, making a total of $2,936,252,000.
Mr. Leffingwell contemplates that by the end of the year the amount of
Mr. Leffingrell
these certificates will be reduced to at least $2,250,000,000.
states the Treasury will retire on March 15, on receipt of taxes, the $847,000,000
of certificates then due and will also pay off the $125,000,000 War Finance CorA most bncouroging program.:
poration bonds due April 1.
Mr. Leffingwell thinks that between now and June 15 it will be necessary
for him to float only $500,000,000 of new certificates, all to mature on March 15,
$300,000,000 to be dated March 15; $100,000,000 dated April
1921, as follows:
15 and $100,000,000 dated May 15.



1 made inquiry a day or two ago of twelve of our largest institutions as

EOERAL RESERVE BANK OF NEW YORK

2.

2/21/20.

to the secondary distribution of all outstanding certificates purchased by them.
I
found that of the total subscription, aggregating $816,000,000 to the four issues,
they now have on hand but $214,000,000, or practically 26%, the balance of 74% having
been distributed to their customers.

There has been, however, during the past week, some $50,000,000 of certificates overhanging the market which the owners would like to sell on some basis,
even though this would involve selling them under par.
My own view was that as
the Treasury was practically out of the market it would facilitate the distribution
to the ultimate consumer if they were now freely traded in, even though they were
sold at a slight discount.
The Treasury Department, however, has frowned upon
this and think they see in it some scheme to compel them to pay 5% (a perfectly
proper rate for the $300,000,000 which they expect to borrow on March 15.)
Mr. Leffingwell continues to hold the fort against all comers with respect
to his general view on the rate question.
Ithink it likely that our present rate
of 4 3/4% on certificates will shortly be fixed at a higher point.
The pressure
upon our member banks and upon us for credit continues unabated.
It appears to be
greatest among the strictly commercial banks and many of them have been obliged to
borrow here sums largely in excess of their capital and surplus and not infrequently
sums considerably larger than the amount they contribute to the common fund in the
way of reserve deposits.
I am convinced that the group of banks up-town conduct
their business very unscientifically, sending out solicitors during a period of easy
money to invite all the new borrowing accounts they can get and then fail to make
any appropriate record as to the amount of money they are obligated to loan, so
that at times they find themselves quite surprised and embarrassed by the extent of
their commitments.
I am discussing this phase of the subject with the officers
of the up-town banks and in addition to obtaining their closer cooperation am requiring in many instances additional collateral from them.
Our present reserve
is but 37%, or, after setting aside 40% on notes, our reserve on deposits is about
33%.

Our information is that during the past six weeks there has been a curtailment of our export business to the extent of 20% to 25% and there is a good bit of
evidence that the rise in discount rates is beginning to make itself felt, and, in
my opinion, within the next 60 or 90 days we shall see the credit situation in a
better position and under more effective control.

loans.

There has been a real liquidation in the total aggregate of stock exchange
The reduction is now somewhat more than 20% from the extreme high point.

The exchange of definitive for the temporary Liberty Loan bonds is to be
I anticipate we shall have a good bit of activity
made beginning with March 15.
in that department.
Governor Passmore will retire as governor of the Philadelphia bank on
March 1 to become president of the Bank of North America, Philadelphia.
Mr. Jay has no doubt informed you that we have selected as counsel, Mr.
Edward H. Hart, who has been for some time associated with the Treasury Department.
He comes with us on March 1 and I hope will prove to be the right person.
On receipt of your letter from Mr. Hartley Withers of the "London Economist"




AQERAL RESERVE BANK OF NEW YORK

3_

2/21/20.

I took up with Reuters the matter of transmitting our weekly statement to that paper
in the form suggested and they have agreed to the program mentioned.
This gives you a bit of the current gossip about the office.
With respect to your trip through the Orient' am taking care of the details
set forth in your letter of February 1.

Mr. Hamaoka has resigned as Superintendent of the New York Agency of the
Bank of Japan to return to Tokio and act as Superintendent of all Agencies of the
Bank, and he has been succeeded by Mr. N. Nagaike who was recently introduced to us
by Mr. Hamaoka.
The latter is at present away from New York and I am therefore
arranging with Mr. Nagaike to notify the Bank of Japan of your visit and to send you
a letter to them.
I will also notify the Bank of Japan direct.
Regarding our relations with de Javasche Bank, I have prepared a summary
of our agreement with them which was negotiated with Mr. Van der Berg with whom, T
believe, you are acquainted.
I will also send you a brief resume of our operations
under this agreement.
I have written to Mr. Bedford of the St,andard Oil Company, who is just now
at Pinehurst, and to the three American banks with branches in the Orient (Asia
Banking Corporation, International Banking Corporation and Park Union Foreign Banking Corporation) with whom we are transacting the silver business, requesting letters
of introduction for you, and I will assemble them and all other papers desired, forwarding them to you presently in one packet, sending at the same time several conies
of our last Annual Report and that of the Federal Reserve Board.

As you are aware, we have been in touch with Day of the San Francisco bank
regarding passage on the Jap line.
Through the good offices of Mr. Nagaike we
were able to reserve a de luxe cabin on the "Korea Maru" which was scheduled to
sail March 30.
However Mr. Day wired us on February 11 that it would not be convenient for you to sail as early as March 30 and that you would use the reservation previously made for you on the steamship "Nile", sailing April 10.
Personally, I am sorry that you could not use the reservation on the "Korea
Marti", as I am inclined to think you would have found it more comfortable.
Mr.
Nagaike told me yesterday that Mr. Vanderlip, Mr. Alexander and one or two other
New York bankers were contemplating a trip to Japan, sailing from Seattle, the early
part of April and that through some of his Japanese friends he was making the necessary hotel reservations in Japan.
If I can ascertain any additional information
with regard to the plans of these gentlemen, I will let you know.
My only excuse for making this letter so long is that it is the first one
I have penned you since you went away.
I hope that your camping trip has proved
to be a great success and that you will come out of it much refreshed and ready to
enjoy your trip to the Far East.
I am mighty glad to know that you have had Mr. Miles and your son Ben as
I have been careful to see that their names were mentioned
company on this jaunt.
in all the letters of introduction which I have obtained.
Very cordially yours,

Benjamin Strong, Esq.,
Phoenix National Bank,
Phoenix, Arizona.






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NO EMPLOYEE OF THIS COMPANY IS AUTHORIZED TO VARY THE FOREGOING.
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CLARENCE H. MACKAY. PRESIDENT.

CHARLES C. ADAMS,

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EDWARD REYNOLDS, VICE-PRES, AND GENERAL MANAGER.

VICE-PRESIDENT.

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VICE-PRESIDENT

CLASSES OF SERVICE
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the next if' My business day, at reduced rates but in no case for less than twenty e.t.a
tolls for A...Are Message.
SPECIAL TERMS APPLYING TO NIGHT MESSAGES. Pbe Company shall not be
liable for damages or statutory penalties in any case where the claim is not presented in
writing within thirty days after the message is filed with the Company for transmission.
NIGHT LETT E R GRAM S: Accepted up to midnight, for delivery on the morning of the next
ensuing bust' hs day at rates still lower than standard night message rates, as follows: The
',for ale-word day message shall, be charged for the transmission of te night
standard MN
ining SO words or less, and one-fifth of the standard day rate for a le-word
lettergram m.
day message.shal be charged for each additional 10 words or less in such night lone/gram.

SPECIAL TERMS APPLYING TO NIGHT LETTERGRAMS. In farther consideration
of the reduced rate for this special "Night Lettergrani" service, the following special term.
in addition to those enumerated above are hereby agreed to:
Night Lettergraans may at the option of the Telegraph Company be mailed at destin.
lion to the addressees, and the Company shall be deemed to have discharged its obligation
In such cases with respect to delivery by mailing such Night Lettergrarns at destination,
Postage prepaid.
Night Lettergrams shall be written in plain English. Code language is not permitted.
any ease where
The Company shallnot be liable for damarms or statutory penalties in is filed with the

the claim is not presented in writing within thirty days after the message
Company for transmission.

THE FASTEST TELEGRAPH SERVICE IN THE WORLD



FEDERAL RESERVE BANK
OF NEW YORK
March 10, 1920.

Dear Mr. Strong:

I have assembled the data which you requested in your
letter of February 1,

in connection with your trip to the East.

Mr. Nagaike, successor to Mr. Hamaoka as New York
Representative of the Bank of Japan, has sent word to his bank that
you are sailing via the Pacific on April 10, and will visit Japan,
and has also sent
the Bank of Japan.

us

a letter of introduction for you to present to
I have notified the Bank of Japan of your visit

direct, and enclose a letter of introduction for you to them, together with Mr. Nagaike's letter.

I have also advised the Javasche

Bank and enclose a letter of introduction to them.

The three banks

which are handling the silver business for the Treasury, and the
Standard Oil Company of New York, have given us letters of introduction
to their people in the East for you to carry with you.
I am sending you two copiss of the Federal Reserve Board's
Annual Report.

As our own report for 1919 has not yet come back from

the printer I am unable to enclose it with this letter, but understand
it will probably be ready in time to be sent out when your son, Ben,
leaves, the latter part of this month.
Thinking that you might desire to cable us confidentially,
we have prepared a set cf test numbers, and enclose copy of Bentley's
Code, which you may want to take with you.




You will find with this letter the following enclosures:
1. Letter of introduction from Mr. Nagaike to the Bank of

..EDERAL RESERVE BANK OF NEW YORK

2.

Benj. Strong, Esq.

3/10/20.

Letter of introduction from us to the Bank of Japan.
Letter of introduction from us to the Javasche Bank.

4. Letters of introduction from the Guaranty Trust Company
to their managers in the East. (These were furnished in lieu of letters
from the Asia Banking Corporation.)
5. Letters of introduction from the International Banking
Corporation to their Eastern branches.
6. Letters of introduction from the Park Union Foreign
Banking Corporation to their Eastern branches.
7. Personal letter to you from Mr. Pratt of the Standard Oil
Company of New York, and letters of introduction to their Eastern managers.
Summary of Bank of Japan agreement.
Summary of Javasche Bank agreement.
Summary of Special Silver Agreement.
Two copies of Federal Reserve Board's Annual Report.
Test numbers and Bentley's Code.
Very truly yours,

J. H. Case,
Acting Governor.

Benj. Strong, Esq.,
c/o Phoenix National Bank,
Phoenix, Arizona.







'arch 11, 1920.

Dear Mr. Strong:

have your letter of March 1, In which you enclosed
a latter from your son 3ents old room--nate at Princeton, mho
signs himpelf "Thug."

T agree

with you in ii you s')y regard-

ing the desir9bility of h9.ving in the bank more men of this

type, man with good eduction, manners and blood.

From your

letter I note that you have asked him to call on me, and when
ho comps in I shall be

glad

to do the necessary.

This morning I talked the fritter over

with

Mr.

qilbmit, who is orly too vlad to cooperate in this regard.
I strongly advise thrt a men of this type be ussd

Personally,

as a supply man nd shifted around to the various ',apartments.
If he were to spend P few months , ch in the foreign, loan,

bill,-and investment departments, mrd accuint himself with 'omn of
the operations of the b;nk, it rould be e desirmble thing.

I sent you, yesterd-y, by registered mdl,

11

of

the

letters of introduction for which you risked, and I -m enclosing
with this

copy of my letter, for your informntion.
I am glad to know that you are having a Rood rest mnd

that you have enjoyed your c.-mping trip

in the woods.

Sincerely yours,
Benj. Strong,

'En.,

0/o Phoenix Nytiona..1

1 FEDERAL RESERVE BANK
OF NEW YORK
March 16, 1920.

Dear Mr. Strong:

I had a very satisfactory talk, last Saturday, with young
Edward Douglas and learned at first hand just what is in his mind
with regard to his entering the banking field.
He is a very pleasant
young fellow to meet; and after I had chatted with him a bit I turned
him over to Mr. Gilbart, with whom I had previously had a few words.
You will be interested in Mr. Gi/bartis report to me, which is as follows:

"Mr. Edward Douglas, whom I interviewed
at your request on Saturday, made a most favorable
impression.
He is by far the best of all the
young college men whom I have had the pleasure of
In my opinion, he possesses the
interviewing.
fundamental qualifications essential for success in
banking - strong character, cautiousness, firmness,
determination, an affable manner, and more than
average intelligence.
"Although we have been paying college men
$1,200 a year to start, (most banks pay from $900
to $1,200) I felt that he, being of superior type,
was entitled to a little higher remuneration and,
therefore, offered him $1,500, which he said was
entirely satisfactory.
"He has a few matters in Troy, N. Y., which
he would like to settle before coming to the bank, and
we therefore set June 1 as the starting date.
"He had no difficulty in passing ,our physical
examination.
When he reports, I will see that he is
properly taken care of and will so arrange it that he
will have an opportunity to work in all of the important
departments."

We have been having some extremely interesting days here at the
bank, and I will just mention one or two of the "high spots."
TREASURY OPERATIONS:

The Treasury Department redeemed, yesterday, some $S50,000,000 of
As a
tax certificates, about one-third of which was paid at this office.
result of this operation, our member banks temporarily increased their reserve balances $140,000,000, paying off approximately $50,000,000 in loans.
The other side of the picture is that we had a temporary overdraft of the
Government for $125,000,000, with an increase in float items (exchanges of
The Treasury is offering, as of March 15, a new issue
about $65,000,000).
of certificates, which will run for one year, at 4 3/4%, with the hope of
selling about $350,000,000.




.L RESERVE BANK OF NEW YORK

Governor Harding.

3/16/20.

Mr. Leffingwell, who spent Monday, March 8, with us at the bank
and talked with a number of members of the old Liberty Loan Committee,
was advised to make the rate 5%.
This suggestion was
Secretary Houston some two or three weeks ago at a dinner tendered him
by Mr. George Foster Peabody.
However, Mr. Leffingwell argued that, by
reason of the vacuum created by paying off so large an amount as
$850,000,000 on March 15, there would be automatically created a demand
for the comparatively small amount he desired to sell.
It rather apOur subpears, at this writing, as though he had misjudged the market.
scriptions are but $55,000,000, or one-third of normal, which, I understand, is approximately true of other districts.
Person
very sorry that he insisted upon the 4 3/4% rate in the face of the
almost unanimous opinion expressed to him here, that a higher rate was
imperative.
I think, however, that he had a jolt of this sort coming
to him.
The total subscriptions for the whole country approximated but
$150,000,000.
GERMAN GOLD ACCOUNT:
On March 12 we made a final payment, amounting to $2,541,903.17,
to the United States Grain Corporation, which represents the balance due
them on the German Gold Account.
Up to this writing we have received in
London gold representing a total value of $173,000,000, of which some
$60,000,000 has been sold, leaving a balance of $113,000,000 with the Bank
of England.
Expenses incurred by the Bank of England, de Nederlandsche
Bank and the Federal Reserve Bank of New York amounted to $619,966.47 and
$563,900.55, the latter amount being one-half of one per cent. of the
value of the gold still with the Bank of England, which is withheld here in
Suspense Account to cover the cost of moving the gold to New York, should
it be found ultimately necessary to do so.
A very recent estimate from
the Bank of England was but one-quarter of one per cent., but our directors,
the Grain Corporation people and the Federal Reserve Board all felt it was
desirable to make an allowance sufficient for emergencies.
It is expected
that if this money is not used, by reason of the gold being sold in London,
it will eventually be returned to the Grain Corporation or the German
You may be interested in the enclosed photostat statement of
Government.
this account, as of March 11, 1920.

BANK OF JAPAN:

The Bank of Japan agreement was signed a week or so ago, and they
are to make their first deposit, amounting to $20,000,000, with us to-morrow,
March 17; four-fifths of this amount, I understand, is to be immediately
Under present conditions we will welcome the opportunity
invested in bills.
of putting that amount of bills in their portfolio.
- 0 -

new
for
had
the




Our earning assets during the latter part of February reached a
The pressure
high level - a total of $1,148,000,000 as of February 27.
credit has continued unabated, although during the last few days we have
some evidence that the situation is getting under control.
During
period between January 2 and March 6, the net deposits of our city banks

raA-,_ RESERVE BANK OF NEW YORK

3.

Governor Strong.

3/16/20.

were reduced from $5,422,000,000 to $4,904,000,000, a decrease of $518,000,000.
This large reduction was financed by withdrawing about *280,000,000 from their
street loan account, by increasing their borrowings here $60,000,000, and by
A net reduction of about 25% has
liquidating $180,000,000 of other assets.
taken place in the total amount of street loans.

March 18, 1920.

It has been interesting to observe the comments and criticisms
stirred up by reason of the recent export of the comparatively small amount
I am glad to say, however, that the opinion
of gold to South America.
is quite general that if we are actually to be a real, financial center and
not a make-believe one, we should not be disturbed by a reasonably free movement of gold in and out of this market.

Argentine has fifty-millions of bonds maturing here on May 15,
which amount is likely to be paid and will absorb a considerable part of any
surplus funds she has in New York.
The recent announcement that Great Britain
of Anglo-French bonds maturing
and France are to pay off the $500,000,000
In spite of the load she is carrynext October, has had a wholesome effect.
ing, one cannot fail to recognize from time to time that Great Britain continues to "have her nerve with her," and knows just when and how to make
an announcement that will be beneficial.
I observe on the Dow-Jones news-sheets of yesterday a statement
of gold imports and exports, set up on a monthly comparative basis, from
I am enclosing this for your information.
January, 1914, to January, 1920.

Beginning March 15 we have had great activity in our Bond Department,
Mr. Sailer tells me
due to the exchange of temporary for definitive bonds.
that on Monday, on the 24th floor alone, the transactions cleared aggregated
We had a meeting of the Building Committee
over six hundred million dollars.
yesterday; and while progress in our plans seems somewhat slow, I am sure that
So
some headway is being made towards whipping the plans into good shape.
much for the gossip of the office.

I am enclosing with this what I consider a rather interesting extract
from a pamphlet published in the London Magazine in the year 1767, entitled
"Thoughts on the Causes and Consequences of the Present High Price of ProWhile this was written more than 150 years ago, it really applies
visions."
with equal force to conditions at this time.
The fact
what better than most of our articles dealing with economic subjects of the present
day.

The Dow-Jones news-sheets of March 17th , report that you are to
sail for Japan very soon and that Mr. F. A. Vanderlip and party will leave for
the Orient within the next ten days, as the guests of representatives of the
Japanese Government.
A memorandum of this announcement is enclosed.
I am glad to know that you have so thoroughly enjoyed your camping
trip and that you are feeling fit for your visit abroad.
I sincerely hope you
and your party will have an idea/ time in every respect and will return home in
due course, ready to "eat 'em alive."
Cordially yours
Benj. Strong, Esq.,
C/o Phoenix National Bank,
Phoenix, Arizona.


http://fraser.stlouisfed.org/
Encs.
Federal Reserve Bank of St. Louis

FINAL STATEMENT - GERMAN GOLD ACCOUNT

March 11, 1920.

DR.

ADVANCES TO OR FOR 4/C OF U. S. GRAIN CORPORATION

FINAL OUT-TURN OOGOLD FROM

'2

CR.

1

0:0,000 Marks, melted and assayed Fins 050.3,330,220.731
. a 159,842.215
680,000 Sovereigns, Exchange of

Aug. 8, 1919 Payment to U.S.Grain Corporation 485,2)8,303.90
. . .
4,372,627.35
"
1919
. . .
4,372,285.02
16, 1919 "
5
N
4,372,182.32
18, 1919 *
N
N
1,624,601.41
23, 1919 "
"
a Guaranty Trust Co.a/c
20, 1919
Com.for Relief in Belgium 2,747,478.21
4,371,703.06
a .. .. .... .
25, 1919 *
. .«
*
a* 42,880,818.73
Sept.12, 1919 "
U.S.Grain Corporation 8,231,905.80
*
1919
N
N
N
1,386,406.24
12, 1919
N
N
*
Dec. 8, 1919
Total
4420.67183462 .111128.,22144.
.1

SI

1111 AMSTERDAM

Kilos bar gold

»

874,481 Sovereigns, Exchange of
14,130,630 Marks,
10 Foreign Coins
305,869,370 Marks,

18,300,00 Austrian Crowns

5,500,000 Russian Roublass

Total

«

"
N

701,991.850
205,675.960
162,318.937
2.229
3,510,364.720
179,064.322

/ 6,2 0.949

11.3 5.7 1.913

..

..

$169,923,106.52

CHARGES FOR EXPENSES, etc.

Expenses paid by Bank of England
£22,269:19: 3
Freight
do Nederlandeche Bank's )
charges for packing & )
transmission to Hook of)
)
5,491: 8: 7
Holland and
Personal expenses Bank )

of England's represen-

tatives

National Bank of Belgium charges for pack-

)
)

ing and transmission to )
Antinsrp and

Personal expenses Bank

1,501:13: 3

)

of England's representa-)
tives

Melting and Assay
charges
Miscellaneous

12,125:15: 1

792: 6: 8
£42,181: 2:10 643.688147211.$ 155,570.26
Total
de Nederlandsche Bank's charges
Custody

0161.8 8,450.48

37 154160

.$ 33,555.90

Federal Reserve Bank's out-of-pocket Expenses
$ 126,725.30
Insurance
Gov. Strong's ex1,997.12
penses in Europe

Ur. Fred I. Kent's
expenses in Europe- - - - 1,000.00
Cable colt.
Total
Total char.ee for Expenses

p 130.840

319,966.47

Amount withheld to cover
cost of moving gold to
N. Y., namely 1/2% of $112,780,109.84

563,900.55

BALANCE DUE U. S. GRAIN CORPORATION
.

Total value German gold

- $173,348,876.71 . (8,385,751.913 fine oss.)

Amount sold to date

- $ 60.568.766.87

(2,910 014.098

Balance with Bk. of England- $112,780,109.84

(5,455,737.815




2 541 901.17
4173 348.876 71

eeienMea:

Copy of erticle published in the London Magazine
In the year 1717.
Extract from a Pemehlet ntitled
"Thoughts on the Causes end Consequences

of the
Present High Price of Provisions."

According to this writer, "The present high price of orovisione arises
principelly from two sources; the increase of our netionel debts, and the increase of our riches; that i5, from the poverty of the public: and the wealth of
nrivete individuals.
Whoever remembers the many millions ennuelly borrewed

funded and ex-

pended, during the lest war, can he under no diffioulty to eccourt for its in-

crense. To ;ay interest for these new funds, t_i_ewtexeswereiltyLliletz_eimposed, end additional burdens laid on every comfort, and elmest every necessary
of life, by former taxes, oactasioned by former wars, before sufficiently loaded.
These must unavoidably increase the nrices of them, and that in a much greeter
,ro-ortion than is usually understood: For e duty laid on any commo,iity does
not only add the velum of that duty to that commodity, but the demler in it
must advance the price double or treble times that sum; for he must not only

repay himeelf the original tee, but ouet have oomeensetion for his leases in
trade by bad debts, nnd lose of interest by his Increased capital. r'esides
this, every new tax does not only effect the 'rice of the commodity on xhich it

Is laid, but that of all others, whether taxed or not, and with which, at first
sight, it seeme to have no manner of oonneetion. Thu, for inetance, a tax on
candles muet relief) the price of a coat cr a pair of brenches, because, out of
these, all the texee on the candles of the kool-comber, weaver end the tailor

must be reld.
A duty ueon ile must raise the price of ehoe
11 the taxes uyon ale drank by the tanner, leather dresser and shoemaker, which

is not a little, muet be refunded.

Po tax is imeedietely laid non corn, hut
the price of it must necessarily be advanced, b8OMUSG, out of that, all the inrumberable taxes paid by the farmer on windowe, soap, canrles, ma/t, hops, leather,
sten..., and a thousand others, must be repaid; so that corn is es effectually taxed
If a duty by the bushel had been primarily laid upon it, for taxes,like the
various streems which form a general Inundation, by whatever channels they
separately find admission, unite at last end overwhelm the whole. 'he man, therefore, oho void sand upon an ess and rained the price of it during the late war,
although abused for en loposition,meet certainly acted uron right rensons, for,
though there were no new taxes then imeosed either on sand or asses, yet he found
by experience that, from the taxes laid upon almost all other things, he could
neither maintain himself, his etre, nor his ass, as cheap Its forme,ly. He was,
therefore, under e necessity of edvencing the price of his sand out of which, -lone,
ell the taxes which he -aid must be refunded. Thus, the increase of te,es must
increase the price of everything whether taxed or not; and this is one principal
ceese of the present extraerdinFry advance of provieions and all the necoseeries s
live.
The other great eouroe, from whence this oelamity arises, is certainly
our vast incrense of riches.. That our riches are amazingly increaned within a few
years, nA one eho is the least noqueinted eith this country can entertain a doubt.
Whoever eill west his eyes on our public works, our roads, our bridges, our pavements and our hositele, the prodigious extension of our ceritel, end,in some
proportien, that of every considerable town In Great Britain; whoever will look
into the possession and expenses of individuals, their houses, furniture, tables,



-2-

eluipegea, te,rks, gardens, cloth, Clete ,n1 jewels, wili !id everywhere rourd
him sufficient mirks to teetify to the truth of this rro7olitton. Thie greet increase t.f 1;rivete ofulence is undoubtedly eying to the very elme ceece which increeeed our nationel debts; that le, to the enermoue expenses
unperelleled
succese of the lete war; end indeed very nuch erieee from that very debt Iteelf.
Pvery million funded ie In feet e nem creatior ef ao much wevlth to inlividuCle,

both or :rinclpel end intereat; for the :rincipel, being eeeily treneferrsble,

eferetes exeetly es ea muoh oesh; end the interest, by enebling 90 ny to .onaume the comeedittes on whieh testes are laid or the Teyeent of it, Ir greet
eeesure froduces ennuelly en inc-ee to discherge tevelf. Of ell the enermeue
sume then eveended, little besides the subsidies grented to Germen POnoee, ,%8

lrst to the individuels of tilt onentry, though the .4,n1+1 wng irrerevershly
elienated from the ubiie, ell thereat annuelly returnine Into the ozkets of
the meretveIts, contrectore, brokers and etock Jobbers, enabled Chem to lend it
-gein to the eublic on new mortgage, the folloeing ye-r. every emission c°

,eper-credit by beak not, excheeler end Navy Mile, so long ts they oirculpte,
4nswers 01 the purposes of 40 luoh edlitionl gold end eilver, as their velue
If we edd to theee the Immense riches daily P;-wing in qinee thet
eericd from our comeerce extended over every euerter f the globe, from the nee
ohnnel of trade orened from 'merle-, and the eme2ing sums imeorted flem the
"mounts to.

Feet Indies, it *ill not sure be difficult to ecoount for 'he meulenee of the
eresent timee, ehlch hea enabled men to Inorele their exeeneee and oerry hxury
to si eitoh unknoen to ell fernier egos.

The effecte cf this vast end sudden ineresee of riehee ere no lees
evident then their cauae. The first and most obvioue effect of the incresee of

money is the decree of its vale, !tee filet of ell other eommodities, for money,
being but e comeodity, Its velue must be relstive, thet le, dependent on the
euentity of itself and the quantity of the things to be purehesed ei+h it. in
every country whore there ia greet plenty of Trovielone end but little money,.

there ,provisions euet be cheep; that is, e greet dell of them win be eecaned
for h little money. On the ooetrery, where there ere but little provisions in

proeortten to the- number of oensumere, n-A a groat Tlenty ef money or abet r41MSSI

fo money, there they ell/ inevitebly be deer; Viet is, e greet deel of money must
be given to purchase then. These effects meet eternelly follew their eeeses in

all egee end in ell countriee, and that they have done co, the histcry of k1l
countries in ell vete suffielently informs us.. Tho v1ue e money et the time of
the Niemen conquest wee neer twenty times greater then at ereeart, And it her
been gradually deoreesing flem that Forted, in eroi7ortien es our riches helm Int:moused.
It bee decreesel net less then one-third during the erosent lentury,
end / believe one-helf at twist of that third,since the commencement of the leet
ear, ehtch, r doubt not, could it be oeactly eomputed, would be found to he in due

le-oportion to the increese of its quantity either In reel or fictitious eesh, and

the price of provielone in elycLreed !n the memt proportion during the aeme eericel.
The increeee of money does not only operate on the 7:17ine of erovielone

by the diminution of its on velue, but by onebiing more peo0.a to purchese and,
eonsequently, to eonsume thee, which must unevoidebly likewise ineretee their
scarcity, and thet meet still add more to their erioe. Tgenty rich femilies en'
consume ten theca as much meet, breed, butter, eoep end cendles, ee twenty 1:,or,Ir

femiliee oonsieti g of the eeme number, and the prloes of ell qlese meat eerteinly
rise in proportion to the demand. This effect of the increeee of eeelth in many
countries of Europe is very vieible ut this dey, an In none more than in the
northern pert of this Islend, who bevine of lete see-uired riche by the introduction
of trade, menufecturee and tillege, 011 new well afford to eat roast beef end,
therefore, consume much of those (settle, with which they were formerly glad to aupply
ue,end will not part with the rest but at priees greatly edyenced. The eoneumetion



-3of everything Is also amazingly Incre,,sed from the increase cf wealth in our
metroTolis and, indeed, !ri every corner of this kingdom; and Che lunner of
living, Ilroughout
',mks and conditions of mbn, Is no lees amazingly altered.
The merchant who formerly thought hi,tself eortunate If in course of thirty or
forty yeLtra, by 9 1,trge trade And strict economy, he ame_ssed together es many
thousand pounds, now ocuires in a quarter of that time double that sum, or
breAks for a greater, nnd vies all the while with the first of cur nobility, In
his houses, table, furniture and e-:ui;,,age. The shopkeeper who used to bc veil
contented with one dish of moat, one fire and one maid, has now two or three
times 4s mny of each; his wife hs her tee, her card-rsrties and her dressingroom; -fnd his rentice has climbed from the kitchen fire to the front Inxes
the Any-house. The lowest manufacturer and the meinest mecbnic will touch
nothing but the very best pieces f meat anl the finest white -'read, and if be
cannot obtain doublet the wages,for being Idle, to what be formerly received for
working tva.d, he thinks he has a right to seek for redress
by riot and rebellion. Since, then, the value of our moneyof his grievances
is decreased by
its luantity, our consurr:tion increased by universal luxury, and the sur^lies
which we used to receive from roorer countries, new also groL4n rich, grently
diminished, the present exorbitant price of ail the necessaries of life can be
no wonder.




EQUITABLE BUILDING
NEW YORK

0




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/41eus,t fey,.

Z/4-t_es-e

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--

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April 1, 1920.

Benj. Strong, Esq.,
C/o Federal eserve Bank of San Francisco,
San Francisco, Cal.
Dear Mr. Strong:

Just a word or two of farewell before you embark on your trip
received the letters of introduction
we recently forwarded to you at

to the Far East. I presume that you
to various institutions abroad, which
Phoenix.

_

I'114104
With this T em enclosing a copy of a communication from Mr. Eigo
Fukai, a director of the Bank of Japen, together with a copy of my reply.
Mr. Fukal wee a delegate to the Peace Conference and was introduced to lie'
last year by Ir. Famoake, as he was paesing through on his way to Paris.
You will note that he is looking forward to meeting you in Japan during the
latter part of April.

'Mr. S. Imemurt, of The Sumitomo Bsnk, Ltd., Osaka, japan, with
offices at 140, Broadway, New York, celled here one day last week, to say
good-bye before he sailed for Jepan, and expressed his pleesure and satis-

faction upon learning of your proposed visit to his country. He further
expressed the hope that you and your party would,find it convenient to call
at The Sumitomo Bank during your visit, and, at hie suggestion, I. am
enclosing a letter of introduction.

In my last letter to you,I mentioned the fact that there was then
being offered an issue of one-year 4 3/4f certificates, dated March 15, the
sale of which was not going any too well. The truth is, the issue was a
failure; total subscriptions throughout, the country emounted to only
*l80,00,000, which, together with "40,000,000 received from Treasury
sources, brought the grand total to :4,200,000,000, whereas the Treasury
The net of it all is that
really wanted from t!50,0,00,000 to t400,00P,000.
Seoretery Houston and Mr. Leffingwell have at last become alive to the
They are
situation and now recognize that they are missing their market.
at present offering, as of to-day, t200,00r.",000 of three-months 4 3/4%
certificates, which I think eill be subscribed for largely through the
We
efforts of the Federal Reserve Banks in urging the banks to subscribe.
I told Mr.
have our quota. of 480,000,000.- obtained by that method.
Leffingwell, to-day, that he would have to pay at least 5f for subsequent
issues of short bills, and he has indicated his readiness to do this.
Thinking that you may be intereeted, I am enclosing a copy of my confidential
letter to Secretary Houston, under date of March 22; also a copy of my
telegram to Mr. Leffingwell, under date of March P.
Bankers acceptances are now moving freely, from 5 3/4f for indorsed
The dealers report a strong
bills to 8 1/0 for unigdorsed 90-day paper.
Some
demand from country banks and a good demand from large corporations.
of the former certificate buying is being diverted to bankers acceptances




P.

Benj. Strong, Eso.

,4/1/20.

and short municipal notes (such as The City of New York) which are now selling
on a 5 1/21 basis for April to November maturities.

This seema to be an era of bank consolidation.

The following in-

stitutions have consolidated or are in process:

Bank of the Manhattan Company

absorbing

-

Merchants fictional
Bank and Bank of
nLong Island.

Citizens Nat'l Bank.
Irving Trust Cc.
Franklin Trust Co.

Chemical National Bank
Irving National Bank
Bank of America
Mechanics & Metals Nat'l Bk.

tt

New York Produce Exchange
Bank.

I am looking forward with

governors, conMonday night and all day
Tuesday with Governor Morse in Boston and bad the pleasu.e of meeting at
luncheon a number of the imnortient Boston Bankers.
I find it rather
interest to attending the

ference at qashington, April 7 to 10th.

I

spent

refreshing to get away from the office now and then and to gather some other

fellow's viewpoint.

Jay ran off last night and will be gone over the week-end.

Shepard Morgan tells me that he sent you, this morning, by special delivery,
twenty-five copies
Annual Report of the Federal Reserve Bank of
New York, the publication of which has been delayed.
I hope you will receive
them promptly.

of the Fifth

the last word that you will have from me before
5m glad to knot that you have so thoroughly enjoyed your stay in

This is probably
sail.

I

you

Arizona, and my earnest hope is thet your trip to the Orient will be extremely
enjoyable as well as restful and that you will presently return to is with
renewed vigor and a full measure of good health.

Sincerely yours,

JRC/RAB
Enos. (5)







40:3r

OM-11-19

RAL F.ESERVE BANK
F NEW YORK

(SEND TO TELEGRAPH DEPT.)

SENT BY

Vi3

COPY OF TELEGRAM

Arril 14i10420.
Benlamin Stro,
,ere of Fodert1 Feserver!,,anx

7r

8CO.

few of the high spots at the
For your information Irx reporting notion t-,x.on o
!3sCretary Houston outlined
Certificates. of Indebtedmt*
governors conference.
probable reuiroments of Tremsury for next to months, as follows: kpril fifteenth,
two hundred fifty millions; Wy first, one hundred twenty riY6
fifteenth, one hundred twenty- five million; Junr, first, ono hundred twenty five
millions (these last four figlftes representing 1-obable issue of sh. rt-term loan
certificatec Kt five ;..orcent or better); and June fifteenth, three hundred mi131ons,
(this last figure ro2reeenting ;Tobnble issue of tmx cErtificmtes of longer maturity).
Proceeds or the lastnamed issue to refund nbort-torm loan certific,tes maturing in
July:- (Notes Amount of outstanding tax certificates due June fifteenth, seven
hundred millions). Governors considered 7n=',tter of rstos and maturities for pronosed
current issues *nd-recommended combination issue of short maturitiee for April titter
ms follows: three monts tt five percent, and oix monthe at five pIld one.-Jarter
percont.

This recommendation wref or-Toyed by the Treamury,

(Chicago, :4oston ;nd

Atltnta voting for one-uarter percent higher rite on both 'roues). I rill here
to
interrupt my report on the action taken at the governors conference, lon7 en

91




-q".
FED t

ft6y
UF-4)1'EWY.0:R.K

K
or

FrOSTW

Page 2.

(SEND TO TELEGRAPH DEPT.)

COPY OF TELEGRAM

41,

)

t.'c.t

both of the current thrse-nontbs five percent 'issue rond thelerg-months,five
and oes-quarter 7stroent issue. Apc.m,r to ba going well in our district.
111.
to
resent writing, Our full quota has beon subscribed to fi4uros ranohirA 01:,^
,olndred miil- on
odd.
To go on with my report on the conference, the Treasury broke
into nsw gi.oun6 by eTTrovine olicy of c-en mrket trding,by
ether
outstanding cortitios.tes, in interest bases approximating those now established on
new certifletes. Credit Control: Fffect of recent rate incmIss upon li7uldation
fully alscussed.
Several districts, including New Tork,'Weported some liuldation
due directly to 1-cremsad rate, indicating ::reaent rates were becoming effect:1,0.th
exercising credit control.
Ni.ljority of western %nd southern district reported ro
real lirluidation as yet.
Considor-,tion given to the A71!Jndment to Yederal neserva Act,
authorizing Fieserve banks to fix progressive rates for borrowings beyond normal
discount line.
:rajority ointcn we that .it should not be availed of at prorent, but

should be used only when ;.ossrve bAlk mantRoment cannot control abnormal berroging.
3tlanta and Kansas City voted for immediate use. aankers Accepts-noes: New York
reportee wide distribution among banks And investors, at six rercont. ,Ionference

-greed to principle that stabilization of New York open bill market is incumbent iron
Pesorve lystem as a whole, and appointed committee to make such support effective.
Discussed mothods for encouragink continuous investment by member banks.
Discount Fates:
In this connection, you have doubtless observed that 3ritish Treasury

hes.s r,ised its rate from five end one-half

rcent to el* and one-hraf T:ercont on




Ari

-40M-11-1.

1AL Re-SERVE BANK
F

5.:;(1S,NnDiT(9.TELEGRAPH DEPT.)

NEvt4o!lhin Strong, Cals4rfrsr!,.1 Peserve

COPY OF TELEGRAM

.4n

,

w\g'ia

Tre*sury bills, and that the &Ink of Tneand has today raised iCadlscount rrl.to to
sewn Terofmt.
hilo consider,lble eifferenos
o;,inlon exists aa to further
1
0w was a Au shopld
nn In. ,7.e now
bul should zaoh situation closely, ' 4th vieh sexotriently to increase rates any
tials such courao (moms necessarY or de3irble, *y beet wishes for a pleasant
t

voymgo.

.0.rr y v

Coo4bye.

CASE.

FEDERAL h
VE BANK
OF NEW YORK

OFFICE CORRESPONDENCE
Mr Case
FROM

DATE___Znne_29192.0..
Saliant_Foatures

SUBJECT:

of Accompanying Report.

R. G. Bellah
RESERVE PERCENTAGES

Our reserve percentage on June 25, after allowing for rediscounting for
other Federal Reserve Banks, was 39.2 per cent.
If there had
for any rediscounting our reserve percentage would have been 42.8 per cent.
The
rediscounting was for six banks.
The amounts, and the actual and
percentages of these banks follow:
Amounts Rediscounted
with
Fed. Res. Bk. of New York

Atlanta
Chicago
Minneapolis
Kansas City
Dallas
St. Louis

$ 4,160,000.00
14,950,000.00
11,623,300.00
9,958,000.00
2,000,000.00
19.269.682.96

Actual
Reserve
Percentages
36.4
36.7
21.2
33.9
37.4
27.8

Percentages
after
Rediscounting
40.6
40.0
41.1
41.1
41.4
41.9

6196O982. 96
The highest actual reserve percentage was again that of Cleveland.
63.1 per cent. and the adjusted 51.1 per cent.
actual and 56.8 per cent. adjusted.
San Francisco was third with an actual
52.1 per cent, and an adjusted of 52.0 per cent.
Philadelphia stood fourth
actual and adjusted both of 45.0 per cent.
New York dropped from fourth to
place.

It was
Boston was seco
of
with an
fifth

Of the banks rediscounting with us on June 25, Atlanta has gone down
2.6 per cent., Minneapolis 3.1 per cent. and Dallas 1.7 per cent.; while Kansas City
has gone up .1 per cent., and St. Louis 1.8..
It is of interest to note that all
six of the banks rediscounting with us have an adjusted percentage much higher than
ours.

WEEKLY REPORTING MEUBER BANKS OF THE COUNTRY
A decided increase in al/ loans is noted for the four weeks ending June 18,
and also for the week ending June 18.
The increase for the longer period was
$113,000,000. and for the shorter period $85,000,000.
All the loans for the balance
of the country showed a decrease during these two periods; for the four weeks of
055,000,000. and for the week of $56,000,000.
All the loans of the City decreased
$119,000,000. but the increase in the balance of the country was $216,000,000.
The
net result has been that during all three periods, the year, the month, and the week,
there were increases throughout the entire country.
There has been a slight increase in the loans on stocks and bonds in the City for the four weeks ending June 18
and the one week ending June 18.
For the entire year, however, there has been a
heavy decrease of $243,000,000.
In the balance of the country the loans increased
the last week: $10,000,000.
As the lag point was touched on June 11, this means that



-.3A-90MA-20

.VE BANK
OF NEV. t'ORK

FEDERAL RE.

OFFICE CORRESPONDENCE
Mr.

FROM

DATE

CaseSUBJECT

:

Jure 29, 1920.

Salient Features
of AccnmvanyingLReport.

R. G. Bellah
-2-

the loans on stocks and bonds in the balance of the country stood on June 18 just
The deposits of the Reporting
$10,000,000, above the low point for the year.
The
Banks of the Country increased $148,000,000. in the week ending June 18.
deposits also increased in the four weeks ending June 18, but for the entire year
there was a decrease of $107,000,000.
DAILY REPORTING BANES
Net Deposits Decreased in Week ending June 25
Borrowings of City Banks from Federal Reserve Bank Increased in Week
Street Loans Increased in Week.
Balances of Out-of-town Correspondents Decreased in Week
Street Loans of Out-of-town Correspondents Decreased in Week.

07,455,000.
28,827,000.
8,912,000.
37,259,000.
15,393,000.

It is of interest to know that the balances of the out-of-town correspondents of the Daily Reporting. Banks was on June 25 at the lowest point of the year,
and the Street Loans of the out-of-town correspondents were only $1,285,000. above
the low point for the year.




C.3.1 .00M-I-20

.RVE BANK
I FEDERAL R
OF NEW YORK

Mr. Case
FROM

street Loans, Borrowings and

SUBJECT

P. G. Bel'all,
000 omitted
Street Loans
22.1015Elie

ELPIEapils

Borrowings

City Banks

-------.77,:14

1918 High Point

NR

NR

Jan. 15

NR

$854,302

Apr. 15

July 30

Feb. 15

463
Nov.

Jan. 15

Nov. 1
749,373.

1

868,670.

847,7 76.

Feb. 19

May

64

-...-A-L--------.-3-2----224-21-6*6.
914
661
....1.11Lnavi.2ULI22
.123.2.

A ril

2
1

1

4

.

. :

4

70;

.1 .

.1°
.52 120.

02

1

0.

1

.....ViV

1 -- - ---681-1-04-----646-8 3.

June

-

June

26

High

Point

LOW
...

0'

.

Point

4824

40 Q 4.

_AL/4 .4*.

..

2

1-

634 K66.
1

0
[,082.(----___L11._2___
-- 685 022.
536 103.
436-14 .

---11-szrz=gwassoctzsar-w4
-

440,035.

643,093.

Jan.

J an.

:

750,698.
June 17

5,441,286.
Feb. 21

44

820 436.
70 :
1.
733

-12.

Mch.

Jan. 5

Jan.

29

584,090,

4,966,551.

Dec.

$234,924.

$639,912.

NR

_ma Low Point ______I_B_LB_
1919 High Point

Out.° f.Town

211.221mi Go amondents

F. P. Bank

------

Street Loans

# Balance
Out- f-town

C4Lx_Banks

from

Februe.
March

June 29, 1920.

DATE

OFFICE CORRESPONDENCE

22

864,298.

2 15 -

June 26
64 0.1

may 27

505,566.

---------------------___
Fe

683,186.
June 24
50.1.,28

Net Change

for Year
Jan. 2-June 26

456 433.

77,667.

274, 74.

177,343.

129,000.

Net Change
for Month
May 2 6.June_26

37, 816.

37, 954.

47 68 a

23 761.

73. 114.

37,455.

28 827.

Na
r-

Change

for week
Jone19..June 26

Increase June 26
from Low Point

Decrease June 26
f crwt Hi aL Pertnt.

4 081,

81 811.

4744 715,,

166 608.

$1.221,__JL.2.9.
4

880.

0

286 52

221 20

-111.222L-1.28 .
1 7 7 620.

# Included in Net Deposits City Banks.

From January 2 to June 26 inclusive, the net deposits of the City Banks declined $456,433.
This decline was met, in whole or in part, as followe:




Decrease in Street Loans

Bo rrowin gs from Fed. Res. Bank e

Decrease in Other Assets

$274,721.
77, 667.

104,045.
14456,4n.

FEDERAL F
:RVE BANK
OF NEW YORK

OFFICE CORRESPONDENCE

DATE

Mr. Case

June 29, 1920

Loan,, DepnAits

SUBJECT

and Street Loans of

G. Bellah

Weekly Reporting Member Banks.
-2.
The following table shows the amount of all loans and also the amount of loans on stocks
and bonds of the Weekly Reporting Member Banks of the country. The figures for the seventythree weekly Reporting Member Banks of New York City are contrasted with those of the rest of
the banks of the country and a total is shown.
(The seventy.three Weekly Reporting Member
Banks are not the same as the Daily Reporting Banks, although fifty-one of the
are
among the seventy.three banks.) The high and low points are indicated in each case and the
net change for the year, the month and the week.
In addition, the increase from the low
R.

FROM

latter

point and the decrease from the high point are show.
WEEKLY REPORTING MEMBER BANKS
000 Omitted ALL LOANS

Date

NewYorkCit,

Bal. ofCountry

No. Amount
Nov.15

191:HighPoint
Feb.1 tee* 1
191:LovPoint

0t.10

Nov. 7

8 0 422 726

71

1919LowPoint

1920
2

June4
MU

o8

73.

71

7

ot
No.

Amount

N R

N R

N R

N R

1

Dee.2
---57-8--.2
9 7 248 797 3 300 331
Aug. 29
Aug.15

1

455 6171 726

1

Dec. 5

757 13,636,545 71 1,256,169 702 i,63,64 774 2,912,458

2 460 1 1 418 107 27 1 '74 986 7.8
78 1
72
2 040
,07 7 10 9
.
liaitffliEfflialla 1 1 0
4
22 14 34 10 71 2.,4 Empjummaj 1 17 50 JIM

5
2

*

Jen.3

Feb. 21

Oct.31

I.

15 626 75371

65 5,050,042 698

April

a. Amount

N R

670 11,494,5'6

1

1919HighPoint

March

Ba/ a fCount

Fe'.

Me1-Dec*31

Januar
Februar

INswYorkCitv

No. Amount
o. Amount
Nov.]
7 0 14 040 7771
N R

.

64

26

1

Total

LOANS ON STOCKS AND BONDS

a

_

3.7 2211O 10 4

pm 1

.

7 .4 ijjEmiloW

'29

June 18

5,475,987 741 10,413,762 814 15,8899749 73 1,175,256 741 1,937,885

High

Point

January 2
5,595,089

Low

March

5

5,242 /45

Jer.2 - June 18

Change for Month

liay21 - June 18

01

110

' 94

111 0-

814

3,113,141

January

2

10,197,371

February 13
May 14
15,714,921
1,154,371

February
2,020,726
June 11
1,928,029

January 2

1,418,107

97 289

March 12

10,614,866

119,102

1'2

07

302
:10 : .TEHEIROMI/41
Eillitfialtliir2 MUM 11 9.9 3L L3 1 9 ;
2
1

41

MOW] io 441 2

I 74

Point
Change for Year

3.3 ota_.

34 EiVigaW41341413011

3

I

II

3

,

242,831

37,103

279,952

April 161

January 2

55,004

7 -32

13 447

9 843

8

34o

56,326

014

7 948

98(

17 804

23

8-

216 3 1

1741828

20 88

-- 985E

17,804

119,102
Included in ALL LOANS

201,104

140,545

242,851

82,841

279,952

Change for Week

creas une
from Low Point
Decrease June 1

from Bi h Point

* The high and low points for LOANS ON STOCKS AND BONDS during 1919 cover
August 15 to Decomber 31.




i

16,030,294
3,393,093
June 11
3,095,337

36

Junell. June 18

p

4a:1--

the period from

FEDERAL R
OF NEW YORK

.:RVE BANK

OFFICE CORRESPONDENCE

DATE

Mr. Case
R.

FROM

SUBJECT

G. Bellah.

June 29, 1920.

Net Deposits of Money Reporting

Member Banks.

-3NET DEPOSITS OF 'EFXLY R.EPORI'ING MaLBER BANKS
000 Clnitted.

Date

New York Cit
No.

No.

Nov. 8

1918 High Point

Amount

No.

'

Amount
Nov. 1

Nov. 1

680

7, 345, 422.

70

12,104, 471.

1

10 935, 2p.

Eejlt_i_r_nps..3.1_
High Point

1919 Low Point

70

4 7 6 21.

8

4.416.703.

618

6,368, 882.

70

5, 414, 799

725

8,926,328.

65

Feb. 1 - Dec.31
1918 Low Point

122.2

Amount

Total

Bal. of Countr

Feb. 7
4, 607, 465.

692

Jan. 3
7,307069.

770

11 985 328.

July 19

Feb. 3

Mch. 15

Sept. 19

Dec. 19

De c. 19

796

14

136 367.

Feb.

1920

7

January

2

71

401 166.

727

9 17]. 089.

798

14 572 255.

Februar

6

71

5,064699.

733

9 113, 216.

804

14,1 77,915.

March

5

3

4,918 828.

734

224 23.

807

14 143

ern

2

72

5 1 0 077.

73

811

14

306 07

7

72

044 527.

737

9 127 019.

80

14

171 546.

74

04 31

73

9 161 265.

813

14 255, 580.

73

5,193,162,

741

9)271,752.

814

14,

May
June

June

18

--Trui.--2-

High Point

5,401,1 66.

Low Point

5

9* 8.

Mch. 12

082.

464, 714.

Jan. 16
14,600,225,
Feb. 20

4,877,867.

9,329,972.
Feb. 20
9,108,113.

13 986,000.

208,004.

100,663.

107,341.

Feb. 20

Net Change for
Year

Jan. 2 - June 18
Net Change for
Month

May 21 - June 18
Net Change for
Week
June 11- June

18

---11,24.4.5.7s_
101 74-6.

Increase June 1:
from Low Point
Decrease

jr.,.

-oint

46211_

......3m1.25.1

163 619.

208, 004.

58,220.

June 18

. ..,



]3,3f,7._

235. 824,,

__ALLi 311.____

4781211._
135,311.

- 3.1.90M I-2,

,-2VE BANK
ORK

- OFFICE CORRESPONDENCE

DATE

Case

Tr

SUBJECT

June 29, 1920.

Reserve Percentages of the Twelve

_Federal_Raserva_Distrinta._

-4-

COMPARISON OF THE RESERVE PERCENTAGES OF THE
TWELVE FEDERAL RESERVE DISTRICTS

New
Rich, Atlan- Chi- St. Minna-Kansas
San
DosTo. Iork rialia.uleve, mond
ta
cago Louis =oils ulty vallas rran

A

1918 High Point Aug26 Aug10
Aug. 9-Dec. 31 67.9 64.0
1918 Low Point Oct30 Dec30
.;lug. 9-Dec. 31 39.0
40.3
Aug14 Sep18
1919 High Poin 56.1 56.3
Nov12 Dec30
4.
. P.T.t
7
3: 7

10

January 2

Jan.-WI.
High Point
Jan.-117bh.

C

B

D

E

F

G

Aug23 Aug23 Oct24 Aug23 Dec 2
69.2 69.9 60.4 56.5
NoV21 Dec17 Aug10 Dec3 Nov 6
46.0 44,6 39.6 49.3
39.3
Jan20 Nhy20 Nov 8 Decl Mch15
66.5. 52,7 46.8
53.5 74.3
June3 Nov25 June Sepl: Dec29
8
49.3
43 0 38 3

1JKL

H

Nov13 Aug23 Sep12 Nov22
75.9 68.7 54.4 62.6
67.6
Aug23 Nov14 Dec16 Oct25
39,2 42.8 38.2 46.3
Jan27 Aug23 Nov18 Feb 4
68.6
72.4 62.3
Mch22 Dec26 Dec17 Jun18 No 1
4L
59.4 39.0
39 3
' 0.5

Aug23
59.1
Nov20

46.8 40.6 44.2 48.6 52.6
Jan13 Jan 7 Mcb2O'Ftb 5 Jan 7 Mch25
54.7 51.3 59.5
53.1 59.3 52.9

43.7
Jan 8
45.8

:',

43,7 38.7 41.0 48.1 42.3 510
Meal 4 Mcb31 Mcb12 Mch20 Feb
Janl
54.3 41.8 41.8 52.7 47.0 55.4

Aug23
70.5
Ceti°
43.0
Feb 8

Low Point
June
High Point
June
Low Point
June

56.8

.t,pril

Low Point

May
High Point

May

25

39.2

45.0

51.1

41.7

40.6

49.1
JRn16
54.2 59.

Dea0
44.5

46,2

ifeb 7 Jam13 Jan31 lich15 lich16 Lich
Idch31 libb15 Jan 2 Jan 3
39,7 34.7 34.5 44.1 38.9 40.7 38.6 38.5 40.6 41.2
26
22
19
20
13
9
12
3
5
54.6 44.5 44.5 51.2 44.2 49.4 41.1 43.8 48,3 44.5
1
5
14
9
1
30
2
1
24
15
44.2 38.8 *39.5, 45.2 39.4
1.4
(3.7
68.6 39.3 38.0
1
20
25
18
24
27
26
13
10
55.1 42.4 42.3 52.7 44.6 41.4 42.1 41.6 42.0 45.2
14
3
4
26
28
25
20
7
8
19'
47.8 394 ...W.:- 49.3 40.2 39.0 '9_.1
39.2 39.0 38.9
17
25
25
2415
17
16
10
2
7
56.8 43.3
45.0
55.2 45.2 43.0 41.8 43.2 44.6
15
7
11
15
7
10
22
15
19
15
46,7 38.3 39.3
39.4 39.5 49.1 39.5 40.0 38.3
39.0

Low Point
April
High Point

TOt

40.0

41.1

41.1

Iich15 Feb.3
39.0
522
1

LIcha5

40.9

46.4
23
38.8
5

41.9
11
39.2
16

44.3
3

3

41.1
10
43,6

49.4
29

5

3890
12
42.6

42.3
11
28
42.7

1

15

40.6

42.0
18
53.7 42.9
44.5
3

38.1

41.9
41.4

5

41.8

52.0

43.6
....

Change for Year
Jan 2-June 25 13 .1
Change for Montt
May 25-June 25
6.3
Change for Week
June 18-June 25 4,2
Increase June 2'
from Low Point 17.1
Decrease June 2
from High Point 0.0

0.5

4.0

11.2

6.2

4.9

3.0
0.5

3.1

7.2

0.1 0.

2.7

0,8

0.8

1.0 1.9
1.6

0.8

0.4

0.2

1.3

10.5

3.3_ 34

3.5

1.9

0.

0.1

02

3.

10

2.1

1.3

4.5

10.5

7.0

2.8

1.6

1.4 3.4

2.1

3.1

3.3

14.0

5.3

0.0

4.1

5.3 14.L

19,5 12.8

10.2

12.0

 The Net Exports of Gold from Federal
http://fraser.stlouisfed.org/ inclusive,
Jane 26, 1920
were 4101,515,500.
Federal Reserve Bank of St. Louis

1.7

1.1
0.9

2.5

2,2 17.9

Reserve Bank of New York from January 2,
1920 to

SECURITIES AND CUSTODY ACCOUNTS

ACCOUNTS WITH OTHER FEDERAL RESERVE BANKS
BEFORE SETTLEMENT

Securities Department
Custodies held
Securities held in vault Safekeeping
awaiting delivery

DUE FROM

$

SIM

Boston

Certificate of Indebtedness Department

Ottegicti

t

.

_

379-386,43

346,400 747.97
11,500-000,00

000-

13-700;138037

3_131,709.84
92,282,19

7Z-.2.41.-05(^ 59

227,639.08

1628,306.03
611:043,. 37

Government Deposit Department
Securities held in vault as collateral to Government Funds, W. S. S. etc
" by outside custodians as collateral to Government Funds

W. S. S. etc.
awaiting delivery

jap4E

e.a4
1,0902'7"

ooliQ to

t frr,"

lq 619;906028

e 000;00
320 000,00

1

I

Loan Department
Securities held as collateral for Rediscounts and Advances
it
awaiting delivery

412c732.82
237,020.20

244' 3240528,08

303,592.64131:837083
202e 153

)
2977542,433 36
18,062.98

.

4,515,473024

aQg

2749515.42
21;122038

601 395,721051

93,, 688064

Total

1700545.83
252,416055

602,249,971051

Federal Reserve Agent's Department
44,4,
Unissued Federal Reserve Notes held by F. R. Agent
Commercial Paper held by F. R. Agt. for F. R. Agts. of other res. bks

awcounts

"

1za:600. 000._ 00

14 492:223.43



$

Temporary Receipts issued for Subscriptions
to U. S. Securities, etc.

Buffalo Branch Account (Cash Balance)
Cumulative dividend liability to
Liberty Loan Funds with Depositary Banks
Certificates of Indebtedness Funds with Depositary Banks
 Deposit Funds with Depositary Banks
Special

Atlanta
New Orleans Br.

2;315.720.62
933.659,67

2: 017,297 56

1 435:875.68

Kansas City
Denver Br.
Omaha Br.
Oklahoma City Br.

10205:3690e3

NET DEPOSITS

TODAY

7,939_238.73
ONE WEEK AGO

125 52700000

96;57546

509,190017
189,150019

;
22451060

22,760.16

804266086

Dallas

El Paso Br.

25,900023
102r 800,46

Houston Br.

0:549406010
149:688.69
14,015.04.

San Francisco
Seattle Br.
Spokane Br.
Portland Br.
Salt Lake City Br.
Los Angeles Br.

455,043,, 27

126439 759,4/4

TOTALS

IN THOUSANDS (000 OMITTED)

YESTERDAY

$

2.805375:18

COMPARISON OF IMPORTANT FIGURES

-'1,742,812079
33_000,00

14 010,709,38

St. Louis
Little Rock Br.
Louisville Br.
Memphis Br.

$84,689,817.3-,

uk.

30708 9954073

Grand Total Liability for Custodies and Securities Held

4-726:518,45
5;102,323068

Minneapolis

660.,,225,28

1-3619514,615,94

Richmond
Baltimore Br.

Chicago
Detroit Br.

2;028,622.45

9730266,786,00
250;473,944078
64,829,830057

Total

Total

10-651,438060

2418 7C23079

-.4g./01302.4=

4

usu,s4e4 41,4 far Fort'

Cleveland

6, 000 ,00

10,977 000,00

" War Finance Corp. Bonds
-

Securities held in vault custody
awaiting delivery
" for exchange of denomination
Canceled securities held awaiting shipment to Washington

Total

15 970,151,27

370.47
028-,10553

int ettatedlm hilad

-.4011.11. USG

Philadelphia

3000'n5C0c00
34.270,50040

Government Bond Department

A

15.c 617:851.42

518,191,026.S)

.2o90o0t00oo00

Securities held in vault custody
" awaiting delivery and exchange
Canceled securities held awaiting shipment to Washington
Temporary Receipts for Subscriptions to U. S. Securities

.41.6

19.44.

325790463415

$

Total

DUE TO

13.11

Total

Ism

30, 192U.

T

04 ne .v.

1

'. - 12'

AVERAGE
THIS
MONTH TO DATE
AVERAGE

LAST MONTH

-5

F. R. NOTES IN
F. R. BANK NOTES IN
ACTUAL CIRCULATION ACTUALCIRCULATION

/

q658tr

78,37

23.o
?

'503

TOTAL EARNING
ASSETS

r' & , 95,:

13:1

"*a

/ 04.

'V

ry

0i,

TOTAL RESERVES

- -,- ,,V,

% OF TOTAL RES.
ro COMBINED NET
DEP. A NOTE LIAO.

BK 7.1-12M-3-20

STATEMENT OF CONDITION

FEDERAL RESERVE BANK
OF NEW YORK

ACCOUNTING DEPT.
BOOKKEEPING DIV.

CLOSE OF BUSINESS
RESOURCES

LIABILITIES

AMOUNT

ITEM

TOTAL

TOTAL

AMOUNT

ITEM
-

RESERVES

Gold settlement fund
Gold bullion and coin
Gold certificates

FEDERAL RESERVE NOTES
Outstanding
Less held by bank
" f or'd for redem.

$

55,9450000.00
282,655,450.89
45,940,081.54
.6,801,575.14

Gold redemption fund F. R. notes
Gold with Federal Reserve Agent

507,956,970.90
41,584,720.00
46,577,845.40
201,000.00

Total Gold Reserves

Treasurer U. S.General a/c

73,775053

3,115,470,00

5 % fund against F. R. bank notes

866,556,975.

nc

38,579,4000'00

DEPOSITS

625,099,554.50

Other cash on hand

no

In Actual Circulation

1,163,583.60

Total Cash Reserves
Total Reserves

A ?sr

FEDERAL RESERVE B'K NOTES
Outstanding
Less held by bank
7,890 100
" for'd for redem.

40,9510660.51

Legal-tender notes
Silver coin and certificates
Mutilated currency for'd for redemption

1

In Actual Circulation

1,461,560.00

Bank of England gold a/cOurs

'

Member banksReserve balances
Non-member banksClearing a/c
Foreign governments
Foreign banks
Officers' checks, etc.

974,008.83,
754,0910 144. 1,3

7.0010215.55
36, 858 688.98

5,424,472,65
4,353,318. 76

OverdraftsU. S. Government

Total
DEFERRED ITEMS

3,187,248083
DEFERRED ITEMS

5,520,500.00

F. R. notes of other F. R. banks
Deferred debits other F. R. banks
Due from other F. R. banksColl. funds

3, 661, 038.39
.7,160,744.'33
5, 261, 337. 09
5,756, 654,87

Remittance accounts
Exchanges for C. H. and other cash items
Deferred items Treas. U. S.

Suspense a/cTreas. U. S.

Total Deferred
Gross Deposits

468,501.07
1,014,12.4.63

A.Affalo Br. Suspenae A/00

Due to other F. R. banks
Deferred creditsOther F. R. banks
Deferred creditsMember banks

16,590,684.68
93,583, 969, 37
242.45
74

98 657, 74E. 16

MISCELLANEOUS LIABILITIES

Gold in custody withheld for expense a/c

594,809.96

Participation of F. R. banks in Bank of Eng. gold and

709598,559053

Reserve against undetermined liabilities

200,000.00

Reserve for tax on F. R. bank notes
Reserve for depreciation, etc.

430,116,35

exchange accounts

1,422,701.18
48,825,990.12
1,115,907.94

Total Deferred

Allotments to other F.' R. banks

Argentine Govt a/c

Due from foreign banks

of .

Reserve for self insurance

Participation ctf. L/L bonds

tber V 2. Virgo
:1 A/00

.

92, 740. 4 2

255,706. 62
16, 280. 00

Suspense a/cGeneral

20 552, 000. 00

Difference a/c

iitpatorve tor irr anehise

178.45
140 962,518, 24

4,094,599026

Total Deductions

3.S)D 909.57

Total Miscellaneous

EARNING ASSETS

Member bks. coll. notesU.S. securities
Member bks coll. notesCtfs. of Indeb.

Bills disc.MembersU. S. securities
Member bks. coll. notesComl. paper
Bills discountedMembersUnsecured
Acceptances purchased
Acceptances purchased with agreement

3ke.

CAPITAL
Paid in by members
Paid in by applicants for membership
Surplus

155,422,807.51
171,595,000. 00
1$7,928,418.45

Pftol

Total Capital and Surplus
EARNINGS

48,874,67703

Discount earned on bills discounted
acceptances
Interest earned on municipal warrants

974,272,338.69

Total Bills
Investment a/c self insurance reserve
U. S. bonds owned

00. 0

1,256,800. 00

U. S. sec. to secure F. R. bank notes

tt

59,276,000,00

U. S. certificates of indebtedness
U. S. C. of I. purch. with agreement

42# 505, 0000 00
15,501,000e 00

Total Other Investments

49,344,800.00
1,962. 934. 66

Super-surplus

240,527,920.64
179,145,414.10
12,941,595.51

240 672v 300. 00

" U. S. securities

non current funds
Discount profit on bills sold
Commissions earned
Sundry profits
Penalties on deficient reserves

105,684,900.00

Municipal warrants

Par value of earning assets
DEDUCT
Unearned discount

Dep. res. on U.S. sec
Total

!,nr' no0. (In

U. S. Sec.

Gross Earnings

2,326,76140
1

Liquid Value of Earning Assets
MISCELLANEOUS ASSETS
Bank of England Sterling gold a/c held for
other F. R. banks

Expenses paid in advance
Expenses adv'd to Gov. Loan Organiz'n
Suspense Account disbursements
U. S. 1 st L/L bonds held a/c
Participation Ctfs.

Internal revenue stamps
Difference a/c
Real estate
New building

bills sold

?,,958 222.78

Less Mt. accrued on

Suspense a/cGeneral

Less Discount loss on notes rediscounted

1082,859,258.49

70,598,559.53
90, 214.65
291,845.25
9,326.78
374,089.72
36, 250. 00

398.20
5,591,459451
171,096.58

0800552,47712

Less Current exp.
Deduct Inc. 1
Add Exp. Ireal es.

Net Earnings
Add Ace. div: rec'd
Less "
" paid
Amt available for dividends & surplus

Total Liabilities
RESERVES
Gold against net deposits
Gold and lawful money against net clepos. %
Gold against F. R. notes in actual circulation
Ratio of total reserves to combined net deposit and
note liability

Actual

42.4

Zoc4

360

4000

59.2

Contingent liability as indorser on bills rediscounted

with other F. R. banks.

Total

Total Resources




isatt or

Contingent liability on bills sold to foreign correspondents

Arbitrary

6 088,751,52

42

-

- -..,46 ,

/0 e GreZ erezd
Zer---e

114' e
,9 issu

of k;ertificate3 0:: InLeotecine 0 - o outstndir

of June 14, 1920.
June 15, 1920

728,130,000.

Tax
Loon
Loon
Taz

July 1, 1920

July 15, 1920
jept.15, 1920
Oct. 15, 1920
llov. 15, 1920
Dec. 15, 1920
Lax. 15, 1921

200 ,669 ,500.
63,903 ,000.

657,469,000.
170,633,600.
102,863,000.
703,026,000.

LAX121

Lovx
irt,Z

,....taLi:L_7(j......at.)
50

Total as of June 14, 1920

,2,848,064,500.

:.1he three isoues maturing in June awl July

which are fully provided for are:

-.4q4

June 15, 1920
July 1, 1920
July 15, 1920

328 430,000.
200,669,500.
13.9 "?0,.WXV.
.....14aL6,47.914k19.8.

,Z.,)12.702.390.

TOTa

Deducting from above total leaves a balance of

./1,835,362,000.

To which we must add two issues June 15 (mount cold) . .

2ota1 O. of I. es outstaxxling as of Jima 16, 192)




.2,235,362,000.

to a net reduction of
.,..,2,702,600 has token place.
ITUIATIODI OF 0"0"26,151DING OLIVIPICATIE
,IIDIDG JULY KAIZURITV,S ALIOH,M PROVIDED

AMMT

Sept. lb, 1920

Tax-

15, 1920
15, 1921

Tax

Dec.
Iota-.

a=

tkert---"451494a.)
June 15, 1921)

.A57,469,000.
703,026,000.
201,370,500.
200,000,000.

Total tmc certificates (self 11 uidatinr)
Oct.

Ilov.

an.

15, 1920
15, 1920
3, 1921)

Loan
Loon

soli

,aavii--4171-49.14)

.

41,7G1,865,500.

170,633,500.
102,863,000.
200,000,000.

utal loan cortificates which 37AT

require tolporary refine=

0

0

,,235,362,000.




June 53, 1920.
STATENENT OF WOVE AND EXPENSEr FOR SIX WRITES

GRJ86 EAR.IIGS FWJti OeFRATIeN mut JAHUheY 1, 1920 TO JUNE e

-DING JUNE 30

1920, INCLUSIVE

..

Discount earned on bills discounted.. meobers
Discount eerned on scceptences
'interest earned on U.S. Securitiee
Discount profit on bills sold
Interest on noncurrent funds
Penalties on deficient reserves
Profit on sele of French coin (Napoleons) .
Sundry profits

Earnings from operation for

511,234,955.78
5,097,884.19
981,798.21
571.15
4,357.68
78,173.84
5,308.15
3.693.81
27,378,751.00
65t348.75

Lees Discount loss on bills sold and notes rediscounted

Gross

1920.

427,193,404.47

six ponths

Deductions

3,E19711-70

Current Expense from January 1, 1920, to June 30, 1920
w

P4,045092.48

ontha

Net Eareines from aeration for six

Additions to Net Earnings
Net Income from Reel Eet0..e Kfil per eehedule "i09 eWched

143,373.82

Assessment of F.R.Board for expensee for the first nix eon hs of 1920.
This amount yea charged to Profit A Lose Acct. Dec.31,1919, by instructions of the F.F.Boerd but In order that the &mount might be included in the ex2enses of the °emelt period it wee necerApary to credit Profit i Lose Acct. ELF4 an offset to the monthly charges to "Current
Expeuve" Acct.

180,891.70

Sundry edjuateent items fie per schedule "B" attached

1.82506

Total Additions to Net ZerdiaLl

214.eaval

24,188,575.18

De4uotioee from Net Earnings

Suatiry, .',:justeent Items ae per schedule "C* atteched

f! 472.17

Net Income Available for Dividends nd Additions to Suroua Accounts

24,5S,)'94.49

Deduct Dividend reauireeents Januery le 1.920 to Juno 30. 1920
Dividend rweeiremente 124,572,500. et 8% per

a-nnum

Jobe* eccruale said in

Add accruals paid to liquidating beaks
Net Prof Lt

1740,169.00

45060.47
698,284.53
17.450.10

for eix months ending Juee 53..1910

715.736.81

"2,542 ms.as

10% of Net Profits for six months ending June 30, 1910 retained IX P-ofit A Loss
Account by instruction of Federal Reserve Board
Tranefer to "Surplue" account an amount sufficient to bring Surplus up to 100%
of subscribed cepital or 249,344,810
Belence remaining

2,354,155.54
21,186,120.27

4.583000.00
16,525,020.27

"remoter to "SuperSurplus" account la%

1.581.502.03

Transfer to "Reserve for Government Prenohise Tax* account 90%

14,982,518.24

After closing the bookc June 33, 1920, Capital and Surplus hocounto
stend as follows:

--spite'. (Paid in)
Surplus! (1001 of Subscribed Ceeitol)
SupereSurplue

Profit P

Total

Dose

114,872,300.00

49,344000.00
1,962,954.58
P.5$4,23!.59
178,334,070.25

FEDERAL RESERVE BANK
OF NEW YORK

July 2, 1920.

Dear Governor Strong:

Your very interesting communication, written from Tokyo under
date of May 29, has been received, and I have enjoyed very much reading
your account of conditions in Japan as you have found them during your
I have passed the letter around to a few choice souls,
sojourn there.
Including the members of our executive committee and Messrs. Jay, Sailer,
Kenzel, and J. F. Curtis, all of whom say they find it both interesting
You have had, I am sure, some delightful experiences
and enlightening.
in visiting the Far East at a time when you have not been obliged to
hurry on from place to place but can stay on or move on at your leisure,
and I hope you will continue to enjoy the balance of your trip.
I am anticipating with keen interest an account of your views
It seems to me that she has vast,
respecting conditions in China.
potential possibilities, if she could be gradually awakened and guided
The general feeling here is in line with the
in the right direction.
one you have expressed; namely, that Mr. Lamont has done a splendid
piece of work in standing by his guns and carrying out American ideas
as regards the Chinese Consortium.
A few days ago I had luncheon with
Mr. Bromley, President of the Shanghai Baptist College, who gave me a
short but interesting account of conditions in China, and her relations
with Japan, based upon his persona/ observations during ten years of
residence there.
It is hard to believe that you have been gone for quite half
a year; and I am sure you will agree that Mr. Jay and I have held to
the course suggested in not bothering you unnecessarily with bank details.
We all hope sincerely that you have greatly benefited by your rest and
traveling experiences and that you will return, the first of the year,
in the very best of condition.
I am planning to leave the office,
to-night, to spend a short time with my family at Rangeley Lake, Maine.
As Mr. Jay will be out-of-town until the first of next week,
I am not sure just what matters he has covered in his recent letters to
you, and I shall, therefore, briefly touch a few of the high spots.
He
has probably mentioned our new director, Mr. Richard H. Williams, of
Williams & Peters Coal Company, who is a very intelligent, cultured
gentleman and a real addition to our board of directors.
He succeeds
Mr. William Boyce Thompson, who resigned in order to become Chairman of
the Finance Committee of the Republican National Committee.
counsel, Mr. Edward H. Hart, formerly of the Treasury Department, is
working out splendidly, and we are all very much pleased with him.
Mr.
George L. Harrison, one of our two new deputy governors, arrived here
yesterday, and I am sure that, with his wide knowledge of the Federal
Reserve System, he will readily slip into harness and relieve other officers in a great degree.
Mr. Kenzel, the other appointee, needs no
word of mine as to his capability.
He was out on the Pacific Coast,
attending the Foreign Trade Convention, when appointed, and he was
naturally much pleased to receive our wire advising him of our selection.



FEDERAL RESERVE BANK OF NEW YORK___.2-

Governor Strong.

7/2/20.

Mr. Jay has probably written you of the other promotions in our official
staff, which have placed Mr. Hendricks in the position of Controller at
Large, Mr. Leslie R. Rounds as Controller of Accounts, and Mr. J. Wilson
Jones, Controller of Fiscal Agency functions; these promotions, of course,
please the organization, and assumption of these functions by the men
named will enable Mr. Sailer to devote more of his time to other matters.
Mr. James M. Rice, formerly assistant to Mr. J. Wilson Jones, has been appointed Manager of the Government Bond Department.
On Tuesday of this week the bank distributed to its employes the
regular quarterly bonus, based upon the figures for the last bonus, which,
as you will recall, were:
20% on the first $1,500
15% on the next $ 500
10% on the next $ 500
No additional percentage
and $5,000

or
or
or
on

part thereof
part thereof
part thereof
amounts between $2,501

Both at the present time and during the January distribution, we have received many expressions of thanks, verbal and written, from various department heads and other employes, for our action in this regard, and a general
feeling of satisfaction appears to prevail, some of which may be a "hangover"
The
from the liberal action taken by the bank at the close of last year.
cost of living has not decreased to any appreciable extent, the reduction
in price of some commodities being offset by the rise in others, while the
housing and high rent problems are most serious.
FOREIGN MATTERS:

With regard to the special arrangement made with the three banks
for shipment of silver dollars to China, about which I gave you a memo to
take on your trip, the sensational drop in the price of silver has of
course made unnecessary,shipments in addition to the $13,000,000 exported
in December, January, and February.
These silv
melted in China and final returns made to us by the three banks on the
They show a profit of $190,000 on the
exchange operations involved.
three shipments after deducting all expenses, and we have been instructed
by the Federal Reserve Boaid to pro rate this profit among the Federal
reserve banks.
I presume you are aware that the Director of the Mint is
now buying American-born silver at $1.00 per ounce to replace the
The initial regulations
200,000,000 ounces sold under the Pittman Act.
issued by the Treasury, governing the purchase of this silver, were so
rigorous as to practically nullify the whole arrangement, but amendments
have since been made as a result of conferences between miners, smelters
and refiners, and Treasury representatives, so that actual purchases by
the Mint are now being made.
I understand that about five or six million
ounces have been bought up to the present time.
This
establishing two markets for silver; one, the domestic-mined and reduced
silver, which is eligible for purchase under the Pittman Act and is quoted
regularly at 99 1/2 cents, and the other, foreign silver, which is now
quoted at about 90 cents.
I see no reason why we should
for the Bank of Japan, if they request it, and I do not believe it would
interfere in any way with the Treasury's program.
In fact, I understand
that the Treasury is not anxious to make purchases under the Pittman Act
at $1.00 per ounce.



FEDERAL RESERVE BANK OF NEW

Governor Strong.

7/2/1920

We have recently gone through the formality of raising the limit
from $10,000,000 up to $40,000,000 on the amount in gold which we agree
to earmark for de Javasche Bank.
They reached the previous limit of
$10,000,000 in May and, anticipating considerable expansion in their
currency during the coming export season, inquired whether we would
grant them further facilities for earmarking, in view of the removal of
restrictions on gold exports.
We were of course glad to accommodate
them, but,rather than remove the roof entirely, we thought it advisable
to place some limit on the amount which we were willing to earmark.
We
informed them that this was done merely in the interest of definiteness
and that we saw no reason why the amount could not be increased if they
later found it recessary.
We received a letter from de Javasche Bank
the other day in answer to our notification of your visit, stating
that it will he a great pleasure to them to see you.
They further
stated that Dr. Vissering had informed them of your trip to the East
and that they had accordingly communicated with you, in care of the
Embassy in Japan.
Since your departure the Argentine Government has been making
rather heavy withdrawals from their deposit with us.
The rate of exchange
turned against them early in May after heavy shipments of gold had been
made from this country in January, February, March and April, and when
our dollar went to a premium the withdrawals commenced.
Since the middle
of May, their balance has decreased from $72,000,000.00
to $34,000,000.00.
I understand that the dollars are released by the Argentine Government,
however, only against payment in Buenos Aires of the equivalent in gold at
a rate of about 104.25.

The Treasury has advised us that beginning this week the Indian
Government has removed all restrictions on the private importation of gold.
I understand that this is in accordance with the recommendation of the
Committee on Indian Exchange and Currency, but that little gold is expected
to go to India as a result of this action, owing to the fact that the
premium on gold in the Indian bazaars has been reduced to about 4%.
Furthermore, in conjunction with the fall in silver, rupees have been weak,
being quoted to-day at about 36 cents.
The Bank of Japan agreement has been working smoothly.
They still
keep $4,000,000 in current account and $16,000,000 in bills.
In line with
the suggestion made by you at one of the recent governors, conferences, we
have offered the other reserve banks a participation in the account, and
they have all accepted.
The current deposit has been split up among them
on a pro rata basis and each reserve bank has assumed a proportionate share
of the contingent liability involved in guaranteeing payment of the bills.
This is, I think, a good principle to work by, as it spreads any shocks which
may occur over the entire system.
After discussion with Mr. Jay, I will
take up with the Board your suggestion with regard to increasing the
$20,000,000 maximum provided for in the agreement.
We will discuss with
Mr. Nagaike, the new representative of the Bank of Japan, in New York, the
matter of a possible exchange of confidential data.

There have been no changes in the German gold account except an
occasional sale of gold bars in London to the Bank of Montreal for account
of the India office.
These are becoming very infrequent, the last two
being for $1,500,000 on February 11 and $1,250,000 on lelay 24. We now have
$111,500,000 earmarked with the Bank of England.



FEDERAL RESERVE BANK OF NEW YORK

4*

Governor Strong.

7/2/20.

The preparations which it is generally believed have been made by
the British Treasury to meet their share of the Anglo-French bonds maturing
next October have been very interesting to watch and the subject of much
As you have probably noticed in the press, they have
favorable comment.
shipped to this country during the past three months about $75,000,000
in gold, and in addition there have been persistent rumors of further large
It was reported that approximately
shipments to meet this maturity.
$50,000,000 of this gold was used by the British to pay off the Argentine
Our banks were unloan of that amount which came due here on Way 15.
willing to renew this Argentine loan, as the balance of trade was against
It was generally
us and Argentina was making heavy withdrawals of gold.
understood that Great Britain came forward and furnished the dollars to
Great Britain
pay off the loan, but this has never been confirmed.
has probably made provision for her share of the Anglo-French loan by
In doing so she has undoubtedly sold securities in this
this time.
market and has already retired a substantial portion of the maturing bonds.
It is not so clear what, if any, steps France has taken to meet her share
of the obligation, or whether she will ship some gold or endeavor to
refund some part of the bonds.
CREDIT SITUATION:

The 7% discount rate which became effective June let is undoubtedly working good results, but as yet the improvement effected in our
Its general effect, however, is to
reserve situation is practically nil.
exert a steady and continuous pressure upon our banks and borrowers, and I
am sure the improvement will come, though somewhat gradually, within the
In any event, it has doubtless prevented loans increasing
next few weeks.
I should like to see an extra accumulation in our
to still higher figures.
reserves between now and Autumn to furnish a little slack to let out at that
Undoubtedly the "acid test" of the Federal Reserve System is to
time.
come this fall, and I feel certain that it will stand like a rock and meet
all calls which are likely to be made upon it.
political year and, in consequence, will have to undergo a good deal of
criticism from time to time, most of which is not justified.

Ii]nclosure

No. 1.

Unfortun

Our loans to banks and the volume of Federal reserve notes outwithin the last few months we have
standing are now at the Maximum point.
shipped nearly $50,000,000 of Federal reserve notes to Cuba and our Insular
This, together with inflated wages and inflated prices that
Possessions.
The accompanying
prevail, tends to keep our circulation at a high point.
statistical information relating to our reserve position as of June 25
will, I am sure, be of interest to you
You will observe that New York
has undergone a substantial liquidation in net deposits, in loans and in its
This reduction, however, has been more than
borrowings by "city banks."
absorbed by the rest of the country - labor troubles and inadequate transThe
portation facilities are responsible for this in large measure.
volume and value of "goods in transit" has increased amazingly this year.
In reviewing the clearing house statement for last Friday, June
25, I notice that, while the clearing house member banks carried with us
a reserve of $550,000,000, they have in addition to this nearly $100,000,000
in "Cash in Vault," which includes their gold holdings, the gold item having
been eliminated from their statement some time ago.
Of this large surplus
cash, the National City Bank has approximately $15,000,000, the Mechanics
& Metals, $11,000,000, and the Hanover National,about $8,000,000.
As the
first two banks are large borrowers here, our executive committee has authorized




FEDERAL RESERVE BANK OF NEW YORK

5

Governor Strong.

7/2/20.

me to suggest to the proper officers of these institutions the idea that,
at a time when their borrowings here are excessive, we think it inappropriate
to lend them additional roney for the purpose of locking it up in their
vaults,when they could reduce their line with us by depositing some of their
surplus gold or other cash holdings.

Enclosure
No. 2.

In this connection, I see in to-day's paper that the Bank of
England is having its own troubles, which appear to be due largely to the
semi-annua/ window-dressing carried on by the joint-stock banks.
Their
reserve, as of June 30, 1920, was but 8%, against 15% the previous _week.
This was apparently caused
(8% is said to be the lowest reserve on record).
by an increase in deposits of 55,000,000i. sterling and an increase in
I am enclosing a memorandum on this,
circulation of 5,000,000 E sterling.
showing some interesting figures.
BANKERS ACCEPTANCES:

Enclosures
Nos. 5, 4,
5 and 6.

This market is in a fairly satisfactory condition, with a steady
growth in the number of country banks throughout the district which are
accumulating them as secondary reserve.
We of course have
portfolio throughout the year.
I am anxious to see the time come when these
bills will constitute the real secondary reserve of our member banks.
In
ç
connection with the bill market, I am enclosing with this a memorandum
prepared by Mr. Kenzel and his assistant, Mr. O'Hara, together with two booklets
recently published by the American Acceptance Council.

1r-

CALL LOAN SITUATION;

The call loan situation leaves much to be desired.
My judgment is
that the "sharp call loan," based upon non-liquid - in fact, absolutely
In the
rigid assets, constitutes the missing link in our financial chain.
last week we have had high rates, ranging all the way from 8% to 15%.
NORTHERN NEW JERSEY CLEARING HOUSE ASSOCIATION:

The Northern New Jersey Clearing House Association, which embraces
practically all the institutions in Hudson County, is now in operation, using
one of our buildings at 37 Liberty Street for its clearing house.
This is,
I think, a good, constructive piece of work and greatly expedites the prompt
collection of checks across the river.
I have no doubt
Newark, Paterson, and other nearby towns will knock at its door for admittance.
BANK EARNINGS:

Enclosures
Nos. 7
and
8.

The earnings of the bank for the six months period ended June 30, 1920,
I
are approximately $24,000,000, or equal to about 100% on our capital stock.
am enclosing a copy of some *intimated figures which Mr. Rounds has prepared for
me, as of June 19, which are substantially correct.
These figures have not been
published, but I am expecting to hear a very loud wail from our member banks
when our earning figures for 1920 are given out.
I further enclose a copy of
our balance sheet, showing resources and liabilities as of June 30, after
closing our books, giving figures for total capital and surplus of more than
$78,000,000.

Governor Harding recently advanced the idea of assessing monthly
against each Federal reserve bank a tax based on the averageemount of its
notes outstanding.
This suggestion did not find favor with this bank, and Mr.




*June 30 actual figures now given.

FEDERAL RESERVE BANK OF NEW YORK

6-

Governor Strong.

7/2/20.

Jay has written to Governor Harding, opposing the idea.

CONSOLIDATIONS:

Since you have been away there have been many consolidations effected between our New York City institutions, with most of which you are
There is a well-recognized tendency towards larger banking
familiar.
units - a movement which I am glad to see, always providing, of course, we
are developing bankers sufficiently trained to handle the work properly.
CERTIFICATES OF INDEBTEDNESS:

Enclosure
No. 9.

Enclosure
No. 10

The United States Treasury Certificates of Indebtedness market has
Up to May / the Treasury
very materially improved during the past two months.
was very much averse to having the certificates traded in at any rate other
I finally succeeded in convincing Mr. Leffingwer that
than the coupon one.
his policy was wrong and was very harmful to the certificates, and he eventually
concurred in my views, with the result that open market trading has worked a
decided improvement in the certificates situation.
enclosing copy of a letter from Messrs. Salomon Bros. & Hutzler addressed to
us under date of June 28, which speaks for itself.
We have from time to time
purchased small amounts of these certificates from them under a sale and repurchase agreement.

In

The Treasury has at last come abreast with the money market by writing
in its last issue of certificates interest at the current market rates; 5 3/4%
for the January 3, 1921 maturity, and 6% for the longer, June 15, 1921 maturity.
These certificates were distributed through the usual channel - the banks, and
have been absorbed largely by private investors, such as savings banks, life
insurance companies, trust departments of financial institutions, and individuals,
so that few of them remain in the banks.
I enclose a me
of outstanding certificates as of JIlly 15, at t2,200,000,000.
LIBERTY LOAN BONDS:

With regard to the Liberty Loan bond market, as the credit pressure
has become more and more pronounced there has been a great deal of selling on
the part of industrial concerns which originally bought the bonds for patriotic
reasons and which have since felt obliged to sell in order to supply themselves
with necessary funds for current business operations.
market nom, however, is standing on its own feet, the Treasury having withdrawn
from the market some six weeks ago.
Buying is good and c
those concerns and individuals who regularly accumulate investment funds.

Section 6 of the "Victory Lan Act" provides that for the fiscal year
beginning July 1, 1920, and for each fiscal year thereafter until all bonds
and notes are retired, there will te an appropriation equal to 2 1/2% of the
aggregate amount of Liberty Loan bonds and Victory notes outstanding on
July 1, 1920, less the amount of any obligations of foreign governments held
by the United States on July 1.
Estimating the total outstanding at $20,000,000,000 and deducting the
foreign obligations of $10,000,000,000, leaves a total of (approximately)
$10,000,000,000, 2 1/2% of which amounts to S250,000,000 to be purchased annually
by the Treasury.



FEDERAL RESERVE BANK OF NEW YORK

7.

Governor Strong.

7/2/20.

The War Finance Corporation and the United States Grain Corporation
are being liquidated and will soon be out of business.
Mr. Leffingwel/ has resigned and leaves his position at noon,
Mr. Gilbert, his understudy at the Treasury, is to
to-morrow, July 3.
I am very glad to report that our relations with the Treasury
succeed him.
Department are of the most cordial nature, and that they are inclined not
to fix any interest rate for certificate issues without first obtaining
our views on the subject and then following them.
NEW BUILDING:

Mr. Jay has doubtless written you about our recent real estate
purchase on Maiden Lane, acquired for the purpose of erecting immediately
a storage warehouse, with the thought in mind that it will be completed by
May 1, 1921, thus enabling us to move our staff from 37 Liberty Street
to the new building, before we begin tearing down the property on our new
home site.
CONCLUSIOAL
This letter is somewhat of a hodge-podge, because I have merely
I hope, however, that you
hopped around from one high spot to another.
will find some of the information of interest.

Tr. Jay and I have not arrived at any definite understanding as
to your suggestion of meeting you in England this winter.
It is my
belief that Mr. Jay rather hopes to go abroad next year with his family.
If this is his conclusion, I shall be very glad to adopt your suggestion.
I will have a frank talk with Mr. Jay about this matter very soon, because
I fee/ that if he would really like to go over this fall, he should have
the opportunity of doing so.
With the best of luck to you and your party during the balance
of your time, I am,




Cordially yours,

t

-

BANK OF ENGLAND'S STATEMENT

June 50 1920.

Circulation
Public deposits
Other deposits

Government securities

Other securities
Total reserve
Bullion

Proportion of reserve

to liabilities

Bank rate




June 2.3., 1920,

I. 120,060,000

1, 115,240,000

15,647,000

17,869,000

Dec.

2,222,000

175,956,000

118,471,000

Inc.

57,465,000

91,097,000

53,003,000

Inc.

38,094,000

103,188,000

80,139,000

Inc.

23,049,000

16,274,000

21,025,000

Dec.

4,751,000

117,882,136

117,815,415

Inc.

66,721

Dec.

6.91%

8.49%

7

15.40%

Inc. b 4,820,000

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FEDERAL RESERVE BANK

s,

OF NEW YORK
October 21, 1920.

Dear Mr. Strong:

It seems scarcely possible that we are in the middle of autumn
and that three-fourths of your year's vacation has slipped by.
We are
all delighted to know from the messages you have sent to us and to friends
outside that you have fully regained your strength and are longing to get
back on the job.
This has the month Iring to it.
All this right have
had it on my mind to sit down and write you a long letter but have permitted various matters to interfere.
This afternoon, however, I am
determined to fly at it.

Acting upon an invitation from the directors of our Buffalo
Branch and at the suggestion of our own board, I visited our Buffalo office
for the first time about two weeks ago.
The impression I gained of the
way in which their activities are carried on is altogether favorable.
Mr.
Gidney has proved to be exactly the right man for the place and the Buffalo
bank presidents have taken him not only to their hearts but out on their
golf links as well; so that, in some instances, they are calling each
other by their first name.
I had a most delightful visit with our mutual friend, Mr. Locke.
He was good enough to put me up at the Buffalo Club, entertaining me there
at a luncheon which most of the Buffalo bank presidents attended, and
altogether was exceedingly kind.
For Mr. Lockets perusal I took with me
your letter written from the Fujiya Hotel at Miyanoshita under date of May
29.
He has just returned it, with the comment that it is one of the most
interesting letters he has ever read and that there are but few men who
could prepare such an exposition.
He also told me that he is looking forward to the fulfillment of your promise to spend a week with him at his
home in Buffalo some time after your return.
He said he proposed that you
should be ft free lance, to come and go as you please; but I do know that he
is eagerly anticipating such a visit from you.
I hope you will try to
make it.

In my last letter I suggested that the Federal Reserve System
would undoubtedly be under fire this autumn.
It is - both from political
and economic angles and then some/
And while the System as a whole has
come through all of these attacks with flying colors, it has at times been
just a bit distracting.
Applying David Harumts theory that "a few fleas
are good for a dog,because they keep him from brooding over the fact that
he is a dog," these annoyances serve a useful purpose and should grow less
after November 2nd.
Mr. Jay is in Washington to-day reading a paper before the National
Last week
Bank Section of the American Bankers Association Convention.
he and I attended a joint conference of the chairmen and governors of the
twelve Federal reserve banks with tha Faderel Reserve Board.
After the
joint discussion, the members of the conference separated, the governors
holding their own meeting in one place and the chairmen holding theirs in
In this connection I am enclosing for your information a brief
Enclosure another.
resumed' of the topics considered by the governors and a statement of the
No. FRASER
1.
Digitized for
http://fraser.stlouisfed.org/action had thereon.
Federal Reserve Bank of St. Louis

2.

FEDERAL RESERVE BANK OF NEW YORK.-

Benj. Strong, Esq.

10/21/20.

GENERAL CREDIT SITUATION:

Enclosure
No. 2.

Enclosure
No. 3.

This topic is uppermost in the minds of the commercial, industrial
Of
and banking world and is one about which volumes are being written.
course, there are many vital factors in credit granting under present conSuffice it for me to say that the fall in commodity prices has
ditions.
The
not yet penetrated generally to retail trade, which is quite dull.
decline in cotton and wheat, however, is causing great pressure on public
authorities for banking accommodation to enable growers to hold off their
products from the market for higher prices.
Secretary
Harding have had to bear the brunt of their appeals and criticism and have
We, like all the countries of
stood like a rock - "more power to tem."
the world, are feeling the effects of the readjustment period which, I take
The
it, is going to last quite a spell before normal conditions obtain.
editoilal by Dr. Frank Crane, entitled "The End of the Vicious Spiral,"
expresses, I think, the general feeling that the end of the expansion spiral
has been reached and that we are beginning more nearly to approach normal.
The sobering-up process, although necessary and wholesome, is always disagreeable while being gone through.
I well remember my discussion with you, before you left, on the
subject of a general raise in discount rates as the one important means of
effecting a control, and while we were somewhat tardy in applying this
remedy practically everybody is beginning to recognize that it is the one
There are,of course,some critics, notably Senator
most effective measure.
Owen, Comptroller Williams, and the Manufacturers Record of Baltimore,
representing that school of thought whose adherents want the throttle
left wide open at all times and who seem to believe that the measures taken
This view is vary graphically pictured in the achave been too drastic.
companying cartoon by Ding, which I recently clipped from the New York
Tribune.
Mr. A. Barton Hepburn, who, you will recall, is now a member of the
Federal Advisory Council, confirms Mr. Alexander's view that the demand for
credit is still fierce.
Our directors have invited him to meet with them
each month.
BANK OPERATIONS:

On October 15 the total earning assets of this bank reached a new
As a matter of fact, the week of October 15
high total - $1,148,542,000.
On October
was a red-letter week in many of the departments of the bank.
14, for instance, the transit department handled a total of 327,000 items,
a new high record volume of business and 80,000 items above the previous
highest single day's total, which occurred just a year ago - October 14, 1919.
The reason for the handling of such an enormous volume of items on October 14
is due to the fact that business generally is not held up on October 12
(Columbus Day) as is the business of banks, end the total given above is,
consequently, representative of nearly two dayst business.
Mr. Sailer has had prepared for me a statement of the turnover
transactions of the bank as of Friday, October 15, of which I am enclosing
You will observe that the grand total turnover of the bank for that
a copy.
one day was just a bit short of one billion dollars.
of these transactions is the comparative ease with which the turnover was
The redemption of $225,000,000 Anglo-French bonds on October 15
effected.
was not, of course, reflected in our figures until the following day and merely

http://fraser.stlouisfed.org/
resulted in some large shifts of reserve balances.
Enclosure
No. 4.

Federal Reserve Bank of St. Louis

Th

FEDERAL RESERVE BANK OF NEW YORK

3.

.Benj. Strong, Esq.

10/21/20.

REDEMPTION OPERATIONS:

Enclosure
No. 5.

In connection with large redemption operations in this market, I
am beginning to recognize the fact that we have to think of these in two
terms; that is, Federal reserve funds and clearing house funds.
All
Government operations are, of course, settled in Federal reserve funds.
The accompanying comparative statement shows the effect that the quarterly
tax certificate redemptions have exercised on our reserve here during
several quarterly tax periods.
You will observe that in each instance the
process results in:
(l)

An increase in reserve balance of member banks;
and

(2)

A decrease in their borrowings here,

the two items approximating the amount, of certificates redeemed, which
inevitably necessitates a temporary advance to the Government.
Thereupon,
checks sent for tax payments proceed to go through the works, bringing down
the excess reserve balance of member banks and building up the Treasurer's
account, enabling the Treasury promptly to liquidate its indebtedness.

Shortly before September 15 I found that we were steadily losing
money to other districts through the Gold Settlement Fund.
At first I
was inclined to think that these heavy withdrawals of funds from our New
York member banks were for crop-moving purposes, but a study of the
estimated tax receipts and certificate redemptions to be effected on
September 15 convinced me that these losses were due, in some measure, to
an inequitable distribution of the maturing certificates.
Out of
$650,000,000 of certificates to be redeemed, New York, with but $210,000,000
of taxes to pay, held some $400,000,000
a large oversupply; while Chicago,
for instance, with $125,000,000 of taxes to pay, held but $35,000,000 of
the certificates - a large undersupply.
In view of the fact that we were
sliding under our reserve, I arranged, about one week prior to September 15,
to purchase from our member banks some 45,000,000 of these certificates and
resell them to some of the other districts that were undersupplied.
This
sale furnished us with $45,000,000 additional gold and obviated the necessity
A little synopsis of
Enclosures for rediscounting with other Federal reserve banks.
Nos. 6,
"movement of funds" appears in Mr. Jay's monthly review under date of September
7, 8 and
30.
You will be interested in looking it over, together with the accompanying
charts which tend to visualize these figures.
The Gold Set
9.
certainly a smoothly working machine.

CERTIFICATES OF INDEBTEDNESS:

Enclosure
No. 10.

The certificates of indebtedness market is now in excellent shape.
J1 active open market obtains for all issues, with the result that our member
banks are no longer complaining about certificates of indebtedness being a
frozen asset.
The interest terms of all Treasury certificates have for months
been vary satisfactory, and our relations with the Treasury Department are on
a most cocdiel basis.
Mr. Gilbert, the Assistant Secretary of the Treasury,
has just sent me a statement of the Public Debt of the United States as of
June 30, 1920, showing on the reverse side "Securities Owned by the United
States Government."




FEDERAL RESERVE BANK OF NEW YORK

4.

Benj. Strong Esq.

10/21/20.

You will be interested to know that Mr. Leffingwell has, as of
October 15, rejoined his old firm of Cravath & Henderson, which will
hereafter continue under the name of Cravath, Henderson, Leffingwell &
DeGersdorff.

BILL MARKET:

The bill market is slowly but steadily developing on a fairly
The one outstanding weakness, to my mind, is the disincline,
sound basis.
tion of our city banks to make substantial loans to dealers except at
I am hoping that
rates comparable to the call money rates then obtaining.
the educational work along this line, which is steadily going on, may
The number of out-of-town banks which
presently be productive of results.
are purchasing bills is constantly increasing.
purchased in excess of $31,000,000 for the account of 186 country banks.

So far thi

BANK CONSOLIDATIONS:

The growing tendency towards bigger and fewer banks, which I
touched upon in my last letter, continues, and there are numerous consolidations and several large capital increases taking place.
The National
City Bank is putting out some new stock, increasing its capital from
$25,000,000 to 40,000,000, and, with its surplus and undivided Profits of
will have a total of more than $100,000,000, thus retaining
$65,000,000,
first place in this regard.

MISCELLANEOUS:

The second Organization Chart was brought out September let.
member banks were notified of this and upon request we furnished them with
copies as desired.
The comments upon it are most favorable.
Mr. Hopf has done a good piece of work in this regard and believe the
adoption of the policy exemplified by the chart has resulted in developing a
I am enclosing three
Lnclosures great many of our junior officers.
11, 12, 13 for your information and use.

,nclosure
To. 14

Our statistical department is now furnishing the general officers
with a daily summary of newspaper items relating to the Federal Reserve System
and general financial topics, which service we find very useful.

FOREIGN MATTERS:
Bank of England.
The first shipment of gold from the Bank of
England arrived here on the Baltic on October 1 And was transferred to the
Assay Office on the following day.
Since then we have received five more
consignments.
The Bank of England has sent a schedule of the proposed
shipments which shows that they are sending the gold in twelve instalments,
the first eleven consisting of 1,000 bars each with a value of about
$9,500,000 for each shipment, and the last or twelfth being made up of 750
bars with an approximate value of $7,000,000.
According to this schedule,
the last shipment should leave England about October 50; so that we shall
probably have all of the gold here early in November.




FEDERAL RESERVE BANK OF NEW YORK

Benj. Strong, Esq.

10/21/20.

We left the detailed arrangements for shipment of this gold
entirely in the hands of the Bank of England, and I am very favorably
impressed with the thorough and expeditious manner in which they are
Each shipment is accompanied by an elaborate
handling the transaction.
statement in book form, showing the number, weight and fineness of each
The bars are very carefully packed in saw-dust in boxes, three
bar.
bars to a box, and a box of assay pieces, carefully wrapped, accomianies
All of the gold is being transferred to the Assay
each shipment.
Office, but from present indications we will not receive the final returns
for some time after the last consignment is deposited, as the Assay Office
cannot remelt and assay the bars as fast as we are delivering them.
However, this will not inconvenience us, as the gold has not been taken
out of our reserve.
Sir Charles Addis, who, you will remember, is a director of the
Bank of England, called here to-day with an introduction from Mr. Montagu
I understand that he comes to represent Great Britain at the
Norman.
conference to be held here in connection with the Chinese Consortium arSir Charles is a most delightful fellow and has a
ranged by Mr. Lamont.
His observations on some of our laws are
well-developed sense of humor.
He commented upon the notice posted in the subways
very interesting.
warning that the "penalty for spitting might be a fine of $500, or impri'eonment for one year, or both," and facetiously remarked that in
England the fine for killing a man might be thirty shillings or thirty days.
Mr.
I made arrangements for Sir Charles to spend next Monday with us.
Jay, I know, hopes to have a talk with Sir Charles and we shall want to
entertain him at luncheon and extend whatever courtesies we may during the
balance of his short stay here.
OurErrangement with the Bank of France to asBank of France.
sist them in retiring their share of the Anglo-French loan which matured
October 15 by accepting a deposit of earmarked gold with them, was not
The terms upon which we agreed to accept such a deposit as
availed of.
outlined in our letter to the Bank of France dated September 9, copy of
which I understand was enclosed in Mr. Jay's letter to you, were accepted
We recently received a letter from M. de Sieyes,
by the Bank of France.
their representative in New York, inquiring whether this arrangement was
limited to deposits made on or before October 15, 1920, or whether it was
I am enclosing a copy of
Enclosures intended to continue in force until canceled.
Nos. 15-16 this letter which was dated October 13, together with a copy of our reply.
You will note that I have explained to M. de Sieyes that the proposition
was considered by our directors and the Federal Reserve Board only in the
light of an emergency transaction undertaken to assist France in the retirement of her share of the Anglo-French bonds and not as E. continuing
We do not feel that we should enter
facility in force until canceled.
into a commitment to accept gold earmarked with the Bank of France for an
indefinite period in the future and without knowing in advance the reasons
If an occasion should arise in the future similar
for such earmarking.
to the retirement of the Anglo-French bonds, we would, in all probability,
agree to accept a deposit of earmarked gold with them if they so desired.
It was felt that the best way to handle the matter without giving offense
to the Bank of France was to grant an extension of three months, thereby
intimating our unwillingness to make an indefinite commitment, and
bridging the gap until the matter could be discussed personally with
M. Robineau when you visit the Bank of France, at which time I presume you
will wish to take up with him the question of establishing our relations
upon a broader basis similar to the Bank of England agreement.



FEDERAL RESERVE BANK OF NEW YORK

Enclosure
No. 17

Enclosure
No. 18.

Benj. Strong, Esq.

10/21/20.

You will recall that in Mr. Jay's last letter there was enclosed
a copy of a cable which we sent to M. Pallain upon his retirement as
governor.
You will be interested in the enclosed copy of a translation
of M. Pallain's acknowledgment of that cablegram.
We have been informed
by the New York representative of the Credit Commerciale de France that
M. Pallain has just joined the board of directors of that institution.

I am enclosing for your information copy of a
Russian Gold.
cablegram received from the Bank of England as to the status of importations of Russian Gold into this country, together with our reply.
Recently, about five million Russian gold rubles arrived in New York
from Sweden consigned to Brown Brothers & Company which, together with
a small importation to some unknown importing concern in New York, was
offered to the Assay Office.
The Assay Office refuse
rubles until instructions were received from Washington, and the
Treasury Department has advised 'Brown Brothers that before a definite
answer can be given, the Treasury must know whether Brown Brothers &
Company will warrant without qualification the title to the gold and
assume responsibility for any complications which might arise in the
future as a result of the Assay Office's accepting delivery of the
rubles.
Brown Brothers have given an unqualified guarantee as to
title but, to my knowledge, the matter has not progressed beyond that
point, the Treasury still having it under consideration.
The State
Department has received confidential information from Sweden that the
five mil/ion gold rubles mentioned above are being sent into this
Mr. Montagu Norman, in a recent
country to finance radical propaganda.
letter, stated that their policy in England in regard to Russian gold
had been practically the same as that outlined in our cable to the Bank
of England.
Bank of Japan.
I have talked with Mr. Ichinomiya of the
Yokohama Specie Bank, Ltd., regarding the matters outlined in your
recent letters from Japan.
We are giving Mr. Nagaike each week some
information regarding business and credit conditions for his cable to
the Bank of Japan, and he is sending us some data as to conditions in
Japan.

The special representative from the Bank of Japan, Mr.
Yashikawa, whom you mentioned in a recent letter, called at the bank a
short time ago and is now making a thorough study of our operations
under the guidance of Mr. Jefferson.
He plans to spend about six
weeks here examining carefully the workings of each department.
collecting a set of books to be sent to Governor Inouye, in accordance
with your recent request.

Mr. Ichinomiya called at the bank to discuss Japanese operations in this market, their balances here,and the probable withdrawal
of gold during the autumn.
He said that his bank had pursued a very
conservative course since last February, with the result that they are
now in a strong cash position and have accumulated substantial cash
balances both in this market and at home.
He further stated that, taking the Japanese banks as a whole
and including balances of the Japanese Government, they have in this
market, in the form of cash, Treasury certificates, and bi/ls, approximately $300,000,000, one-third of which is invested in United States




FEDERAL RESERVE BANK OF NEW YORK

7-

Benj. Strong, Esq.

10/21/20.

They have, within the past few
Treasury certificates of indebtedness.
months, shipped to Japan about $20,000,000 of gold, and Mr. Ichinomiya
is of the opinion that it will probably be necessary to ship a further
moderate amount of gold (not exceeding *8,000,000 to *10,000,000 a
He stated also that they fully appreciate the general
month) this year.
credit situation that exists in this country at the present time and that
they propose to make their gold withdrawals just as moderate as possible.
I thanked Mr. Ichinomiya for coming in and chatting over the situation,
and assured him that we are of course quite prepared to facilitate the export of gold to which he alluded.
Mr. S. Imamura, New York Agent of The Sumitomo Bank, Ltd., called
to say that he has had the pleasure of meeting you in Japan and left with
me a few snapshots of your party, which we have all enjoyed looking at.
You may be interested to
Japan's Plan to Stabilize Silk Prices.
know that in order to stabilize the prices of raw silk in Japan the silk
houses, in conjunction with the government, have organized a concern,"The
We
Imperial Raw Silk Corporation," to purchase raw silk at a fixed price.
learn from the New York representative of the Bank of Japan that the
capital of this company is 15,000,000 yen, all to be subscribed by the
In addition to
exporters, manufacturers, and other branches of the trade.
exercising general supervision over the activities of the company the
Japanese government is empowered to lend up to 50,000,000 yen for the
purpose of purchasing silk, these transactions being done through the
All purchases are to be made at 16.50 yen
Hippottiek Bank of Japan.
(about $8.00) per 1,000 kin (about 1,325 pounds) "extra" and 1,500 yen for
These are approximately the prevailing prices, and
"Shinshui No. 1."
for that reason it is not likely the purchasing by the Imperial Raw Silk
Corporation will be extensive for the present unless raw siik again drops
to its low price of about 1,000 yen for "extra" reached during the crisis
in April and May.

It has occurred to me that in connection with your stay in London
and Paris you might like some information regarding British and French loans
There are the $50,000,000 City of
maturing in this country' during 1921.
In addition, the
Paris five-year 6% gold bonds maturing October 15, 1921.
new $100,000,000 twenty-five year external French Joan just floated in this
market calls for an annual payment to J. P. Morgan & Company of *4,400,000
as a sinking fund to be applied to the reduction of the principal to the
During the first five years payments are to
amount of $4,000,000 annually.
be made by the French Government quarterly and to be used to buy up these
bonds in the market at 110.

The British Government has a maturity of $150,000,000 to meet on
November 1, 1921, when the United Kingdom of Great Britain and Ireland fiveWe are informed that at present there are
year 5 1/2% bonds come due.
about *129,000,000 of these bonds outstanding, the difference representing
The Canadian Government
bonds already bought up by the British Government.
has two loans falling due here next year, one for $25,000,000 being
five-year 5% gold bonds due April 1, 1921, and the other for $15,000,000 in
two-year 5 1/2% gold notes due August 1, 1921.




FEDERAL RESERVE BANK OF NEW YORK

8-

Benj. Strong, Esq.

10/21/20.

CLOSING:

If so, both he and
Your son, Ben, I take it, is still with you.
you will be interested in the following report from Mr. Gilbart regarding
Mr. Edward Douglas:
"During the short time he has been with us, Mr.
He has covered
Douglas has made remarkable progress.
almost every position in the discount department with
credit to himself and the highest commendation from his
He is an exception to the average
chief and supervisors.
college man - sticks to his job, does not hesitate to do
anything that is asked of him to the best of his ability,
does not think that he knows more about the work than his
chief, and is well liked by all in the department, because
he has a splendid personality and because he does not try
to impress upon his co-workers the fact that he is better
He has a quiet, determined manner and
educated than they.
is ambitious to learn everything he possibly can.
"When he came with us, I told him it was our idea
to have him work for short periods in all the various departments in order that he might eventually qualify for an
With this in mind,
executive or semi-executive position.
I spoke to him two months ago about transferring him, but he
said that he felt there was a great deal more that he would
like to learn about the discount department and reniested
I spoke to him again, last
that I defer the transfer.
week, about taking up some new work in another division, but
he again requested that he be left in the discount department
a short time longer, as he had been given some new work which
he said he had not quite mastered."

The political campaign has been rather a quiet affair without quite
At this writing, it looks very like Harding.
the usual public interest in it.
Mr. Jay has cabled you that under existing credit conditions it seems wiser for
both of us to remain hereon the job this fall rather than to make the suggested
I am sure you. will appreciate the wisdom of this decision.
trip abroad.
We are all looking forward to your return to the bank the first of
the year and are glad that you are feeling so fit.
Possibly this may be my last line to you before you return; in any
event, it may not reach you much before the holiday season, so I just want to
take this opportunity to wish you and your party the Season,s best.




Sincerely yours,

J. H. CASE.

C.._ L c

.s

NEWSPAPER REVIEU
ON
rlDERAL RESERVE SYSTEM AND FINANCIAL SITUATION

October 21,1920
No.35

Daily summary prepared by the Federal Reserve Bank of New York,
Statistics Department, Reference Library. The original
clippings may be obtained from the Library, phone Automatic 230,
Bell 343.

A.B.A CONVENTION
Federal Reserve.

State bank relations - Resolution adopted "condemAng and doprociatiLs
method employed by the Board" in its relation with State banks
which are not members of the System. (New York Tribune, p.1)
Par collection - Par clearance of checks subject of heated debate, Charles
Claiborne, of New Orleans, contending that banks were entitled to
compensation and C.H.Wolfe, of Philadelphia defending staunchly
Reserve regulation which "saved bankers and commercial interests
4135,000,000 last yearN." (New York Herald, p.20: New York
Commercial, p. 1 and 3)

Credkta - Position of Board on essential credits endorsed by Dr. Parker
Willis, who pointed out it involved the same general principles
of sound banking that had always been recognized. (Journal of

Coerce, D.9)
EstimAtes for coming fiscal year.
Government estimates - 44,000,000,000 of Government expenditures, during
next fiscal year forecast by Secretary Houston. Plans to redeem
entire "floating debt" by end of fiscal year 1922; to this end
tax basis must not be so law as to allow revenues to fall below
expectations. (Journal of Commerce, p.9)

Export financing - 4100,000,000 corporation to aid United States foreign
trade and to operate under :dge act will be established about
January 1921. One of the recommendations is that representatives
from Federal Reserve districts should be on board of directors.
(Journal of Cbmaerce, p.1 and 9)
Liberty bonds - Treasury is opposed to refunding of Liberty bonds into
obligations bearing a higher rate of interest. Mall Street
Journal, p.7)

Editorial comment - A.B.A. and not Reserve Board proper source of possible
help for farmers. (World, p.12)
Report on "stabilized dollar " emphasizes injustice of a scheme which
does not stabilize the goods side at same time as money side,
as only real stabilizing factor is larger output. (Journal of
Commerce, p.6)



Newspaper Review, 10/21/20.

No.35.
7. 2

A.B.A. CONVENTION
Editorial comment

(continued)

8. Proposed Edge law corporation will provide machinery for financing exports
with investment rather than commercial banking funds and thus
will secure greater public support.
(Journal of Commerce, p.6)

UNITED STATES - GENERAL
Farmers

9."Strike of the Farmers" useless in face of world downward trend of prices,
as is criticism of Federal Reserve Banks which have extended
five times asmmuah credit as was possible under old gystem.
Orderly marketing only possible basis for further advances.
Wall Street Journal, p.1, Editorial)
"Country cannot afford to bond itself any further far the benefit of a
special interest." (Journal of Commerce, p.6)
Trade acoeptances.

Trade acceptances are gaining in favor as indicated by result of
questionnaire sent to paint trade which shows that 40% of members
are using them.
(New York Commercial, p.9)
Waterway for wheat trade.

Deep sea waterway through Great Lakes and St. Lawrence river endorsed by
Herbert Hoover as means of increasing production of wheat for
export,through estimated saving to farmers of at least 10 cents
per bushel. (World, p.17)

(kJ&
12.

Gold stock of United States 42,704,672,504 on October 1, which is highest
figure since March 1, 1920. (New York Commercial, p.3)

Monev market.
Easier money market soon is predicted by M.L.Farrell, who gives detailed
reasons. (Financial America, p.9)
Savings deposits.
Savings deposits grow in New York State inppite of high cost of living.
The number of depositors on July 1 being 112,047 more than on
January 1. (Tribune, p.11)
Taxation
Repeal of excess profits tax,recommended by National Industrial Conference
Board, - the loss of revenue to be offset by other taxes.
(New York Times, p.17)
Philippine bonds.
Philippine 46,000,000 bond issue had three other bids besides high offer
of W. A. Read & Co. and Kuhn, Loeb & Co., bidding jointly.



(Financial Ameriaa, p.4)

Newspaper Review, 10/21/20.

No.35.
- 3 FOREIGN.

Cuban loan
Cuba needs aid of American banks to finance sugar. Similar condition
might result in this country if our banks could not obtain loans
from each other. Moratorium probably be lifted November 1.
Wall Street Journal, p.12)
Dollar securities committee.
Operations of American dollar securities committee summarized from
official report.
Of interest in connection with approaching date
for paying off Anglo-French 5% bonds. (Journal of Commerce, p.9)
French loan.
French national 6% loan of 1920, is intended in part for redemption
currency of national banks of France. Subscriptions are
opened. (New York Commercial, p.5)

of

officially

French public stirred by high interest rates on $100,000,000 loan, but
newspapers point out that it is reasonable when compared with
Belgian and Swiss loan. (Tribune, p.19)

Capita for Germanv.
Germany would like United States capital in Ruhr coal region to remove
menace of French seizure.
Speech by Deputy in Bavarian parl
(New York Commercial, p.1)
Germany
Germany's financial misery grows, due to new depression of the mark,
discouraging industrial reports, withdrawal of German credits
(Journal of Commerce, p.11)
by Americans and fe4r of Bolshevism.

Brazilian loan
An attempt to confirm report of 440,000,000 Brazilian loan is without
(Journal of Commerce, p.10)
result.
China.

United States signs trade treaty with China, providing graduated increases
in 5 per cent flat rate permitted on imports. (New York American, p.9)
Russian currency.
How new Russian "czars" are deluding their own people and flooding world
with promises to pay not intended to be kept is described by
(Wall Street Journal, p.6)
Fred. J. Kent at A.B.A.
Danish loan.
Amount given today is 425,000,000 instead of 420,000,000 given yesterday.
(Financial America, p.4)




,IC/24.A_AAv

FTL_c

Lu_s urC

COPY OF CABLE FROM BANK OF ENGLAND.

"Can you inform us in confidence whether gold from Soviet Government or
of Soviet origin is allowed to be imported into United States."

COPY OF OUR REPLY.

"onfidential

Replying to your telegram of September 17 there are at

present no legal restrictions on physical import Russian gold into United States.

Russian gold from Sweden has been offered for sale here to several banks

but we

understand without success banks being unwilling to buy such gold because of uncertain title and possibility of future attachment.
not care to buy Russian gold at this time.

For sim

As to purchases

United States mint or assay offices we understand none has yet been presented and

action of Treasury will depend largely on particular circumstances prevailing at
that time but Treasury would insist that

depositors of such gold be thoroughly

responsible parties and that they warrant without qualification or reservation
whatever title to the gold.

Furtheremore in case Bolshevik gold presented to

any mint or assay office Treasury would probably desire assurance from State

Department that title to the gold if purchased would be valid internationally and
such assurance will not be sought until specific case presented."




FEDERAL RESERVE BANK
OF NEW YORK
November 26, 1920.

Dear Governor Strong:

Both Mr. Jay and I have written you regarding our arrangement with the
Bank of France to accept earmarked gold with them against corresponding credit to
their account here in New York, but it occurs to me that since your mail has been
sent to Morgan, Grenfell & Company, London, you may not receive these letters before your visit to the Bank of France, and as there is one phase of the matter which
Governor Robineau will undoubtedly discuss with you, I thought it best to write to
you again on the subject direct to the Bank of France.
I am enclosing copy of our letter to the Bank of France dated September
9 which sets forth in detail the terms upon which we agreed to accept earmarked gold
with them in order to assist in the retirement of France's share of the Anglo-French
loan which matured October 15.
The conditions set forth in this letter have been accepted by the Bank
of France.
However, they did not avail themselves of this arrangement prior to
the maturity of the Anglo-French loan.
On October 13, M. de Sieyes, the representative of the Bank of France in New York, inquired of us whether this arrangement
was limited to deposits made on or before October 15, 1920, or whether it was intended to continue in force until canceled.
I am enclosing a copy of this letter
together with a copy of our reply.
You will note that I have explained to M.
de Sieyes that the proposition was considered by our directors and the Federal Reserve Board only in the light of an emergency transaction undertaken to assist France
in the retirement of her share of the Anglo-French bonds and not as a continuing
facility in force until canceled.
We do not feel that we should enter into a commitment to accept gold earmarked with the Bank of France for an indefinite period
in the future and without knowing in advance the reasons for such earmarking.
If
an occasion should arise in the future, similar to the retirement of the Anglo-French
bonds, we mould, in 911 probability, agree to accept a deposit of earmarked gold with
them if they so desired.
It was felt that the best way to handle the matter without
giving offense to the Bank of France was to grant an extension of three months,
thereby intimating our unwillingness to make an indefinite commitment, and bridging
the gap until the matter could be discussed personally with M. Robineau when you
visit the Bank of France, at which time I presume you will wish to take up with him
the question of establishing our relations upon a broader basis similar to the Bank
of England agreement.
On October 30, the Bank of Franca earmarked for olir account gold to the
value of $3,300,000, for which we have given them credit here on our books.
This
deposit of earmarked gold has been prorated among all of the Federal Reserve Banks.
Wepaid the t3,300,000 to J. P. Morgan to-day by order of the Bank of France.
The foregoing was all included in a letter which I wrote you under date
of October 21 and which was mailed to you at London and, es I explained in the beginning, this present letter is written merely to avoid the possibility of your
visiting the Bank of France without knowledge of this whole matter.




e FEDERAL RESERVE BANK OF NEW YORK-2.----

11/26/20.

I had hoped to write you a good newsy letter by this mail, but the pressure
has been particularly heavy the past few weeks and I have not succeeded in my purpose
in this regard.
Everything is moving along just as satisfactorily as could be expected with the liquidation that has been going on.
Whenever a weak situation develops, our bankers are disposed to sit in and nurse it along.
Sincerely yours,

/712'

J. H. CASE

4!
Benjamin Strong, Esq.,
C/o Bank of France,
Paris, France.




169/176 words

December 4, 1920.
enjamin Strang,
c/o Morgan, Grenfell & Co.,
Loddon
-

We all send you our affectionate greetinge upon your return to this side of the
world.

Conditions now as we see them here show a recurrence of drain upon

New York by interior.

Our reserve percentage last night was 37.8 after selling

to Boston 20 millions of certificates maturing December 15.
of rediscounts still out.

Have 6 millions

Decline from 40.8 per cent. last week result of heavy

wire transfers_ out of district and increase of 65 millions in loans.

Reserve

position of system last week was 44.4 highest since July, but some decline expected today.

Possible cause may be preparations for December 15 tax payments,

which come at a.bad time for manufacturers and others Who have been caught on

declining cmmodity market.

Reg4rd banking situation in this district perfectly

sound, and one or two flurries outside city involving member banks have been nipped
in the bud. Experience of Massachusetts and North Dakota nonmember state banks has
furnished vivid example of system's complete adequacy at this time.

You probably will

hear rumors about largest trust company and largest foreign trade house in New York.
These are malicious and unqualifiedly false.

Definite statements were cabled

abroad by a newageney Which had tie name of German uropagandists before our entrance
into the mar.

Similar rumors circulated here for stockmarket purposes and have

been entirelydiscredited.

Harding and Houston are still bombarded by western and.

southern inflationists in and out of Congress, but are adamant.

Trice declines con-

goods
tinue but chief difficulty seems to be slow movement or complete stoppage of

in some lines.

This last is necessarily temporary and will yield to consumer

demand as soon as retailers cut prices cdrreenondingly to reductions by wholesalers.
We are taking over sub treasury Monday.

Zeilinga arrives next Tuesday, leaving for

Amsterdam Saturday, and we are planning to takegood care of him.




CASE

OX-18

Cable Order

FEDERAL RESERVE BANK
OF NEW YORK

(Outgoing Message)

Decembe-r-O.,

Data

of Cablegram sent to CODING DEPARTMENT.
From

Mr. Case

-

a-at,

Please code the following message addressed to the

amOSS,
1101ea,

Care of Hiarjee, Parity.

Number of Cable

Cr,
(If Payment Cable)

Clad to learn your safe arrival
proposed itinerary stop

Ravo no suggestions regarding your

In vies of first earmarked gold transaction recently

consummated with Bank of Prance you will doubtless

actual procedure under

such transactions

indefinitely stop

Zeilinga here

as been entertained a§ PP

Due Ameterdam twentysecond
Banks appointment as our
a

erected to ascertain their

i

Res

asked probable duration

as it does not feel that gold held by forel

believe he

os -v21

\a4

aye en
(

unted as reserve

hould

hVslil visit with him and

u1'4 w

sails on Rotterdam eleventh

e\-to e

top

Have advised him Java

agentia cor4spoaden and have discussed with him informally

more comprehensive reciprocal agreement along following lines which meets his approval
One Each bank to act

\\\

maintain an account
be kept free of

-,\

d correapondent

thhe\dtheVeubject to check

Charges erid commissions, except

custody charges

for the ether

F

Two Each bank may

Three The respective accounts to

s to actual outofpocket expenses or

bank to purchase bills for account of the other as and when
\F,a,c//A

so requested such purchases to be at current market rates

Five

as agent for the other in receiving and holding bills remitted for

collection




Six

No interest on aalances in current account

Each bank

will act

acceptance and

Seven

The debtor

Time

(Dept. Head's Initial)

(Officer's Initial)

FX18

Cable Order

FEDERAL RESERVE BANK
OF NEW YORK

(Outgoing Message)

Date

Coy of Cablegram sent to CODING DEPARTMENT.
From

Please code the following message addressed to the
3 iklq S ."1921

Number of Cable

-2-

(If Payment Cable)

institution will set aside and earmark gold on a bullion basis representing balancer
due

Eight

Information will be exchanged respecting r 't matters nnd financial

conditions stop

Pending receipt your views

guaranteeing payment bilis bought for their
their indorsement stop

conclude srrangements with Nedeilc
I

a,

am'tamed November 1918

,ozt

when we opened account with Neder1ande4

tip& such bills without
t N erlandsche Bank our

eserve

--LIkaA0




count g disd

Executive Committ

agent and correspondent and approval,

are investing five mi

discussed question

cu4,61,.ct4rl1A'

Assume you will want to

aMury

kri3O444....c

dsche Bank

bill

lar to thoseA withJava stop

We

Java Bank
CASE

Time

(Dept. Head's Initial)

(Officer's Initial)

A-1996 a

Obviously if "liquidation" or "stabilization" of the existing
Note;
situation are to be regarded as the objectives of the Feaeral
Reserve policy of credit control, a condition which can be regarded as
"normal" will be attained very much more quickly than if the objective
is a reduction in considerable amount of the total volume of credit.

credit

Methods of credit control.
different methods of credit control.
5.

Consideration

of the efficacy

of

Horizontal increase of rates, especially of commercial
rates; a canvass of the experience of banks which have put
into effect a 7% commercial rate, to wit, New York, Boston,

Chicago and Minneapolis.

Progressive rate schedules starting with 6% as a basic
rate; a canvass of the experience of Federal Reserve Banks
of Kansas City, Dallas, St. Louis and Atlanta.
Other methods of dealing with the situation, such as the
implication that increased offerings by member banks will
force higher rates or recourse to the progressive rate; a
canvass of the experience of the Federal Reserve Banks of

Cleveland, Philadelphia, Richmend are San Francisco.
Restricting issues of Federal Reserve notes
Reserve Banks as a potential Means of enforcing
canvass of English experience and views.

to Federal
credit control;

6.
Inter-Reserve Bank reaiscounts as related to the problem
of credit control.
Is the existing policy and practice with respect to such rediscounts satisfactory and sound?

To effect an approximate equalization of reserves?
At the same rate fixed for its member banks by
granting the accommodation?

the bank

Note: When recourse was first had to inter-bank rediscounts it
was thought that the value of a Federal Reserve Bank's endorsement
was entitled to recognition' in the form of a reduced discount rate.
lore recently this idea has been abandoned and rediscount transactions
between Federal aeserve Banks are maae at the rates established for
member banks by the Federal Reserve Bank extending the accommodation.
The question now arises, however, whether a Federal Reserve Bank which
has been able to maintain high reserves by reducine the demands for
accommodations from its awn member banks, which are its depositors,
should be required to extend accommodations to member banks in other
districts through the medium of their Federal Reserve Banks at the
same rates as are established for their own members.




-3II.

Y-1988 a

Ikelib bWURED BY LIBSrTY BU.NJkOV
VIJTORY

Is there any moral obligetion resting upon any of the Federal
Reserve Banks to establish rates lower than commercial rates for

paper of this classification?

Would liquidetion of loans of this class be retarded or promoted by the establishment of lower rates?
If lover rates are deemed desirable, would it be equitable
and practicable to have such rates apple to originel subscribers only?
Should. member banks' collaterel notes be fully secured, taking
market value instead of face value as a basis?

If so, how and when could the new policy be put into effect
with a minimum of friction?
XII.

DER A L R ESE: VE NOTE ISSUEL

Is the note-issue policy of the Federal Reserve system subject
to legitimate criticism?
What connection is there between chenges in the volume of
credit and the volume of currency?

Is there any difference in relation to effect upon prices

between the volume of credit and the volume of currency?
properly

'Jan the note-issue policy of the itderel reserve system be

charged with any imeortant responsibility for inflated prices,
If so, what has been the responsibility and in whet way coos the issue
of Federal Reseeve netes promote or assist inflation?

Oen the aooepted principles of bank-note currency regulation,

applicable in normal circumstances when the eommeroe of the world is
conducted on a gold standard, be safely teken as a guide in the abnormal
eircurnstanoes now eeisting, when the gold standard it virtually suspended,
exoept In the United Ltates and Japan?

6.1h oonnection with tbe pollee. of credit control should the
present note-isoue police of the Federal Reserve system be changed and
restrictions be thrown around the issue of Federal Reserve notes?
7. If the Iseue of Federal eserve notes should be restricted, what
fort should the restriction take and what effect yould different methods
of restriction have?




eae

Xe.1998 a

Imposition of charges against Federal Reserve notes upon the
uncovered part of circulation issued to them at a given rate, for
example, a fixed rate of 5% or a rate varying with the commercial
rate.

Would it be practicable to establish for each member bank a

so-called normal currency limit and to impose charges upon member

banks calling for notes in excess of their limit?

Would it be advisable while continuing to have the Federal
Reserve Banks pay all transportation charges on incoming currency,
to have shipments of outgoing currency made at the eepense of the
consignees?

Restriction by definition of the character of the paper acceptable as collateral by the Federal Reserve Agent against the issue

of Federal Reserve notes. ahould member banks' collateral notes
or customers' notes secured by Government obligations be taken as
collateral for Federal Reserve notes?
Limitation of the total volume

of Federal Reserve notes by the

Yederal Reserve Board, the maximum amount being fixed pro
(Jae Federal Reserve
each Federal Reserve Bank.
power to accept in part or to
Federal Reserve notes.)

rata for

Board has statutory

reject entirely all applications for

Would restriction of note issues in any of the above mentioned ways
at would be
the effect upon the commerce and business of the country?

operate to promote a better control of credit, and if so,

It is suggested that the Chairman of the Board of Directors of each
Federal Reserve Bank bring this tentative program to the attention of the

Executive Committee and that a committee of the Governors confer by
correspondence with a committee of Federal Reserve Aeents, and assign to
each Governor and Federal Reserve Agent a part of the foregoine program

for discussion. It is desirable that the program be covered fully and
that each partictpant in the conference prepare carefully a paper treating
upon the particular subject assigned to him.




CDE I ,1514-4-20
1

FEDERAL RESERVE SANK

COPY OF TELEGRAM
SENT IN CIPHER

OF NEW YORK

DICTATED BY

CASH DEPARTMENT

CODES & TESTS SEC.

TIME

COPY FOR WIRE TRANSFER DIVISION

December 15, 1920.

stronik_

0/0 Harjes, Paris.

k

#8 referring to your 11 executive committee cordially agrees delay

your sailing date and Approves reciprocal guarantee of bills with
both Java and Nederlandsche ban'yx Reserve Board also approves.

Els. heLaren and Hendrickm married last Sunday sailing from Frisco
for Honolulu December 22.




e

CDE 1.I-15M-4-20

COPY OF TELEGRAM
SENT IN CIPHER

FEDERAL RESERVE BANK
OF NEW YORK

TIME

DICTATED BY

14 Cords Via

CASH DEPARTMENT

CODES & TESTS SEC.

!:

COPY FORTANIRE TRANSFER DIVISION

-4-imi2% Strong,

Joe IL; :JOr

Bank of .ngland, London.
'7)

(Tos7were)

Reserve Board sends you greotings and bust wishes

or Merry Christmas and prosperous Now Year.




Case.

1910

MISC. 34.1.1161.4.0

FEDERAL RESERVE BANK
OF NEW YORK

SENT BY

SEND TO FILES

Albt

COPY OFt'llAiLtditAisi
J:VW

Lvi,cemir
...4,J1jam1n Strong

C61.* Bank of gingtibd
dokt, itfel%nd
-

tiolleoprweler-recelkopod.

bt;ct

hrietms ,sreetinkA to vu Yrom dl.

mebehge number fifteen tomorrow.

Ce Jey
Cr.ge. Fed. hrs. bk. of het York.




ill .anster




(7.\
_




P km (IL

EST 1404 UNION
ANGLO -AMERICAN
7,Z21-

CA B

WESTERN UNION DIRECT UNITED STATE'

"illo

'G RAM Via Western Union.

RECEIVED AT 22, CREAT WINCHESTER STREET, LONDON, E.C.2.
DEC

A Fl 2C9/24 NETYORK 22
BENJAMIN STRONG CARE BANK OF ENG LAND
LONDON

BEET XMAS GREETINGS TO YOU FROM ALL WI LL ANSWER MESSAGE NUMBER
FIFTEEN T OMORROT

CASE JAY

DATED 2i

No inquiry respecting this Message can be attended to without the production of this paper.




THE WESTERN UNION TELECRAPH-CABLE SYSTEM.
THE LARGEST TELEGRAPH AND CABLE SYSTEM IN EXISTENCE.

DUPLEXED ATLANTIC CABLES.
OVER 25,500 OFFICES AND 1,500,000

MILES OF WIRE,

Direct Wires from Cable Stations to all the principal commercial centres in Great Britain, United
States and Canada, and Direct connection with Central America, West Indies, South America, Australia,
New Zealand, Fanning, Fiji, ancl Norfolk Islands.

DIRECT AND EXCLUSIVE CONNECTION WITH MEXICO.
RECEIVING OFFICES IN THE UNITED KINGDOM :
LONDON:
Western Union House, 22, Gt. Winchester Street,
E.G.

Telephone Nos.

Telephone Nom.

2274
LIVERPOOL: C 4 & 5, Exchange Buildings (cornerCentralBranch
(Private

(Prhae Branch Exchange)

The Baltic, St. Mary Axe, .E.C....
52, Charing Cross, S.W.
10, Holborn Viaduct, E.G....
Mark Lane, E.C.
Royal Exchange, E.C.
Donington House, Norfolk Street, W.C.
48, Tooley Street, S.E.
5 Also Regent 3073.

CO5Perall Offices

...1

London Wall
800

City 3717
Hop 5275

of Chapel Street and Rumford Street)
BRISTOL: Canada Rouse, Baldwin Street
BRADFORD: 10, Forster Square ...,
DUNDEE: 1, Panmure Street ...
EDINBURGH: 50, Frederick Street
GLASGOW: 23, Waterloo Street

..,

'71

.

MANCHESTER: 30, Brown Street ...
NEWCASTLE-ON-TYNE: 1, Side ..,

'

BUDAPEST:
BERLIN:
CHRISTIANIA:

...

(Privnte Branch
Exchange)

City 1455
Central 1174
Central 1329

WESTERN UNION HOUSE, 22, GREAT WINCHESTER STREET, LONDON, E.G. 2.
TELEPHONE No.: LONDON WALL 800 (Private Branch Exchange).

PRINCIPAL CONTINENTAL OFFICES AND AGENCIES
AMSTERDAM:
ANTWERP:
BERGEN:
BARCELONA:

Central 309
Bradford 771
Central 1351
400

4, Weesperzijde
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Leppen Tyskebryggen
Paseo de Gracia 94
Caspe 57
Csengery-Utca. 7 VI 2
140, Kurfuerstendamm
4, Prinzensgade

COPENHAGEN
GENOA:
HAVRE:

HAMBURG:
MILAN:
MADRID:

4, Jornbanegacje

Via San Lorenzo 11-14
118, Boulevard
Strasbourg
22, Monckeberstrasse

Corso Vittorio

Emanuele 31
Juan de Mena 15

MARSEILLES:
NAPLES:
PARIS:
PRAGUE:
ROME:

z

5a, Rue Beauvau
Via Marina Nuova 14/19
1, Rue Auber
37, Rue Caumartin
Heinrichgasse 7

Piazza di Spagna 4950
STOCKHOLM: Regeringsgatan 10
Zelinkagasse 13
VIENNA:
Pelikanstrasse 22
ZURICH:

The Public are recommended to hand in their Telegrams at the Company's St,lions, where free receipts are given for the
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Telegrams for this Company's Cables are also received at all Post Office Telegraph Stations ; but in order to insure transmission by the Western Union Telegraph-Cable System, the forms upon which Telegrams are written should be marked "Via Western
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Cable addresses .are registered free of charge.
All important Telegrams should be repeated, for which an additional quarter rate is charged.

I

FEDERAL RESERVE bANtk
OF NEW YORK

COR "SPONDENCE
Governor Strong
FROM

DATE

x

July 29, 1921.

SUBJECT

J. H. Case

I strongly recommend that steps be taken to bring about emergency
legislation;

"To enable a national bank to obtain relief in
emergency by use of other than eligible paperOr United
States bonds:

Under existing laws no member bank can obtain
funds, lawfully, from its Federal reserve bank however
urgent the need except upon security .of-Uhited States
obligations or upon paper of a certain character and
description shown to be eligible under the regulations
of the Federal Reserve Board. There are many member
banks, including some of the largest and most ably and
conservatively managed, which include in their assets
large amounts of securities of a high character including
state municipal bonds, prior lien ra4lroad mortgages and
industrial mortgage bonds of unquestioned merit and value.
If banks in this condition should have the misfortune to
be subjected to a run upon their deposits, they would be
unable to obtain loans or advances from their Federal reserve banks except to the extent of eligible paper and
United States bonds which they may have on hand.
In times such as we have been through in the
past few years, they would also find it impossible or
impracticable to convert even their high class securities into money except at a grave sacrifice, if at all,
and attempts to realize upon large blocks of securities
might precipitate further trouble on such markets as .we
have sometimeS had in the past."

An amendment to the Federal Reserve Act which would make it possible,

under proper safeguard for a member bank which is found to be in sound and solvent condition to obtain in an emergency from its Federal reserve bank upon its
obligations, other than eligible paper or United States Government securities,

when such loans are recommended by the reserve bank of its district and approved
by not less than three-fourths of the members of the Federal Reserve Board, would
prove distinctly sAlutary and would largely dispel the nervousness which sometimes
arises in financial circles because of the possible dangers of the situation as the




ANIMMIIIIMIr
'11111r11-

,CE CORRE

I

I

C=1-1C011i

L.,

OF NEW YORK

I

DATE

NIDENCE

olternor_Strong

I

July 29, 1921.

SUBJECT.

J. H. Case

- 2law nowstands.

This memorandum is largely based upon a recommendation made by the former
Comptroller of the Currency and found on pages 52 and 53 of volume 1 of his report,
t0444,

leA4

for the year 1920.

,

9A,

For your further information Treasury Department Circular Yo. mw (copy
of which is attached) dated October 6, 1917, under conditions therein set forth
permits us to receive as eligible collateral to secure deposits of Government
funds, approved bonds listed on some recognized stock exchange and other securities
not eligible as collateral in obtaining loans from Federal reserve banks.

Mr. Barrows has just handed me a copy of a bill covering this subject,
which he found among the Liberty Loan records of kr. Curtis and which he thinks
A bill enacted in substantially this
was pending during the latter part of 1917.
form would, it seems to me, about cover the sitUation.
P. S.

1




FEDERAL RESERVE BANK
OF NEW YORK
September 6, 1921.
2:45 o'clock p. m.

Dear Governor Strong:

Everything opened up very quietly here at:the bank to-day.

Our

loans increased approximately $1,000,000, with a/loss of $20,000,000 through
the Gold Settlement Fund, which left our reserye position at 72.5.

Mr. Gilbert, of the Treasury, was palled back to New York from
Washington last night, owing to a sudden t rn for the worse in

his

father's

He came into our office this/morning and had been here but

condition.

minutes when he was summoned tack to the hospital.

a

few

Before leaving, he told

me he did not believe it possible for ;his father to live through the day, and
he has, consequently, arranged to spfind a few days in this city, making our

(The Treasury has practically agreed to the terms

office his headquarters.

we discussed with regard to its new security offering.)
Mr. Cromwell,

of the few York Stock Exchange, called at the bank

and I had a very/satisfactory talk with him.

He

is

in full ac-

V::::Morning,
cord with the idea of substitAting Mr. Frew for Mr. McGarrah, in the matter

Mr. Cromwell discussed briefly the question

looking after call money affairs.
of 'making a change, from a

mission by members of the

4aily
kock

of

to a weekly basis, in the matter of the sub,
exchange

of

reports to this bank, the thought

being that if, later, this change should prove undesirable, the present method
of daily reporting could be resumed.

As it

is

Mr. Cromwell's opinion that

there is no haste about making the change, we are leaving the matter open, with
the understanding that he

will

see Mr. Frew and urge upon him the desirability

of stepping into the breach and taking Mr. McGarrah's
retires.



place,

when Mr. McGarrah

le>

Benj. Strong, Esq.

fl

9/6/21.

-2-

For your information I am enclosing the following:
Translation of cablegram received to-day
from the Bank of England;
Current letter from Whaley-Eaton Service;

Memorandum, in comparative form, showing
borrowings (10,000,000 or more) of New
York City banks, as of the close of
business January 5, 1921, and September
3, 1921, respectively.
I had a talk, this morning, with Mr. W. p. Potter and Stuart H.
Patterson, and they have very cordially agreed to our suggestion with regard
to bringing down the papers we are reviewing to a more recent date, so that
the information may be assembled in more orderly form.
Mr. Norman and Sir Charles Addis contemplate having a motor trip to
Quebec, and I suggest that careful

inquiry be made at Bar Harbor as to the best

route.

I sincerely hope you are enjoying your holiday to the utmost.
Cordially yours,

Benj. Strong, Esq.,
C/o Mrs. Markoe,
Bar Harbor, Maine.

Encs. (3)




frie

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