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F.D. 12A.3

002.4-0

No

Federal Reserve Bank
District No. 2
Correspondence Files Division

875%/Ua

P/91DEIZS

SUBJECT




0 ni

if

DIRECTORS.
JAMES S.ALEXAN DE R, Prest.NatBank ofCommerce in N.Y.
STI-,IEN BAKER. President Bank oFthe Manhattan Co.
G. BAYNE. President Seaboard Nat.Bank.
E Cvv iN M. BU LK LEY, Spencer Trask& Co.Bankers.
JAMES G. CANNON, President Fourth Nat Bank.
E. C. CONVERSE. President.
THOMAS DEWITT CUYLER, Prest.Commerciel Trust Co.Phile.

HENRY P DAVISON. J. P. Morgan & Co., Bankers.

RUDULPH ELLI S, President Fidelity Trust Co. Phila.

OFFICERS.
C. CONVERSE, President.
B E NJ. STRONG, J R.,Vice President.

BANKERS TRUST

WILLIAM C. POI LLON, Vice President.
D. E. POM [ROY, Vice President
W. N. D UAN E, Vice President.

COMPANY

I. KENT, Vice President.
HAROLD B. THORNE, Vice President.

E. HAYWARD FERRY, Vice PresidentHanover Nat Bank.
WALTER E. FREW, President Corn Exchange Bank.
F BE DR T. HASKELL,V Press III.Trust&Samgs Bank Chicago.
A. BA RTON HE PB UR N. Chairman.Chase Nat Bank.

FRANCIS L. H IN [President First Nat Bank

THOMAS W. LAMONT. J. P Morgan & Co. Bankers.
EDGAR L. MARSTON. Blair & Co Bankers.
JOSEPH B. MARTIN DALE. President Chemical Nat Bank,
GATES W Mc GARRAH. Rest Mechanics'&Metals Nat Bank.
CHARLES D. NORTON, Vice Prest.First Nat.Bank,

WILLIAM &POI LLON, Vice President.

DANIEL E. PO M EROY, Vice President.
WILLIAM H. PORTER. J. P Morgan &Co. Bankers.

CAPITAL
SURPLUS

$10,000,000
10,000.000

CABLE ADDRESS: BANKTRUST. NEW YORK.

F. N. B.0 LOS E, Vice President,
GEO. G. TH OM SON. Secretary.

GEORGE W. BENTON, Treasurer.
GUY RICHARDS, Asst, Secretary.
H.W. DONOVAN, Asst Treasurer.
BETHUNE W. JONES, Asst Secretary.
F WI LSO N, J R., Asst.Secretary.
R. H.G 1 LES, Asst. Treasurer.

PERRY D. BOGUS, AsstSecretary.
HARRY N. DUNHAM, Asst. Treasurer
M IC HAE LS, Trust Officer.

16 WALL STREET

SEWARD PROSS ER. Prest Liberty Nat.Bank

DANIEL G. RE I D. Vice President Liberty NatBank,
BENJ. STRONG. JR. Vice President.
EDWARD F SWI N N EY. Prest First NatBankKansas City
GILBERT G. THORNE. Vice PreSident.NalPark Bank.
EDWARD TOWNSEND, Prest.Imp& Traders' Nat Bank
ALBERT H.WIG GIN. President Chase NatBank
SAMUEL WOOLVERTON, Vice President Hanover Nat Bank.

NEW YORK ,

July 14, 1913.

Thomas G. Patten, Esq.,
House of Representatives,
Washington, D. C.
My dear Sir:-

'




Your favor of the 8th instant, addressed to Mr.Converse,
President of this company, has been referred to me for reply, and
possibly I cannot do better than send you herewith a copy of a
letter of this date, which I am sending to Hon. William M. Calder,
Congressman from the Sixth District, New York.

My point of view as an officer of an important state institution should poesibly be explained in connection with my letter
to Congressman Calder. No one recognizes the need for legislation
on this subject any more than I do.
It would be my wish, a
officer of this company, to recommend that the company participate,
by membership, with any institution in which the law permitted us
to invest our funds, by which it would appear to accomplish a satisfactory revision of our currency and banking laws.
The bill proposed does not appear to me to accomplish this.
I trust, however,
that further consideration of the subject on the part of both the
bankers and the committee charged with the framing of the bill,
will lead to such revision as may make it possible for bankers
generally throughout the country to give it their endorsement.

Yours very truly,

Vice-?resident.

Atamir of 1i4usrutati1ies11.

.

TununitWron
Mantling ant1 Tun-part?,

,

July 8th 1913)

Dear

sir:,
I am sending you under seperate cover a

copy of the Banking and Currency act recently int=
roduced in the House of Representatives,

Being the only Representative from the
City of New York upon the Banking and Currency Comm-

ittee, I shall be pleased to receive from you any
criticism or suggestion's you

may desire to make,

And will take pleasure

in presenti

the consideration of the Comittee,




Ve

Truly,,IA425e,/!)




j
"--A"2
1ttet-te,L-1-4

/

SIXTYFIFTH CONGRESS.
CAR,

Ass, VA., CHAIRMAN
PHELAN. MASS.
JOE H. EA
TEX.
RIC,
OTIS WIN
JOUETT SHouSE. KANS.
HENRY B. STEAGALL, ALA.

JAMES A. HA.. L., N. J.
ECK. NEBR.
CHARLES 0.
AUGUSTINE LUNERGAN, CORN.
C. H. BRAND, GA.
W. F. STEVENSON, S. C.
THOS, F. SMITH, N. Y

EVERIS A. HAYES. CAL.
FRANK P. WOODS. IOWA.
EDMUND PLATT, N. Y.
LOUIS T. MC FADDEN. PA.
PORTER II. DALE. VT.
ROSCOE C. MCCULLOCH. OHIO.
EDWARD J. KING, ILL.
GEORCE P. DARROW. PA.
JOHN H. CAPSTICK. N. J.

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

WASHINGTON.
C.MHAMNER,CLERK.

December 13, 1918.

Mr. Benjamin Strong,

FILINQ DEPT.

Federal Reserve BanktAl

New York CitftEam., REsErtvE BIM
Dear .Mr. Strong:

oV/
country has

I am greatly obliged for your kind note
congratulation.

The generous way in which the

received my selection for the Treasury portfolic, has deepened my

sense of responsibility, as

it also has quickened

my very earnest desire to be of real service in the office.
Please believe that I genuinely appreciate your personal
interest and your expression of good wishes.

I shall need,

and am pleased to have the assurance that I will receive

your wise counsel and patriotic assistance.




Sincerely yours,

rv-

°




Estes Park, Col.,
September 5th, 1916.

Dear Mr. Glass:

Thank you for your note ofBleptember let
i
advising of the pansuge of the am lTdrit

to the

iederal Reserve Act.
I very mUc.

ate your comments on

n regard to the proposed
7.
amendments
Secil 16. Possibly I can furnish
further data on this/
)slubject, if desired.
Veryier ly yours,
the memorandum I sent

0

Ill1=///r/)

ChairMerrZommittee on Banking & Currency,

House of Representatives,
Washington, D. C.

3\

M CALDER, M.C.
,<TH DISTRICT-NEW YORK

it3gin

uf Itrprmentatiaes 11.

114 Iff
JUL 1 4 1913




June 26, 1913.
E. C. Converse,
16 Wall Street,

Bankers' Trust Company,
New York, N. Y.

Dear Sir :
Enclosed herevdth find copy of the
Currency Bill introduced. by Congressman Glass

es the administration measure.

I would be

pleased if you will examine it carefully and

in
make it

advise me just what you think of it and how
your judgment it should be amended to
a real

practical

scheme.

Yours very truly,

B.

P67
DI R ECTO R 5.
JA,.'"

OFFICERS.
E.C.CONVE RS E, President.

S.ALEXAN DE FR, Prest.Naf.Bank of Commerce in N.Y.

BE NJ. STRONG, J P.,Vice President.

ST

;EN BAKER. President Bank oFthe Manhattan Co.
SAI,LIEL G. BAYN E, President Seaboard Nat Bank.
EDWIN M. BULKLEY, Spencer Trask &Co.Bankers.
JAMES G. CANNON. President Fourth Nat.Bank.
E. C. CONVERSE, President.
TROMAS DEWITT CUYLER, Prest.CommercialTrustCo.Phile.
HENRY P DAVISON. J. P. Morgan & Co., Bankers.
R U DU LPH E LL S, President Fidelity Trust.Co. Phila,
E. HAYWARD FERRY Vice President Hanover Nat Bank.

BANKERS TRUST
OMPA NY

WALTER E. FR EW, PresidentCom Exchange Bank.
FRED'', T. HASKELL, V Prest.III.Tnist&Savings Bank Chicago.
Ai BARTON H E PB UR N. Chairman.Chase Nat Bank.

$10,000.000
10,000.000

CA PITA L
SURPLUS

FRANCIS L. HI N E.President First Nat.Bank.
THOMAS W. LAMONT. J. P Morgan &Co. Bankers.
EDGAR L. MARSTON. Blair & Co Bankers_
JOSE PH B. MARTINDALE, President Chemical NatBank.

CABLE ADDRESS: BANKTRUST, NEW YORK.

CHARLES D. NORTON;Vice PrestEirst NatBank,

16 WALL STREET

DANIEL E. IPO M EROY, Vice President.
WILLIAM H. PORTER. J. P Morgan &Co. Bankers.

I. KENT, Vice President.
HAROLD B. THORN E, Vice President,
F. N. B.0 LOSE. Vice President.
GEO. G. THOMSON, Secretary,
GEORGE W. BENTON, Treasurer.
F.

GUY RICHARDS, Asst,Secretary.
H.W. DON OVAN, Asst.Treasurer.
BETH UN E W. JONES, Asst Secretary.
F. WI LSO N, J R., Asst.Secretary.

R. H.G I LES, Asst. Treasurer
PERRY D. BOGU E, Asst.Secretary.
HARRY N. DUNHAM, Asst,Treasurer.

GATES W. MC GARRAH,PrestMechanics'&MetalsNatBank.

WILLIAM C. POI LLON, Vice President.

WILLIAM C. P01 LLON, Vice President.
D. E. PO M E ROY, Vice President.
W. N. D UAN E, Vice President.

MICHAELS, Trust Officer.

SEWARD P ROSS ER, Prest Liberty Nat.Bank

DANIEL G. RE ID, Vice President Liberty NatBank.
BENJ. STRONG. JR.Vice President_
EDWARD E SWINNEY. Prestrirst Nat.Bank,Kansas City
GILBERT G. THOR NE, Vice President Nat.Park Bank.
EDWARD TOWNSEND, Prest.Imp & Traders' NatBank.
ALBERT H.WIGG IN. President Chase NatBank.
SAM U EL WOOLVERTON, Vice PresidentHanover Nat Bank.

Doe

N E w Yo R K

ills

e,e"--- -----',---:-%\.
e,
,
,

Ote/7

19343.

'

feeicte of the

Our 2re Oonverse has leendo

00,v of Reuse Resolution Nee 64,54, Windt/ d hy le Cla.5/1 "h Italide:71:o
exprese to you me opinion es to the violet ons el , he bine
1 ahail not attempt to ao more' then nisetion a few features

bill,

ehiebe in the vriter's opinion, malts it fatally defeotive.
Pint; Thie plan would riot,
present werlateos of owe

materielly strencthen the

0

o]a.L bezelelne systh,tn the matter of the assemblece

\

and utilization of reserves,
1

es to issue
Second: Under the term of Nhe bill tye;Government pro
additional amounte of cenermeey, whiA meld undoubtedly be :pod, anrIhi eh would
be faraished with= reserve by the utilizatiop,of reservds now held by the beals

=death other weer in the be Of short time commercial papery:bleb the banem
fe.stp, be imported by %a credit of the "mule,
are also to furnish,- it would,.
This is mot, boeuver, in mropinionp_a_iMatrfaWetsmurniorl'7, nor deee it :moot
00 universal orltiOitni of our present eyetam, \ilia can only be not by having
these metee lamed by the "'ellen eaceleelle, undo 7 uitable eovermneet wqpervioion.
'

fiThirde

"lhe eetablisbneat of l eerie:Anal! institutions, as proposed, is,

in Lv opinion, danderoue, mi the 'bill pritetiqr rill not permit tbeee biotite,
tions to meet the dwell/do erhich will be r6n then at times eten conditions exiSe
with whierh baziteers of this country
'aiir4heilinr. If 12 seperato institue
tions are to be establinhad, entire freedom for 4tQrohne of discount should exist,

otherwise, when the burd.012 112 one dietriet 1ez1lé3 too heavy for the loo-1 institution
to earry, the tendency on the part of theeecledr 11 would be identleal with that
now eziate between afferent banlosee iheyibould endeavor to etzeteethen their resourees

rather theh disemnit for the institution re,Niring mob aocixeeedeeione
Reserve Board should be erisoe
See rviaory powero 'meted
1401.2rths
eers of ,, eat radii and everionee, end not by a boOy of .nolitiaal apeointees

meant °Motels.



11irnla. Calder,

oatiefied,, will notrneet the
views of 'bank °Moors throughout the eoreitry elnerslly, raid fear will operate
IL:

The bill in ite presont tarns

in tbc lonc 11232, if passed in its prostraV.form, to restrict the devolorscont ond
usefulness of our Nationza banks in a Txty'that migh.t produce serious consequonoss,
fitzths The iovernrent does TIOt se-ra iolinve recor,lized it* moral oblit.
tion to the Dutional bzw143 zInd att'orded 'Mena entisfactrley protectiofl asnInst

serious loos on no crnership or Gov'rlyseut

oonolucian, this bill In sr" optdon, reflects a mofound distrust of a

lamp body of ob1i

tItOrWat titV3ilte OS mon* nmoly, the Officers mtd, (drool-ars

of the rfational banks. Ocr notional banXing system has shown a troa.derfol arm-% and
served a moot useful rliirposo Iron 7,1017 It bae outgrown the otatate, under which the
oyster! 17Sa orenliZeda *MY OS' the sins with Tideb. the berft have been oharsed under
this systom are those originating in the defects of the system itself. Those, I do
not believe" ere euffielactly ramified 1,)y the propooed bill, or sea they be corrooted 'by ourtailzsont Of the discretion of benlmrs, or witthoidine :F.Yort them the 'ewer
toma.t..4ye their own buzinese.

'These views :arc evressed to you personally', as the initution of rhieh
am an officer to r_ot direotly afreoted- Tbs bill to sem ite preeknit purpose,

harmer, ..:7-triad :1011 Way 4.:71C,117 the views of the national 'hnnisi and secure their co-

operation, L7trt shou10 logd to a universal nooeptnnoe of the /Ann by ofIloors of

state institutions,- to um* a degree, in ftet that their influeuce sztold beed
toward the mondriont of state bcp.Idne Jars throughout the country, co es to enable

them to portleipate in the plan. This I do not thin7:: ocim be Emirate:1 with the
leeislation ae nor: pronosod,

We It--,vo bad hi rsh hopes

none of vPhieh do I believe will be re
have sent Ties,




by the

onoy system,

t øf *be bill which you




PERSONAL.

October 11th, 1914

Dear

Glass:

I very much regret the news contained i4 your favor of

the 9th inst., as I felt certain that our meeting in Uinneapolis
-71/114(be

productive of good results,
shall take advantage of your kind suggestion and be-

fore my next trip to LIshington ascertain whether it may not be
'possible for us to arrange a meeting there, and posfAbly spend a

the
day discussing the work of banks, in which I know you will be in-

terostod, and which it seems to me, we should get together over
before Congress convenes.

-ith cordial regards, believe me,.
Sincerely yours,

Hon. Carter Glass,
Ouse of C4116WiefeRtiv,.;,

ashington, D. C.

BS Jr/V0-3




C6- 3

iqougr nIiarprrorttiattut5
(t.

asiiington,

Lynchburg, Va., November 16, 1915.

Mr. Benj. Strong, Jr.,
Metropolitan ©1140,

Washington, D. C.
Dear Mr. Strong:

Your letter of November lth, addressed to
Congressman Glass at Washington, has been received here. Mr.
/.
Glass has recently returned from,a, hospital and, under di-

'




rection of his physician, is pct giving any attention to his
correspondence at this time

He is in Washington now, but

may leave there Tuesday morning.

I have written him of your

visit to Washington and if he does not leave before my letter
reaches him, he will very likely communicate with you at the
Metropolitan Club.
Yours very truly,
C. D. Hamner, Secty.

Co-"




May 22nd, 1916.

yy dear Mr. Glass:

I am very much obliged to you for your

courtesy in sending me the hearings before the Subcommittee of the Committee on Banking and Currency,

which are much appreciated.

Very truly yours,

Governor.

Hon, C(Irtr_gAas,s,

House of Representatives,
Washington, D.' C.
BS Jr/VCM




Estes Park, Col.,
August 26th, 1916.
Dear Sir:
Among the proposed aleendmente to the Federal Reserve

Act now before Congrese for coriaideration,

izee reserve ban

which author7d

inks
to exchange Federal reservei: cies for gold
1
t

and permits them to include the amount/1j4o received an
a part of their reserves. Understa4likng that a re is some
i

aa>

doubt of favorable action by/go gress

is respectfully submitted, in
cing reasons why tn; r1iT

ble, at this soostoa/ o

he followi.g statement

that it conveys convinuld be passed and, if poseie

f Con'

In the rparatioziJoA the Federal Reserve Act, Congreen

;aognazed the 'AI

nancing of the foreign coerce of

atates ad for ceaay years been dependent upon banking me wary lerai h was under the control of citizens of composting natt4n particularly of Great Britain, and that this
the

iAed

dependence should be removed so promptly as possible.

Congress

sought to accoMplish thic, both by enlarging the powers of na-

tional banka so an to enable them to do a foreign business and
by conferring upon rderal reserve banks powers and functions
which would supplement the neve activities of the national banks.
The Federal

eserve Act, in foci, receanizeo thal internetional

finance is ineeper :bit) Cram intornetional ccmmerce and aims to

establish our financial system upon e basic where ameritall




-2To

Hon. Garter Glass.

Aug. 26, 1916.

credit can finance Americen trnde.

The Fnglish system should

be examieed in t is connection in order to underetand why Englieh banks have

so long been

able

to

control the largest pro-

portion of the world's international banking, and what we must
do to develop and extend our own system upon an equally secure
basis.
The chief and fundamental reason for &Oland's suci

cess, which is emphasized by every English
on this subject, is the ability and
ers

at all

times to meet their

Since the Bank ,.ct of 1f,44

dation of English banking.

for4
/
haa

wiLlIn

authOnlity writing

-ess.

f her bnrkn gold.

the pride and four-

Federal Heeerve Act per-

n s'
.fit the resolve bankt
colatrol of gold, as will
eneble them to di*arge theil blig tions to their members, and

to the pu,1,414-1.3

a new

rtment of Americnn banking, with

the sa e, snccess as tiiienFirrgl'ish banks!
If our Pantry is to permanently tnke over even its
ef 1 8A5155, and is to finance its own foreign
own elle
commerce, its banking syetem must first establish in the minds
of bankers in every pnrt of the world that it is able and willing to export gold whenever the exchanges make it profitable
for its creditors to auk for gold payment.
Our past record
in that respect is bad. nince this country resumed specie payment, there have been at lenst three occasions when gold payments
were arbitrarily suspended by our bankers, bringing discredit to
our barnl,ng system and seriously impairing the, confidence which




-3To

Hon. Carter Glass.

Aug. 26, 1916.

should be felt in our banks; such confidence, in fact, ae is
nne enjoyed by the Englieh eystem and which we muat enjoy, if
we are to compete wite England. In 1907 and in the Fall of

1914, our banks arbitrarily declined to pay geld to their

creditors and in the latter case, to their foreign creditors.
During a recent visit /o London, our action on these occasions

/ creating nn

was Arequently mentioned by prominent hankers tat

almost insuperable obstucle for us to overcom 4 1 our efforts
,n
to compete wite Eliglish bankers in feireign-max* ts, nor did
, it\
any banker with whom I diecusse

tier seem t understand

that thie suspension of intetion

old payment was forced

upon the bank e of New York, pa

in course of being,,,iafe
/

fects of our currerry system
ooeu .4#nces o

our/Oeition.

'44411

ohangt

assed the

was sea

ed

y a eituation that is now
*what by the inerited
hich we hope in time to corree .
914 will illustrate the weakness

August of that year, eterling ex-

14 export point, the gold held in New York

OE 65 (40ering /WU'Se institutions; no one of

them, a I recall, holding in excess of $50,000,000, (The Na..

tional City Bank), the total of all banks in the city being
1bout $250,000,000. Of these 65 institution, not over eight
or ten had connections and facilities for supplying foreign
drafts to enable our merchants and dealers to make payments
abroad.

Had these few institutione, which alone enjoyed the

facilities, undertaken to create all the exchange needed by




-4.
To

Hon. Carter

Glass,

Aug. 26, 1916.

shipping gold to ?rope, their gold would have been exhauoted
in a few days and they had no possible means of replacing it.
The drafte which they soldowould be paid for by the purchasers
by checks on other banks. These checks would be collected

through tee Clearing House and settlement made there, in silver
cortifieeteo end greenbecks ( and later in netionel bank note).
Not only would that have reoulted from the dir4 transactions
of these exchange-drawing banks, but it would

4v.o

reculted

also from the operations of all priteatte-ba
who had facile,
itiee to draw exchange. They woetZ-leve withd
gold from
these same large banks, with
,.ept their accounts,
making payment therefor with

from the purchasers

s whioh they received

te, in settlement of weich,

the banks would a4 recoiv
and greenbacks through the1(ilvek/cortificates the ship
c earing ii u.10. In other words,
mont

//
o9;;;=-iy the)reurTeatItutions which had foreign
---

cennec-

7

tions' imuld havseMeen entirely inadequate to meet the situae
//
tion, \s,,.. i if tOeythad shipped the greater pert or all of
,

---<,-..

their gold-rasli:ves, and, to the extent uhipeed, it would have
promptly reoulted in the conversion of their gold holdings iito.
to silver certificates and greenbacks. During the period when
Clearing flouse loan oertificetee were being issued, teey would
not even have received silver certificates and greenbacks, but
would have received the promise to eay of the varioun Clearing
;louse banke which had to eeet debit baXamices cauoed by the pree-

entetior of the oheoke deposited by the banks weioe had shipped




To

Hon. Carter Glass.

Aug. 26, 1916.

gold0 which they in turn had received from the purchasore of the
amohange.

The only means preeumably available for these banke to
restore their eold renorves was by presenting large umounts of

U. S. not and silver certificates to the Vubtreaeury for redemption in gold.

The average amountof gold held by the Treasury

Department in the general fund available for

redemptions

s

during the pket two yeers hno been trifling in .4mp rioon with
the amount of money of this charecter --whinkagk,t, be presented
t

for redemption, especially it we/I

and silver certificates, the,,t
(including Aldrich-Vreoland no
of 1914. Ihe combitad--gxel
jug the 5 'A Redemp.i en Fund

and during part of\
sum ind

paper

(o

currono

imo,

amou

f greenbacks

of national bank notes

outstanding during the Fall
oe
\\) of the Treasury, includnot then over 4250,000,000,

eh loss than this - a very mall

insure tha-redemption of about t2,000,000,000 of
y, the m tenanee of a gold basis for all of our

d t.,00)onduct of the regular financial Unsinees of

the Govornmeni.

Three tiro* in recent years a situation has arisen
whore the free payment or exportation of gold would heve depleted bank reeerves in this way and thrown the burden of furnishing
large amounts or L;old upon the Treasury. Department, when it

not in position to moot the demand.

was

It would hmvo addci to the
alarm already created, had the gold rceerve of 4150,000,000 been




To

Hon.

Carter Glass.

Aug. 26. 1916.

weed for thie pOrpoce nor, it fact, was it so uved, or its use
even euggeeted in a crieis of unprecodeeted seriouunoes, in 1914.
The foreign exchengeo of the country are settled ale
meet entirely through the banks of New York City. They, in turn,
will in future years largely depend upon the Federal Reserve Bank
of New York for their gold requirements to meet foreign oblige..
tions, when exchenge in net otherwioe availabl and the volume

of these obligation° will increase in proporti 9 to the extent
to which our new banking syetem is succ
own foreign commerce.

Enlarge

arise under the new system t

ful, of the use of acceptance (

financing our

for gol
11 at times
ncouragement, if ouccesedrawn on how York t:smks

English acceeetors are re-

bankers..

gsrded by bankers ft

ke world up convertible at (nice

bank credit which, in turn, can
be con c ed into gold
withdrawal, if the rate of exchange
waken
ceesary or profitable. Bills of a like
upon urriv
1

characi

p

Amerieen acceptors must enjoy thio name quali-

ity And reputation if we are to develop successfully the use of
doller drafts for financing our foreign commerce. Noreign
bankers will not, if they can avoid it, buy large amount of
Now York bills, unless they are assured that. they cel be eertrin of immediate discount, and rely upon liquidating the resulting credit in gold, if necessary. It was, in fact, to bring
about exactly such a development or our benking business abroad

that various provisions were incor orated in the Federal Reserve




Hon. Carter Class.

To

ug. 26, 1916.

Aot and Congress should now carefully consider whothor adequate

means are afforded to the reserve banks to accumulate gold in
sufficient quantity to meet the demands which may and arc almost certain to be made upon us in /liter years if, as we hope,
our internationol banking assumes importent volume.
Coos the

Federal Reserve t,Ot, in fact, Fccomplish what it wo. designed to
accomplish in this resoect!

If Federal reserve notes cannot be jnucd in exchange
for cold, or if the gold so A:cumulated /fhe p
t clumsy
method of exchanom duee not count as p?

f the re erveo of
reservo banks, then the only ao_urr-c-oe41 supply of .4,/o d for the
/7
reserve banks is the reserve posits\member banks, (and
the General eund of thø gevmnnt), th )11stount of which is

\

liv,ited by law and whic

materially beyond the

(Sr wilt this gold
<c\fle state

\
shows a total...

c

lio4--ex$,Oit will be increased
,, --

required to he carried.

:,ote

,lo 12 reserve banks as of June ;i0th
eeerve of .3?7000,000, wnich was about
_

1
,
of d 'orit and note liabilities, e percentage certainly
as low, if t lower than should be permitted for the entire
System under present conditions. The amount of earning es..

69

1

''.:,

sets of all the reserve banks at that date wan t165,000,000,
which earned, roughly, at the rate or 2 i % for the month of
June.

This amount of earning asoets at the prevent average
rate or about 2i 1: has produced net earnings in the first
months of 1916 for the entire syotem of about 2.9

capital.

on the

Aeluming a moderato increase in expenses, it will




,p1111

To

hon. Carter Glass.

Aug. 26, 1916.

take a further investment of, Bei, 00,000,000 at present rates
to enable the 12 reserve banks to earn their current dividends,
This additional investment will
regardless of those accrued.
CPU00 the reserv banks to pay out an equal mount of their

,id reserves so tOet it is undoubtedly a fact that if the recorve banks were to-duy earning their dividendsm their reeerves

fl

would be so low that they could meet no domancqi of importence
i

from their member banks for gold for Wort.

It is frequently stated WO demaiai
banks for discoants by member

e/
babi 4)bo

met byNd.lie issue of

I

\

Federal reserve notes, thus 4,f1 bli

reserve.

n the reserve

em to conserve their gold

That is not_As.---tiket. \ the first place, only 14

/
of the earning intisente o
7.

_ eo
---- --,,
1.\

c

%

Nerve bankc consist to-day

of the discounts OflmerAer bail.e and the demands for discounto
i/
\
has no connection whotever with
by member,ias so'
---

; for/ the issue of iederal reserve notes - that is, for
demand/
rMembei banks apply for discount; when they hew, exourrenty
/
tendeAcaanloa n to their customers to the point of impair-----o

_,",

----- ,
ment of their reserves. They take credit for the oroceeds of
the discount in their reserve eccounts and draw checks on the
reserve banks as these balance's are used for loans or otherwise, which checks are ultimately presented through the exchanges, and must be settled by the payment of reserve money,

that is, gold.

'The reserve banke cannot meet these checks

by the ptle of Federal reserve notes any more than the Rank of

.ngland can require its depositors to accept its notes in pay
mont of deposits or redeem its notes by the issue of its own notes.

To

Aug. 26, 1916.

hon. Carter Glass.

The oeme othtement applieu to other inveutmonts made

by the roservo banks, tht is, government bonds, municipal warranto and bankers acceotunces, (the letter comprising 42 % of
ell earning investments.) These are purchased from brokers
and benkers and paid for by check, which checks likewiee are
presented through the clearings in the usual couree and must
be paid by the use of the benkse rowel-ire moneyl
I deral rot:serve
The only available means of
notes is by delivery or vipment to theee_reLepb rl banks what:0
cuotomers have use for eurrency, and-on those 0 '4,cions the

reserve banks are eometires a

to protect their gold and

by

mulute,or'-.t any re.te,
yt1ing of such demand that

put by Ft total of t162,000,000
i
o r e we agents, but whch does

the reeerve btalks heve-beilm.ablo

of gold which is n 7, held by

not count as pert
able to /Se
/

ment

hes, sr

11(

he no

their re rveo, and iv not directly avail»
or banks.

During the pant 14 or 15 months, since the establishe Gold, ettlement Fund, the Reserve Nink of New York
, received from the banks of New York City, either
v..031032

in exchange for rederel reserve notes or through private transectione with importers, in the neighborhood of t200,000,000 of

gold, which it could not retain. This imported gold, however,
which we should trove hod the power to hold to meet possible fu-

ture demands, had to be distributed to the other 11 recorve
bunks, through the Gold Settlee,ent Fund, in order to eettle
for exchenge sent to Now York by the other reeerve banks for
eredit, and through the other reserve banks huo Woen put into







To

Hon. Carter Glass.

Aug. 26, 1916.

circulation. Tie operation simply distributes gold certifiee
cates, principally of t10 and '.20 denominatione throughout the
country in hand to hand circulation, whereas it should be impounded by the reserve banks nnd held against future emergen-

cies. Nor will re be auccepsful, of course, in accumuleting
gold in a large way againnt issues of Federal reoerve notes un/
til the Congress is willing to make Federal refs rye notes reserve money for the banks tnd until the banks la e able to acf

cept reoerve notes in settlement of Cl-e-arinillo ue balances.
reeerve notes
Objection is made theleepree e of Fed
ee
fe"
unsound,:/'flnti1 end will result in an
for that purpose is
e\

undue expansion of our circuliN, tedium. quite the reverse
p7t, Federal reserve notes,
is true. Undert /lerere
77issued ke.inet difiel unted pa e nol4iy, will be entirely a fiRrge gold backing as would be the
duciary issue and \ thout
e,

riservez coutlelee-ereCumuleted by the exchange of Federel
cues
.Had the Federel Reserve Rank of Yew
renerVe/ notes for old.

ir

tion to effect such exchanges and retein the
gold reccive1 during the past year, it would to-day hold in its
note and general reserves possibly between $450,000,000 end
*500,000,000 of gold instead of about 025,000,000 as at present.
fork b

n

Ate percentage of reserveo would have been much larger than at
und it would be in position to meet
present, possibly over 90
the demende of it: member banks for gold for expert when that de-

mend arises without an alarming depletion of its reserve.

To

Hon. Carter Glass.

Aug. 26, 1916.

Up to tee present time, the loss of gold received by

Reserve Bank of Nee York has been occasioned first,

the Federal

by the investment of its funds, payment for which investments
is made in gold; second, by settlements with other reeervo banks

the Gold Settlement Fund of the

through

balances created by de-

posit of

NOW York exchange, sent for credit, (which

sults in

the

operation re-

conversion of our gold reserve intolilver certifie

cates end greenbacks.)

When, however, a demand' or geld for

export arises, as it will inevitably

sope374myT-

f lone of gold

impair

will be caused by trensactions whi,k,w41, very ra
the bank's reserve position.

A( ber

first withdraw whatever excess

s in New fork will
over their

nerve they may have oly

required re-

When these are exe

hausted, they will li ely apply, .o

us

or the discount of corn-

!
!

mercial

paper

and bi

draw in

gel

the

or expor

tect °Ur' sold,
decrees°

the

o eode of which they will withnote issee cannot be used to pro-

our "ecounte will increase and our reserve will

7

ante'Le)

stated atiev-C,

of gold paid out against them.

were the

And

as

Federal Reserve Bank of New York wil-

ling to invest a sufficient amount of its funds to earn its full
dividends, the amount of its reserve would be so greatly reduced
that we woeld be unable to meet any considerable

demands from our

member banks for gold for export.
This country differs from other modern banking countries
in the vast number of its banking institutions.

for security's

sake this condition demands s larger fund of assembled gold than
is required even for 'nglande



During the pest two yeers, we ivy()




e,12e.
To

Hon. Carter Glare.

Aug. 26, 1916.

witnessed an exhibition oF, strength by England in the metier
of exports of gold, ouch ao has never before been displeyed in
the history of banking. Thio country could never have net a

situation such tee ngland in now meeting without changes in
our laws underteken in time of oeerg,ncy, and risking added
Nor does 'England care to risk the lose of prestige to
alarm.
her foreign banking oystem by suspending goldieeeorte, even

in time of mar.
It should be borne in mind llmr4-44ean.

easury of the

to re t the rodeepUnited Stites is genorelly not
tion of United Stntee notcsei si11rjcertifiotea in times
demende upon the reserve
of crises and that under the n
----.
king them the first agency
banks for 6o1d h v
of redemption, poi:411)0.1y b he sorting process described
above, whic takeo 1 ace nt e Clearing Houees. It i e highly
\\e
their mewbers and
imeort, Y, not only ito---411-0- reserve banks,

the o b ic, but tf7he governnent as well, 'that this process of
otionEhould be fortified by es large a reserve
te
intern

------7

of gold at; can beeeecembled.
any New York bankers have inquired of me why the

Geeral Reserve Bank of New York was not able to accu mulete u

greater proportion of the gold noe being imported and a greater

poreortion of the gold in current cirouletion in snail denomination gold certificates. "-here ere a number of reasona in addition to lhoee waned above in connection with the note issue:




To

Hon. Carter Glans.

Aug. 26, 1916.

At ,resent, when gold is imported from Europe, it is
immediately deposlted with the essay Office and Assay Cffice
chocks are iesued to reeponeible depooltore for 99
sumed value of the gold on the day of deeosit.

of

Thene

t?ke asessay

Ofeice checks are paid through theMbering House or directly
at the New York Subtreeeury by the Josue of gold certificates.

Theo gold certifioatee go into the bunk nceer
ually shipped throughout the country and eut

s and Kre

ifrto

The Englioh eyetem is quit- dift ront4nbi]4\o
England to stand between the

impyi-

Office, or the mint.

TikNof gold

the bank of
the Aceay

tekee ,old from depose

eh mi

itors at the rate of 77 e. 10e

eirculetion.

oounce, issuiig in payment

/

the actual sovereiwe>ne.nede,

end of, any 12 days; to

avoid the inconvenience of

eold importers, the Dank of

uy gold bars at 77 c. 9 d.
meke imp':e' etc, peymm
. per ounce of gold is lose than
i
the eqlu valent
2 days intereni and ro sette in prcticelly
e
ell g
nurchao' a,being mede by the lark of Engle'nd. Some
off
sech plan *mut bepoerihlo in thie country, provided the note
England Jo reeulr64 by lee

provieione of the Federel Reserve Act wore amended and it is

gate to cay that precticelly all the gold imported to the United
States in the past to years would nov be in the veulte of the
Federal Reserve banks, if
itc practice

the

Treasury Department discontinued

or immediate payment

could pay for. the gold by the iceue

ond if the renerve beike
or h

note which would be acp.

ce ted in settlement of Clearing House bulanceu.

-14To

Hon. Carter Glass.

'Aug. 2E),

1916.

The Bank of England is understood to go even turther
than above deucribed in order to insure retaining control of
gold receipts; it is currently reported that the bank always

has enough gold bars at
postpone returne by

the mint for coinage, to indefinitely

the mint to private depositors, so th't all

importers of gold are forced to the Bank of :rigland with their
gold bars.
Should Congress determine to amend th4 1h0te provis-

ions and expect reserve benk- to avail
muleting a more adequate gold reef

issuing #10 and t20 gold cert.ifatee
e
tinued, and greater discretion
r.cessury to determinino:

/

shall be issued

sue of thean

in
ell

fpture.
e ominat

env of accu-

raotice of
uld be gradually disconpresen

in the Secretary of the
etions if gold certificates

mere discontinuance or the isnotes would lead to the replace-

at amount o?-lei-d----crculation by the Federal Reserve

eentf(
notes i1

they Midi doquate circulating qualities and some hun-

io'Af gold certificates now in circelution would
gredually be driven into the reserves, not only of the reserve
dreds o

benks, but of member banks as tell, thereby graduelly increau.ing the strength of the gold reserve of the whole country.
Unfortunately, issues ? f Federal reeve notes, per
ticularly of the quality now in use, are exceedingly expene:.ve.

In fact, the cost, if entirely borne

the

reerve benks, is

prohibitive, unless the reserve banks make use of this very
nethod of




accumulating reserves to considerably expend their

To

Aug. 26, 1916.

Hon. Carter Glass.

investment account.

Thin, at the present time, is highly uncle.-

sirahle and I hive reluctnntly come to the conclusion

thet

ever Congress is willing to autnorize the expansion of note operations by the reserve banks to the degree required, it will be
justified in having the Treasury acsume the cost of the note issue, as there will be a great saving to the Government in the
cost of the present issues

of gold certificates.

banks will indirectly recoup the Treasury, when

The reserve

t4

pay a seare

of their profits to the goveenment.
Course

have mnde no reference

0

xcnange

bankers and econo-

after the conclusion of the war'

m

mists believe will be adverse t

country, possibly for a

long

)eriod, and

of some portion of the

reou)rf

t500,000,000 gold wWilih we heve,

period when the exch

7::23

ees have

hazerdin1jVprophecy as

ocei

d from Europe during the

en in our fever.

Without

eienY such occurrence, it is neverthe-

less surf ciently arossibilitYto require the reserve banks
to make

previt

ation for extensive demands for gold.

As

I hope ha e Veen brought out by this letter, means are not

available which will be edequete for this purpose except through
amendment to the note provisions of the Federal Reserve Act.
To summarize the above, the provisions of the Federal
Reserve Act as they are at preeent, do not permit the reserve
banks to accumulate sufficient gold to meet the domande which
may be made upon them during a long period of adverse exchanges.
There is considerable possibility of those conditions arising.




To

Hon. Carter Glass.

Aug. 26, 1916.

It will take time to accumulste a sufficient fund of gold to meet
such conditions. Unless Congress amends the i,ct efficiently in
advance of the conclusion of the war, it may be found that the
reliance of the community generally, as well AF member banks, upon
the new banking system i11 meet with disappointment.
Yederftl Reoerve Act affords a bneio for the ruorganization o our banking system, and ultimate l4 of our currency
The

f

I

system, on sound lines, but I do not think thatt.lit will provide
moans for adequate development of our,f-areiga lb nking until the

-j
whole subject of the note issue andgold reeriof has been cotproneneively dealt with aomewVru aoJvs indicat

udicen in regard to our curr

Old nrej-

em must be abandoned.

The

object ultimately/te,blrifttle \hrough the agency of the reserve bqnke is to(/ ve but t
'

ium in the flited\t tee - o

ith

serve

47\ kin4101/

f major circulating pled-

gold, and the other 1.-cderal re-

,old reserves in the custody of the

banks.
Ti)

Very truly yours,

Hon. Carter G1RSO,
Chairman, ,jommittee on banking ana Currency,
Ocues of Repreuentatives,
Washington, D. C.
BE Jr/VW




4100(
SIXTYFOURTH CONGRESS.
CARTER GLASS, VA., CHAIRMAN.
WILLIAM 0 BROWN, W. VA.
dOUETT SHOUSE, KANS.
HENRY B. STEAGALL. ALA.
R. PATTEN, N. Y.
EVERIS A. HAYES, CAL.
U. STONE. ILL.
MICA
. PHELAN. MASS.
FRANK E. GUERNSEY. ME.
FRANK P. WOODS, IOWA.
JOE F.
AJLE. TEX.
OTIS WINOS, ARK.
EDMUND PLATT. N. Y.
EMMETT WILSON, FLA.
GEORGE R. SMITH, MINN.
RALPH W. MOSS, IND.
CHARLES A. LINDBERGH, MINN.
THOMAS F. KONOP, WIS.
ABRAHAM L. KEISTER, PA.
WILLIAM W. HASTINGS. OKLA. LOUIS T. MC FADDEN. PA.

HOUSE OF REPRESENTATIVES,
COMMITTEE ON BANKING AND CURRENCY,

WASHINGTON.

CHAS. D. HAMNER. CL.,

LI
j'4'st)

September 1, 1916.
%

..0115!

Mr. Benj. Strong,
Fetes Park, Colo.
Dear Mr. Strong;

Responding to

yours of August 26th, I desire

to state

that the amendments suggested to the Federal Reserve Act by the Federal
Reserve Board, as passed by both

branches

of Congress last Monday, do

not embrace the provision authorizing reserve banks to exchange their

I shall be glad to give

notes for gold,

careful consideration to

what you say on the subject and, if my judgment shall accord with yours,
I shall be glad

to

take the matter up when Congress reconvenes in Dec-

ember.




Sincerely yours,

4.

.ae3FIDIKoD Hill U01 yTXI2

.,,I

,23VITATI1323F193F1 RO 32U0H
YOK3fIlit10 CiMA

,

T73,,
.1

oi

=

3".'TTINIMOJ

Y .0 .V,i_19 nt,,'
.11 IM

mca-rovitHeaw

3

da,

.nPf I ledme/geR

Ya,t

.014,0

lo aluoy o

ats$5.1 a$ lleeb I ,j/,I=
Isla1)37 sAl y4 IcA

frlafie7 ed/ ol bectE,

oh ,ystatoM /sisZ,sewlano0 Io 2edancld dIad yd bee*sqIls

dledI swains a/ alinsd evleacet antshodtuo aplaival
ad/IngeLinao lu/sisa evl:±

edI J:J1I
.soF eviesoR

rit eozlime to:

bnIg ed Iluds I.LIa2 Inl astan

dIlw 1:7000ks ilsde IftenzLItt ym /4 b:te. $0e1Jue wifI tyas U0X Jari,
--u77 Al sa1evnooe7 lase/vie nedw qu Istind cff t-14I $ 1,412.ed




11-fc
.15.1119

44,z Izio%




Estes Park, Col.,
September 4th, 1916.

My dear Mr. Glass:
Since writing you in regard to

amendments to the Federal floserve Act, I
distributed throughout thy
the syotem to member bv,

aer

received

system,

through

ly in the period

1916, is 463,000,000.

side of direct shipments

ss of

ho fund,

throug

e month of July, 1916, wao

The I

t

I

ger:1)4-

from May, 19, 1915 to Aug

which did no,

10.vo

indicatin-jth-atU total gold

figures from the office

This is a net,/

e proposed

,000,000 and for 28 days of August, 0,000,000. This
(

\\ someishat'ilites than
my k
i.fer to you.
e

the figures quoted from memory in

Very truly yours,

Hon. Carter Glass,

Chairman, :.;ommittee on Banking & Currency,
HOUSO of ' ,.epresentatives,

Washington, D. C.
BS/VCM




)2/

rietLIM-

f .4ttaltZ4-

if/
7

-




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