View PDF

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

STRONG PAPERS, Strong to Norman, 1922
(List created 6/2004)

January 30
February 2
February 7
February 7
February 7
February 7
February 17
February 17
February 17
February 17
February 18
February 18
February 18
February 18
February 18
February 18
February 18
February 18
February 21
March 4
March 9
March 9
March 9
March 22
March 22
March 22
March 22
March 22
March 22
March 22
March 22
March 22
March 22
March 22
(March 24 C)
March 28
March 28
(March 29 C)
March 30
March 30
March 30
March 30
March 31
April 3
April 3
April 3
April 10
April 14

April 14
April 14
April 24
May 15, with memo on attendance at bank
conference in London
May 18
May 18
May 19
May 23
May 23
June 1
June 9
June 12
June 19
June 21
June 21
June 21
June 22
June 27
June 27
June 27
July 6
July 6
July 6
July 6
July 7
July 7
July 13
July 14
(July 14 C)
July 18
July 18
July 27
July 27
August 3 [with August 3 clipping from NY
August 24
September 5
[September 15]
October 2
October 16
October 18
October 25
November 3
November 10
November 15
November 20
December 1
December 21

Strong Papers Key for years 1922, 1927, 1928:
) = Document is in Papers but prior to now had not been photocopied and included in research binders
[ ] = At earlier date, item was listed as present but no original or copy is now in Papers
{ } = Photocopy exists but original is missing


Jan. 30
Feb. 17
Feb. 17
Feb. 17
Feb. 17
feb. 13
Feb. 18
Feb. 18
Feb. 18
Feb. 18
Feb. 18
Feb. 18
Feb. 18
Feb. 21
Mar. 4
Mar. 9
Mar. 9
M r. 9
Mar. 22
Mar. 22
Mar. 22
Mar. 22
lar. 22
Mar. 22
Mar. 22
Mar. 22
Mar. 22

Strong to Norman, 1922
June 22
June 27
June 27
June 27
July 6
July 6
July 13
July 14
July 14 C
July 18
July 18
July 27
July 27
Aug.31 with clipping from N.Y.Times
Aug. 24
Sept. 7
Sept. 15
Oct. 2
Oct. 16
Oct. 18
Oct. 25
Nov. 3
Nov. 10
Nov. 15
Dec. 1
Dec. 21



Conference of Central Banks by A.LansbuEgh,
sent to Strong by Wadsworth of Treas. Dept.
Aug. 16, 1922

liar. 22

Central Banks, information prepared by
Mar. 22
Foreign Information Service, Reports Div.,
Mar. 24 C
Statistics Dept.
Mar. 28
Mar. 28
Mar. 29 C
S. R. Resolution, 160, in House of RepresenMar. 30
tatives, Mar. 16, 1922
Mar. 30
Mar. 30
Strong's handwritten notes on debts,etc.
Mar. 30
Mar. 31
German Reparation Payments(table,1920/50)
Apr. 3
Apr. 3
Draft(with Strong's handwritten changes) of
Apr. 3
acceptance of -Invitation to attend meeting;
Apr. 10
letter of invitation, and Agenda.
Apr. 14
Apr. 14
Similar documents sent by Strong to Jay
Apr. 14
May 1,141th memo on attendance at bank
conference in London
Similar with changes in red ink.
May 19
June 1
Draft of resolutions, with changes written in
June 9
red ink.
June 12
June 19
June 21



r), 19?.

:dly dear Norman:

I am just beginning to pick up my mail, taking the easier ones

This is my first day at it, and I am simply starting by send-


ing you my warmest thanks for the photographs of your 4mr Memorial.


think it is very beautiful, very appropriate, and you will not misunderstand what I rein when I say that it gave me a great deal of pleasure to
realize what a lovely thing it is.

I am all right again except for a very stiff tongue, a slight
lisp which will disappear, and somewhat shaken nerves.
me on S,turday that the best thing for !T5 now is work.

that porformed the opertion.

Dr. Stewart told
He is the fellow

My other doctor, Miller, who looks after

my lungs, ade a thorough examination, took another batch of X-ray pictures,
and wrote me "the best thing for you is to ignore your lunge, which are
better than they have been in years, and give a little attention to getting
your nerves back in good shape."

So you will see that I any coming along

You are liable, therefore, to be deluged with mail from me wren I

settle riht clown to Decenber's letters, none of which I have answered.

The cable from Mr. Trotter indicates that you have reached London

I hope you get back in fine health and spirita, and ,lease, good

friend, do not be too discouraged.

I shall try and write you a little more

fully and intelligently after I have had or:ortunity to visit lashin4ton.

Yours sincerely,

February ?, 192?.
My dear Norman:

This is really th- beginning of the series of letters to

you, which can

not all be dictated at once, and is to complete the hand written reply to your
letter of December 18.
care of my health.

I definitely enter into an obligation with you to take

You over-rate the importance of it, but that does not lessea

my appreciation of your letter, or of your feelings on the subject.
I sat Moreau,for a few minutes, an

he is dining with me to-night.

Last night
But I shall'

not defer this letter until I have talked pith him, as I am spending the day
my apartment working on that wretched accumulation.
Of course I have realized the difficulties with which you have been
fronted, and sympathize with you in being obliged to face any such situation altV

arose prior to and during the Cannes conference.

Ye have had what I regard

a serious setback due to the unfortunate debacle in France.


I am privately



assured, however, that many Gf the responsible people in the French GovernmentAA4

are fully aware, and privately state that they are aware, of the inconsistenci
and impossibilities which characterize the present situation, but are hoDeles
and helpless in the face of the public opinion.

I somatic es wonder whether thpf:.

have not been more responsible than they realize for making that public opinio:N.

It seems to be a case after all of not what the facts are, but what people thitik
they are.

Moralizing a bit along this line, you must reali7.e that in human

&Praire there are certain things to be accomplished which are possible by ordi
methods; others that can only be accomplished as the result of crises which fo
or change public opinion.

Having had two months in which to do a good deal of

reflecting about these matters, I

Europe, as well as

an inclined to conclude that the situation in_

with us, is of the second type, and that only a crisis will



Montagu C. Norman,Eso,

February 1, 1912.

affc.rd convincing proof of the character to make public opinion.

that the crisis till leave the patient alive.

You rememb

ing about a capital operation which he had performed, when he said that the

operation was successful but the patient died.

My guess

going to get fell, and really more promptly than you or I realize at the moment.
Eut unless I am mistaken,

-re are gcing to have the crisis just the same.

The funding bill passed the Senate yesterday, slightly emasculated,.
anj I am not cabling you the text, because in a matter of such importance


details will reach you directly either through tho news dispatches cr through your
own reeresentative in this country.

The indications ere that it sill erom-tly

nass the House and be signed by the President.

It is freely stated that, it is

the President's intention to conrine the appointments to a commission of five,
to members of his Cabinet, and to members of Congress.

In general, this ;mould

lead me tc surmise that he might make such appointments as !-lecretary Mellon,

Secretary hoover, and either Secretary 'leeks or 4allace, the former being Secretary

of Oar, a man experienced in financial mattere, and the latter Secretary of
Agriculture, and possibly on that acccunt more accejtable to this agrarian coalition,
which has developed such strength in Congress.

The Congres

would likely be the Chairman of the Senate Committee on Banking and Currency, who
is at ;recent Senator McLean of Connecticut, a man of large ability and splendid

His teeointment would be more than acceptable tc me.

From the House,

he might apoint the Chairmen on the same Committee, 1r. McFadden, chose business
experience has been as president of a small tank in Pennsylvania.

He is a gc.Di

fellow, possibly of nDt the same ability as Senator McLean, but a man /the, I believe
would be in every way acceptable and satisfactory.

Such a commission would give

the President three direct representatives in his Cabinet and the nominal 3r titular
representative of the two Houses of Congress in banking and economic matters.

Of course, I


guessing, and have no knowledge of ghat he will do.

I have just dictated a long letter to Havenstein, my previous letters

Montagu C. Morman,Esq.


February e, 19?2.


*haling been prepared for my signature vhen I MS in the hospital.


inflict you with a. Dopy.

I shall not

It is simely a friendly and personal pursuit of the

subject, along the lines of our discussion, with the idea of cheering him u;' and


indicating that we are really friendly, tht, we want to de eonething, end indicating something of the technicue involved in developing these relationships.
In this personal and confidential letter I think I an justified in writing


which I do with the deepest regret, that the French have very much worsened

their position in this country as the result on the one band of their attitude
on the subject of limitetion of armaments as to both land armies end naval establishment, and on the other hend in the reactionary political developments of the last
One hears many comments of that character, and I an told by one of my

few weeks.

colleagues that the reermsentative of one cf the most important French banking institutions in this country, came into our office imrediatel;- after the downfall of
the Eriand government, literall

with teere in his eyes, expressing his distress

that his people at home had so little understanding of public opinion in this

Our position here has become, during the past six months, exceedingly

I shall not recount the reasons, but in brief, it is not unfair to


say that most of them arise from the fact that vs have a very important Congressional

election in November, and as human nature at its best can not eacape being influenced
by the fact that votes will be gained or lost during the next six months very largely by the way in which folks at home interpret votes on legislation °roe now on.
Always have this in mind in passing judgment upcn what takes ,face in Congress.

must not be too sharp in passing judgment upon such a situation, and I knol that
you are not.

Thile the Congressional Inquiry is tehind us, and in general hex been
very helpful to us,

ve arentill being hammered and bang ed, the last crack being

a resolution passed in the Senate a few days ago, calling upon us to produce all contracts
Federal Reserve Bank of St. Louis

for the construction of our new building.

Ye shall try and have


.February ?, 19??.

Montagu C. Norman, Eel.


another hearing on that subject alone, at which to 4111 have no difficulty in


convincing the banking and Currency Committee, or any other committee,

the need

for the building, and of the skill and foresight with -.Mich the operatioo in being

In your comment about demooracy,

I am reminded of the book written by

a Frenchman by the name of Faguet, which in the English tranelstion is "The Cult
some day when you have nothing tc do (if that day ever arrives)

of Incompetence."
get it and read it.

It is a critical analysis, of a very searching obaraoter, of

the failure of democracy in France, and it applies in many regards to this country.
So much, my dear friend, for the present, except a 'ow personal words
about myself in conclusion.
my condition,

He is delighted with

I eat my doctor yesterday.

.rescribes work in moderation as the beet thing nor me, and :,redicts

that when my nerves get back to normal I will be in better
for many ywirs.


than I have been

Ho admits something the doctors rarely are -Tilling to concede;

and that is, that I must have been taking the most scrupulous good care of myself
to have .one through the recent ordeal thn.t. I did, without being knocked out for


wish I mi-Alt fuel the same lack of concern .about,

y,;u that I do about

myself now, and I beg ;ou to slow down, not so much in hours of work or in application to it, but in worry about it.
to me.

That is the beestting sin common to you and

It will take the flesh off of your bones, rob you of sound



your appetite, and ultimately frank you.

If a chance comes for me to get away for ^. visit with ru, and I am not
at all sure that it will, I may try to rersuade you to do something thA, I have

long wanted to do: In a word, out on sore old clothes, and tramp about some attractive
part of England.

Do you think that you could stand it?

I am entitled to a holicay

this year, and if I takc it. in some such way, I ccu!ci justify it by attempting a

certain amount of business at the same time.
My very best to you,

for that letter,

with a great deel of affection, and still more thanks

which I really treasure.

Fe 1.1,:ari


Faithfully your friend,

Montagu C. Norman, L'e;.,

Governcr, Bank of England,
Threadnee dye street,
London, England.




February 7, 1922.

Dear Norman:

This is a belated beginning cf that accumulation of correspondence,
which chronologically requires me to send you first a draft of the letter which
I prepared November 1,

which was far from satisfying me, and which I finally

decided not to sign and send to you; but the draft is enclosed iith

some com-

ments of Jay's simply as an indication cf what has been going through fry mind.

The excuse for sending it to-day is the sterling quotation of 4.35.

It seems

to me that the return in the direction of parity should not nom be marred by
any considerable or violent reaction.

This is not solely from your point of

vie., as I ba]ieve the recovery of the trade of the world is largely dependent

upon stable quotations for sterling and dollars, and se will all benefit by
seeing this brought about.

Sc, selfishly,


an suggesting that you consider

whether any meals may not now be possible4in which, if you please, we might
have some par)forinsuring better exchange conditions.

I am not willing to

sign the enclosure, which would indicate that I am com -itted to the views
expressed, but which you may consider as conversation or thinking aloud.
/ith kindest regards,

Very sincerely yours,

Montagu C. Norman, Esq.,
c/o Bank of England,
Threadneedle Street,
London, England.


February 7, 192?.

Dear Norman:

SO much sates has rolled under the bridge since your letter of December 5,
that I find it almost unnecessary to comrent cn it in detail.

It rewinds me that

I mas not sending you a copy of the recent personal letter to Havenstein, shich
omission is nos corrected, And I enclose a copy with this.
As to ter. Nakaoe; my illness ;7revented my having a meeting sith Ir.

Pukai, shoal you kilos of old, and mho has been in this country fer some months as

one of the Advisers to the Japanese Delegation attending the Conference on Limita,
tion of Armament.

He sill to in is,/ Yuri tis seek tefcre leaving for home, and

I have Tarried him that it is in our min' to have a serisus disonssien of the
central bank 17,1an .with him.

After our conversation I shall grits y.:u more liberally.
The last inquiry on pal-,,e three of your letter

I shall elaborate it now

been aneosered by ',able.

to some extent:

The very recent slight e.tivnce in rates in New Ycrir has been vocasioned
by no real funtlamentml. change in conditions, but rathsr by a nose or less forttitous

increase in the balance

shich the Treasury has been carrying ?ith us, and whenever

that occurs, even though the amount is not very large, it seems to instantly
affect the more sensitive rates in the market.

Their balsnce

round figures, t50 millions, sharaae normally se do not expect the Treasury to
carry site us an average of much over 4'1.0 or ti5 millions,

funds being carried, as you knos,

the bulk of their

by this bank in special deposit

.itu member tanks of the district against collateral.

It seems to be the fate

of our Treasury to continue as a disturbing element in the market from time to even
Federal Reserve Bank of St. Louis

since the abolishment of the inaependent Treasury system, simply because

Montagu C. Nor ;an, Esq.

February 7, 19??..


mostthe country eenace nuv beforecombination or a cealition vhich seems to be
dangerous generally, is a the Federal Reserve System, and


e:airee of 1;reparatiea between Henry F.,r1, Thmas A. Edison, fillisel J. 3

and some of the lesser lights, surA as John Skelton fillians, in a deli

campaien flr cheep credit, Ford going so far as tv advocate printing eap

3oth Ford lad Ediser: `.eve been regarded as miracle workers, the farmer e

eerepaper in Dearborn, which has a considerable ciroulation, end vhieh
to publieh articlef teekly suggesting uneound meney expedients.

This :

;mite confidential, so far as it relates to this coalition, 'whim!, i9 no

far as I can gather, al acoomplished rapt, sad I may say, actually in con

Lhet we are quietly arming for the conflict, and Jay is not in fashiegto
cussing the matter with varieue public bodies that happen to Le seeting

committee, to see that can be done at it.
of ceelation, so-called,
'..e ray

It is the uefortunats out


f !i3ht speared 1sst mouth, /hen Mr. Gimes rent for

in 111121i,a6Ured termu.

Met he Said 1M3 s

-Iemd that I aM sending you an

with the ur.,,lt, reouest that yeu read it from saver to cover.

This is

vrite to -la ;, except to emy thit I hare a confidential letter from Blso

taining a very private and confidential memorandum regard n3 German repa

concerning 1.-eh I shall write him shortly, and I think if it im -,;roler
you might nek him te,

shoe yJu my latter.

It dies ee a lot of e'eod even to be able te aaake this limited

in catching u; in my ccrrespondenee with you, which frankly is one of t
able twinge in the week's dor,: here shish melee the work worth while.
Montagu C. Norman, Esq.,
My best '.:::

yc i,

Governer, Lank of 17ingland,

Threadneedle Street,
London, England.



2ontagu C. Nerman, Esq.

February 7, 1g2.


February 7, 1922.

Dear Norman:

At last I have been able tc read Sir Charles' address,
hich T)11 kindly sent me lith yours of November 11.

He also

sent me a copy in exchange for the printed copy of the Hearings
of last summer.

Nith some of hio statement I am not in entire
agreement, but he does take a lick at the devaluation cranks,
and for that I sae heartily grateful.
Yours sincerely,

Montagu C. Norman, Ecc,.,
Governor, Eank of England,
Threadneedle Etrest,
London, England.

February 17, 1922.

Dear Norman:

This note rill be presented to you by my friend, Ir. Eigo

Fukai, Deputy Governor of the 9nk of Japan.

He has been some months

in fashington acting as one of the Advisers to the Japanese Mission
attending the Conference on Limitation of Armament, and is now on his
may to attend the Conference at Genos to represent the Japanese

He and I have discussed quite fully the subject of more

intimate relations between the various banks of issue, and I have in-

generally of the views which you and I both entertain aa to
the desirability of promoting this plan and the importance of the objects
to be accomplished.

Mr. Fukai will explain to you, as he has to me, the conditions
which are his institution, and something of the intimate

relations which have already been established between the Bank of Japan
and the Federal 1-eserve Bank of New York.

It is my earnest hope that the result of your discussions will
be further progress in the intimacy and effectiveness of our respective
relations with each other.
Montagu C.
Federal Reserve Bank of St. Louis

cordial regards, believe me,
Very sincerely yours,

Norman, Esq.,


February 17, 1922.

we are seeking to accomplish.

?ay I diffidently point out that the difficulty

of language seems to make it necessary for Mr. Fukai, as well as other Japanese,

to take more time in deliberation then is always the case with Americans, who
are so inclineA to speak hastily without deliberation.

You will find in dis-

cussing, important matters with him that immediate progress may not be possible

at the time of the discussion, but that the next time you see him he will have

thought matters over thoroughly and carefully and be prepared to speak definitely

Please pardon this rather pedantic discussion, which may be wholly
unnecessary, but which on the other hand may be of some assistance.
ith best regards, I am,
lours eincerely,

Uontagu C. Norman, Esq.,
Governor, Bank of England,
Threadneedle Etreet,
London, England.
BS .1[U&



wry If, 1V44.

Ilkcontrols in these matters permit of his being put in training for a period, say

seven a year, before the time comes for you te retire?
going to be necessary for you to retire?


On the other hand, is it

I dread the possibility that at the

very time when re may be making real progress together in important matters some
change of personnel might rob us of the fruits of our work.
The other matter is as to my own situation here.

You have been dis-

turbed about my health, and I ae confident that :t is not warranted.


that Moreau said to no indicated that -)ou also had some feeling of uneasiness
[About the question of my successor.

That is a matter of which it is rather

difficult for me to give you any information of value, because I

now nothing

about the possibilities of the future, even though it became necessary for me to

We have a number of excellent men in the bank.

They ere all different;

some have qualifications for one type of responsibility but possibly are lacking
in others.

To be quite frank with you, I am watching then all, and every day

I am putting more of the responsibilities of tee bank upon them an as to gain
a better knoeledge of whoi I might be called upon to recommend in case the time
for my retirement arrived.
But tis to this possibility I must say frankly that I have not the

slightest intention or exieectation of quitting the bank in the near, or even the

somewhat dietant, future, certainly not until well after you have completed your
term of office even though it might again be extended next year.
place I would not colt under fire.

In the first

In the second place I would not think of

doing so until our organization and our ne-o building is perfected and completed.

My health deee not necessitate considering any such action, and the only contingency that I can see as likely to bring it about would be a determination urpri

the part of somebody with authority do do so to fire me.
I feel quite strongly thet some of our recent exchanges of cables have

been most unsetiefactory to you in respect 40, not onlyi\our rate position but more







Wr.Montagu C. N
Governor, Bunk
Threadneedle St
London, En3land.


Mr. Montagu C. N-rman


February le, 1922

2ear Norman:

Between your letter of December 30 and one received day before yesterday,
dated February 8, comes the gep caused by your visit to Cannes.
I shall include in this letter no comnents upon the enclosure (relating to
the hiksbank) which I must reed carefully and study before writin_, about.


yours of February 8 is recent enough to permit me (to iuote your own words) "to pick
up some of the threads".

As to the Genoa conference:

So fur as I can gather, without hevine.

visited Nasnington, there arias to have developed iuite


sentiment favorinj American


participation, subject, however, to its being based upon certain reservations as to
the agenda.

I assume they related especially to three thins, reluotence (a) to

sit at the same table with the Russians, (b) to discuss inter-allied debts, and
(c) to enter an economic discussion and possibly incur obligations respecting

eubeequent action so long as military expenditures by certain European nations
(all of them but Russia are creditors) cannot likewise be discussed.

This is

purely surmise, but I, personally, believe it to be e fairly accurate summary of
the facts.

The Genoa conference we are now advised is postponed for three weeks,

that is until March 29 or thereabouts and we are told that further postponement
could not be trrare;ed with the consent of your Government.

1 am referring to

the Genoa conference in reply to your comeent upon the Cannes meeting because one
seems to have been the outgrowth of the other snl both, I fear, are equally futile

ference at


Unless I as mistsken, there are two possibilities as tc the conCne is that it will be held the last of March us proposed;


Mr. linntagu C. Nor:an


Ophet it will result in the passage of a nu

that it will be

roductive of no material

conference so lone as the conditions for c
as they seem to be today.

Ii this should

ferenee might later be held, to ehice I wi

would be to arrange a much longer postpone
until a date late in the outwear or early

Government might participate with a better

Asking you first to beer in mind
point of view hero, I would like to 'amve

to what minht appear to be a lonical sun:o
hope of a constructive agreement:


ents by Germany, which woule roeuce the am

able to pay, such moratorium and reductioe
to taxes and loans.


Await reti:iot

treeties submitted in connection with the

When the Funding Commission is appoi

discussions are promptly underteeen oy the
with this Coemission.


Dependent so

able reparations moratorium, and upon reas
Funding Commission, seek to bring about a

templated at Genoe, and whic.n. I now regard

possible after discussions with the Fundin

agrement to be arrived at as to all of the
in November of this year.

Some of the matters touched u,on

my rs'sons for such a pronram &lore tease
written him.

Please beer in mind, eoweve


Mr. lonte- u C. eel-an

important bearing upon our correspondence regerdine th



are certain fa-tures of eer ,resent political situetion he

no twitter how embarresaing or mortifying it may be to admi

The crux of the matter is, from our standpoint,

System han been cherged with being the arch enemy of the t

thet cites hts n large representation in Ccnereas end, cene

position at the fells ther en importstt election comes &lo

ergreesive in defentine ledslation, which they heve the p
been able tc enact important leelsletion.

In the Gee of

antegonism in Conerese, the Feeerel Resorve System muet, t

rely for its protection geinet kclitic.l attack end inter

Up to the present time I thin': I can tr

had that sueport in a satisfactory, in f,ct in

very coura

The importent thine from our standpoint is to

which would h-vo a political efect and welch would embarra

which includes our beat frie0s.

Since you returned home I have been itcreeeingly

faring a determined hcstility in Congress of a oL.:or sei

for uo to combat because of the ignorance, in fact the inc

Cergreoemen to speck Ir defence of the Systee, to matter wh

We cannot afford, practically or pcliticelly, to em

ignores the policy of the ndeinistretion, ehice would poss

istration and plexe us in tte position where we could be (it

the repeated efforts which have been made in Cengreen to ef

sibly vital modificatiors In the underlying principlse of

Ther fore, %a I wrote Bleckett, and es I shell now repeet t

from our stendpoint, that the wise course in any effort whi

arrarge for a conference along breed lines for the discussi

in which we are all interested, is to postpone action until


Mr. Montagu C. No


Wtmosph -re is cleared.

You would be the last one to advo

very existence by interposing, independently of our friend
Ailof their policies, in any way which would embarrass them.

a repetition of the briand episode in Paris, the opportuti

at the November election, when it will be detaraited uhat
a democratic Congress.

This is a bit of a digression fr

the confarencs at Carnes, but it fits in with the gonural
cussing in your letter.

I as 8.rtyto have the intimation in the iliat pa

Colonel is not as happy a spokesman as we might have to s;a

1 had beard the same sontimeat expressed from

as these.

feel at liberty to write me particulars I .maid value acme



Everything that I might write is rely L. t

think is covered above.

This is t8p6C1611y true as to

reparation payments by Germany and the dependence of that
done as to the French indebtedness to the ..cited States.

You ask stet may be expected aloag

Washington when you wore were.


It is imaosainls ;'or ma

satiafactorily until after I visit 14asainaton, and tau o.t

tained in my otner letter in which I mentioned the


in the senate and the inference edict might be drawn 2rom

17th that I muat await further information before sending

Viseering's illness, of course, modifies the sa

be expected, failing Viseering, to undertake tue difficult


Mr. Montagu C. Norman

*ind itimpossible to continuo to make our rate changes pra


Your cables are of so much more recent date that I snail d

ject in a separate letter referring to our cable correspond


Viseeringle illness ie really a snoo. to me

It struck me that in many ways he had unusual qual

the Austrian situation, and, failing Vissering, I am wonue

might be expected to undertake this huge task with the int
which we could expect from him.

I must write you later in regard to the ftik

memorandum will re4uire more study than I can give it today

This completes my meat inadeluate, and 1 fear un

to all of your letters which have accumulated during my illna

as 1 have,the better part or today to reading them and rep
pression grows upon me that if it is pcasible

or me to arr

to gat over t- afe you acme time this sua:;itar.

IL may not

tne difficulties of our situation at home, but it I can do
notice and would be iuite willing to mL.ko tae trip ..ven if

than a week with you In London.

It is of the greatest poseible value to me to have


in your own letters and the encloeures, and when t

can spend some time in Wesnington discussing these matters
to send you som.Anin

Tore definite and satiefactory en .11

they cover.

pith warmest regards, I am,

Very sincerely you

Ur. Yontaeu C. Norman,
c/o Bank of England,
Threadneedle Street,
London, England.

February 1P, 1922.

Deer Noraen:

Referrink: to our exchange of c bles ire regard to rates, which ere

aeperately corfirmed, the situation here just now really does not permit of our
doing whet we would otherwise most like to do, end thet is maintain our rate et,
say, one-half of one per cent. below yours.

Evidence continues to multiply thet lijuidetion has been almost completely arrested in raw materials end largely in the level of wages.
retell prices continue small declines.


Wile we have had a magnificent boni

s I judge you have clew, accompanying it there are unmistakable evidences

of the development of some public speculation in stocks and even in comeodities
in a small way.

sligbly above ours.

The Treasury is borrowing large ercoents at rates e,ual to or

The rate for commercial paper, uhice comprises the bulk of

bank borrowings, is still at least (11,-heaf of one per cent. above cur rete, and

it leecomes a matter of serious Moment under these conditions to induce


stimulation to any speculative spirit, such es would be 6 reduction of cur rats
to four percent.

There is one circumstance in connection with the money market

which may result in altering this condition, but it lice not yet developed to a
Feint shy re we can gauge the effect.

The Tre:sury during, the past few weeks bee

had abnormally lerje trensactiens in the money market.
and the effects sill disappeer in the near future.

This will be behind us
They happen to have

coincided with the beginning of the plowing Beeson in the South end with some little
revival of business in certain lines.

It is not Et all out of the juestion that

within the next few weeks we will have e further distinct sesia, of money in New

If we escape en outburst of speculative tendencies that develop here so

Mr. Montagu C. Norman


rapidly it then may be possible and sound for us to come down to four per cent.
One thing that must always be borne in mind about the Pew Tort- rate is


that a reduction by our bank inevitably brings an insistent demand from other
rectionc cf the country that their reserve banks should make correspendini: re-

ductions, and one which it is exceedinily difficult to withstand.

Even ttough

ccnditions arise within the next few weeks or months that justify a fear per cent.
rcto In New Y!-rk, we must still consider whether we sould not give rise to serious

embarrassment to the management of other reserve banks in conseuence, where lower
rates thnn those, now established would mo,lly be a 'senate.

One think is not at all clear to me about your own situation.

lith ways

,Lld means &dvancoe, as I understand it, entirely paid off, or very materially re-

duced, wh:t causes the surprisinc ease in your money market?

You are fully one

per cent. below us here, notwithstanding the enormous re,uir meets of your Treasury,
represented by heavy ttices, and not withstanding the hoary peymi,nts which your

Government has made in the reduction of its foreit7n loans.

of a real paralysis of trade,


16 ICI; Lmdicetion

if so, hew long is it likelj to continue?


the decline in your commodity prices in recent months brought much confusion to

I shall cable or write promptly in case there are any indications of a
change in cur situation which would justify a change in our rates.
Faithfully yours,

ontagu C. Norman,
c/o Bank of England,
Threadneedle Street,
London, BS.MSB

February IP, 1P22
Deer Norman:

Your cables 34 and 37 reluire a somewhat more extended reply than I em

able to send by cable, and I sm especially anxious that you should understand our
position, although, es I wrote yon_: when our correspondence with Hevenstein com-

menced, I felt very certain that it would be impracticable for us to consiier any
credits to the Reichabenk so long as the reparations matter remained in such an unsatisfactory eosition.

Referring to your No. 34 by peragrephs:



This is in part the subetence of our difficulty.

I have

long believed that the amount of reparation payments must be determined by Germany's
capacity to pay, reteer than by pcliticel exigencies in France and Beizium, and
that so long as the latter considerations control and impose upon Germany payments
in excess of capacity we must expect

a serious effect upon mark exchange and, correspondingly,

to a greater or lees extent, upon the other exchanges.

The amount of the proposed

gold loan asked by the Reichsbenk is too small to be materiel in enabling reparation
payments to be made end if extended to facilitate such payments suce loan would -e
made in violation of the very princil,lea for which I believe you and we ere contending.

Of course I assent to the principle which you state, but

again the amount of the loan proposed will be but a drop in the bucket toward effecting stability.


Agreeing as we do personally (and this is only my i;rivute

view) that the whole subject of reparations and inter-allied indebtedness must be
dealt with as one subject, could I personally justify recommending credits to the
Reichsbank when I so radically disagree with the present program of dealing with

Mr. Montegu C. Norman



- e,




the inebility of the Peichsbank to secure a temporary
advance may not to likely to assist settlement, but may not an actual crisis be
To be Bur

hese matters?




7i. 4 i

014desirable rather than that the Reichsbenk may be denuded of its eold before some e e
scheme of settlement is arrived et.
(E and F )

I agree with you that in ordinary circumstances we

would not allow a political consideration to influence the ordinary relations between
a bank correspondent and ourselves, but, unless I am mistaken, the principal eolitical


influence or pressure now being felt by uerwony is that ahich arises from the

political exigencies mentionee in paragraph (A) and makes it impossible to consietor
a credit for the Reichsbank without at the same time considering these very eolitteW,

The suggestion in regard to our xeotine Revenstein'e re uest

conditioned upon complete autonomy of the Reicbaeank contains the earls of real daeger

which is touch,-d upon in the first paragraph of your No. 37, to which cable I replied
on February 17.

The point is this:

Immediate publicity was given to our cor-

respondence with Mavenstein in Gereeny and it was cabled sou this country.

It is

impossible for ue to determine to what extent similar publicity may not be riven to
any transection which we might undertake and to any conditions which we might impeeeVy guerre is that the object of the loon is to place the Reichsbenk, or the Gereen

Government, in position to erecticelly announce that credits have been arrenead ey
the Reichsbank with the federal Reserve Bank.
from our previous experience.

At least the implication is neturel

If that is so, and should it be published th,._t vto

had extended creeits and had imposed conditions reepectine the eutoncmy of the
Reichsbenk, I feel very sure that it would arouse a storm of protest here based upon
the charee that notwithetanding the policy of our Government to refrain from any
participation in reparation disputes the Federal Reserve eank, s.ctine independeetly,
was undertakin

arran ementa which would defeat the policy of our Government.

do I think that ae should enter into suce


credit arreneement with such stipule




Mr. Montagu C.

itteched without


my opinion, wou


Lined in p
feel so atronely t



I mot def


Mr. Montagu C. Normsn



on Thuredfty to enable me to do


then re&i it.

In the meantime, I cabled


you es follows:

*Are considering proposal paragraph first and sugieet no intimation
to iamonstein until you beer from ua.
Am g1E,a to *rite 'Aim
personel views as to autonomy concerning which I am writing you
c/o ;ilk of Englard,
Threndneodie Strset,
London, gngland.
I r. Montagu



Mr. Montagu C. Norman



worth cons

February 18, 1922.

Dear Norman:

This is in acknowledgment of your letter of December 23.

Since that

letter was dictated changes in the situation make it unnecessary to send you comments in dateil, the point being that the proposals outlined in the "aide -memoirs"

have, as I understand it, once again been modified, and the payments now being
made are simply those due to Belgium under the priority stipulations.

The only comment which I can make upon the proposal as to the Reichsbank
is to indorse fully in principle what you say with but one reservation:

I think

we must recognize that whatever principles and whatever theories may be regarded as
sound and controlling as to the autonomy of banks of Jesus in times such as we have
experienced since the war started, the principles and theories give way to force
majeure and if those who control the German Government find themselves unwilling,
or believe they are unable, to concede such a degree of autonomy to the Reichebank
as seems essential from the standpoint of the Allied Governments, they will not

concede it unless they are forced to =Weds it.
No arrangement for a technical advisor will overcome this difficulty,

unless the technical advisor has either the authority of a treaty or of an army to
fall back upon.

I deeply sympathize with Havenstein and with his difficulties,

but cannot escape the practical view that to expect the German Government to vest the
power of veto of their entire financial and economic program in the Reichsbank is a
great deal to expect indeed unless that power of veto is conceded as the result of
the application of irresistible pressure by the Allied Governments.

To express it differently, there are a variety of means which may be
employed to insure a compliance by the German Government with the demands of the

mr. monta.;u C. 3orman



Allied Governments.


One is the threat of occupation of the Ruhr.

subordinate to this threat.

Do you seriously :relieve that the Reichsback, except

backed by all of the authority that may be exerted by the Allied Governments, can
accomplish what is desired simply by the appointment of a technical advisor, whether

neutral or otherwise, whose duty it will be to see that the printing press is limited
in its operations?

I frankly can't see it, .nd the proposal impresses me as

being subsidiary to the main issue, whice is whether the influence of the Allied

Governments will be sufficient to induce the Germ= Government to impose sufficient
taxes and to float sufficient permanent loans to Meet reasonable reparation
obligations, or whether, failing to do so, France is to be allowed to send en army int

Sympathizing without reservation withthe principle which you uu:Test


in regard to the Plichsbank, I cannot help feeling that practically the arrangement
will not be effective however it may be attempted.

In a later letter I shall make

some reference to this in so far as it affected my reply to your cable regarding
the gold credit.

It has undoubtedly occurred to you thLt the ultimate limitation upon
reparation payments by Germany is the ability not of Germany to pay in en economic
sense, but the willingness of the German people to maintain a reasonably sound

Government in office which is willing to carry out a reparation program that is
sound, and that pressure for the imposition of a Grogram of reparations beyond
that point of willingness will result in a government which will be incapable of
making any payment of consequence.

It has struck me recently in reedits; press

despatches from Germany that the factor of safety in this respect is being daneerousle

ly dissatisfaction with this, and other letters that I am dictating to you
today, arises from the fact that they cover essential matters which we should
luietly discuss and for which letters are a very inadeauato vehicle in which to
express ones views in detail.

 Mr. lenta7u

Yours very sincerely,

C. Norman.

February 1E, 1g22

My dear Norman:
This will serve to acknowledge receipt of your iota of December 1,-,
enclosing copy of a memor.uadum dealing with the Austrian financial domestic

The new developments in this regard in this country are, first, the

of the Funding Bill, which undoubtedly gives authority to the com-ission,

when appointed, to deal, within certain limitations, with the Austrian debt to
the Grain Corporation.

You may not have observed, however, that Senator Lode

has introduced a bill in the 3,-nate providing specially that authority is granted
to deal specifically pith the Austrian debt.

I have no information r.s to the

statue of this proposal,and cennot well obtain it until I am next in Washington.

It impressed me when I learned that the bill had boon introduced as evidence of the
continuing interest of the administration in the Austrian situation, and still more
us encouraging evidence of their desire at least not to be an obstacle in the tray
of dealing with it, or possibly .-s evidence of a J..eire to affirmatively assist
in its solution.

This affords me en opportunity to repeat what I recently 'rote you, that
I have a. !pod del of diff culty in writing satisfactorily about some of these
matters until I have opportunity to visit with some of my colle:gues in Washington.
It may to twc of three weeks before that it possible.

Very sincerely yours,

vx. Montagu C. Ncrman,
Covernor, Bank of England,
-Threadneedle Street, London,

Federal Reserve Bank of St. Louis


February le,
Wy dear Normen:

This is replying to your second confidential letter of December 23,
in regLrd to the Guarailty Trust Company's proposal to acuire an interest in one
of the discount companies of London.

No word of this matter reached me until your letter arrived and I have

made no in.uiries on the subject, feeling that wht you haws written me is too
confidential to permit of my iniuiring.
Without having opeortunity to hear from the other side in the matter,
it strikes me offhand that the position expressed in Peget's letter, su
by your explanation, is perfectly sound.


.n the other hand, there is this point

to be considered which !Key not be controlling but which has some beurine upon our
own plans.

In the long run, may we not expect that a better spirit of coopera-

tion will be promoted between the bankers of your country and 'tire by a Larger

common financial interest by American investors in your markets and by /our investors in cur markets?

Assuming th,t a sound basis could be Jeveloped for some

such transaction ne the Guaranty Trust Company

ro;osed, wouU it not in the long

run be the sort of thing which we could afford to promote?

I am influenced to

suggest this point of view by the fact that European capital is seeking that type of
partnership in similar enterprises in New York.


ceptance Perk is an example of whet I mean.

It may be that from the point of

International Ac-

view of the 'eank of 'England the specific trans ction to which you refer, because of

personnel or for some other reason, did not appeal to you as

desirable one, but

I shall hope that your letter might not indicate that your mind is dosed to some
of the edvanteges which would accrue out of the investment of some keericen capital
in the i.ondon money merket.



Nr. Monts:u C. Normen
Faithfully yours,


February 21, 1922.
Dear Forman:

Reverting now to the sixth paragraph of your letter of February 6,

I have had opportunity to study Mr. 41118 letter of January 27 and the accompanying memorandum.

As you say, there is an attractive

method of expressing hope that you would be the kind heartJa 4entleman to "bell

the eat",


on the other hand, I cannot refrain from an ex,:ression of

sympathy with hi4 point of view if one eliminates the peculiarities of his own
position in the so-called Scandinavian Economic Agreement.

The defect most observable to me in his letter and the announcement
lies in what h s not been stated rather than in the opinions which he express ,)s.

It is a little curious taut i should hive sent you a draft of a letter prior to
the receipt of this document which so nearly coinci:es rite his own views.
It has long been my belief, (1) that restorini; starling to parity wiA.h,

dollars on a gold basis rill affect so large a part of the treeing world that It
be distinctly beneficent in effect;

(2) that the re-establishment of parity woo .

re,uire the employment of a very moderate amount of credit if certain abnormJ1
influences are eliminated, and those are (a) German reparation payments, and
demJ):is for the 1-,Ayment of the debt due 4 the allied governments to our yovern.

and, in consejuence, similar demands by creditor allied governTents u:on the]

(3) that once our exchanges were within the gold shipping points nom.-

paratively slight difficulty would arise in inducing Japan, Scandinavia, an
sibly some otaer countries, even including Holland, to fall in line;



the first decision rests with you.

Of course Mr. Noll naively ignores reparations and inter-allied deb
It may be that he and his Scandinavian colleagues are too much out of the current


Mr. Montagu C. Women

of the exchanges to feel the il:Cluenee of reparation payments and that his
eiseion of this consideration is a natural one.

On the other hand, he also omits any reference to what would be your own
case in Enzland if sterline should experience a further recovery of fifty cents

in the pound in the matter of your domestic prices and your foreign, trade.

have nor experienced a reeceery from a low of about $5.53 to about $4.40 which in
itself must have imposed some strain upon domestic prices in their relation to
those of some of your principal competitors.

Could British export trade

readjust to a further recovery of, say, fifty cents in the pound?

While there

would doubtless be a considerable section that could opeose a pro ram of prompt
stabilization of about gold verity, would it not in general be confined t


who export finished goods and who ieport little in the way of raw meteriels with
which to manufacture those goods, - that is to say that class .of ex,,orts the

principal value of which is created by labor or processes.

As against their

attitude there must be a large section of your trade which is interested in
normal prices for sterling because of their large imports, and certainly the 3ritish
Government is interested in the restoration of parity in its capacity of debtor
to tnis country, and the interest would be by so much enlerged were developments
to result in the payment of interest on your debt to us without corresponding collection frog

your allies who mie:lat be alarmed by an appreciation in sterling

without a corresponding appreci.tion in their own currencies.
Summing it all up, Mr. Moll's correspondence impresses xe as indicating

a fine epprecietion of the value of stability in the exchanges and of the importance
of your making- the first move in that direction if you can afford to do so.


seems hopeful that he should et least lee in the frame of mind which might make him

the spokesman for a revision of understanding between the Scandineviin banks that
might result in their joining the ranks.

You will have op,ortunity to discuss

this with Mr. Puke', who will explain to you the eifficulties inherent in the

Japanese situ,tion,

which do not impress mo as insurmountable by any Mbt.118.


Mr. Montagu C. Norman


Since dictating a number of letters to you the latter part of last


week, which are eeing mailed today under dote of February 18, I have had op-

41 portunity

to get a little indication of the situation in Washirgton, and, in

general, I am gratified to learn that the subject of the exchanges,

nd some plan

for their management and stabilization, is 4 growing topic of conversation and
its importance is being increasingly apprecihted every th;y.

We have been asked

to furnish all of the information which we can gather on this subject, end I am
planning to go to Waehington upon my return from Chicago ilext week ac as to
ascertain. just whet is contemplated, and, if possible, to escertEin whether some

affirmative and constructive program may not nce be discussed pith the sympathy
of the Administration.

Since dictating the above, it hes just been announced, as I am cabling
you today, that the President hes apeointed Secretaries Mellon, Hughes and Hoover,
together with Senator Smoot and Representative leurton as members of the Funding

Upon the first three names I need not comment.

of Utah is one of the leading and influential republican senators.

Senator Smoot
He is a. man

of very considerable experience in the financial aspects of our leeisletion and
is regarded as one of the watch dogs of the Treasury.

He is a thoroughly honest

and intelligent men and among much the highest in rank of ability in the Senate.

Congressman Burton has formerly served in Coneress and later in the

He is from Ohio;

is a sound money man;

and hhs been a student of

financial matters all of his life, end the author of some books on economic subjects.

He, also, 13 an excellent apeointment.

The surprise to me is that the Presieent ignored so-called comeittee
appointments which mieht have appeared to be natural in the circumstances, that is
to say in not appointine the chairmen of the finance committees or of the banking
and currency comritteee.

He bee, however, picked two excellent men from the

legislative branch of the Government and I believe those with whom this Commission




0 mu,*






Tfar, iNg4

Qq pcolvinlvifuoo uodn aTt leolovilwqo ;o Qq4 uoIseit,Do0

Fui4Jeteu uTyBt o4




op ArloolIp






noA pinom


tqu Jo ltpAPGie PuoTia 071 Quit Jo




ATInplIv4 sine. I


'Tp Olquofi
Auve do
uPqoaq.1. 0TP0 '40914s
4uopuoi pwri3t2








=AU-V.131j 3ON30N0a1.331.11UCO



March 4, 1922.

Dear Norman:

It will, I fear, take you some time to digest the letters with which
I recently inflicted T.,u.

Here is one more!

Thinking ever the occurrences

of the past few months, I can not help but feel that you may have become somewhat dissatisfied with the way things are going, both at home and over here.

Please bear in mind that le are in the midst of a difficult and complicated
political situation which may not clear u: until after the elections in
November; certainly not until after the Treaties are ratified.
no ,,art of our business!

Politics is

You mill agree with me, however, that those who are

responsible for the policies of such institutions as yours and ours can not
claim that they can wholly ignore political developments, and that they alone
have such knowledge and wisdom as is needed to guide the nation's affairs in

economic matters and are therefore superior to the executive and legislative
branches of the government.

ie here Pre simply the creatures of Congress.

Our powers and responsibility can be modified or swept away almost overnight,

and as in all democracies, one's best judgment must be devoted to determining
at what point it is possible to stand firmly for principles and at the same
time risk the consequences of having those principles overruled.

Such is our

present situation.

In the present circumstances, and until the atmosphere clears in
Tashington, there is nothing that we can affirmatively do in the Austrian matter,

Montagu C. Norman, Esq.


March 4, tnt.


Thin is all very cryptic and mill be unsatisfactory reading.



am. led

dictate it, although largely a repetition of what I have already written,

Ilibecause I have just returned from Nashington where I have been discussing some of

these matters with our friends there.
Ae to your cable No. 41, let me express a 7urely personal opinion for
what it is worth.

I do not see any advantage to result from Sir Silliam Goode

coming to this country, although it is not a matter in which w
suggestion or in which we would desire to interfere.

Your Treasury h?s, I be-

lieve, a representative here now discussing these matters.
a favorable impression.

can rake any

I think he has made

There is nothing that can be done anyway until the

Funding Commission is confirmed by the Senate.

If oonfirmed, they mould see-

to have adequate powers, as I underpt-nd it, to deal yith the Austrian debt to
the Grain Corporation, etc.

Put until confirmed, nothing can be done.

statue :-f the confirmation proceedinze is a bit complicated.


A constitutional

question has arisen as to whether a member of Congress can serve upon a commission
which he voted to create, even though members of such commission receive no
compensation fror the government's funds.

This question (as to Smoot and Burton)

vas referred to the judiciary committee of t!-:e Senate, which has only recently

reported that it desired another ten days in which to examine into the question.

In my absence, Jay cabled you what he had learned as to the status of
the Austrian negotiations for a loan.

It might be unfortunate for the unofficial

adviser of the Austrian Government to get into o,,osition where he could claim that

he had been the one to work out an arrangement (es to both new and old loans) of
the character now desired.

Those who are familiar with the matter in our

government are so fully informed of the situation and are, in fact, so



with the difficulties to he dealt with, that it would be very easyAto creato
wrong impression of their attitude, and that of course would be most unfortunate.


March 4, 19??.

Mantagu C. Norman, Fee.


ke to our rate situation; I still have some little hops that we may be
able to reduce tc 4 per cent. later on.

But let me review to you some of the

circumetencee with which we are nee confronted.

of gold.

In the last fourteen months we have imported nearly $700 millions

Sc far it hat only functioned in the may of eayine debts, but it

creates reserve balances Which the eember banks may, and doubtless will, gradually
use in building up e credit structure, which le are unable to restrain.

Our Nov Tork stock exchenge loan account has increased ebeut

$230 millions since the low point of July, l921.

Meat hes advanced from t1.00 to t1.50.

Corn from 17 cents on the

farm last summer Le 70 cents at the primary markets now.
from e low of 9 cents.

Cctton is at lecents

Similar advances have taken place in lambs and sheep,

calves and cattle, hcge, etc., etc.

The general advance in the stock market

and in the prices of these basic commodities indicates that the pendulum is now
swinging in the other direction,


from laet year) and that in due course we may

see a. development of speculation that will need curbing.

The proposed soldiers' bonus act has nca taken 9 form which may, in

the opinion of eeme critics, ehou7d it pass Congress, impose additional loans of
t50C' millions, or mare, upon the banks cf the country - in other words, inflatione

All of these things need watching for k while before we can tell whether
further rate reductions will be safe or not.

If things flatten cut this summer

as it is possible they sill, then we might come down to 4 per cent., which
make it muoli easier later on to advance to 5 per cent.



It is going to be very

difficult for us to get our rates up at all, however, with conditions as they are,
and I am loath to surrender such little advantage, as ve now have, in the money
market, represented by the difference between 4 1/2 per cent. and 4 per cent. until

conditions really justify our doing so.

The sign

Montagu C. lorman, Esq.

Perch 4, 1922.
able in a geed mEn

prices /Het I have

relating to unempl

some bunineee expa

You my h

gard to foreign lo

would indicate tha



by bankers, with e

such ?roieoted loa

publicly of ehat h

The atmo

look upon the Ceno

I hear many

conference until som

satisfactorily solve

are rel:!e to reduce

inflating currencies

tion paymente on sou

of the ere simply is
are 'forth.

I do wi

illness has left me

are bocoming impatie
the 9th for ten days
as often as you are

Montagu C. Borman, Es
c/o rank of England,
London, England.



March 9, 1922.

Dear Norman:

Your letter of February 23 is just received and I shall read the enclosures which accomranied it during my absence.
Your cable advising of the probable :-Assage of legislation securing

the autonomy of the Reichebank interested me very much indeed; but I hope you

do not mind my expressing some sketicism as to how effectual the proposal will
be in the face of emergency conditions.
between the nations not to use poison gas.

It is a little bit like an agreement

The agreement holds good until the

nation is threatened with destruction, when any weapon is likely to be brought
So I fear it might be with the Reichebank if the pressure for

Ilkinto use.

reparation i::Iyments become too great to withstand.

This morning the news from Yashington sems to make clear a number of
matters that have been in doubt.
regarding the Genoa conference.
earlier letters.

The first is the announcement of our attitude
This I think was fully forecast in some of my

On the whole, and in the long run, I think that you and we

may both anticipate better results from non-participation by the United States
in this conference than if we did attend.

Another iashington despatch indicates

that Messrs. Smoot and Burton will likely be permitted to serve on the Funding

Pd.& is not o'ficial, but if it proves to be the case, the Commission

will be by eo much the stronger.

The third is the evidence of organized, de-

termined opposition to the Four Power Treaty covering Far Eastern matters.


may be interested to know that every one with whom I have talked in lashington
has stated that it is his best opinion that after the usual amount of preliminary
discussion, and possibly a lot of very severe criticism of Senator Lodge, the

Montagu C. Norman, Esq.


'Treaty will certainly be ratified.

March 9, 1922.

I hope that will be the outcome.

During my absence you are likely to hear from Mr. Jay in case anything
imnortant transpires.

Referring now to yours of February 20, part of it is answered above.
You will, I am sure, an-reciate the difficulties of our situation as
to Havenetein.

I have written him more than once, and in my last letter intimated

as strongly as I felt justified in doing, that so far as my own personal views
went they were -uite out of sympathy with the present eoheme of reparation settle-

ments, and that that was a definite obstacle to our extending credits under
present conditions.

Of c urse it is no more than a pereonal opinion which

doubtless he will interpret as an indication of my symie.thetio attitude with

him personally and the difficulties with which he is struggling.

The soldiers' bonus legislation has taken a new turn, with a proposal
of such a grotesqueAattached to it that it now looks as though Congress would
have much di?ficulty in passing any bonus legislation before adjournment this

The pending bill may pass the House, but it will have s rocky road in

the Senate.

The possibility of seeing you in London this summer turas upon so many
different considerations that I an unable just now to give you any indication of
chat I might be able to do.

If I can not run across for a visit, even of no

more than a week, I will 1Pt you knot promptly and it may be that you Gould
squeeze out the time to slip over here.


would gladly reet you in Canada if

you prefer that and if it would save time.
Thank you ror sending me a co.:4 of your letter eddressed to the

President of the Banque Nationale Suisse.

As bearing upon the relations between

the banks of issue, I would much appreciate your sending me any data which you
are able to let me have bearing upon the economic agreement

between the

Scandinavian countries, and the extent to which it affects the banks of issue
and their freedom of action.

,You will find Mr. Fukai able to speak more authoritatively for the Bank

4' of Japan, and I am sure you will eeke progress iith him.
talks, and

36 have had some frank

think he is wholly sympathetic with our ideas, although he will doubt-

&less need to continue discussions with Governor Inouye before giving you anything

Of course, his reture to Japan /ill be delayed until after the Genoa

conference, to which he is e delegate.
I do not like the

our atocl_ exchange loan account ceetinues to rise.

prospect of a stock exchange boom any more than you do.

'Mile I can not agree

with the extreme views vbich I understand Mr. Hautrey holds, I am nevertheless
inclined to the belief that cur heavy gold imports are going to be felt in the

price level from now on, and our discount rate later in the year must be brought
into play.

If we could defer until next year (which is of course looking very

far ahead) I would like it much better.

In the meantiee, however much we

might desire to reduce our rate in the summer, these developments may make it
imperative that

is maintain at least the 4 17? per cent. level.At the


the view is foggy.

I have kept you posted on developments bearing upon the Austrien matter
in former letters and there is nothing to add except the few words stove regarding
thg Funding Commission.

Everything must await the Senate's action on confirmation.

iith best regards, I am,
retire sincerely,

Montagu C. Sormen, Esq.,
c/o Bank of Eneland,
Threadneedle Street,
London, England.







March c, 1922.


Dear No rrian :

Your note of February 24 anticipated one which I was
about to write you ticking if you would send me a copy of Mr.
Hawtrey a s..ddrees.

I read hie book on credit and currency

a couple of years ago and 'me nt,t much in--reseed with his


Because I an 'Jasmine.; this noon for Miami, I shall

take the article with me arid possibly send you acne comments

on it later.
Yours sincerel y,

Won tagu C.

ra. an , Eziq ,

c/o Bank of England,
Threadneedle Street,
London, England.

March 22, 1022.

Doar !Terrain:

Roferrin: to yours of ',re' 2, Vr. Fulud Till forbtle.Jr be
detained in 1.ondcr by renson c# the pcstponvment of tho


If he is still there le-en this 12tter reaches you, might It not be tiell

for you to f,.elc him to explain to yo, in

full detail as he le willing

to do just phz.t. the Jap,inese axchani;a positron is i-Ith this c-Juntry and

soarathinc of the

that regard?
wit% the Pan":-

of his 1--nIc

of the J-penese CovImment in

It he an important bearing upon your and our relations


I foal very sure ti.

t 'r. F...1(.1

will ba

willing to discuss the eitt ctiou as frankly Si Ui you e' %a, ni the
o ther officers of his la_nk, have with me.

I km glad that my hint ..bout the porgunal e,uc.tion .ie of

3incsrely yours,

Mr. Montflgu C. ri,.:rman,

(.1/0 Ban i of angland,

Tnreadneedle Street,
London, Eni;land.



March PP, 1922.

Dear Norman:

Since acknowledgik; yours of February 24, I have recd Mr. gewtrey's article

and, as it ai;eare in proof, I lust say that he has given a wonderfully well-considered
state:sant of the Federal Reserve System.

In a few minor particulars he is not

entirely accurate, but it is sc vaatly more accurate and judicial than most of the
material cf Ilia character which rez,ches us from 'broad thet. I cannot refrair from ex-

pressing my admiration for the result of hie study.
know whether he had access to the

I would be much intereeLd to

as of date appearing it the hearinc's conducted by

the Joint Commission of Agricultural

Your letter Intimates that chmges ray hve been made before the lecture
was delivered.

This must have been t. *,

case as Hawtrey was quoted in this country as

stu.ting that he propheeitid an era of inflation in the United States which would result

in such a depreciation of the dollnx as

o lead to heavy gold exports.

I find noth-

ing in the article you sent of _pits so positive a character.
On the whole I should think that his 1 ,ature, if well circulated, would do

good deal of good.
Sincerely yours,

Mr. Montagu C. Norman,
c/o Bunk of England,
Threadneedle street,
London, England.


March 22, 1922.

Dear Norman:

ReferrinE to yours of February 23, I have still

been unable to go through the tentative program for Genoa
and will defer commenting until I have really studied the

Ant by that time you may have had opportunity to

read my letter to Blackett.

Since it was written the

press despatches indicate that his plan has been made public

likMarch 22, 1922.

Dear surIkan;

four letter or 3:arch 6, on the subject of the autonomy of the Feichshbnk,

pu4.e ea entirely new ligat upon their position and it was stupid of me not to have

gone into tad nistory or the organization of the Ralchebank before writing you on the

In uiecusaing the autonomy of the bank of issue, however, one must be willin6 to accept une view in time or peace and a somewhat different view in time of war,
or undur suet. koet-war conditions as have recently prevailed in Germany.


I am

sure you unaorat000 the arguments in my last letter on that subject..
I snail write to ?resi:lent Havenetein within a few days, - simply a friendly

and pe.'ounal latter, which 1 hope will 14ad him to feel free to writA me informally

and ?ersonaily, - and if you find excuse for doing so, you might drop a hint to him
that i wuuid be glad to have letters of that character from time to time.

Your advice of the passage of the bill granting autonomy to the hdichsbank
is, of course, most encouraging as Indicating a real intention on the part of the
girth goverhmbat to auopt monetary and fiscal reforms, which I regard as the inherent
weakness at ,resr./at. in the German position vis-a-vis the demands of the Reparations

Thd extract from your letter of February 6 is-, of course, altogether

in line with our own thought.
Very sincerely yours,

Mr. Montagu G. Norman,
c/o :5,41x ot Lriglano,

Threadneedle Street,

London, LiOand.


leech 29


Dear Noreen:
ReplyinE; to yours of" re.ret 6, the ei+u-tien remains tuite unch,need es to

eny eessibility of dealing with the

.antri-r situetien, with the eels exception ttat

the Senate, a for due ego, peeved the resolution intrcduced by Senator Lodge authorizing the extension of tho Austrian obligations to the Grain Corporation, etc., for a
period of twenty-five yeere.
cept r

Thin would appear to have no arecial signifioence ex-

an indieftlon of e:Inion, bocauve the powers greeted to the Punding Commission

under Vv- bIll alreedy paned would apTear adequete to tecomplieh evcrythtng sought
to be e.ocomplished in the Lodge resolution.
Thu ,tre Zt leret in cart right in f:3312Minj 4,1!At domestic reeeone continue

Mr. Norman



caniot understand how anyone of experience cLn expect successful nea7otiations



in such a matter as the Austrian lohn except by dealing directly and

solely with one or

.p_rty, rather than by taking it up with a number of parties at the same time.
As to our course here.

I recommend that nothing; be done at all until after

n is conetituted and the treaties are ratified.

ths Commi

And then, if you please,

I will, with your concurrence, lay the whole matter before the proper officers of cur

see in what way a credit transaction can be undertaken for Austria by

crir tankers coincident with negotiations for extension or subordination of the Austrian

Frankly I believe thst any other course than this is simply a waste of time

ani rill accomplish nothing.

So th-A Sir William Good's

proram will be of benefit

only in that It miht result in our Treasury officials leerning a little more about the
Austrian situation than they now do.

As for dealing with the Rothechilds, I think

you sre luite right in deferring any negotiations until after the position here is

clearer, unless, indsLe, you think the situation is becoming toc desperate to wait on

lenver, ?Tr! prefer to corclude eloce, solely in England and France.

This, how-

ever, toali be urfort,..ntte te the Acetrien eittetion presents the ideal opiortunity for

a non-politio,sl ranking ereistspoe from this country elono. sound lines and predicated

upcn sound ultiaste treFtrert of the old Austrian debt by our Government.

tt any time tbrt ycu eink the situetion is becoming so desperate as to restare.

irrcJirte and pinrl word from us, please cable me and I will take it up in

Washingtcn .t cnre, although with no expectation of results unless the Fundind. Commiesion is duly constituted and in a position to act.

In a later letter I shall refer to your recent exchange of cabl s with Jay
cn t'.1e ShM0 subject.

Sincerely yours,

Mr. Montagu (;. Borman,
c/o Bank of 7'.!lend,

Threadneedle Street,
London, England.


Varch 22, 1P22.


Dear Norman:

Again there has been delay in my acknowledgment of your letters because of

I bad a meeting in Chicago, one in Pashington, and then determined that it was

necessary to have a little holiday and went to Florida for ten days.
Immediately atter leaving the hospital, and while In Atlantic City, I wrote

you pito fully, addressing my letter to your house, about my experience at the

And as I have no acknowledgment from you I am wondering whether my letter

reached you and specially whether it answered all that was in your min! in regard to
my health.
The interruption in our regular correspondence, 'Ind possibly ttl,

tory nature of some letters which were prepared for my signature when I we unable to
dictate myself may Iiava disturbed you a bit, but please do not let it do 30.

I am

catching up rapidly now and will shortly have time to get in a little regular golf,
which I badly need.

Please lot me know all about yourself; whether you keep well;

as you may, wht your ;tune are for the summer.
With beet regards,
Sincerely yours,

Mr. Montagu C. Norman,
c/o Bank of England,
Threadneedle Street,
London, England.


and, as soon

0 all

eho are inspired by ?etriotio atotives and who rare as hard worked a lot of men as


we have in the country.

But they ere Americena living 3,0e0 to SAGO Milde from the

eane of the werld'a difficulties;

Ataeply ignorant.

and concerning many of them they are neturaley

I would not write this so frankly if I did not think that tee sem

ie true of tee great majority of our business men, oven of our liew fork bankers, mho
are just as provincial le international matters as ally clew)

peoples in


I recall that this was one of your obsorvetione during your recent visit here.

pologi2ine for this digression, it me at least call your etteetiee to the
splom:id development in our investment market, which is continuing to absorb foieign
lesues et e Erect rate, and to which no obstacle seems to be interposed ey our


end which develoyment, in the lon,f run, is bound to be of eseistanc

in a general way towards Puropesn recovery.

lordly a day 1:.esses test nee isseee er

nut eneounced which are instantly Wren, and by good fortune are taken by read investors who put them awry in strone boxes.

Ysetorduy I eat next to e Mr. Chisola,

I believe, of the Encyclopeeie Britennice, whom you say know, and wile ex-

pressed the view ;Ilion I stronfiy hold, t!let the best kind of cooperation between

your bankers and ours just now will be for your bankers to fecilitets tte introducti
of these foreign loens in our market.

Certeinly your own Government's refunding

operations should have right of tray end in the interest of those oper tions why not

upon the American market?

It will pay you to study Senator Glass' address in the light of our

conversations of lest :summer.

It 6,:es had a profound effect upon tnougntful people

and das very largely relieved us of the eaberressment of tas attacks by certain membera of the 3enate.

I fully uneerstend your difficulties and your desire for 80M9 guideec

from hare es to whet will be a satisfactory coures from our point of view in dealing
situ the whole ,lueation of funding.

I wish I might send you A satisfactory rely,

but I know so well how these matters are dealt with that I have not even attempted t


Mr. iiormAn


ilk lead you by a..zarding any 14W:icicles or even suggesting d course just yet.


Mr. Gorman


Our Studies of the Garlln exchange positicn all i



ya-mIt the mark collall-,sef E-om.. more.


a;c1 J.leerdar within Germany

as will ultia .tely m

rei,r-.tion payments to continue at anything like the Cunnas

I k.ope this imd tn.:: other letters of today answer
tween 1_,s

answers c:J1 nov -oe sent.



umeat retErde, I am,
Jincerely yours,

Mr. Montagu C. 30rmsn,
c /o: Bank cf 1E,n;.iond,

Threadneedle Street,
London, 7.nzluny.


.3401,AnD- 3Y


retaAM:...;:ta" C


Mr. Norman




time to pLrticip

The real point

dertille any such plan
ment, an

whether the la

German reparctiors is a

mind to such L scheme a

ne,_rly the normul metho

diocuosed, -nL, acios fr

that the sentimental eff

exchtno v:ouId in itsel

The moot impor

to foreign loans.

I lo

in reetorins more etnble

Mr. Montagu
0/0 Bank of England,
Thres.dneedle Street,
London, Englend.









acoerr5%; to the xetter cf rates mentioned in yours of risroh 93
--7ur situAlos Is re:.1.-!1)

ya' :r



am ':-21XICQ5 t.11A you shcul

March, re t,:ve


laveloi-inc7 In

5 directi,7n rath,:!r diffore-,t from

understand it..

s std2en poriendiculr lecTine it Toney rntee in the mErkot vMch

zort:fttlly szoribcd cr your olds to cur 1.:17!

00 r-2-+ lo not the expl.uroA!cn.

fifteeTAL of

Cur.rnoinL Cie fifteenth of

The Tre:-.zury

rhlch roctscL:Itutol temcLr 7.";

thd to sierl,7enrj trEde.

EDMC vtry Levy oper%tIon6 on tte
i,dvcnEse by tLt rJecrvo becke to the

Tre,,eurrr or :4p::c,nr:T,occ, o° rhich cur rank advanced ,t1SF,OCO,OCO.

Pourinz this
amount or

at ery limo canto

tut tr-_,ccc,oce b

yot lOwtlir this

wt frey rt7y cr t

118, the effoot cf

fortunate cErso,..

cannot. be instl.n

the reservo banLe

inclined to belie

gobe eL


wilhin the

to consid

forecrst their pos

should be recomm.,

Mr. Norman



There is, however, another important underlying factor in the whole eittttlen

which is troubling us a good deal.

The discounts and investments of the reeerve banks

401 a whole have declined from the high level of last year to but little more than

t1,00C,000,0e0. #

The member banks in our district are regularly borrowing frcm us

only from $30,000,OCO to 00,000,000, and the belunce of our interest earning assets
comprise the bills which we buy in the market and Treasury certificates of indebtedness
of short maturity.

In other words, unless wo are willing to sail under bare

with no income, not enough, in fact, to pay our running expenses, we have

entirely lost our grip upon the money market.

Confronted with this situation, - our

gold reserves for the system es a whole now amount to $3,000,00C,CCO, and we are still
importing gold from Europe, - how can we expect to arrest the inevitable inflation
which may take place as the result of these gold imports when we have no loans tc call
in and when we can exert no pressure upon the market by adv.ncing rates?

Since May 4, 1921, when we made our first rate reduction, our stock exchanv
loan account has increased $211,000,000, and has increased nearly $300,00C OCC from
the low point of last July.

There are definite signs of business improvement, and

here and there considerable advances are taking place in the prices of raw materiels.

We have a real stock market boom under way, with "million share days" of fre:lent occurrence.

In fact, indications gradually multiply that we may be in for a merry

dance if we don't luok out.

Some of this may be wholesome.

liquidating frozen credits;

gat the country in a better humor;

It will result in
end, more especially,

as is already the case, mill loosen up the American purse strings to foreign borrowers.

On the whole I think our course should be to reduce our rate when conditions justify
it, say, within the next month or two, or even sooner, but alwaye with an eye to the
development of runaway conditions which will necessitate increasing them later in the

This is little different from what I have already written you, except that

my judgment of conditions is stronger than it was then.
Sincerely yours,

Mr. Montagu C. Norman.
/Discounts alone V500,000,m0


March 22, 1922.

Dear w.!_n:
Teatak you for joi_re c,f


t,e, here, have bee:, deNclopior


f,ae3a-f: of unetsinees :thou+

the to...1,-mLs schesee pro;.cee3 'or 63'crt-cut wttho3s 'toward rebubilitft1cn,

eapacibaly in the elchtcses, Such L.F

one roLem fcr my cermsnte upon


Senator !itLhccck


7Judt-ra ty1e

1-7 Fern,t(r Owen,


The :!iffictlty

t the eme t41


un2cr the rlua which yell refer te le the inclualcr of :ussia.
Goverulcut's at'dtl.,je



tv,Tdo Ln fcr


the r!c-r.t note ient by .1:«leretkry

!oellr!n, cr.rtic!p;t1m-

reert. ir,

111 ?1La

llfca '2iolude

Iincrely yours,



+h1 Geno.

;Jo mu- t rrgerd thet s.e the: dictum which

ao must Lxalt develoonnta.

c/o Bank of England,
:hroadneedle Street,
London, England.


March 24, 1922.

Bank of '-!:ngland,

London eland.


Referring your W.

Unanimous passage of Lodge resolution in Senate and unanimous

recommendation of passage in House by 7:ays and Means Committee indicates

Treasury and State Departments will shortly be able to deal with Austrian debt
without awaiting confirmation funding commission.

J. P. Morgan and Company wish to defer consideration nroposed

loan until Lamont arrives abroad

Following comments occur regarding memorandum of loan proposal

submitted by Goode after seeing him yesterday:

Arrangement for trusteeship might provide method for including

American banking representation without involvine. them in participation in or

dependence upon League organization or as alternative a nethod for their
approval of trustees to be appointed.

Undertaking by Austrian Government might provide now for later

organization and scheme of control or bank of issue

Later political comnlications might be avoided it general scheme

f first loan rrovided method for later repaying preliminary advances already

ade by Turopenn governments, thus converting loan ultimately to wholly nrivate

ather than partly private and partly government treansaction.

Will reply your .:48 early next week.



March 28, ]Q22.

My dear Norman:

Ycur letter of March le indicates possibly some omission on our
part in inaugurating correspondence with the Swiss National Bank, but, on the
other hand,

the opportunity for inaugurating such a correspondence has not

yet arisen naturally, end /e have hesitated to make en etpreach to such a
subject in any way which would appear to be a solicitation of bueinees by
our hank, which, as you know, is the last thing that we would undertake to

Your diFcueeion with M. Schnyder de lartensee affords us the opportunity to write him without its appearing to be in any way forced, or as an
approach for business, and I shall do so at once.

In this connection, a matter developed in formulating our
relations with De Nederlandsche Bank, of which you should he advised.

I had

written Viesering explaining the principle .which we had diecussed .rite you

of exclusive mutual arrangements between the banks of issue, but bore of our
directors pointed out that to embody such a provision in a definite agreement
with such a bank as De Nederlandsche Benk contained some elements or danger,
and that we had better, for the moment, allc w our relations to develop

naturally without attempting to enforce this principle by formal agreement.

ens reason is that De Nederlandsche Bank has 'or a long time past maintained

Aarch 28, 1922.

The object sought to be accomplished can tell be served vithout
at the present making this the subject of formal a?,reement.

Thank you very much for mriting me about your visit isith
y. Schnyder.

I till advise you if anything further develops.
Tours sincerely,

Montagu O. Norman, Esq.,
Governor, 8.11E,'.

cf England.,

Threadneedle Street,
London, England.



Montagu C. Norman, Esq.


pith, provided the convention were wholly divorced

it seems ea though we could deal


from political matters.


March ?e, 1922.


Document 8, paragraph 4;

Mere I see your hand, and I hope the

proposal produces some results.

Annex, paragraph b;

I suppose this is necessary, but again 4i11 this

afford the opportunity for thP 4efletieelets-to core forward with fancy schemes.

The terms of the annex indicate the need for American participation.
Commenting generally upon the Genoa Conference, I think it is observable

here that public opinion is beginning to take held of the whole subject of our
sttitude toward European economic recovery.
producers of


Our exporters, and especially our

products, seer to bezin to feel the pinch of declining ex-

It may yell be that

following the Genoa Conference, with the Treaties

ratified, and with our Funding Commieeion functioning, some Frogress can be made
toward m better understandine. generally of conditions In Europe, and what we

might do to aid in their remedy.

Let re repeat: e former comment that I think

the avenue of approach is through the Funding Commission, and that the method of
fteproach should he to have your Government, the French, and the Italian Government

especially, euhmit all the facts to the Commission °F rrCMntly and as frankly as
possible as soon as the Comeissinn Is organized.
Nith best regards, I am,
Tours sincerely,

Montagu C. Norman, Esq.,
Governor, Bank of England,
Threadneedle Street,
London, England.



March 29,


Bank of 'FrIgland,


Your A49

(1) 'Mile I have no advices from

ashinTton Personally believe

prospect of Passages of Lodge resolution rrobabl:' not affected by any
representations from abroad.

There seems to

general sympathy with

Austrinn difficulties end some desire to holp
(2) .1111 cable after inquiry as to prospects of Czechoslovakia

loan here

(3) My suggestions were all directed towards avoiding possible

political complications in a strictly banking transaction so as to leave
the subordinated loans as entirely government loans and the new advances
including one proposed by Goode as entirely rrivate banking transactions
and I believe this position is sound from our point of view.


suggestion three D appears to be covered by ?,"organ's desire that nogotiations

should await Lamont's arrival abroad.

Have advised Anderson in Lamont's

absence of my #65.


riarch 30, 1922.


My dear Norman:
This is to tell you something of my vi Fit ,with Addis.

Ye had a

couple of hours yesterday afternoon.

I shoved him one or two of your recent

letters and your cables about rates.

He was reserved in expressing an o;.inicn,

not knowing the conditions with you, but I think he understands the difficulty
under which I am laboring at the present moment in going much further in reducing.

He will explain it to you in detail.

I spent some time in explaining to him the great chanie which had
taken place in the political situation since ynu vere here last sumNer, and I
hope you mill get from him vhat he remembers of our talk.
thile he did not finally corn it himself as to Genoa, he did say thnt

he supposed it vas a duty vhich he was oblieatad to perform, however inconvenient
it might be, and I took the liberty of making a little nersonal appeal, stating
that we were very much interested here in seeing sound proposals emanating from

Genoa, although me had no hand in them, and I thought he could do a good piece
of mork in serving the organization in such a personal association with the
Prime Minister.

I told him all about my health, and I think he can explain the

le had quite a little talk about the question of management in this
bank, and touched someahat upon the same question in yours.

I shall not enlarge

upon it; but I did take the liberty of making one suggestion to him, possibly an
intrusion in your personal affairs, which I think I shall leave to him to explain.


March 30, 19??.



normal conditions around the world.

Very sincerely yours,

I have been wondering ,whether your Treasury may not be considering

that this is a favorable opportunity for some considerable refunding c7erations
which might preoccupy your market and naturally lead to the direction of these
loans to this country.

This is simply another evidence of the embarrassment

of the natural process toward recovery which results from a lower money market
with youMontagu C. yet developed with us.
than has Norman, Esq.,
Thorpe Lodge,
Campden Hill, liberty of showing Addis the Agenda
I took the 4. 8,
London, England.

you sent me in antici-

pation of the Genoa meeting, as he expressed very great interest in the subject
and wanted to -,et any information which I had.

I also showed him your letter

and my reply, and hope that this is all right.
lith 'warmest regards, and looking forward keenly Le the possibility
of your visit, I ar,


March 30, 1922.

Dear Norman:

Thank you for writing me so fully in yours of March 30 on the subject
of the American interest in a London discount house.

It seers to me that

your argument is unanswerable, and, of course, is based upon your varied experience, such as we have not had here.
Taking no private accounts at this bank, by which I mean, of course,

the accounts of private firms and of corporations which are not member banks,

we necessarily must assume a somewhat different position toward the bills of
those houses which accept and which deal in bills and which only reach us
throurt the raember banks; for instance, when Frederick Huth and Company opened

a New York office we required of them the information which

we ordinarily re-

quire from any house which accepts bills, not in the expectation of dealing
with them directly, but with the understanding that, if the information re-

ceived was satisfactory, we would expect to take their tills through the
member banks, or actually buy them in the market when suitably indorsed.

This and other matters bearing upon the general subject of American
credit we can, I believe, discuss with profit if you are able to come over as
indicated in your cable number 53.

I was delighted at the possibility, and now that Addis has indicated
thst he will go to Genoa, I am looking upon it as pretty well assured.


you not able to come over I would have tried a little later to run over to
London; in fact,

I may decide to do so anyway in the course of the summer; but

it is too soon yet to decide definitely, both on account of matters pending

March K, 19n

here, and somewhat on account of my health.

I could not afford to be away

if there was any risk in getting out of reach of my own doctor.
I an writing separately of a nice talk I had yesterday with Addis,
who is in Aashington to-day discussing the Consortium situation with
Secretary Hughes.
Pith best regards,



Faithfully yours,

Montau G: Uormani Esq.,
Governor, Bank of Eng:and,
Threadneedle Street,
London, England.


March 30, 1922.


Dear Normen:

Just one further word in reply to yours of March 21, about the restoration of starling to parity.

The obstacles are those mentioned in your letter,

and my embryo letter took account of those Aidi conditions precedent to the adoption
of a plan.

I have written separately about the Solaiers' bonus, and think the

inflationary effect, even though the bill passed in its present form, has been
greatly exaggerated.

It should not be counted upon as an influence toward the

restoration to parity.

I think if it were aut before me to-day to decide upon

e policy ee to the course cf sterling and a elan to rectors it to parity, I
would say that the subject must await (1) a demonstration of Germany's ability
to meet the Cannes or 6076 other scheme of reparation payments without great
disorder to the exchanges, and (?) the development of some policy as to the
American and Inter-Allied debts after our Funding Comeission has had a chance
to deal with the subject.

lith these two matters reasonably secure from being

a seriously disturbing influence, then I should think a transaction such as pas
roughly sketched in the embryo letter might be feasible and that the effect
would be greater than indicated simply by the amount of credit or gold involved.
My reason for that ste.tewent is that I have great confidence in the effect upon

sentiment resulting from any such arrangement.

It is a little bit like the

situ tion in the United Et-,tee in 1878 when Sherman was Secretary cf' the Treasury.

You will recall his famous remark "The way to resume is to resume."

This was

made shortly before we did resume specie payments on January 1, 187w, but



March 50, 1P9.2.

been designed to Pet the Pull sentimental effect, but he sae not willing tc rely
upon sentiment alone, and would doubtless not have mode the statement except he
felt thet the Treasury had sufficient gold to back up the sentiment.

;ts a

matter of fact, Then specie 1.eyments were resumed, after about 18 yeare suspension,
and vith

;old quoted at one time as high as 280, not over 50 people appearod

at the Subtreasury in New York to get gold for their greenbacks, and in half an
hour or eo there was no one at the Subtreasury asking for gold.
somewhat the situation in regard to gold payments with you?

Is not this

Or will it not

to the cues wIth these debt situations dealt with, with our trade beck more

nearly to normal, and with this large flow of investment securities to the
United f7t,tes oonstantly oeerating to reduce the ;reeeure on exchange?


in a word i6 the general view that I take of the future.

In a telephone oenvereation with fashington to-day I learn that there
is some irospeo, of emrly action on the eppolutmont of Messrs. Smoot and Burton.
There will be opposition and discussion and some of the lawyer members of the

Senate 'ill argue against the appointment on constitutional grounds, but I think
the belief in levhin,--ton is new that the appointments sill be confirmed after

these gentlemen have had An opportunity to air their views.

I hope that this

Montagu C. toward Esq.,
doss take place because it rill much facilitate progroes Norran, a better under c/O Bank of England,
Threadneedle Street,
standing of matters in this country.
London, England,
Again with best regards, I am,




.::rah 50, 1922.


Ly dear Norman:

an enclosing a copy of a letter which I have just written to
It is merely a feeler and intended to open the door to his

Monsieur Schnyder.

making some suggestion, following your visit with him.

I not have your letter of March 21, and think we are in entire agreement, except as to the effect of the Soldiers' bonus legislation, which I have
not written about vary fully as yet.

Ins till has just passed the House and till later come before the
Senate in due 00Urb9.

The provisions which affect us you 4111 find in

paragraphs 501 and 502 in the enclosed copy.

It has been much advertised in

the press that this scheme will have an inflatlooary effect because the

soldiers who desire immediate cash payments will all 6u to the barks and borrow
the money.

Personally, 1 do nut think that any such thing till happen.

largest loan can hardly exceed t300.


ust of them will be for very much less,

and I do not believe that the banks till to willinj to make loans which they
cannot expect to collect, in case of default, until one or


yoare after

They will not want to be bothered with these small loans, and in

most parts of the country the limitation upon the rate of interest will make
them unattractive in comparison with rates which they receive on other forms
of loans.

What I do expect sight develop would be rather unwholesome, however,

in another say.

host of these boys sill want their money.

any of thorn

will go to tho bankEto get loans, as that is the only way in which, under the
United States statutes, they could realize at all upon their certificates.

The banks till probably, in many cases, decline to make the loans and we will

lontagu C. Norman, Esq.



March 70, 192'2.

have a smell army of dissatisfied young men, all complaining abut the treatment that they are receiving at the banks.

It will simply intensify the

criticism of the banking syetem, and put the whole matter back before Congress.
Further than this, I do not expect to see the bonus bill finally

The Senate sill have strong advocatee for

paesed in its ::resent form at all.

a plan to raise revenues for the purposo of meetirw the cormitment, if it is
made, and Senator Smoot is an ardent advocate of a sales tax for thie purpose.
After amendment in the Senate, the bill will have to go to the Conference
Committee of members from both Houses.
arduous discussion.

Here again there will likely be a long

Then the bill finally emermen from the Conference Committee,

it must be considered by both Houses, and there passed or defeated as finally
amended in conference.

This lefliel14-ive rond is a lone and tcrtuoua one, and

little sympathy from the Administration and

much of it gill be up-hill with
much criticism by the nubile.
as some people are.


I am not as concerned sbout the legislation

Rut, on the other hand, there is still a. nossibility of

some le!islation in some form, and many people think it is more than a possibility,
in fact a probability, if not ft certainty.
4ith kindest regards, I an,
Yours sincerely,

Montagu C. Norman, Esq.,
Governor, Bank of England,
Threadneedle Street,
London, England.



March '51, 19?2.

DAar Norman:

In rAturning the papers relating to the Genoa
Conference, Addis calls my attention to the fact that the word
"deflationists" appears

in the first and fifth paragraphs.

This word was intended to be "devaluationists" and of course
the entire meaning is changed by the typographical error.
'Lure sincerely,

Montagu C. Norman, Esq.,
c/o Sank of England,
Threadneedle Street,
London, England.

April 3, 1922.



My dear riormem:

Thank you for yours of the 23rd, encloeing a reprint of
Falk's article in the 3conomic Revisi, a magazine which we
have just subscribed for, and which I see occasionally when
articles of this sJrt appear.

Ir. Falk bas fallen into some

error es you have doubtless observed,

i learned from Addis

that he is a member of tho Tuesday Tight Glut, as also is Keynes,
and I believe some others of like abilities or disacilities.
don't some of you gentlemen

of the bank, yourself or! Addis, give

them some talks from our standdoint vu these matters?

I understand

that Falk is a pretty able fellow, but as you say jaundiced.
Y:-Airs sincerely,

Montagu C. Norman, Esc!.,
Governor, Rant! if Fivland,
;11readneedle Street,
London, England.




April 10, 1022.

Dear Norman:

Thank you most heartily for your kind letter of March 3D, enclosing
a copy of tarburg's letter to Sir Henry Strakosh.

I am especially glad to have

it becauso it puts me in oosition to clear up possible misualerstandings which
might arise between Marburg and myself rare he intending to :ursue his activities
aggressively along the line indicated by his letter.
The first part of his letter is natural enough.

He has long been

interested in banking legislation and the promotion of the reserve system since
the legislation was enacted.

His present official relations with us are those

arising by our having selected him as s. member of the, Federal Advisory Council
from this district.

He is sometimes tco ardent a champion almost cf the

bank and of the system, concerning Jhich we cannot complain.

I shall ask him

to tell me something of what he is doing with the European banks cf issue, and

meantime hazard the surmise that ho has so far done very little, outside of
possibly sore, special transactions for the Reichslank, and, it may be, a little
in Scandinavia.

There is some embarrassment in discussing the matter with him from the
point of view of his letter to Strakosh, which it may be that you would prefer
he should not know that I htive reoGive:I.



sill do the test I can

in dealing with the matter.

You know the tendency so likely to 7revall in a new organization,
especially one developed under such auspices as the International Acceptance

bank, to reach out for business in all directions.

I much doubt if Marburg


April 10, 1922.


and appreciation cf the possibility of his acting in conflict with us,



really inclined to believe that he would not 3o anythin,3 of that sort were he

a-vire that conflicts might arise.

Alec, up to the present time I


in doubt P.,E

to the extent of 4arburg's

knowledge of our plans, and of his bank's associating its activities in any may
with ours as a 'oossible cause of embarrassment.


;rill write you later on this

in favor of some fantastic plan thich mould either interfere later with the

adoption of some sound plan or would necessitate a oLorganization

of the

banks of issue denouncing it.
There was never a time then those 'rho are willing to stick to

orthodoxytell settled principles are so badly needed in the councils in these
matters as just D04.

Unfortunately, I a7, sufficiently skeptical of human

nature to believe that some of the plans being advocated give less thought to

the merits of the plans than they do to the advertising of the authors.
all of this te can discuss when yiu arrive.
Yours sincerely,

Montagu C. &man, Esq.,
Governor, Bank of Ragland,
Threadneedle Street,




April 14, lin?

Dear Norman:

Yours of April 4 with the documents regarding the
economic agreements between the Scandinavian countries is

read ,vith a good deal of interest.

just received, and will

urs sincerely,

Montagu C. Pic r: an, Feg . ,

Governor, bank of ZIngland,

Threadneedle Street,
London, Eng? and.




April 24, 1922.

Montagu C. Norman, Esq.,
Governor. Bank of England,
Threadneedle Street,
London, E. C. 2, England.
Dear Norman:

It gives me pleasure to send you herewith a copy of the
Seventh Annual Report of the Federal Reserve Bank of New York for
the year ended December 31, 1921.
On oage 33 you will find a summary of our foreign relations
with a reference to our transactions with the Bank of England.
Very truly yours,

Benj. Strong,


May 15, InE.

Norm -n:

Att-ched a

fresh co;Ive or the Temoeoedum respecting my

attendance at the bank conference in "-,:idon and the oroposed



anr) of parts one and two of the agenda.

These embody the eubst,noe cf our discusstons at Naehirgton
no far se it was goeei.cde to gAll exprecsions of views 7ittout brving

the final doeumente in hand.

Govern:- Warding bac not seen the

owing to his abeence.
suggestion is thst the matter be loft in t)-Os rather

definite ehspe until, upon your roturn, you are

to inform u,1

more definitely of details.
I am retaining a copy of

our original private and confidential

draft of invitation and of parte one rtiC t.c of the Pgendo.
I hope you will not mind g

privetely expreseing my personal

o7Anion that if the mooting should bs too lert,e, that is to say should

include representatives of banes Ahich may nave in les2sr degree than
erne of t:).e others a sense of responsibility toward the questions to

be discuFcer, it will he more difficult to accomplish the reel purpose

or the neetin.
Faithfully yours,

kr. montagu C. Norman,
Bank of England,
Tnreadneedie Street, London.

Governor Strong will accept an invitation * to a meeting of

Central and Reserve Banks to be held in London in July or 'Aptember in

accordance with the request of the Genoa Conference for tYk following



To state the principles of and devise means for

continuous cooperation between Central and

Reserve Banks within the legal limits prescribed

for the operation of each Central Bank or the Federal

Reserve Banks.


To consider a recommendation to their respective

Governments for calling an inter-National

Monetar., Convention
to. approve the means suggested b.) the

Genoa Conference for reestablishing the
pre-war golu basis (where such basis
does not now exist).

This recommenda-

tion for a Monetary Convention may
involve stating that it should not be

held until the essential antecedent
condition of com,lete and final settlement of all inter -gov rnmcnt urbt

questions arising out of the war shall

have been reached b: the Governments

* The invitation as now proposed is attached, and the above is subject
to any subsequent changes which ma-..

L. changes in the terms of th

be made necessar:,, as, for example,





I am directed to enclose herewith a Report adopted by the

International Conference of Genoa, on th recommendation of its

iinancial Commission, and in accordance with Article

I have the honour to invite ;,ou to attend a Ueeting at the Bank of

o'clock on

1,:ngland at



June, l92:-

It is suggested that this Meeting shall be followed by others

curing the week beginning on that date and that the Agenda shall be

limited generally to the subjects Tentioued in Articles


of the enclosed Report and to the Economic


relation of inter-tate indebtedness now existing in consequence of the

ar, to the reestablishment of th,

former gold standards and of stable


I am to say that the proceedings at these 2eetings ,ill be non-

political and confidential although it may be convenient to publish such

formal conclusions as ma

be finall,


In view of the limited accommodation at the Bank of England,


am to ask that you will consider this invitation as p rsonal to yourself

or to such gentleman as ma;,

be chosen as

our Substitute and that you

or he (as the case mkk be) will be in a position to state the views of

the Bank of

as regards the subjects to be discussed.

Requesting a reply at :your earl;) convenience,

I am,

Federal reserve 3oaru for Governor of

Bank of France

federal 7e serve Bank of taw York

National 3ank of Belgium

Bank of Japan

Bank of Italy

South African heserve Sank

Netherlands Bank

Imperial Bank of India

Bank of Sweden includes

Sank of Norway


Bank of Denmark

National Bank of Egz,pt

National -Bank of Roumania

National Bank of Aitzerland

Bank of 'Spain


Bank of Portugal

Imperial Ottoman Bank

Bank of Finland

Bank of Poland

Bank of Ireland_

National 3ank of Greece

Commonwealth Bank

Banque Nationale ae Bulgarie

(omit South America)


RISSOLUTIOBB proposed for adoption by the Gev44paere-er-likebee4-4eato-e4-

Central and Reserve

Banks represented at :1eetings to be hold at

the Bank of England.


June, 191;2

Resolutions concerning Co-ol,eration.

The Central and Reserve Brinks here represented approve the

following principles:


Autonomy and freedom from political control are desirable for all

Central and aeserve Banks.


.ubject to conformity with the above clause a policy of continuous

cooperation is desirable amvng and' Central and Reserve

Banks, wherev.r situated.


"ithout hampering their freedom, co-operAtion should include

confidential interchange of information and opinions among

such Banks with regard to such matters as rates of discount,

the stability, of exchanges and the movement of gold.

aesolutions concerning an International Monetary

Convention. in-aeeer4asee-wi44,-1..hto-iiepert


The Central and Reserve D'anks here represented agree to urge

forthwith upon th(!ir respective Gov.rnments that an international Monetary

Convention be summoned to consider and report upon the following programme

for thc economic reconstruction of the world, viz;


The Governments of the participating ccaritries declare that the

restoration of the ore-war gold basis is their ultimate object,

where such basis noes not now exist, and the:.; agree to carry out,

as rapidly as may be in their power, the following programme.


In oruer tc gain effective control of its own current;,. each

Government must meet its annual expenditure without resorting to

the creation of fiduciary coney or bank credits for the purpose.


The next step T'll be, as soon as the economic circumstances permit,

to determine anu fix the gold value of the monetary unit.


will not necessarily be at the former gold par.


The gold value so fi2e6 must then be made effective in a free exchange



The maintenance of te ourrenc;

at its gold value must be assured by

the provision of an ade uate reserve of approved assets, not

necessarily gold.


"hen progress permits, certain of the participating countries will

establish a free market in gola and thus become gold centres.


A participating country, in adcition to any gold reserve held at

home, ma, maintain in any other participating country reserves

of approved assets in the form of bank balanoes, bills, short-term

securities or other suitable licuid resources


The ordinary practice of a participating countr


will be to buy and

sell exchange on other participating countries within a prescribed

fraction of parity, in exchange for its own currency on demand.


The Convention will thus be based on a gold exchange standard.


condition of continuing Elembership will be the maintenance of the

national currency unit at the prescribed value.

Failure in this

respect will entail suspension of full-nalabanship. the right to hold

the re erne balances of other participating countries.


Each country will be responsible for maintaining_tha the necessary

legislative and other measures rermired to maintain the

international value of its currency at par, but and will be

left entirely free to devise anc. apply the means, whether through

regulation of credit by Central and Reserve 3anks or otherwise.


Credit will be regulated, not only with a view to maintaining the

currencies at par with one another, but also with a view to

preventing undue fluctuations in the purchasing power of gold.

It is not contemplated, however, that the discretion

f the

Central and Reserve Banks shoula be fettered by an;.


rules framed for this purpose, but that their collaboration will

have been assured in matters outsiae the province of the

participating countries.

But they reconl. their deep conviction that such a Convention

4ftwalicln not be summoned with due expectation of successful results until

a complete and final settlement of all inter-Government debt questions

arising out of the war shall have been reachfsd between all the Governments


The:y consider that then, and then only, can this programme

succeed and the economic reconstruction oI the world be attained.


July 18, 193?..

Dear Norman:

zany thanks to you for your letter of July 5, in
reply to mine describing the action recently taken by the
ties York Clearing Houee Association.

I am very glad indeed

to have this information 4hich fully confirms that my memory
had retained of our talks on this subject.
Yours sincerely,

Montagu C. No rrr an, Esq.,

c/o Bank of England,
Threadneedle Street,
London, England.


July le, 19"1.

My dear Norman:

Your personal letter of July 6 just reaches me cn my return from


few days outing at 'foods Hole.

Peacock writes

e that he will be in New York to-morrow, the 1Pth,

late in the afternoon, and as I am most anxious to have a visit with him
before he returns, I am proposing to delay my trip to iashington for


or two.

Of course, I have appreciated the rather kaleidoscopic chances
which have preoccupied attention in Lohdon.

That is to say, Ireland, not

to mention the situation at the Hague, and then the unfortunate assassination
of Rathenau.

As to the last, I can well understand the consternation with

which you received this news, especially as you had more than once expressed
your admiration for him.

I have a most interesting letter from Kerlin from

a friend who dined with Rathenau and Stinnes the night before the assassination,
in which he sum-ed up Rathenau's attitude, in the vernacular, by saying that
recent developments seemed to have gotten Rathenau's "goat".


Rathenau for some time had been very much disturbed by the breakdown in morale
in Germany which extended throughout the country, coincident with the evidence
of a nagging policy, not alone by GerTeny's largest creditors but generally by
unfriendly neighbors.

Since writing you last seek, the announcement seems tc have been officially
made in the House of Commons that a commission will come tc this country in
September to deal with the debt question.

This is all to the good, as we shy,

July 18,

Montagu C. Norman, Esq.

and I am gratified to see matters moving in that direction.


It woul d interest

greatly to learn whether the proposal api,earing in press dispatches to-day for
a debt adju 'tment between your Government and the French

French to reduce demands upon Germany.

suspicion in

encourage the

The figure stated is large - I think,

from the London figure of 132 billion gold marks to
I have a lurking


EC billion

gold rarks.

regard to Austria, Germany, and generally

of the European situation, that the immediate picture looks so black that it
otr_cures our vision as to progress which has actually been made since the

Armistice, which on the whole is remarkable, and further, that we do not sufqciently take into account, the evidence of adaptability or adjustability of the race
to these changed and unique conditions.


Some way or other the world does rock

people get fed and clothed, governments do not fall and disappear,

Bolshevism does not extend, and by and large the net is improvement rather than

Please do not feel too down-hearted.
My best to you, as alwaya,
Tours sincerely,

Montagu C. Norman, Esq.,
Thorpe Lodge,
Campden Hill, N. 8,
London, England.





July 27,


My dear Norman:
Your letter of July 15 was a 'vaiting my return from iashington yesterday.

First, it seems as though my letters or cables may have given rise to a little
misunderstanding about Washington.

I had intended to make clear that anything

in the nature of a commitment as to my attendance at the meeting would be impossible until opeortunity for further discussion in Yashington.

Is it possible

that you interpreted this as indicating that I referred to the Wametary Convention
and that I aesumed that that would possibly be held io Washington foiloving our
London meeting?

The uee of the capital leAcr in the word "conference" at the

bottom of the first page of your letter is what suggested this thought.
As I cabled you yesterday, i can find no objection to my attendance.
This is not an official attitude at all.

I think the responsibility for my

.oing rests more with me than with any one else, and if I misbehave or do something
foolish the blame will he mine and mine only.
in my cable
The reservationsAas to program or policy of continuous cooperation are

those which I believe are necessary in connection with any scheme of this kind.
The Agenda ie certainly careful enough in safeguaring us against making open
commitments for credits or anything of that sort.
develop at the meeting.

but one cannot tell what will

With 20 or 25 banks discussing thin policy it would be

very easy indeed to have the impression develop that the Federal Reserve System ie
prepared to embark upon a program of extending credit to the various central tanks
in the world as they might need it for exchange or other purposes.
course, is suite out of the cuestion.

This, of

The Federal Reserve Act itself you'd not

permit such credits, and good policy mould not encourage them in some instances
even though the law did permit.

And I therefore thought it was necessary to


Montagu C. Norman, Eeq.



July ?7, 19? 1.


My dear Norman:

I em turning over in my mind arrangements for my trip which it nos
seems Quite likely that I will he able tc

-flake for the nurnos.e of attending the


seemed to


not mind my being quite frank on one or two noints.

*1e that it might he a mistake for both you end me if I stayed at

your house yhen


meetings were in session,

become imoortant that some of

your guests

imnression that we are too intimately

principles, on which they may have

take Ernest

at the

RE ecciated

in backing ;lane,

Then, I am planning tc

fan toturn

un for work -with


for at least a Dart

e good plan for re to

get accommocietion at the Ritz before my arrival,

here I

a typewriter, Rn d

could need



P nlace for Ernest


Anticipating that

your door is open as always, I would hone tc be

able to move out to your house if you

meeting do not gain the

stenographer (which I think I can do) I may

This leads me to think that it

room which I could fit

quite likely might

comfort and convenience, and if I

a man with me to act F:s secretary and general
of my stay.

f,-,r it

other views.

with me as a ITiatter of nereonel

an unable to locate a goad

and for a

It has

I carry out my plan of


to the

Yant me, before leaving London, and then

for a while, I would also

try and arrange a visit pith you on my return.

lhis year I have had no
for a little trip in


holiday so

far, and if I can coax you off

before returning home - and buEinees here permitted -



July 27, 9.
flE they are.


a prompt settlement

your Government sen

time, and that they

Montagu C. No
event a :pod unders
Thorpe Lodge,
Campden Hill,
I shall t

London, 'LnEla
of July 15.

Now pleas

part in regard to t

that have been trou

Mr. Montagu C. Norman

OF 2

would like to do that.

July '27,


But beyon.i this my ,lane are most indefinite.

As for a trip on the Continent, what I had in mind was to go first
to Paris - then to Switzerland for a while in order to see the Swiss bank
people - from there to Berlin - and then to Amsterdam and
on the other hand, if there were no occasion to



sitzerland, I


make the trip the other say - going to Brussels, Amsterdam and Berlin, and
possibly from there tack by way of Paris cr directly tc London again.


hardly seems worth while for me to atotem;t to go to Austria.

I would like to get your own views about this program as promptly
as possible, are! .would especially like to knos ,.hether you think that the

meeting - which now seems to have developed to considerable proportions


is likely to to of a character that would necessitate my taking with me some
good expert adviser or associate.

I have no one especially in mind, but

could readily take some one from cur research department or possibly some one
from outside of the bank.

Referring nor to yours of June 10, and the confidential memorandum
which e.ccone:etnied it.

Matters have developed so that the

message which you had in mind is not aporopriate.




diu, however, have a

strut these matters and gathered that they sere

chat with Yr.

Igiticipekting a visit from some representatives; of your 3overnment to discuss

debt matters the latter


of September, which


he after Secretary Hughes

returns from Brazil where he is obliged to gu as our representative in connection with the 100th Anniversary of their independence - or come such celebration.
This also will serve to acknowledge yours of July 8.

I gather from

chat you write, ae sell as from your cables, that people are gradually settling
down to a somewhat better understanding of the problems, varying and perplexing


August 8, 1922.


Dear Norman:

The enclosed clippings from the Net York Times may

prove of interest to you.
Yours sincerely,

Montagu D. Norman, Esq.,

c/o Bank of England,

London, England.
BS. "fit




August 24, 192-2.

My dear Norman:

Thank you for your letter of August 9 just received on my return from
a fei days of loafing


foods Hole, /here

as you knov Katherine altays spends

the sugeLer.

I wonder sometimes vhether the urge for the meeting of
has not

lost much of its force because of

that may 1:e accomplished.

learn wtelt is


I am, of course, waiting


much interest te,

decided in regard to the conference on debts and especially as to


simply the discharge of the



the delay and of the uncertainty as to

Ant you ray about the Agenda is all right



if the meeting contemplates

duties outlined at Genoa; but


feel rather


statements are no brief, terse and unenlightening to the public as dis-

tinguished frcn the more enlightened (?) bankers,

that the real food

to °ems from

the meeting may be lost unless some Lore elaborate and argumentative Document is
produced as the result of the letors of the re7resentativee.
It ie discouraging and disturbing to learn that from your point

the outlook is so black



in Central Europe; but 4lay it not be that you rather

lean towards the pessimistic rather than the


outlook and that it is

explained by your nearness to events and by your special contact with the most
discouraging side of the problem?
I vould enjoy indeed

arrange it sere

propose and would try and

not the other meeting in prospect in November or conceivably

and vere it

the Federal

ouch a trip as you

not that 4e are still surrounded by uncertainties as to

heserve System and

what is

going to

happen to it.

The delay in



.4, 1922.

reappointing Governor Harding or in appointing a successor is most distressing


and disturbing, and very difficult to explain.

.,n the whole,

I think I shall

have to postpone any thzught of a holiday with you until matters clear up, both
as to the meeting on the one hand and as to our own situation on the other.
I had the good fortune to locate an excellent secretary to do my letter
writing while abroad.
the Hague.

A young lady the is already there doin,

But I fear that the

her to come home.

meeting will make it necessary for

I wish I ',light be able to locate

had when I was in London in

ge have

delay in the

some mirk at

the Mies

Erichson that I

1919, but I fear that her address is lost.

never had such a

quiet time

at, the bank as just not.


whole business community seems to be marking time, waiting on the strike and

political developments more than anything else.
.Pith warmest regards,

Yours sincerely,

Montagu C. i4ortbui,


o/o 7ark of Lngland,


London, Fn,Llanci.



11 lb

September 7,



Ay dear Norman:

A couple of weeks ago I was suddenly


to Yashineton, where

I spent a hot and very busy week, principally on matters ccnnectee with
Governor Harding's situation.

Then I got hack a little rest seemed in

order; so altogether I have been away from the office the Letter part of
two weeks, and now on my return I have yours of August 17.

I fully understand how foggy the picture is Just now, but is it
not somewhat cleared up by 'what I gather to

be Bradbury's

out the agreement for a brief moratorium?

le are a bit puzzled by press

success in working

despatches, somewhat contradictory, as to what is going on in Austria, and
which in the last few days have indicated th9t there are some rather definite
plans maturine to give help at the eleventh hour.
The various matters to which you refer, and especially the delay
in the fundint, negotiations, have made it clear to me that the meeting of
central bankers must he postponed.


will await

and for your private eye please understand
Agenda again in


suppose that I could

that I

your corm. and in the matter,

have been all over the

within the last few weeks, and find no reason to

net attend the meeting, unless developments next month

in laehington bring about a change.
I think you must i'now Mr. Mellon well enouih to realize that he

is the last man to take the responsibility of indicating who should be sent
over here, and while I have expressed entirely a personal view of the
matter, both in my talk with Peacock and in cabling you, I still feel that

tilontvu C. Norman, Esq.

!.eptember 7,1022

September 7, ig?.?

Montagu C. Norman, Eso.

The reason why the coal strike has not,
is a

/r obscure one.


our industry more

The visible supplies of coal. in this country are

known only to the point of the large dealers suneliee, of what is loaded on


the railroad oars and what is in the

ly a vast store of coal scattered throughout

the country

can be taken and which has kept things moving, bat

in the

last few weeks.

eat tied, lE

There is undoubted-


of .which no eccount

with a very narrow verein,

The output, now that the strike is fairly well

increasing tremendously and the car movement :le inoreasine, so

that the only real danger


in in the nerthweetern oection, vhich

not, we hope, be gradually relieved

by the

operation ef the Indiana an

But the Lake transportation is relied upon during

Illinois mines.


summer months to stock up the Sortheest, and if we have an early freeze
they may have


discomfort in the Nertheeet during the cold weather.

a letter which I wrote yet:

Just nor I am unable to locate

I eieh you eetuld read it vain if

months agc, but which eeu may recall.
it is handy.

In it I think I indicated a segueeee


in connection with the debts, and the prime
There never has
that there


arisen any reason fc r m.z te

he a




of starting negotiations.

ehaege that. view,

ee I am hcpeful

clear understanding between your folks and

cure on

this important matter.


here are on the ver:e of considerable :Lctivity.

During the past year banking institutions throughout the country found themthem
selves with idle funds in unprecedented amounts and largely invested4n ehort term


The corterercial demand is now arising aemin, and one

of the principal causes for
bonds has been the


selling by

decline in the market nuotetions for the Liberty



care of their customers regular demands.


in order to take

It looks as though we were six


Montagu C. Norman, Esq.


September 7, ic:,2?,


Len mrites most enthusiastically about his murk, but I gather from

11, his letters that he has to work very hard inceed, shish is not a bad thing

Snwetime .hen you see Ms boss at the bank,

if it is proper, ge

a little idea of that impression he makes, both as to hie generalattitude
to his capacity.

I would like vsry much to hear of it, but please 1160 yo

on discretion in making tte inquiry.
Things are no pretty quiet at the bank.

I am tskin!, it easy

and feeling very fit.
ry bee, regards to you.
:fours sincerel y,

Montagu C. Norman, Esq.,
Thorpe LOdge,
Campcion Hill,


1., &gland.

6S. MM

The letter to which I refer is dated February 18, 19?,2.
read the long paragraph in the middle of the second pane.



October 2, 1922.


dear Nornan:

Your cable of last, week, and now your note of September 21 written

Holland, give me really the first notion I have of your illness, and until your
letter came to-day, I had been quite a bit anxious about it.

A note which

came from Ben, as I recall, spoke of your having lumbago which might indeed
come from a bad throat.


do hope you are well again.

I want to see you

very much, and were I to follow my own inclination entirely, I would return with
you after your trip here with the Chancellor.

The trouble is with polities.

lovernor Harding has not been re-

appointed and no definite pledge for his reappointment has been made.
fact in the midst of a very difficult

We are in

political situation for the System, and

my surmise is that the President will make no appointment until after the
special session of Corwrers convenes on November 15, which will he after the
electione, and then I still hope that he will reappoint (bvernor Harding and
fill the vacancy in the Board,created by its enlargement by the last Congress,
by appointing Mr. Howard of Chicago, a man of ability and integrity, who is the
head of the largest organization of the agricultural industry in the country,
known as the Federation of Farm Bureaus.
Your visit here will give us a chance to catch up.

I am delighted

at your coming, and if you do not in the meantime write me, please on receipt
of this letter give me the best notion you can by cable not only of your plans
but of what you would like to do with me.

I have had no real holiday this

year and might arrange to make a little trip with you somewhere, preferably to
some quiet place where we could loaf and not be entertained.


Montagu C. Norman, Esq.

Oct. 2, 1922.

October lf, 1922.

Dear Norman:

I am writing you separately on other matters, and this is a
very ?ernonal letter to you oentaining a very personal and unusual request.
When I was in London in 1916, Captain Aeginald Hall (now I
believe Sir huginald Hall, and a Member of Parliament) showed :;e in his

office in the Admiralty Building one day the menu of a dinner held in
New York in 1915, whioll I Wieve wee arranged by covm very i:ro-Gornan
sympathizert in celebration of the sinking o° the Lusitania.

On the

back of the menu were the signatures of all the guest.
By now this Lay have peen buried in the archives of the Admiralty;
but if it has not, do you suppose it would he possible for me to have a
photograph of it?

I dislike very much to bother you with a request

of this character, but I can make use of it just now to some advantage


Of course, tho source from which it is obtained will be carefully safeguarded.

You will doubtless recall that Sir Reginald is quite S. warn

friend of Teddy Grenfell.

I hear regularly from Ben, and ho seems delighted with his work,
and especially pleased with his hospitable reception and the many courtesies
he has received at every hand.

For this and more, I am, as ever,

Your grateful friend,
Vontagu C. Y.orrran, Esq.,
Thorpe Lodge,
Campden Hill,
London, England.

40 0


October 18, 1922


Dear Norman:

It is some time since I hive written you at any length, ;tartly because

there was nothing to write about, an

even more because I have heen most

aressingly enfaped, both during the Bankers Convention when McKenna was here,
and irTediately afterwards in preparing and then conducting our semi -annual

oonference of reserve bank officers in Washington.

I returned to the bank

'onday morning.

In regard to your cable to which I have just replie1 as per confirmation enclosed.

Of course I have all alonf- felt that these negotiations

should be undertaken as promptly as possible.

The delay would only create

difficulty in a satisfactory adjustment, but, on the other hand, no one
realizes any better than I do that your government has had its owal difficulties

to deal with, especially in recent nonths and that on top of that, it would
he most embarrassing to have your Chancellor in this country conducting
negotiations should you by chance have a change or government.

This is all

surmise, although the press contains so eany indications of a possible general
election that I can well apprehend somewhat of the embarrassment.

I took the

liberty of mentioning that in Washington the other day where it struck me that
it was already pretty well understood.

Now a few words about business conditions here.
having something of a boom.

We seem t.o


Speculation on the Stook Exchange continues to

absorb increasing amounts of credit.

We have had a continued and striking

advance in prices, with the sole exception of the small :rains.

have had

a considerable enlargement of our note issue and of borrowings from the
reserve banks.

There have been advances in wages in some parts of the country

Montagu C. Norman, Esq.



October 18, 1922.

Benuees are being paid to

to really extraordinary proportions.


classes of building trade workers and of course all steel prices have advanced

very considerably.

The money market has hardened so that e :vied deal of

busieeee is now being done here in New York at 5 aer cent., and with our rate
at 4 per cent., the inducement to borrow at the bank has considerably increased.
From the high point of all the war loans, there have been declines ranting from
one to ilia per cent. or more.

It is difficult to gaugethe extent to which this

development is the usual fall demand for money and to what extent it is the
result of a real shortage of materials and the bidding 1.1;:, of prices.

been very such -uzzled as to what we should do.

I have

The worst thing that could

happen to us ju&t now would be to have anything like an artificial and feverish

We are studyin

the situation, always having in mind of course

that we are victimized to some extent by further gold imports, the consequences

of which are in greater or less degree inflationary according to the extent of
the speculative spirit in the country.

Besides that, we are complicated with

a political situation that is puzzling and which has brought out a good deal

of antagonism to the Federal Reserve System, and, however independent we may
consider ourselves from political influences, we must not be so foolish as to
invite further troubles.

I would give a great deal to have op'-ortunity for

a discussion with you so as to get not only sore of your philosophy, but the
benefit of your own experience under like conditions if such have ever existed.
We have had a succession of speeches and etatements in regard to the
debt owing to the United States, with varying reactions, and I am puzzled to
get what Rome of my friends in Washington would call a conspectus of the

If your plans are such that you are able to

over here somewhat

in advance of your colleagues, I should think that you might gain much valuable
information as to sentiment, both official and public in regard to these matters
by talking with your many friends here and by having some frank talks with
some of our people in Washington.

74ith much regret,

I am obliged to confess

October 18, 1922


that the effect of the Balfour note still lingers in many places and that it
was most unfavorable to the proapt adjustment of the debt problem.

This and

similar occurrences I have all along Pelt could be avoided by ;-e-ompt negotiation, ae I think I explained when you were here arc'_ as I certainly did at 7uch

length when Peacock wee here.

Ben writes me regularly with accounts of progress in his work and
his last, letter indicated that he shortly exrected to have you au his guest
at dinner.

I cannot tell you how greatly I appreciate your interest in that

boy, and he feels eeually grateful.

Although I hsve had no holiday this summer, I am feeling very fit
and about at top weight and barring discouragements about the political
situation manage to keep in pretty good Espirito.

I hope you can give as

good an account of yourself and that you will write me soon that you are
entirely free of your old trouble.
With warmest regards, I am,
Faithfully yours,

Montagu C. Merman, Esq.,
c/o Bank of England,
London, England.


October P5, 1922.

Dear Norman:

The enclosed article explains itself.

I suppose

there is nothing to do about it, but this foolish r_erson is just
muddying the waters, and unfortunately does not know what he is
talicinr, about.

I suppose, on the other hand, that Americans

are just as Drone to telling; our friends abroad what they ought

to do and just ho t.o do it.

I thought yo': would be

interested in this latestefPusionnf Paish, however.
itith best regards,

I am,

Yours sincerely,

Montagu C. Norman, Esq.,

Governor, sank of ingland,
London, England.







November 3, 1922.

Vy dear Nor:an:

Thank you very much for your note of the 25th, enclosing the text of
Sir John Bradbury's memorandum on the reparations question.
I have read it and, of course, with much respect for his
I have

always felt.



On the other hand, with some of his proposals I uuet

say I cannot agree, although his very wide knowledge of this whole nuestion
makes it rather presumptious of me to write even that.
I would rather doubt the ability of the Feichsbank to sustain the
value of the mark by the use of

its -gold, as he

suggests, and I

would further

doubt the ability of the German treasury to function under present conditions
without further note inflation, simply

by making

rtevision that further

notes should not be issued unless equivalent gold were suitable proportion or

deposited in the -teichs-

a.;-,eroved foreign currencies and



The fact is - as we see it here - that the balance of foreign payments


Germany, whether caused by actual reparation payments or by

"the flight of the mark'', combined with

any such

measures from operating.

rootc-: to expect


a constant

budget deficit will prevent

That the cause of the trouble is too deep

from such measures as that proposed under these two



now we are in somewhat the same situation that you were in

because the elections and political matters occupy everyone's thoughts to
the exclusion of almost everything else.

I an watching with the greatest

possible interest what is haepening on your side, out confess that the news-28.par

accounts rather confuse me more than enlighten me.

If you have time to send


Montagu C. .korman, Esq.

Nov. 3, 1922.

Noveabor 10, 1922.

Dear Norman:

This morning I have your long letter of October 31 giving

a most interesting ac,lount of what has been taking :lace with you

Politically and otherwise.

I cannot ho -se to reply to it fully until

next week as Vice Governor Platt is here to-day and we have

matters to discuss.

I also have your private letter to

rr any



shall reply by long hand, so please accent this ss simply an acknowledgment until next

9, eek.

With warmest regards, I an,

Yours sincerely,

Montagu C. Norman, Esc.,

c/o 3ar.k of

London, England.

November 15, 1922.


rly dear Norman:

This will reply to your fine letter of October 31.

Please regard

it as quite personal and confidential.

You already know how I feel about the advisability of starting
those negotiations, and I wrote you a line on that subject only last week so
will not repeat.

I' the Chancellor does come - and I should supeose on the

whole that that would be eesirable because of the prestige of his office - I
should hope that it would be with an open mind and not too definitely crystallized
views, and that you with your present acquaintances and he with his official
point of' view could together work out a satisfactory scheme.
What you write about politics ie sop ewhat as I had understood it,
although I am greatly puzzled to learn how any new .7;overnrnent can get an actual

majority in the Com; one as a result of the general election no long as there

are four parties that will not coalesce upon sore common ground.

I rectal

your stating at one tine that when the Lloyd Ge,rge government fell you feared
it would result in a series of changes which would be unfortunate all around.
In other words, that no government in place of the coalition government could
stick very long.

It looks a bit to us over here as though that were the

situation now; but would not any succeeding government be subject to the

difficulties that the Boner Lew government will

encounter after this election?

What an example it would be to the world if the Austrian situation
could be put upon a workable basis:

I have a feeling that success there might

point the way to success in other directions, but would need to know more of the
details than I now do before having any very strong opinion.


Aontagu C. Norean, Esq.

November 15, 1922.


Montagu O. Norman, Esq.

November 15, 1922.

November 15, 1222.


all of the fleserve banks have
Gur rate situation is briefly this hall. 1/2 per cent. rates, except Boston,

4 per cent.

New York and San Francisco which
I would hope that Boston and

If any change is forced upon us

agreeable) would be
to 4 1/2 per cent. (if the former were
New York advancing

but of course the Reserve
about all that is needed at present au a warning,

expansion just now and we cannot afford
System has an enormous capacity for
such period as 1919 - 1920, even though

to go through the trials of ,iny
be very
our assuming a position which would politically
resistence involves
stand, and I wil] sindeavor to give
This in a word is the way we
decide to definitely recommend a change.
you ample warning in case we
Again thank you for your fine and illuminating

Yours sincerely,

Montagu C. Norman, Esq.,

c/o Bank of England,
London, England.


November 20, 1922.

Dear ilorman:

Thank you very much indeed for yours of Novemoer 8, and for your
help in obtaining that Menu.
I shall certainly return it very promptly,
and would indeed feel distressed were it lost.
What I had in mind was
that possibly a photostatic copy could be made which would serve the purpose, but you were good enough to send the original and that is even better.
Sir Reginald's note refers to an amusing incident which occurred
at a tea party given in his office at the Admirality during the war, when
Lord Derby's daughters came in for tea, which turned cut as it happened to
be an exceedingly expensive one for me as the young ladies were raising some
money for one of the war relief funds.
The next time I am in London I must make a point to see Sir
Reginald Hall.
He impressed me when I saw him before as being one of the
most interesting men I aver mot.
Won't you rive him my warmest regards
when you see him.
Since your letter was dictated, the elections have undoubtedly
given friend Paish something to think about.
I an sorry that he still has
his erratic moments, for he is personally a very delightful fellow and I like

With best regards, I am,
Yours sincerely,

Montagu C. Norman, Esq.,
c/o Bank of England,
London, England.
3S. M1

December 1, 1922.

My de::r Norman:

I have just finished reading with a great deal of interest the most
interesting article that you sent me which was written by your friend Hawtrey,
and which appeared in the September number of the Economic Journal.


are quite a number of points mace by Hawtrey which I think deserve some discussion and possibly some reply.

I wish 1 had time to do so thoroughly.

I very deciiedly disagree with him in what. he states about interest

Also there is an indication in the third

in the second paragraph on page 297.

he thinks
paragraph on page 303 that\there will be an unescapable depreciation in the

commodity value of the dollar because of our redundant supplies of gold.
does not understand our banking system or he would not believe this.



illustrate his error, suppose the managers of the Reserve System should say
that while the law renuires us to ff.aintain minimum reserves at 40 per cent.

against our note issue, and 35 per cent. against our deposit liabilities,
nevertheless in view of the redundant holdings of gold now in the System, we
prefer, as a matter of policy, to maintain these reserves atbitrarily at not
below say 73 per cent. of our deposit liabilities, and a^ per cent. of our
note liabilities; or, say, roughly, 75 per cent. of the two combined, and we
would adopt our rate policy to that hypothetical standard.

We certainly are

capable of preventing a depreciation in the commodity value of. the dollar by
the adoption of some such policy.

He makes no reference to possible political

difficulties in doing so, which of course are the only serious difficulties with
which we are confronted in that regard.

December 1, 1722.


I think your com7ent

on what he writes is justified.

I have just received your cable #57 in regard to Zimmerman, which
requires no acknowledgment, but I thank you for keeping me so fully posted.
Uith warmest regards, I am,
Yours sincerely,

Montagu s. Norman, Esq.,
c/o Bank of England,
London, England.


Decemoer 21, 1922.

Deer Norman:

Owing to my absence from the office, it was impossible to

get off e rerly to your letter of November 27 in time to reach you
before you sail, so this is merely to acknowledge it and to thank you.
i have become very skeptical of any reparation settlement

being acceptAble tc the French except it be the result of either
(a) a Lierman collapse; or (b) outside pressure.

tours sincerely,

Aionta4;u D.

3S. VM

Norman, Esq.,


July 14, 1922.

Bank of

London, 7nglInd.

No. 23


Till surely have in mind thnt you attech



toter im7)ortpnce to

proposals for cooperation than to form of klenda for proposed
internntional convention


tn not clear why paragrarh 3

No.20 sufTested doubt in your mind.





May 18, 39?1.

Dear Mr. Norman:

This gill serve to introduce to you Mr. N. Nagaike, who
has until recently been the Neap York Representative of the Bank of

Mr. Nagaike is desirous of meeting you during his sojourn
in London, and I will greatly appreciate any courtesies you riay
extend to him while he is there.
Yours sincerely,




.'iontagu C. Norman, Esq.,

Governor, Bank of England,
Threadneedle Street,
London, England.




May 18, 1922.

Dear Ai% Norman:

Governor Strong has asked me to send you the enclosed
letter shich sae receiv ©d by him il n communication from

Governor Herding.

I hope you enjoyed your trip tack

means of giving you a needed rest.
lith kind regards,
Yours sincerely,


u C

Norman, Esq.,

-6/6 Lank of Enirifft,

Thrladneedle Street,
London, Zogland.


and that it sae the








May 23, 192?.

Dear Norman:

The original of the enclosed copy cf a letter of introduction
which I have written to you mill shortly be presented by Wr. Edward J.
Lane, President of the Atlantic National Bank of Ja.cksonville, Florida.

Lane is a very well known banker of the South and a member of our
Federal Advisory Council.

He is planning to visit the Continent next

month principally for the purpose of studying the financial and economic
conditions existing in Europe.

I am sure you can be of assistance to

Wr. Lane in this regard, and he will esteem it a nrivilege of having
an o-.)f.ortunity of seeing you while in London.

Appreciating any courtesies which you are able to show him,
I an with cordial regards,
Sincerely yours,

::ontagli C. Nornn, Esc.,
c/o Bank of England,
Threadneedle Street,
London, England.





May Z3, 19:2.

Lear Br. :err:au:
This note :Till introduce to; yoU tar. c:(1 eard I. Lane,

President of two Atlantic Nb.tional Lar.i. of jacksoaville, ?is., and
a member of ourgiving Advisory Counci1J.
ILr. Lane is Federal

al Anci.vco.uoniC, conditions that exist

t0011 it a .privile,ge if he could have

ng this sub.Seot with you.

r courtesy I an,

Very tray yLurs,

Ben j. Stmng,


June 1, 1922.

Lear Norman:
This ie my first opportunity tc write you since you left7home.

I wee

laid up for some little time and then lent away for a rest snd did not work at

Your visit gave me a great deal of pleasure, was really of the greatest possible value in clarifying our opinions over here about various matters,
and I hope later on that it will be productive of real results.

As I cabled

you, the delay in the bank meeLing is all tp the advantage of constructive results, especially from our standpoint.

June 9, 1921.

Dear Norman:

For some months past I have been very much puzzled by the contrast
which is presented by the conditions in England with those in this country, and
we have been seeking some light by going over the literature as to your banking

The enclosed confidential memorandum on the subject may be cf some
interest to you.

Elb appears to be indicated, you have had no considerable deflation

of bunk credit (except possibly that represented by your reduction in volume of
the Bradbury's), and if the conversion of "advances" into "discounts" represents
simply a reduction in comeercial demands which is more than offset by as increase
in government bank borrohings, then it stri,es me that you will need to be very
careful indeed in managing Treasury financing and
periou when business recovery is taking place.


ankiag policies durin6 the

On the one hand, your Treasury

will be pressing for credit in the market while, on the other hand, your manufacturers and merchants will demand it as they find enlarged business turnover
requiring more borrowing.

If it does not result in driving the Treasury to

the bank, you will be fortunate.

It is simply another indication, to my mind,

of the need for your Treasury not A:nding every shilling of floating debt that
can possibly be funded at this time.
May not an explanation of our disparity in rates lie ric'ht in the
figures enclosed?

And may it not point in fact to a greater need for higher

rates with you when government refunding has progressed even more definitely than
it has 6.6 yet, rather than the need for lower rates here?

June 1?, 19??.


Dear :iorman:

any thanks for your kind note of May 31 with encleoure which I shall

read with great interest and special attention to the clause to which you refer.

ii th this I !LIT enclosing a copy of my letter of Way

Eachkiann of the

Penque Nationale Suisse, Lgether pith copy of his acknowledgement Ihich I have

just received, and which completes the correspondence, of which you saw the

first letter rhea you were here.

l hope that. it is entirely in accord with

your ,:),vn views.

An unexpected call to Nashington has again delayed my lriting you Ss
I had hoped, about one thing and another, and especially an acknowledgment r)f

your fine, letter written on the steamer.

still measuring my cork by

capacity rather than desire, but have had as yet not a minute for hand written

Please take the will -for the deed.

hope that you and ben have become as Well acquainted with each

other as i *ant you to be.
fith Narruest regards,
As always,

Montagu C. Norman,

c/o Bank of England,
Threadneedle Street,
London, England.




Montagu C. Norman, Esq.,
Governor, Bank of England,
Threadneedle Street,
London, England.



June 19, 192?,.


Dear No


enclosed printed copy of .an amendment to the constitation of the

New Tork Clearing ibuse Association somewhat explains itself, and as you will at
once recognize lit& an important bearing upon our affairs.


think I should

advise you confidentially that our bank was distinctly opposed to this proposal,
.which was nevertheless adopted by the Clearing House after scse discussion.

is inevitatle that the plan mutt later be aa.ende!4..


I think the reason why it

went through in this form is because of certain jealousies between the banks
themselves, and a certain feeling of reluctance to subordinate the Clearing
House views to those of this bank.

This is all rather unfortunate, but we have

decided to do nothing, but let experience show that the plan is
The history of this -.atter



bad one.

rather complicated and I shall not re-

Some years ago it was decided to apply an automatic rule

peat it in full.

to the rates of interest allowed on bankers' balances by the New York Clearing
House ban'. s.

In the present declining money market it was decided to extend

this automatic arrangement to practically all deposits.

The grounds for


opposition are principally:

1. It places the responsibility upon this bank in fact and without
adequate opportunity to consider the matter of fixing the rates allowed upon all
New York bank deposits.
It introduces a new consideration of great significance in makino,
rates by this bank.

It is the type of comprehensive control which has heretofore

arouses public antagonism, and may again direct criticism against the New York

Montagu C. Norman, ESQ.



June 19, 19?2.

It is lk
bound ultimately tS create dissention in the Clearing Houoe,
and I fear will give rise at times to dissatisfaction with the res

rate changes are made from time to time.

Personally, and very confidentially, I am frank to say t:1

nothing whatever to commend the plan and every reacen fe condemn i

an alternative plan - th,,t the Clearing House Committee should fix

time to time in their discretion and according to the need of the

committee beine reeuired to revise the subject of rates every time

This did not apeeal to them.

I euspeet that in the bac

desire to exercise eoms restraint upon cur freedom in reducing rat

I am recounting this because I would greatly value an exp

o in views as to the merit or demerit of the Clearing House plan, an

can send me some literature without bothering tc write a long lette


exactly how the London Clearing UG1168 cankers' Committee acts on th

My information is a bit out of date and I am anxious to h


Yesterday I cabled you as per the enclosed confirmation.

It is difficult to explain the sudden change of front, bu
rapidly with us.

be but temporary).

le have had a considerable easing of money (whic
Me have had quite a tacking up, I am told, of

of securities offered to the public which have not gone very Nell;
been some flattening out of speculation on the exchange.


feel much sunder with our rate at four per cent. than anything hig
and would feel even better if i

could be brought to

is still a matter of some uncertainty.
acting favorably

a lower level,

I have no reason to doubt

on the recommendation to-morrow, but one can neve

Thile I had a delightful evening with Peacock about ten d
since seen nothing of him until yesterday, because of his being so


June 20, 1921.

He left for Canade last
fe my having spent most of the time in the country.
%night, but will be back in ten days then we expect tc have a good visit together,
Montagu poet him Esq.,
and I till C. Norman, vith the latest news for recounting to you.

c/o Bank of En 'land,
Threadneedle Street, regards,
tith tamest
London, England.




June 21, 1922.


Dear Yr. Norman:
This note will be presented to you by Mr. 'tinhorn L.

Saunders, President of the Ingersoll-Rand Company, and a director
of this bank.

Mr. Saunders would very much like to meet you during his
stay in London and to have the opportunity of looking over your
good institution.

I am sure you will enjoy having a chat with him.

Assuring you in anticipation of my appreciation of any
courtesy you may show to Mr. Saunders, I am,
Yours sincerely,


Montagu C. Norman, Esq.,
Governor, Bank of England,
Threadneedle Street,
London, England.


'fp% 4..ti





June 21, 1922.

Dear Mr. Norman:
This note will be

Cashier of the


presented to you by

Mr. M. C. Hersstreet,

National Bank of Oneonta, New York.

Mr. Hemstreet would very much like to meet you during his
stay in London.

I am sure you will enjoy having a chat ;pith him.

Assuring you in anticipation of my appreciation of any
courtesy you may shop to Mr. Hemstreet, I am,
Yours sincerely,



Montagu C. Norman, Esq.,

"A' xl


Governor, Bank of England,
Threadneedle Street,

London, England.


ri r-e


.sett. v.i -v-v1 t'vrk



June 22, 1922.


My dear Norman:

This iE any first opportunity after reading the report of the Financial
Commiseion (Genoa) enclDasd with yours of Way 31, to send y-.11 a comment or two.

It needs quite a little study.

Offhand the following occurs 14) me

Fesolution 15, as you
which you might consider: state, does not apply to this country, where

there is a well developed market for forward exchange, and furthermore it would

be dangerous and invite the strongest kind of disapproval from our member banks

were lie to become a large factor in the foreign exchange market.

Ae to

the second paragraph of Resolution 15, I think there would

be great difficulty in arranging for the necessary legislation in this country

to gain exemption from taxation, forced loans an6 moratorium, beyond that which

now exists.


shall have our laws examined to see just what the status is,

but in general I should consider it safe to assume that public opinion wouA be

an adequate protection to any fund held by a Federal Reserve sank as the basis

of the resukotion of the gold standard.

Resolution 9 impresses me as a myth.

The reasons for this view

are rather eluborate, but I cannot conceive cf a demand for gold of the char-

acter described, that is through simultaneous and competitive efforts of various

countries to secure metallic reserves.

The rates of exchange gill take care of

that without any agreements or legislation.


June ?9, 192?.

June ?7, 19?1.


Dear Norman:

Almost at the last moment before cur directors meeting last week
the situation developed here in such a ',ray that we felt safe in recommending

a reduction to 4 per cent., rhict ens eromptly ap roved by our directors and
by the Federal Reserve

The change,- while possibly only temporary,

neverthelese justified the reduction, and I am as yet unable to say to chat
extent it may indicate any further move in ene direction or the other.
In the first -lace the speculative fever on the exchange seamed to

collapse for the mcent and I think it became clear that the market was a bit
water-logged both as to the loin account in stocks and investment bonds as well.
Second: The money market developed considerable ease, ample in fact
to demonstrate the need for a rate reduction by this bank,at least to justify
it, and "bile I cannot myself believe that it will be permam,ent, yet there is

a likelihood of its continuing with some interruption I should say until the
late summer.

'such, of course, depends upon the Treasury's transactions, as

ell as upon general business developeente.

The action taken by the New York Clearing House, of which I

c,dvieed you fully, made it neceesary for us to reduce cur rate at once in order

to avoid the great embarrassment ,hick could be caused them if se delayed a
reduction for even one or two weeks.

The Clearing House action which was

finally adopted at the meeting of the thole body, provided for an immediate
reduction of rates. and had notices been sent out at once and the changes
been made effective as of July first, then a. further reduction would have been

June 27, 19?2.

Des.- ilc rtn an :

A very enthusiastic letter from Ben describing hie

visit. 4th you makes re reali/e hat a kind Ind thoughtful
I shall only send you a line of ths.nks,
friend you are.
but I knor the.t yc u mill sppreciate that I fer-31 it very deeply.
Yours most sincerely,

lionta,_)% C. Iion;.sn, Esq.,

c/o Bank of England,
London, Englan:i.

June 27, 1922.


Dear Norman:

Your cable of the 27th is just received, reading as follows:
you by letter of June 23 revised drat c! agenda.
also sending it to Governor Harding."

Of course, I am exceedingly interested in what your letter may
contain, and have only been awaiting the receipt

something definite from

you to send you some up-to_date comr.ents on developments subsequent to your
leavin.7 for home.

There has teen very little - in fact nothing - as re-

gards my associates in Nashington, but of course the outcome of the Genoa
Conference and the subse.uent Rankers Committee meeting does have material
bearing upon the proposed conference of the banks of issue, and I think it
might be enlightening if we could exchange vieve a bit by mail just as soon

as the plans for the meeting have furher developed.
I shall write you separately by this mail in regard to our rate
reduction, having had no opportunity to do so until to-day.
dith best regards, I am,
Yours very sincerely,

Viontagu C. Nor-an, Esc.,
c/o Hank of England,
Threadneedle Street,




July 6, l9??.

Dear Norman:

Enclosed are confirmations of your cables #2 and #3, together with my
reply which goes to-day.

Unfortunetely, I was away over the holiday and this

has delayed attending to correspondence and cables, and yesterday I was engaged in
a meeting all day long.

Our rate situation, as I /rote you, developed quite rapidly.

I now

have little fear for the moment of any stimulation to the speculetion on the exchange as a result of our re-its action, and that of course was an influence in

making the change.
justify it.

The generel condition of the money market at last seemed to

Further than that, the Clearing, House action, ooncerninr which I

wrote you, mode it desirable for us to act immediately as to defer itAlater - that
is, until after July 'st - would -0,tve greatly embarrassed the Clearing House bank'.
by the necessity of changing rates upon their depositors accounts txice within
a period cf P few *Peke.

Any further reduction at the moment seers unlikele.

le are well down

to the market now that pur rate is at. 4rer cent., and so far as we oen gsther, the

prevailing rate being charged by banks generally upon customers' accommodations is
about 5 per cent. in New York.

4e cannot afford to go too much below that.

I do have some concern about erices.

In certain directions we have

been witnessing rather sharp advances, but these have not extended in any imeortant
may beyond raw materiels of primary production, and I think we can afford to watch
the index numbers from now on frith some anticipation that the advance will be

checked and that ve may even see some little recession with summer dulness opting
on and with the possibility of a temporary boom dying out.

July 6, 19?2.



The outlook, however, is still very uncertain, and our political


July 8, 192?.

Dear Norman:

The holidays have again interferred with my mail and unfortunately are
have had a series of conferences on one or two important matters th!,.t have just

knocked my correspondence endways.

This is 4 reply to your letters cf June '3 and 19.
Again many thanks for all that you have done for Ben.

He is very

haply and writes me enthusiastically about your interest in his welfare and
your hospitality and many courtesies.

He is fell worth all the trouble that one

can take with him and I feel sure that you will never regret your interest.
Fire t,

as to the meeting of the Central Banks.

I cannot help but

feel that the developments abroad have increased the possibility that not very

much can be accomplished by the conference beyond affording cp ortunity to re,Alat those pious declarations which you have prepared I must say with a great
deal of skill.

Eut of course the meeting must be held and I presume in the

near future our friends in Nashington must duly be asked to determine whether
I should go or not.

I cannot attend except it is agreeable that I should,

and I firmly believe that it would to unwise to attend even then except I
had a good clear understanding of the extent to which declarations on my part
can be permitted or would be safe on the subject of the debts.
Next, as to the debts.

I have no informtion 't all ae to what is

transpiring in laehington and only know that Mr. Parmentier is now on his way


over here, but have no knowledge of what he expects to propose to the Commission.


Montagu C. Norman, Esq.

July et 1922.

.kith some hesitation I venture to express a personal


opinion - and of

ii ie no more than that - as to the cr'urse being pursued in this matter.

It seems to me that the American Congress has made e very definite declaration of
what the policy of our Government must be.

It also ap ears that any program

undertaken by the debtors which reeks to deal with the debto by aurae method of
approach different from that contemplated in the so-called Funding 3i11 will be
futile end simply serve to make negotiations more difficult in the long run.
Mould it not be better to meet with the Commission as promptly as pcssible,as

think le discussed when you lore here, and lay the foundation for a better under-

standing of the whole subject?

The Commission will be tile medium through which

the American Congress will get information.

I really hesitate to make informal

suggestions to the Secretary that might be aninfluence in hio forming an opinion
in this matter, unless I could speak with more certainty and authority than is
implied in your memorandum.

Ihat I em personally anxious to bring about, as I

explained to you, is a frank discussion of the EuLject within the limitations of
the bill but at the eats time within the limitations which are inherent in the

I shall feel very such easier in my own mind lhen actual meetings

comments, but your letter discourages me of much hope,


these cannot now

be expected for some time
,,f ocurse, ycu must realize that we understand the extent to which your
Government is ,;unt now preoccupied because of the situai ion in Ireland and because

of the difficulties growing out of the Genoa Conference and the general
Russian and Reparations situation.
It will hpirdly be possible for me to see the Secretary for a week or
ten days, and at, that time I will discuss the subject with him, and gill also

take the cpportunity of again referring to the proposed conference.

A letter

from Trotter intimates that this may not to held until early in October.
delay will not in any may inconvenience me in case I am to attend.


July 8, 1922.

You will be glad to know that I am feeling first rate, but um paying

NIpenilty or keeping shorter hours at the bank by these wretched accumulations

oilk cf mail vhich I seem unable to catch up with.

Nith my very best regards to you,(and please write me fully whenever
the spirit moves you or anything develops) I am,
Yours very sincerely,

Montagu C. Nortn, Er"
Thorpe Lodge,
Campden Fill,
London, England.



July 6, 1922.

Dear Norman:

The enclosed is a oopy of a note of introduction which I am
sending to Mr. Sesnon, through the San Francisco bank, to -day.


I do not know Mr. Sesnon, the Governor of the bank writes me that he is
a man of large means and of some influence in the business world on the
Pacific Coast.

He speaks very highly of him, and while I am most

regretful to inflict you with so many letters of introduction, nevertheless it seems that this is one of the penalties of the association of
banks in which we are interested.

With best regards, I am
Yours sincerely,

Yontazu C. Norman, Esq.,
Governor, Bank of England,
Threadneedle Street,
London, England,




July 7, l92.

Dear Governor Norman:

This note All be presented to you by my friend, Mr.
J. Z. Miller, Jr., who until reticent

Federal Reserve Bank.of Kansas City.

the opportunity to meet you, and I be

_has been Governor of the

He will much appreciate
to thank you in advance

for any courtesy that you are able to extend to him.
lith assurance of my esteem, I beg to remain,
Faithfully yours,

Montagu C. Norman, Esq.,
Governor, San% of hngland,
Threadneedle Stroet,
London, England.
TS.' 141


July '3, 19r.


My dear Norman:

I have already advised you of

July 8, and this morning I



your rate to 3 per cent.

appearance of things as I

Our market rates



receipt of your cable 414 received

advising that you

your cable

vas not wholly unexpected from the general

it from your cables and from news

here are still


notes which


Yell above yours, and with our

discount rate at 4 per cent., we are very close to 1 per
oing rate

have reduced

cent. below


customers' discounts at the member banks on their unsecured

are eligible for


here, and between 1/2 of 1. per cent.

and 3/4 of 1 new cent. above the rate for bills and Treasury certificates

which are not very actively dealt with




The relation



rate with the market and the progressive tendency for prices to rise will
make it necessary for us to be increseinply cautious as to any further rate

Your cables 45 and #6

Montagu C. Nor.-an, Esq . ,

c/o Bank of England,
Threadneedle Street,
London, England.

Yours acknowledged.
have been separatelysincerely,


July 14, 1922.


'leer Norm n:

This, is a rather belated reply to ycur letter cf June 23 and June 2E,
and to a cable of July 8, 14.
The delay in eriting has been entirely 'lue to my inf.bility to have any

discussion of theee matters with ry colleagues in Washieeton, end that, I think,
is essential

T Hond you ery final word, lest, indeed, you le mislei ty a

purely personal expreesion cf opinion.
First replying to your tallet


I ne dismayed

at the pxospeet ci. further Lags could imports.

$50,0:1),000 cr more addition in gold to our reaerees will to en uneelcome guest.

I am wondering, therefore, why shipments are commenced before negotiations are

Surely your geverneent would not make a "gesture:" withoet first

knowing sceething of the ettitude of the refunding commission.

Might not this

be unfortunate ehould it later appear thet some tatter arranilement were possible?
Of course I know nothing of what the commission may :lave is mine, but it startled

me to feel that your gcvernment would commence to make gold ehipeeets before some
bert of negctieticns sere inaugurated.

I shall refer to the egenda. later, in answering your teo lettere.


Early October would suit my convenience all right for the mooting

if I am able to attend.

In fact rather better than September.

I muet repeat what I here written you in eoee former letter that

I believe negotiations undertaken as promptly as possible are essential not only
for the value which will come from exchange of information, but because scms feeling of dissatisfaction must arise, unless I am greatly mistaken, if the foreign
governments completely ijiore the funding commission now that notices of its

Mr.Mentagu G. Norman



*appointment have been formally given.

I an not surprised by the Austrian develoment.

It was unfortunate,

but I have long regarded it as inevitable.
Replying to yours of the twenty-eighth:

1 think I have no difficulty in agreeing with you and Vissering as to
list ii.

With tha exception of a few casee,

I feel too ignorant of the situation

in detail to have an opinion worth stating as to list #2.
the auestion does arise, exactly
to know now to answer it.
fine institution.

recited in your letter, and I as at a lo's

The Bank of Java, whlca I visited, impressed me as a

I know all of the offi era and have a high regard for them.

Tney function as a bank of issue
business with them.



ould, and as you know we do quite an extensive

I should think that comparisan would be more between Java

and Japan and India, than it would be between Java
Tne Bank of r.etnonia I know nothing about.

yet established.
of our men.
with, and I

As to list 0, however,


The Reserve wank of Peru is not

They have been negotisting with us to temporarily 83 loy one

The banks of Brasil and Argentina we have had almost no relations
now very little about them.

If Java, Brazil and Argentina were

invited it would increase the number, if all accepted, to a total of twenty-four.
On the whole I think your judgment and Visseringle in this matter
Ana 1 doubt whether that would be as undesirable from the standpoint of results
much better than mine could be, and these running comments are all that occur
as it would be to have two banks such as the two named in South t- merica feel
to me on the subject.
disgruntled because they were not invited.
Of course you know how sensitive
Replying now to yours of the twenty-third:
they are.

Please understand that this anticipates whatever develops

as the

result of my discussions in W ehington; that it is purely a. personal opinion;

and I Kay find it necessary or desirable to write you .suite differently next


Mr. Montagu C. Norman







The text of the invitation.

The only thought occurring to me

since you were hare is cccaeioned by the Size of the meeting.

If twenty or more

etteni, it might be a mietake to indicate in the invitation that the eeeting
will last for only a week.

Some of the delegates might make plena interfering

with their continuing at the meeting if it lasted longer.

Part T.

I mree that the words "wherever situated" in the second


article are unnecessary and might as well be omitted.
This mey be quite unimportant, but peregraphe two, three


and six express principles to be adopted.

It is therefore essential that no

"surrender of sovereignty" should be attempted under the juise or through the
formalities of this expression of principles.

I think you realize, as we have

here, and as in later ye re we may have occasion to realize it even more strongly,
that the domestic functions c,f the bank. of

are paramount to everythine

and that anything in the nature of a league or alliance, with world conditions es
they are, is necessarily filled with peril.

I as suegeeting no specific chanees

it. the language, but merely the thought tht you are quite certain to neoenter
objection at the meeting, unless I an mistaken, to anything which implies the

granting of a right by one bank to another, unless there is some provision by

.e ,,elevesents reeulting from this meeting are subject to imeediete

tereinAion by either party on a comparatively short nctice.
This has been eceewhat emphasized in 1) own mind eireee ICU left by

readine a memorandum prepared by Janssen of the National Bank of Beleium on
this very eutjeet, end I have reason to believe that he feels rather etronely.

dcubtlose weel

represent the National Rank of Belgium at the conference.
Firegreph 7 dells with a natter of major importau,:e, but,


as to this country, surrounded vita a maze of difficulties:

As to taxes: the language of the earlier draft has been


11/ eliminated from the printed draft;

Sr. Montagu C. Norman


there is no question, however, th.t both our

State and Federal Governments have a right tc tux bank deposits, and it would be a

Mr. Montagu C. Herman


1114 moretoria, and Federal taxation, but it is doubtful whether they could be exempted

Oloby treaty from State texetion.

I would regard paragraph 7 as rather a dead letter

This is one reason for caution from the

plete disorder and quite beyond control.

il standpoint



Mr. Montagu C. Norman


of your country mr1A once, or at ieaet your 'oanus and ours, in acceptine,

principles which might have far retching effacie in practice.

Please consider this letter just thinning aloud and in lieu of my being
able to vii to you more positively.

Also pla,tee consider that I am Mbkiftg no sug-

8astJona now for changes in the agencia, esper:ially in Part, II, which is no mu re

than a proposed recommendation anyway.
I nave a tremendous tome from Havenet'ain, - literally vollmi.s cf

argument about conditions in Germany, - wh-lch I regret very .much to feel ar: not
convincing to me tuat the German lovarnment has ta'.:bh hll Llio le(lcur+p

past two years which here within its power to
these aei.11ordhle conditions.



t, %e

to prevont the Jevelopment of

I wish I Lait,,ht be more on to convictio;i thIn I

am, for I have a treat sympathy with U16 pOili UGC.


thi;:k I understn1 some of

the difficulties witn .which he has been porsouully confronted.

You ask in your letter of Juno 26 for h .;able &SI soon


I have hEl

time to study the printed dratt of the agenda, but the bast I can lo is to send you

my cable #2P, which mend delay in getting some advice to you unfl. the end of
next week, cr possibly the beginning of the follominL-7 week, say, ti._ tat,Ay-fourth

or fifth of July, which I much regret.
't'v bent reiards to you as aisaya, ano euccesw to your efforts, rhi f:b are

redly untiring and impress me very much.
Faithfully yours,

t!r. Mont,-vu C. 4orman,
c/o ?dank of al!land,

Threodneedle Street,
London, Fngliond.


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