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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 -