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Stuyvesant Road,

riltwre Forest,
Diltmore, N.C., February 15, 1927.
Dear Monty:

Your telegram came on the eve of your leaving, and I hope that you
got the eecsege which I telephoned to the office for you.

Your visit, and

especially the consciousnese that you were willing to travel such a distance
to make such a vi -it when I so badly needed it, really did a lot for me.

This combination of influenza and pneumonia, especially for me with my bad
record in that region, leaves one absolutely flat.

Tho sense of helplessness

and depression afterwards is one of the outstaeding characteristics, and for
one who is as keen about carrying out a settled program as I am, it becomes
at times a terrible punishment.

To have a sympathetic person to talk over

matters is helpful anyway, end when it is a best friend it is more than that.

So I want you to know that your trip was well worth-while from my celfiah point
of view, even if in sone reepecte it must have Leen disappointing in ccntrast
with the past to you and to Lubbock.
There is not much to report about myeelf.

Dr. Ringer is personally

entieflod with my progrese, but I em still unable to take any exercise at all.
Phil dcen all of that for me.

It ie a relief to have Mr. Moore here and clean

up a lot of mail which weighed on my conscience, end it is a relief also tc
send this message to you, which otherwise would have been greatly delayed or
been written at some effort by hand.
`sonnet /Tiede me a fine visit.

We diccuosed almost everything, in-

cluding Poland, and now next week Mlynorski and some others are coming down
here to continue the talks.

I will rely on Harrison to keep you informed.

Monnet combines wisdom and tact, and I think he can do a great deal in the




2/15/27.

Mr. Norman.

Polish situation, just as he has been in the past so irmatrely helpful in
Fronch mntLers.

At least if we work something out, which I hope will be

possible, I am counting upon your cooperation.
Till you please tell Lubbock that I will write him later.

I would

do so now, but possibly this message will suffice until I get more mail bebind me.

My best to you as always, old partner.

I look forward to seeing

you this Sma.:-.r.

AffectionAely yours,

The Right Honorable Montagu C. Norman,
Thorpe Lodge,
Campden Hill,
LONDOP.
BS:1L




Stuyvosant Road,
Diltmore Forest,
iltmore, N.C., February 16, 1 c.)27.

Dear r.onty:

When I was abroad, you will recall a cartoon from -Cho

*Chicago Daily Tribune" which amused you a bit.
a copy of it.

I think you wanted

I find eome copies among my papers hers and enclooa

one for your amusement.

There is no new

Allot; :ay ias

luLt r

you most affectionate greetings.
' aithfully yours,

The Right Honorable Uontagu C. Norman,
Thorp© Lodge,
ORmrden Hill,
LONDON.




except again to nand

Stuyvesent Road,
Biltmore Forest,
Biltmore, N.C., February lB,

vsasoNAL
my dear Norman:

Yours of February 8th with the two bank reports, Midland and
Barclays, has just come and I have finished reading the reports, co em
ready to endorse your statement that "When thieves fall out, honest mien
get their dues".

It raises one question which we discussed but rather inadequately
when you wore here, and I would be much interested to get your views about
it.

We all realise that the currency note issue must be taken over before

long.

We also realise that this involves some form of inquiry and the nacos-

enry cottinz up of a plan, a decision as to the limitetion of the fiduciary
issue, and likewise a decision as to whether there should be any element of
elnsticity in the note issue, etc.,ete.
What I do not recall our discussing is the form of this inquiry.

Will it be e Treasury committee, or P Parliametery committee or simply a
Bank committee,

The reason for the inquiry is my proving feeling, much em-

phasized since reeding those reports, that the differences of view as to the
Future of the Benk, as to the statutory provisions to 9. ply to its new status,
and as to its policy Pied manegemert ere sufficiently strong anc3 voc:1 to make

it seem likely that you will have a thoroughgoing "full dress" Parliamentary

Inquiry of some acr.

If this should develop, i

it possible that the in-

fluence, say, of Reginald Mc Kenna would likely be considerable!

He has

the advantage of a very active and resourceful mind, and experience both as
Chancellor on the one hand and as a practical banker on Vie other.

I am

wondering Whether you have a definite opinion already formed as to diet the




Mr. Norman.

2/18/27.

2

constitution of the bank Should be;

If you have suer' a definite opinion,

whether it is being fortified in advance by any investigation, and whether
that investigation may be furthered by material from this side.
Frankly, my own mind is open on this subject.

At the ti..e of the

Cunliffe Report, I had some correspondence with Lord Cunliffe and remeribw
rather indistinctly entertaining the feeling at that time that, unless the
Bank of Sngland constitution was changed sufficiently to give some element of
elasticity to the note issue - not necessarily as great as ours - thu enormous
expansion which was taking place among, the joint stock banks would result in

the crertion of institutions entirely independent of the Bank for their protection in time of stress, which would greatly weaken the position of the Bank
of England as to the whole monetary and credit structure of London.

I am

also interested in this matter for a more practical reason, namely, it does
seem possiblo that I will be visiting you this Summer, and if you wished any
informetion or materiel or even expressions of views from over here, it would
be well to pre,)are for it well in advance, so that we could go over the data
when I see you this Sunraer.

I have a delightful letter from Lubbock, written on the steamer, and
wish you would be good enough to toll him that I shall not attempt to reply
until I have caught up a bit further with some other work and ern return the
compliment of writ :A1

hfr with my own fingers.

My best to you.
Sincerely yours,

The Right Bonoreble Montagu C. Norman,
Governor, Bank of England,
London.
BS:M






2.



Mr. Norman.

A/25/27.

41r10

Ir. Norman.

3.

I cannot see that it is the case today.

2/25/27.

If the banks which are borrowing

from the Reserve Banks find it possible to reduce their borrowings 100 or 200
million dollars more without its causing any :nzterial hardening in money

rates (and this is a likely development this Bummer), I should then feel that
we had likely laid the foundation for a rate reduction under conditions which
would not risk an enthusiastic speculation.

I will know more about it, as

I am having some of the men from the office down here to talk over matters.
Phil is devoting earnest attention to golf and horseback riding,

and I have had Mr. Moore here for a week cleaning up accumulated mail, hence
this letter.

Now

of myself is not bad.

really beginning to recover my strength.

I am getting along slowly and

Yesterday I had a walk of a couple

of hundred yards, which was my first, and felt better for it.

The doctor

thinks that I should be able to return to New York some time in April, when
the weather has nettled down there, and both he and the folks at the Bank feel
that it would be a good plan for me to sail some time in May.

But this still

depends upon my rate of improvement.
Please write me when you can.

This letter carries many good wishes

and la'al affection to you from

Yours faithfully,

The Right Honorable Montagu C. Norman,
Governor, Dank of England,
LONDON, E.C.2.

MIL




http://fraser.stlouisfed.org/
(ans.17/4)
Federal Reserve Bank of St. Louis

COPY




Next about myself - I'm much better - never a sign of

Every good wish to you as always,
Yours,
B.S.

Vissering and his wife soon make us a visit - and possibly Bachmann
will be over also.




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Federal Reserve Bank of St. Louis

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COPY

Private
Biltmore.

3/25/27.

Recd. Friaay Ap1.8.

(ansd.17/4)

Dear Monty,

Things have been moving a bit rapidly and I must take
pen in hand again.

Phil & I leave here next week, for a day or two

in N.Y. so that Miller can look me over,-

then two or three weeks

at Atlantic City for change of climate and altitude.

While I am

making good progress, the last picture shows some of the old cavity
not fully closed.
not there.

But its all guess work as to what is there, or

I am to see both Vissering and Bachmann at A.City -

but fear I shall miss Spencer-Smith.

Mahon will be in N.Y. I hope

when I return in April- D.V. - but I also missed Kindersley - which
I regret.

By now you will have heard the Polish story from

Harrison and possibly Monnet.

They seemed to make good progress

while here, -

I am counting upon has
It your h

seemed to me that if this opportunity is not grasped - matters will
be dealt with in less orthodox fashion - possibly
sympathetic and co operative people.

by less

I have learned that the 100%

letter perfect program is only that rare bird when it suits everyone
- and no such unanimous view ever exists - so no such plan ever
exists. -

That is a syllogism, - which I recall Spinoza despised

as a mode of expression - and he is your favourite:

But don't

condemn either the place or the substance of the syllogism, old dear,
- for after it is all behind us - and a success - we will forget the

details and recall only the result:







2 -

3

for the risk and time involved.

Besides there are "fish to fry"

at home - it might be more accurate to say "skunks to skin". B.S.




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Stuyveeant Road,
Biltmore Forest,
Biltmore, N. C.,
March 26, 1927.

My dear lonty:
Your letter of ?'arch 12 arrived just as I had dispatched

one to you which happened to answer eome of

the questions which

you aek, especially as to my progreee.

As your good mother desired a copy of that cartoon, and
as

I have an extra one, I am enclosing one to you also.
.Yorry to have the gloomy opinion you express about the

likely developmente this year in Europe:

Of course, I understand

that the French situation is pretty well crystallized, but I had
not felt that this had extended ae an influence so widely as your
letter intimates, especially as there eeeme to be such a definite
development in Poland, and still poeeibilitiee of similar developments in ,erbia and Italy.

Of the othere I have little information,

and yours is, of course, much later than mine.
Of 'course,

I can understand the difficulty of brin6ing

viewe to ins ae to the Bank of :orance repayments without ratification

having been accomplished.

I have already advised you about icGarrah, and that he will
likely retain hip poeition,nt any r,,te ,or the present, on the genera
hoard of. the ileichabank.

Phil keeps well and buoy at golf and horseback riding, and
joins me in warmest regards and good rriehee to you.

Very eincerely youre,

Rt. Hon. Montagu C. Norman,

Governor, Bank A England,
London, E. C., England.

Stuyvesant Road,
Biltmore Portet,
Biltmore, P. 7.,
March 26, 1927.

lAy dear Norman:

You.L. let:;er of March 15 has juet reached me, aria, of

course, I am greatly interceted in the sugweetion about Dr.
&tewart.

It will be a great pleasure to communicate diecrcetly
and confidentially with him and sufficiently upon my own reL:ponsitility so that no potsible embarrassment can ari,:e.

b

I

shall be quite near New York after newt week it iu alto-ether
poseible that we can have a meeting at Atlantic City, aria after
that

T.

can write you in a preliminary way some thin,; of the

possitilitiee.

courLe, it would suit ue very well indeed to feel
that thie important work was progreesing on both uiies of the
Atlantic alon.J, parallel lies, and I know of no one UO capable

as Or. Stewart to direct such development.
You will hear from me as eo.in as I have any indication
of the possibilities.

Yours most sincerely,

ontagu C. Norman,
Rt. Hon.
Governor, Bank of England,
T.ondon, E. C., England.

Stuyvesant Road,
Biltmore Forest,
Biltmore, N. C.,
March 29, 1927.

110'AtONAL
ay dear Norman:

Your letter of March 14 and the "Bankers Magazine" for March
just reach ste.

In the absence of a specific "method," discussion of

your problem might cover so wide a range of conjecture that I fear it
was premature for me to write you at all.

One point justifying this

letter, however, is exhibited by the articles in the Bankers Magazi ne.

There is much misunderstanding in England about the Federal Reserve
System and a tendency to credit (or charge) us with certain policies
having certain results which might be misleading were they allowed to
influence the decision as to your currency notes.

This I shall not

enlarge upon now.

The article by Galpin in the Bankers Magazine can be disregarded.

It contains heresies, none more :serious than the one which

assumes that you can at a stroke or even fairly gradually extinguish
1170,000,000 sterling of currency without disaster to the country.

Then he has the antiquated notion of a tax of some sort upon
an excel k'

issue of notes or, otherwise expressed, upon the entire note

issue when there is a deficiency in reserve.
part of your program.
central bank policy.

It ie

This should not be a

inconsiLtent with present theories of

If the interests of shareholders induce such a

desire for profits that restraint must be imposed, it is more effective
and hounder to limit profits going to the shareholders rather than to
attempt to protect the reserve ratio by taking away profits for the
benefit of the state.

Mile I agree with most of the discussion in the Lets article,
his statement about open market activities on page 406 is not correct,
or at least it is so incomplete as to be misleading.

He suggests that

our purchases or sales of securities in the open market "actively"

Montagu C. Norman, Esq.

3/29/27.

- 2

go
(which I aedeume meane "directly") influence the reserve position of
our member banks.

Cush purchases and wales hve no such direct effect

upon the "volume of credit" as would be inferredfrom his stutemsnt. The
increase or the ultimate reduction of the volume of oredit le always
brought about through the operation of the discount rate.

Then member

banks are borrowing eo heavily that there is a strain on the money
market the effect of our purchaeine securities is eim,ily to enable
them to repay their borrowings.

It does not change the "reserve"

totals, but does convert our portfolio from loans into investments.
This lays the foundation for a rate reduction by putting the members

out of debt, instead of merely reducing the coat of their borrowing from
us.

Of course, if we buy eecuritiee when member banks are not borrow-

ing we then increase the tote]. of their reeervee and promote a general
1

expansion oe credit, but that is eemethLng which we have never done
except for that brief period in 1924 when we were laying the foundation
for the establishment of a generally lower level of interest rates.
The reverse is true, ae

he suggests.

When we sell securities our

members must replenish their reserves by borrowing and our rate becomes
(more) effective.

On these two points our experience leads to the following
conclusions.

2iret, that a tax upon profits is of no value in exercie-

ing restraint upon the bank's credit policy.

It is only justified

where the philosophy of the central bank as to profits is erroneous
anyway.

The best restraint upon a tendency to expand credit for the

sake of profits is to directly limit dividends eoinL to

shareholders.

Second, that under our system of an elastic note issue and
a fixed minimum statutory reserve, a free eortfolio of Government
securities not aeailable for use in the. market would with us make the

lontagu C. Korman, Eeq.,

I"

-

3/29/27

3

.

fectivenee- of the discount rate difficult, and at some times

impossible.

our former discussions have led me to conclude that you ale

using a choice of three methods for amalgamating the currency;

one

is to adopt a wholly elaetic currency like ours and which in general
prevails on the continent;
issue with

-

another is to retain the gold-secured note

fixed and rigid fiduciary portion

much enlarged);

(

of course to be very

while the third would be some middle course which

would somewhat modify the historical character of your currency by
permitting flexibility within limits either for the event of emergency,
or for a fixed period of traneition.and adjustment.

I should conclude that the -doption of a wholly elastic system
would necessarily mean the abandonment of the tradition of rotation in
the bank and the elevation of a permanent staff.

The adotion of a

wholly rigid system would seem to permit a fairly early return to rotation.

But a compromise between these two extremes might require the

exercise of nice judgmcnt as to whether the Dank of Englanu could
return to rotation or whether it should develop a highly expert trained
etsf

of permanent officials with a much greater degree of reeponsibil-

ity than heretofore.

There is no gaineaying the fact that an elastic currency
requires more "management" and a certain continuity of training experience and policy quite

different indeed from what was sufficient when

the currency was such ae you had before the war.
In a general way I think I would favor the comdromiee middle
ground if the amalgamation was to take place next year, simply because
there remain so many uncertain factore to be dealt with in this
troubled monetary world which miLtit make it hazardous to "burn the

Montagu

MOrmauf

4111

nuridges" and revert wholly to the old inflexible system.
Ir

The above disconnected reflectione are suggested by your
letter and by the articles in the

ilnictre Maazine.

They are far

from being what you may later need from our experience in case it is
decided to depart materially from your present eaheme.

:juin the time

arrives to look this question squarely in the face please do not
heeitate to ask for any data which we

may commiand.

your diepoeal,ae indeed is the writgr.
bincerely yours,

Rt. Hon. Montagu C. Norman,
Governor, Bank of FnEland,
London, England.

It is always at

4

hotel -righton,
Atlantic City, N.
April 12, 1927.

PERSONAL

Dear Monty:
;,ty improvement was such that I have moved. now to

Alantic City for a short stay, and about the 20th of the
month expect to be buck in Now York.

In the meantime I have

a letter from you which will be answered shortly.

This is

simply to let you know that Dr. Miller went over me again
very thoroughly on the first of April

,

and has given me an

excellent report.

There is nothing I can write about Poland as the
center of activities now seems to be in London enjoying your
hospitality.

You will read the enclosed from a dhaley Faton
Service with amusement.
Sincerely yours,

Rt. Hon. Montagu C. Norman,
Governor, bunk of England,
London, -E. C., England.

enc.

J.

ISE

1
.)

Alantic City, N. J.,
ipril II, 1927.

:::',SONAL

My dear Norman:
Mien I left 3iltmore to come :forth I closed un my temporary

office for a time and only yesterday asked Miss Holmes to join me in
atlantic City to get buck at correspondence;
from me in one brief note.

hence you have only hoard

This is to reply to yours of March 25.

I have long felt that your trade needed the support of more
foreign credits, even though at some hazard to your pro;:ram of resumption of ,cld payment.

Of course, it was a fine thing to get through

the two years without drawing on us, and in addition Lo that, to have
accumulated such a huge reserve against the fut..,re dev,lopment of
your program.
pay.

The question is really has the price been too stiff to

I, personally, do not agree -ith those critics who feel that

resumption itself, per se, has restricted your trade, but I do feel
that the imposition of a pretty strict control of foreign loaning during that period, which has enabled you to get through the period

without using us, may have hid some withering effect on your exports
from vhich, of course, we may h)ve berefitted.

/that we want is a

world where trade is free and active, living standards are increasing,
and consequently people are employed and able to live Ecco_ding to
reasonable standards of comfort.

.nd it has always seemed to me that

artificial restraints of any kind or character militated a-ainst the
development of those conditions.

Your exchange his certainly improved wonderfully during all
that has taken

and

I congratulate you.

I think your management

has been a won:.erful exhibition of courage and skill, and no one rejoices more than I do in the success you have realized.

Rt. Hon. Montagu .;. Norman

4/14/27.

- 2 -

Ile

Your cables in regard to the termination of the credit and
of course, it would be

a possible rate change interest me 2reatly.

very difficult just now for us to reduce our rate, and my judgmont
of the situation will not be worth anything until I get back into the
atmosphere of the bank.
The newspaeer accounts indic,Ite that you have concluded your
arrangement with Eoreuu, and your cacao advising that he :'could probab-

ly pay us "130,300,00j to your credit is most illuminating.
is done I should

If this

to have from you as .00n as possible and as

d finitely as you can give it, some sort of an idea what y)ur program
would be as to this ,;merican reserve.

I know so little of what you

have in mind that I can form no opinion.

4e can doubtless shift

about investments and bills so as to meet your convenience.
Vissering and 3aohmann have been here and have taken the

oDeortunity to represent their views to our Treasury in reward to the
tax imposed under the last Revenue

tot on the income from bills of

exchange purchased by foreign banks in this market.
that the tax is unwise.

de are all agreod

There seems to be no administrative measure

capable of eliminating it, so i think an effort will be made to get

the law amended in a limited why so as to relieve foreign wanks of
issue of thie tax where they in turn relieve us of a similar tax. If
we can do that it will relieve you of some of your difficulties, as
you will then need to make no return to the tux gatherer and you can
have a portfolio of readily available Duper.

But, of course, this

must await the next session of Jongrees.
I have Ln excellent report from Dr.

:'filler.

Possibly I had

better send you a copy of it for your direct enlightenment.

I do hope

.

lion. Montagu C. Norman

4/14R7.

that things are going well with you, and that Harrison and you ha,ro
cone to come understanding ;:bout Poland.
3less you, Old Man, and every zood wish to you as always.
Sincerely yours,

Pt. Hon. Montagu C. Norman,
.'3,overnor, lank of l!Ingland ,
London,
Enc .

C. ,

England.

Hotel Brighton,
,Itlantic City, :Z.

J.

April 14, 1927.
Dear Monty:

I am still nursing myself to the extent of avoiding every
unnecessary effort, including handwritten letters, so nardon this
dictated reply to yours of 41ril 2.

It WhS w delight to have a note written from Thorpe Lodge,
and

I interpret the note qnd its tone as indicating three things:
(1)

Thorpe Ledge is repaired.

(2)

:trey is back e.nd well again.

(3)

Monty's sense of humour has returned.

.-11 of this is splendid.

low, about that wretched portrait.
old friend of mine.

Sari Melchemis

Incidentally he is a T,00d

I submit the action of the French

i

very

In evidence

cademy which elected him as the

sole -merle= member to take the place of Sargent who had long been
member.

a

Some years ago Katherine coaxed me into having my portrait

painted, and naturally I got lari to do it.
over it for a lone. time.

Ye have been fussing

It still is not finished and needs to have

the 1.)yer pert of the face done over a hit

,

for it is even more sar-

donic I- the nicture than in the subject.
,'then the darn thing is finished, if it ever is finished, I

will have a good photograph made of it and sent to you, Old Scout,
and I will talm the sweet smile in payment for it.
The!

nortrait, by the way, while desi-ned for Katherine,

anleare to he too large for her to use.
of it.

I don't know what will become

Possibly, when I am dead, they'll hung it up in the bank as a

warnin,7 to evil doers.

-

41111 Rt. Hon. Montagu C. Norman

-

4/14/27.

Incidentally also, Jim dhithem ,brother of your director,

filched a photograph of the portrait from ;art's studio one day
and had a reproduction of it on the front cover of "Town and Country."
This rave me some undesirable notoriety.

recently the New York :elms

had the nerve to print a copy of it in their illustrated supplement
and now, to my astonishment

,

and for the first time I learn from your

note that the portrait has been exhibited at the century.

it'll

of

this is a record of c.cime 25r which I accent no respons:bility.
I hope the above explanatiJn and 'ay affectionate regards
are' both acceptable.

Yours as over,

R. Hon. Montagu C. Norman,
qovernor, Bank of England
,

London,

C., ..,Ingland

,

Hotel Brighton,
t1 nt is City, N. J.,
aril 15, 1927.

Deer Monty:

Ne both suffer from a wealth of misinformation

in regard to all sorts of things, and no better example
of it can be found t1.n in the enclosed paragraph from
the Whaley gaton letter No. 417.
:could you care to iv ve me do anything about it ,
privately or in .:fly other way's
Sincerely yours,

Rt. }ion. Montagu O. Norman,
Governor, Bank of England ,
C. , Znglend.
London,
enc.

1pr

Hotel Brighton,
atlantic Lity, N. J.,

Aril

411)

1L

,

1927.

My dear Norman:
It is a week since Dr. :1;tewart came down to visit me, and I

would have reported the results ere this had I the means of writing
letters.
Tfe

is very much interested in what I have told him, as I knew

he would be, but his present situation requires some consideration.
He is under a moral, and, possibly, some more formal commit
.ent to continue his two years with Case and ?omeroy.

expire towards the end of this year.

-

The two years

He did suggest that by mite

,:ulmor it might be possible for him to make a quick trip to London to

tlk over the project with you.

I told him that if I did not go to

:urope this summer you mi ht be coming over here, which would simplify
matters.

Very confidentially, I believe he is receiving a salary of

30,000 a year from Case and 'omeroy, and in addition to that he will
receive as an honorarium for his first two years' work a considerable
round sum of money Alich is guaranteed to be, I gather, in the neighborhood of two -thirds of the amount of his saary for those two years.
On the other hand, you realize that Pr. 'Aewart is not nearly so much
interested in his financial arrangements as he is in the work itself.
3ut all of this lies between you and him for later discussion.
I explained carefully the general outline of what you wrote
me, and as to the work itself I think his reaction is that he can do
it, that it will interest him greatly, that he can hardly expect to

produce real results in less than the time you name, i. e., three

years, are that possibly the best results might take a little loner.

lit. Hon. Montagu C. Norman

4/15/27.

2 -

3

This probably arises from his belief, which is mine also, that the

underpinnings and foundations must needs be laid before he can begin
to build anything like a well-rounded superstructure.

I think he

would be much influenced in his decision bg such assurance as he could
have that ooportunity would be afforded him in contvot with you to
make the results of his ',cork of practical value to the bank, somewhat

along the line of our own work in New York where, as you know, iurgess

and Snyder have a very close insight and eonsideruble influence upon
policies and operations which are based upon the information and
studies which they produce.

It may nut be amiss for me to interject that I have rarely
had an associate in whom I have had greater confidence, both in his
integrity and ability, or for whom I gained a greater respect as I
got to anereciate his fine character.

Had it not been impossible, for

various reasone, I never would have allowed him to escape my clutches
in New York.

He expects to do nothing further about the matter, and you
may rely upon his holding to any confidence.

I suggested to him that

I would report our conversation, encourage you to go a step or two
further in re,zard to dEtes, and possibly compensation, if you feel

like doing so now, and after I have once more served as intermediry
then I can advise you whether it wo ld 5e appropriate to write him
directly and more formally.

Jntil I know whether some delay is feasible or not I can

hardly answer your inquiry as to whether he would welcome the invitation.

Your inquiry was too confidential to permit him to explore the

possibilities of an erlier termination of his areement or understand-

Rt. Hon. Montagu C. Norman

4/15/27.

ing, and I feel the financial sacrifice possibly involved in doing
so would be too great to ask him to attempt it.

Now, I await your further commnds.
Sincerely yours,

Rt. Hon. Montagu C. Norman,
lovernor, Bank of Zngland,
London, E. C., Zngland.

Hotel Brighton,
Atlantic City, n.
April 20, 1927,

133RSONLII.

J.

My dear Monty:

Yours of

,oril 8 has just reached me, and I so much appre-

ciate your -.1.vrig me this prompt and confidential advice.

I am

greatly interested, and you may recall that once, u good while ago,
you and I did discuss this possibility.

The last line of your letter expressed the hope that I will
approve it, and of that there is no doubt.

Some years ago I had felt

that 7iemeyer dip' not Quite grasp the spirit of our relationship and

possibly, under Political or Treasury influences, tended toward a
little hostility or lack of sympathy towards our country, or esnecially that part of it hi.ving to do with finance.

3ut that feeling

has faded away with better acquaintance with the man and better
knowledge through you of his real attitude.
So

I can write you quite unreservedly as to my feelings,

which are altogether favorable because I know his ability and how
sympathetically you and he have worked together.
11y great interest is thtt he should be convinced of the

value of cooperation and friendship, concer ning which I have now no
rese;vations.

I hope it proves b great help to you.

Many than:zs to you for writing me and much affection to you,
Old Top.

sincerely yours,

Fon. Montagu C. Norman,
1overnor, 3ank of 7.ngland,
London, P.. C., 3ngland.
:it.

April 25, 19 27

PERSOhAL:

Dear Monty:

This is my first day at the Bunk, and it is quite appropriate
that I should write you a word of congratulation upon the conclusion of
your negotiation for the repayment of the Bank of Frl,nce credit.

Surely

this goes a long way toward the solution of your problems both of the
immediate preeent t.Lnd of the longer future.

I can underet.-nd that it has given you at last en opportunity
to het a better control of your money market, and has therefore put you
in position to look forward with greater complacency (I purposely do not
say courage, bee-,.use you have a plenty of that always) toward the d y

of amalgamation of the currency note iesue.

Harrison is in iftehington, but gill be back this week, and

I will then have a chance to learn all about your visits, and especially
to learn bow you are.

with beet reg._rds to you, and to my other friends about the
believe
Bank

me

FRithfully yours,

The Right Honorable Montagu C. Harman,
Governor, The Bank of -iiglana,
London, E. C. 2, England.

April 28, 11423

Dear Monty:
I

m enclosing a set of press clippings relative to

your recent rate reduction, which may prove of interest to you
541C1 some of the others in the Flank.

In the course of a few days, I shall write you

real letter.

Meantime, I find myself fitting buck into the

old routine pretty well.

Anci it seems good to be here, I ,seure

you.

Faithfully yours,

The Right Honorable Montagu C. Norman,
Bank of England,
London,

England.

E:.

a.

C. 2,

COPY
fil

(Ansd.22/5)

Mk

270 Park Avenue

May 1st 1927

Dear old (sic) Monty
It was so good to have your letter from Checkers;
nice to have a message from the P.M.
admiration I have for him.

and

You know what a very great

What you must do is to be sure ana give

him my very good wishes when you see him.

Don't forget!

Your

plans for building up an organization are of course all good, but
dear Monty they will only succeed if you make them a success and tak
those men into your confidence.

This curtain lecture is inspired

by my noticing Harrison let drop that Lubbock took little part in
your talks about Poland.

You are a dear queer old duck and one of

my duties seems to be to lecture you now and then.
Miller gives me an excellent report, but must see me
every week and watch my progress up or down.
make summer plans.

So it is too soon to

I'll cable you as soon as I know, and if I do

not visit you I hope you and Schacht will visit me.

I'll write you

later and more fully about Poland than is possible by hand.
My reference to Wash1.1 arose from those hostilities, of

which you know, which led to an effort to give the impression that I
was too ill to return & that McGarrah was seated for my chair.

I

find that the reaction has been a petard for the bomber, and now,
when I'm fully in harness, I shall smoke out the offender.

Its long

overdue.

McG. joins us tomorrow and I firmly believe will be a
help because he wants to be.

But of course no one can replace Jay

- and Harrison will continue my "stand by".

2

111
ib

The fears I mentioned have, as you know, long been in
my mind.

The underlying hostility between a larger section of

Europe and the U.S. has remained latent so long as Europe needed us.
When no longer needing us their thoughts will turn to markets, profits
advantages and the like;
co operation:

without so much of an urge for real

I dread the day and want to prepare for it.

The

league can do much, - especially in tariff matters, in restraint
upon reprisals and such proceedings as have been common and deplorable
in Middle Europe.

But the League would encounter snags here if

understood to assume any thing like a direction or supervision of
F.R.B. policies.

I'd prefer the direct approach, and woula hope

for a broader comprehension of our problems and a safer result.

here

I equal to it, I'd like to start some real conferences this Summer
here, - or aid you in doing so - abroad.
My time is up.

Mother is not very well and I'm off to

see her.

My love and good wishes to you dear Monty.
Affectionately
B.S.

I hope Amy is recovered and all well at Plodge.

-

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Mis,^i, 24. 1

40 M 5-25

FERAL RESERVE BANK
11100F NEW YORK

SENT BY

Satyr:. To FILES

iii rel ess

COPY OF TELEGRAM

.(o

,

Rt. Hon. Mont 6u Norlioa
'Mit

3.

S. Boren/aria

Many thanks for telegram. Tour 'tette always help and I proaise

to follow your injunotion.

!ivy lg, 19n

PERSONAL:

My dear Norman:

Since the receipt of your person el letter of April 28 I have
been continuously in Washington, and only today, upon my return, found convenient orportunity for a talk with

Dr. Ftowart.

I have now informed him something of

the contents of

your let-

ter and of your attitude gener 1Iy in re and to the proposal; in fact,

have made cleer to him :Al the points covered by our correspondence, with
e sole exception that I hsve not named specifically any compeneation.

This would be a little delicate for me to attempt, so I heve simply suggested to him that he might he willing to entreet me with some idea of
whet would be satisfactory to him (explaining, of course, the tax comIf I find that this

plication), and he is to let me know in a few days.
falls within the limits mentioned in your

lefter, I

ehall then feel free

to indicte that the time has arrived for meu bo write him directly.
He feels, as doubtless you do, that a face

to

face talk is

desir'hle before commitments are rrecle, and says that if you do not come to

New York in the summer, he could easily arrange to go to London in the
autumn.

All of the

above I hope is in accordance with your own desires,

end inceed it hes been a pit:v.:sure for me to do whatever lay in my power

to further this excellent arrenkement.
Yours most sincerely,

The Right Honorable Montagu C. Norman,

Bank of England, London.

Mfq 18, 1927.

My de! r Norman:

Th8 tnclobcd copy of 6. letter which I as writinE to Dr.
Schacht

explains it.elf. It mill eppear to you that I

hove 11,68C

guilty of core vacillation in making plans for the summer.

This

is explained by Dr. ;filler' 1 unce rtd nty i-s to the ti sdom of a trip

to Europe end to my on unc3rtainty a to the need for one.
There arc many things that we should dincuss, and 1

WI!

not altogether comfortable in the fact that the discussion may be

deferred until July. The situation is ohk.nging so rapidly from day
to d'ly (Lnd by thi e I raft:r to the exchan,es, e?,old and the continental situation) that no letter canamentin,:- on developments is of

any v:tlue by the time it reaches you.
I should very much hppreci?te more details of whet bee
been takin.- place in London, anti especially about the lame opera-

tions

in

yozr exchttne market which hive resulted in the sudden

decline of yesterday.

If you can write me privately I should

appreciate i t.
My beet re6t..rds to you se always.
Fad thfully yours,

Rt. Ron. Montagu C. Norman,
Governor, '3ank of En31,nd,
London, E. C., England.

May 18, .12.7.
My dear Norman:

Yesterday I had oi.)portuaity for a further talk with Dr. Stewart,
re.-,11(,r sooner than I had anticipated.

I have still not dircloFed to

any sugeetion in reitra to comi.mnbation.

position quite fully.

his

He has, he never, explained his

Tinder hie preterit. arra.n6crerit he he- E c,ui tea large

minimums :.come 6uaranteed to dim for the two TJa.r poriod rich ends next
On the ozuer Land he is not .1:121v,tio about compensAion but is

Dos.:mber.

greatly interested in the work ae

cnd !. problem.

!f7 notion

is that aomewnore ber-ween tae minimum and saxiarsm fi.zure that you mentioned

in your last letter, after allowita6 fJr inc;oma tax to be paid, -would ho
eaLiroly s_graeable to him, so I now thinx the my is open for you to writs

him yourself ,uitf: frankly and itxpose ytlar thouglte to him direr.ttly.
You need no assuntaoe from Trt.i ma to Dr. Stewart' s character

and

ability. I know of no one whom I could reooiimend to you so highly aft he,
and besides

ae a gym? :ion find ausociata you will find

delig,littful and lovstle 2.rson.

I bee; to :ta:dn,
F.luitully yours,

Rt. Hon. Montagu

C.

Norata,

Gov'rnor, Dank of England,
London, E. C., laIE,land.

his a

most

FEDERAL RESERVE BANK

OF NEW YORK

Lay 20, 1927.
r

Dear Lr. Governor:

I have your letter of Lay 5 regarding the credit
for ;4,200 million to the Dank of :.+n; land which expired on

the 14th instant, and I observe that there will be no need
to aslc us to rant a renewal of this credit.

At the conclusion of this transaction which is,
I believe, one of the milestones aloni.3 the path of central

bank cooperation, I wish to assure you of our pleasure in

having served your interests and our gratification in having
contributed to your effective return to the gold standard.
I have the honor to remain, dear 1.".r. Governor,

2aithfully yours,
p7

/-

L::J. 64'1;1:3,

Governor.
t. Hon. ::ontau O. 1:orman,
Governor, Lank of 1.1w7land,
London, .:,:nland.

June 11, 1327

PERSONAL:

Der Monty:

The enclosed s-,tr.ple of ih..t your friend Kiddy

is writing ehout us may interest you.

It appeared in the

Post on June 8.
I

ma looking forw%rd with the keenest ple,sure

to your visit.

Then we can ttak over all the m..tters of

mut,I,L1 concern in a way which far mIrpr..eses any c,orree-)omf,ence.

F&ithfully yours,

The Right Honoratle Montagu C. :;orrv.n,
Governor, The Pank of England,
London, E. C. 2,
Prig!. end.

Enc.

June i7,

CONFIDENTIA,

191:7.

y dear Monty:

lesterday I had opportunity to deliver your letter
to Cr. Dtewert, who read it with great e&tiefaction,

dune

and while he will doubtless writs you direct I think I

ea

justified, as your intwrmediery, in veyinc that be ie looking
forward to your virit am?: dieouw4on of tbie v2V1,1" quite

hopefully, and is keenly interested in the auggeetion that you
have

been

800(t

ecoug,h to saki:.

if I have ir.

,-,cy way teen

to further this proj?ct

you know how plesaed I shell he.

Fatthfully yours,

R.

ROD.

Montagu G.

Bank of England,

NOrM,M,

London, E. C., England.
28/RAE

7

FEDERAL RESERVE BANK

OF NEW YORK

,PI

July 12, 1927.

My dear Mr. Governor:

In reference to your letter of April 7, 1927, relating to

the employment at interest of a part of your balance with us, I am
glad to advise you that, after further consideration of this subject
and our earlier correspondence relative thereto, it will be agreeable
to us to introduce you to any one of our member banks that you may
specify in order that you might arrange with it for a deposit at
interest.

You may remember that this was the alternative that you

suggested to your original proposal that we ourselves employ part of
your balance at a guaranteed fixed rate or that we employ the funds
for your account under our guarantee.

/

Believe me, my dear Mr. Governor,
Very truly yours,

BENJ. STRO
Governor.

Right Honorable Montagu C. Norman,
Governor, The Bank of England,
LONDON, England.
ey, /42_

(hi 9q

THIRTY THREE LIBERTY STREET
NEW YORK

August 4,

19'-27.

Dear Norman:

I am shipping you
photographs taken outside of
signature to each of them. 11
to whom it belongs written on

separately the entire collection of
my office.
Anc I hs.ve added my
Each copy has the mac of the person
the outside.

!!Pay I trouble you to affix your signature in the appropriate
places r::nd then sass them on to Schacht r.Rth suitable instructions as
to signature and as to passing them back to Rist for his signuture.
Then possibly Dr. Fist will be ,iood enough to send the copies to e:ch
one and retain his o7m.m
I am sorry we could not fix up
of this
before you left, but it was impossible to have them ready in time.

If we accomplished nothing else, at le.yet we furnished
the means of disfiguring several offices here and there
pictures of some very question!,.ble characters!
!ly best to you as always.

Faithfully yours,

The Right Honorable Wontagu C. Norme.n,
Governor, The Bank of England,
London E. C. 2, Engl.-1nd.

a/ln4A9-9-st

74-efift;_2

4t,tA,t_cy"?:

et.ot,t;^-

11A,tp744.44,

Of-127

COPY

New York.

Aug 9. 1927
)1`

Dear Monty -

The Stars having favored doing so, we have reduced our
rate, and it will be our years contribution to reconstruction.

So

far the results are satisfactory here and I hope abroad.
Also I have about concluded my talks with Jeremiah Smith
- and he with Pres.Lowell, and all difficulties have been overcome
but one - which I am working on now.

By the end of this week, if

that is solved - I shall cable you and Young to advise Salter that
they can invite Smith & he will accept.

Should there be any demur

I will be much embarrassed so hope it will be done promptly &
handsomely.

Meantime please tell no one until you hear from me.
Long ago I had reason to ponder the question whether I

would allow discouragements to dissuade me from favoring a
constructive attitude toward reconstruction abroad.

There have been

many and serious ones, at times, and many reasons, as well as
temptations to quit anu let the old world solve its own problems.
Considering everything, (and that included personal
satisfaction and the like) I decided to allow no discouragements to
alter our position.

It has at times involved serious risks to my

own position and prestige in the System and the country.

It has

and will at times necessitate being insistent upon having my own way
- rather than follow the ways of Europe.

All that I expect is

reasonable consideration for these views and the atmosphere in which
they develop - as well as frankness.

If this can be our platform, there will be little trouble,
dear Monty - but on any other basis, I fear I shall be a thorn in
the flesh.

- 2 -

My plans are gradually taking shape.
been over me today & gives me an excellent report.

Dr.Miller has
He approves my

Algeciras plan for Nov" and a winter holiday in South Europe.

So

I shall work to that end and be guided for thereafter by what happens.
If you & Schacht & the others could save part of Nov or Dec to join
me I'd appreciate it.

Things are quiet here & I'll soon write you of conditions.
Now be a good son and write me fully about everything.
I want to know about
a.

The league matter

b.

The bank's internal problem

c.

The currency note plan

d.

The French developments

e.

Your Exchange position.

My love to you, and much more than you know.
Yours,
Ben.

/evil-

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I

FEDERAL RESERVE BANK

OF NEW YORK
August 15, 1927.

PRIVATE & CONFIDENTIAL
Dear /a.. Governor:

I have your letter of August 2 and in accordance therewith have to-day placed the sum of $10,000,000 on deposit at
call with the First National Bank of New York in the name of the
Bank of England.

In order to obtain the necessary funds vie

have bought from you 010,000,000 United States Treasury certificates, due September 15, 1927.

The details will be sent to

the Chief Cashier in the usual way.

I have delivered to the First National Bank of
New York the letter of the Chief Cashier dated August 2.

I am

enclosing copy of my letter of August 15 to the First National
Bank from which you will observe that the rate of interest
on your deposit will be 2-3/4% per annum for the present and
that any proposed changes in this rate will be arranged with us.
Interest earned from time to time on this account will be credited in your current account on our books as and when received

from the First National Bank and will be appropriately advised
to you.

I am also sending you a copy of the letter dated
August 15 which I have received from the First National Bank
of New York.

I have the honor to remain, dear Mr. Governor,
Faithfully yours,

August 16, 1927.

PERSONAL:

Der Monty:

This is just a. line to 4:iwiee you that Charley Mitchell end
Gerrard 'Winston are to be in London shortly and they Trill certainly call
to eee you.

I thought you would be interested to knos in advance of their
arrivr_1, and further to know that since Garrard has been associated with
thee they eeem to be in much better mood as to the Federal Reeerve Bank.
Sincerely yours,

The Eight lionnr4ble Monta.gu C. Norman,
Governor, T e Bank of l'AIglt.nd,

Thrftdneedle Street,

London, Z. C. ?,
Engl and.

THIRTY THREE LIBERTY STREET
NEW YORK

PERSONAL

August 24, 1927.

My dear Monty:

Yours of August 13 in regard to Monsieur
Francke's visit has just reached us.

We will, of course,

do the needful with great pleasure.
Yours very sincerely,

Rt. Hon. Montagu C. Norman,
Bank of England,
London, E. C., England.

August Z5, 11)27.

PERSONAL

My dear Monty:

Treating, myself liberally every week-end, usually

by

visiting my mother

at Moods Hole, has so shortened the week that I have been remiee with a good deal
of my correspondence, and I shall try to catch up.

As to current happenin:_s
1.

Our rate change seems to

selutery and effective and none

bit to keep

too soon, but we have been ecr: tchini;

This ie p, rtly due

our discount rate.

h ye been

the la rket

rates in line with

to the regular seasonal (Lalonde and partly

due to the reluctance of Philadelphia and Chicago to reduce their rates, which

results in

some drain from New

York to those

centers.

I think we la! ve lost one-

thing like :;.-130,000,000 of our reserves in the last few weeks, but I am still wi sh-

out apprehension as

to

the success of our program and even hope .:-hortly to tee them

two retes also come down.
2.

Meesre. Armitage and

Mason have made two or three calls at

each time !:ccompanied by the Commiseioner
have endeavored to give sound :advice.

to the Commonwealth lcen which was

at once, and such
twice

French and

only to

successfully offered

their

Collins, and we

banking plans, but as

yesterday.

The books cloeed

trie 114urtts may be better than that.

I cannot now review our various exchtin et: of

other accounts, but you laay count

ploying your funds.

eatles in regard to the

upon our doing the test we can in em-

There has been a strong demand for

ota.i.L-Atione, the general
a 8% baits.

regard not

Mr.

information se I have indicate that it was a little less than

subscribed, but

3.

in

of the Commonwealth,

the bunk,

all the lone time Gov rnstent

theory being that the Government credit is

drifting

towarda

To go much beyond two 'retire, however, strikes me as an unwarranted risk.

2

Rt. Hon. Monte,-,u C. Boman

too
8/25/27. many uncertainties i
A

3 1/2 % 3-5 yeA notes, in my opini

S

8.

V25/27.

Rt. Hon. Noatagn C. Norman

Thank you for abat you write about the Greek loan.

I as oire it

sill help very much, and I do wish the matter was eettled and behind us.
9.

On the whole, I think you have done a wise thing in your arrent:e-

sent with the Bank of France, and I belive the transaction is coin., through to -day.
It indicates such a willingness on your part, to no il000mmodAting and helpful that

it will certainly 'oring n equally satisfactory respow$e from them in later day.
when nem problems arise.
10.

So far I have not heard from Salter.

My preeen, plane tre to be in

New Tork through October, an', if he comes, as I hope he does, we can have a gooe
visit.

ftt you will doubtlese convey to him that aotn Lamont anti Jeromial, Smith

be away until early in bovember.

11.

So far a8 I as awLve Morrow will be hel'e.

1 think we do vee, eye to eye, in regard to our sterling &beats.

trunsection 116.8 useful at that moment, that, after ell, was what we intended

to accomplieh, and there iu some advantage

to

us in transferring the Londou poi.folio

into L New 'fork portfolio, Locidee the advaata,e of having a reserve purchaeint,

power for Lon)on bills in ca6e later such purchases becom,.; desirable.

We would

such prefer to buy gold only wean it will otherwise curve to New Tork, then we oun
hold it 1.ith you and dispose of It as opportunity ariaeu, thereby keeping it out of
the mousetrap.
12.

Would you advocate our accepting an account from the Commonweal t1

Bank of Australia if it is offered to us?

Armitage is as you deacribe nim,

Dui, he

ham made a ftvorasle impression and I feel the ease as to Nuaon eho is to remuin
here and run the office.

it can be of muctaeasistance to him 1r he mill only take

the initiative in consulting ue when questions arise.

I expect *Old Lubbock will be much ch.stened in spirit if he ,ains the
impression that he is to 'Linea when you do write as well as when you do

OD

:.1.4;eett

the two of you I have heard fairly regularly, oat I wish you ':oth A be happy and

4

Monttgu C. Norman

8/25/27

t t to feel the burden of Pny obliqetion to Pr rite when vou ere too busy.
I Ai not cure Whether I wrote you that toy pl,-ns have ch:tngsd E, little,

pertly dud to the doctor's advice, .nd t cm booing; to ek ti. very ;:.1r1v in January
rather thc2rt in November.

Jenuary end February are our worst t7onths, :-.nd if I get

back by eri.rly or middle March it will he just stow ri .ht.
4ith belet reg-rde to you end Lubiock.
Fel th Cully yours,

The sight Honorable iiontagu O. N.Jrntin,
a/ o The Dank of Eav,land,

Threcdneedle Street,
'14 C. 2,
aka and.

London,

gbi
PERSONAL:

August MI, 1927.

Mi4 dear Norman:

The enclosed very

fragmentary

Financial Times by Philip Sao

reference bi Hirst to an article in the

disturbs me a little bit.

You know

how anxious

I am that misunderstandinis in regard to our policy be avoided, especially among
such men as Snowden, whose knowledge is great and whose influence is accordingly
con si dere bl e.

I had gathered from a magazine article which he recently wrote that he
had a high regard for you and for your opinion, and
in his feelings about me because of our association.

that

this was oomewh t reflected

I am now writing to inquire

whether it would be possible for you to correct Mr. Snowden's misapprehension about
our policy, and especially on the following points:
(1)

There is no deliberate policy of hoarding gold by America.

The gold which we have received since the beginning of the war has come to us because
other means of payment were inadequate;

and it is here readily available to

all

the

nations who are in position to reclaim it.
(2)

The banks of issue of the world now have in the aggregate dollar

balances probably in excess of t1,0-)0,0D0,010 and were they willing to (lo so could

at once build up their reserves by drawing upon us for that amount of gold without
going into the exchange market to buy dollars.

The main reasons why they do not

take the gold are four in number (a)

realize

B' -cause the amount of their own currency

which they could

by coining the gold would he less than they could realize by selling dollar

2

Mr. Normen

to, and consequently they would lose by taking our gold.

d

11
(b)

They are employing these doller balances now at interest

(with the exception of between 10%. and 15% held here in earmarked gold) and consequent-

ly the incentive of profit restr-ins them.
(c)

Their people are now accustomed to lower ratios of reserve for

central banks than were regarded as neceesary before the war, and they do not feel the
urge of necessity.

In of er words, what Begehot described as the "apprehension point"

has been lowered.
(d)

They fear that if they do take the gold they may at some moment

find it necessary to ship it back, and consequently they iould have incurred a heavy
expense without achieving anything.
(3)

The operation of the gold exchange standard by Europe has apparently

not impressed the managers of the tanks of issue, nor indeed Mr. Snowden, as necessitating the reserve banks of the United States maintaining high reserves.

For ex-

ample, the reserve position of Belgium, as calculated by Mr. Harrison when you were
here, exhibits the following:

Mile the gold exchange standard operates differently in different
countries, depending upon the precise terns of the law gov?:rning the reserve bank of

issue, nevertheless as a rule bankers bills and bank deposits in gold standard countries are generally available as reserves against circulating notes.
they are actually counted as reserve is, of course, another question.

Ilaether or not

Potentielly,

however, it would be possible for the National Bank of Belgium to i -sue its currency

in the equivalent of $100 against a deposit of $40 in a bank in New York City.

That

New York City bank, if a member of the Federal Reserve System, would be required to
maintain with the Federal Reserve Rank a. reserve balance of l3%, or $5.20.

Aze.inst

this reserve ba1,2nce the Federal Reserve Fank must carry a reserve in gold or lawful

money of 35k, or, say, $1.82.

It is possible, therefore, under the full operation

8.33.27

Sr. Norm en

8

ot the geld exchange eteadard as r.os ,uthorized in some countries, that

-t.peroxim:.tely

Z of gold in the ?ederel Reserve Bee, may eu.e,,ort a deposit in one of its member

II$

bank

of t40., which in t.4.:rn is the reserve basis for the eluivelent of $100 in currency

Jewell by a bull: of iekue abroad.

Thin aerulate that reserve ratios throughout have

been reduced to low levels.

The ease is true in varying degree With ell the benke of i:eue which
mein:. DA eXet;z1Ige belencee in dollers.

should we permit a huge expeneion of credit

to eevelop upon our preamt gold reserved, a.nd then the Furopeen banke which maintain

balences here ruund it neceesary to withdraw their balencee in gold, we moult! be

obliged to meet those drifts at e time when our reserve ratio e-e 60 ice that high
psnaity discount rater; would hive to be imposed in order to protect our position;
higher rates in

tern would be nice-s--ry in the reet of the world;

end we would

enter upon a celeteitous period of liquidation enc. declining price!, - something not to
be thought or.
(4)

The cleim that Americo to hoarding golf is bated upon eomer vague

theory that by some secret method we rre eternizing gold and rutting it into safe
deposit veults ehere it performs no function and ea & conseruence our policy is

detrimental to the rest of the eyrie. TiY!s le ter from the case.

The f!,cte are

that before the %Ur banes of in:Ate either by law or becauee of tradition regarded

certain minimum ratios of gold to note and deposit liabilities as necereery for
eetety and endeavored to neintain them at or slightly above the treditionel figurer easy 50%.

ladle those banks of issue are ZOIF willing to operate on to tar retioe than

they :sere then raintsining, we, on th4 contrary, are pursuing & policy of mainteining as. hither reo.erve nett°, erg, from 75% to 80%, partly for the re%eons described

In (3), but lergely tecause to n.t.E0 this gold "bear fruit, instead of being sterile
(aa le claimed) we would have to eaberk upon e policy of rink infletian of credit.

The fnit of any cLch
oe.nnot as

.eolicy would at lest he bitter, aegi potsibly Doisonous.

alternative ship the gold Ahmed to those she t.eve claims upon us

And

if

lir. No

4

5.5).27

tad in most inetances it would no doubt come right b,ck anyway.

tbeav co not weet it;

Any euc'. infletion

thin country e.e has been et leedt intimated e.broed,

suet be cceei:;ered in the light of the figures involved. The Federal Reserve nyetem
hes retervee of roughly it billion and e half dollars in exceec of the inieue reserver
Ar;euraing tbet s margin over the minimum requiremente of t500,0090000

rs.uireo by lsw.

is emple the reseining billion dollars could form the baele of en expension of the
loens ene depocite of the reserve beaks themselves of about two end one -half billion
This addition to the reserves of member banks could permit of a general expension of bank assete and liabill tier throughout the United Stet.° of roughly
Excluding eftvinge deposits, it would core not ter from doubling the

$25,0-,0,4430,010.

depoeite of all of our henke, unless artificial bueinees activity and advancing prices
and eget, were to firing large issued of currency into existence, which NOUld Feweihtt

restrict the growth of hank deposits.

3.sob a development in this country 'mould he

about as bad as anything rurope could suffer. After a abort period of feveri eh and
speculative activity, riving prices with a flood of Furopeen goods coming in, is
would hove an Industrie' an comeerciel collapse with unemployment wideepreed throe4f;he
et once a eerious imneireent of the ,takerican merket for .11
out the country
E'uropeen _roducts.

The politicA. end other re-_otione from such a policy would elmoet

certainly reeult in corrective legieletion &ad eoeeibly futriamental eimnees in our
it might sell bring legislation excluding foreign 'pens from our markets
after we had been flooded with ell kinds of doubtful and tad seoeritiee; end Lhen
banking law;

would tome a period of deflation.
oelemitoue to us end

I on imegine no uevelopment which would be sore

the world than ouch a ?eriod of inflation, and its nro-mpt

retribution.
(5)

If, therefore, avoiding ehoerding gold evens per contra inflation,

(me may properly self the!, it is simply a eeetion of degree as to the extent to which
we should allow au ex;;n1sion of lorne, ewp.:cially of lo ne to Blree.

Since 1924

the reserve teak viscount retee have not been in excere of 4% en1 ,'ering w lerge

Ir. Norman

5

8.51.27

pert of Oil time the rate at !iew 'fork (.hich 1t the one that princ1:1 ily counts) bee
01

'.nu 5-1/2A.

A policy of reeeoe:.bly cheep money hee permitted nd encefereged

foreign borrosere to e'ke lone time loene in our ue.,rket which now eggrefc to
$51,000,001,0%) or N!,,011),O;NO,000;

end se hove extended te vast amount of ehort time

benk credit threeghout all perte of the world.
Cen it be possible thfet Mr. Fooecien believes that this ie lees than we

should to in contributing to reconstruction by etking our gold reserves helpful to the
rect of the world?
(8)

Aeide from the indirect usefulness of our eolicy in the rector- tion

of table conditions ebroade there ititts teen kioree direct assietence extended, b'eed
ueoe tht^:,,e gold recervee.

a bye stood re.Ttiy to aid end in e number of cases have

ben oecceseful in erometing monetary or currency reorganisetion es.nd the reatoretion

of the gold ste.nderd in verious countries/ hew* f-rniehfee sense of the bank": of isfele
with I ergo smounte of gold, end have been prepared to furnish others with even greeter
amounts;
tittef,-

and es is now well knevn ateroed ins in thie country, ee heve been ready et

to consider nay proeofeel for a- eietence of this cherecter to banks or issue

where the eecerity for the credit, the soundneee of the echoes itself, en,e, the surrounding conditions juetified doing eo.
(7)

It mist not be overlooked that seccees in bringing teout a redistri-

bution of the verifier banking reerrves deee not rest with us Alone.

The banks of

levee end the comeeroiel banke of other countries he a reeponeibility probably eleal
to ours. Por exemele, one pert of Lhe delicate mechenism by which these matters ere

influfnced is the relative levele of oentrel beak ranee ere: of interest rtes in the
reepective centre]. raonty ettricet.o.

rate anti ours ie 1%.

At, the present time the differential between your

In order that this lay be effective market retee mu et re:eeen-

ably co rreepoed to this di f ferenti el .

kferk.et retes in this country hese been kept

reeeonebly in correepondence with our rite..

In London, as well - e in New Tor

,

one

of the influences won the volume of credit end ite division 1- et.:een the two e.rkees

Mr. Mormen

is the rote of commiesion cherged by benire for ecce-A.nce credits.

Our beakers heves

et tenet until very recently, in mainteinieg a substentiqly uniform
cherrse of not lees then 1% per ennue, for grAnting credit in that fors.
hen.:,

xe

On the other

.ere recently informed thet notebly one, end In coneeqemce probehly a number

of the lergeet ecceptore of bills in the London L.,,erket heves reduced their comet sten
cherge to 1/2% per ennue, and heve even offered, in it latest one inetence, to Accept
free of co:elf:01°n. The effect of this, to the extent th-t creeit of th.t type is

seployed, is to reduce the preeent di ferenti -1 between the two merieete by one-helf

or, where no comeleeion ie cherged, to elimin te it entirely.

The effect of this is
to counterIct, or nullify in pert, the policy o, cooperation ea to money etiset rtes
which ceetrel tenke !.!re only eble to inugurete, but which met be msde effective

by

the coopert,tion of l'enkere generally.

I h e lone been improteed by the extent of the iproor,nce or mieuneeretend-

ing of our national policy in these matters.

In some inetences this mieundereitzneing

hers been fostered by ocItheretaly houtil critic! es 'Ind in other c-see by critical
publicetione which ear to _trite from lack of knoseledge. The time may be A;:-omeshing
whenit will be neceesery for us to abencion our reticence en1 %newer tome of our

critics aublicly.

In this: inst noe, however, realizing your previous intim.,ts

rse,.)ci =,tion with Mr. enouden end the high regard in which you hold him, it seemed

me

better course to write end invite your aesiatence pareonelly in ranching him eith our
point of view, if you feel willing to (:o Po.
iith aesurencee of ply regard and beset thenke,

I se

Faithfully yours,

lionoreble MontegtesO. Norman, lie S.O.,

c/0 no Emir of Fngl end,
London, E. C. 2,
En

enel.

August 30, 1927.

PERSONAL:

My dear Monty:

You will, I am sure, understand the enclosed letter.
It is written in order that you may use the letter or the arguments
contained in the letter in case you have opeortanity to discuss the

matter with Mr. Snowden, which I hope will be the case, but of course
the letter ought not to be published.

The great mass of unintelligent and even malicious
criticism of our respective institutions by our respective countrymen we can well afford to ignore.
much weight anyway.

I do not think it carries

But in this case I really feel that distinct

ham can be done and while of course 1 cF:.ving everything to your

discretion, it struck me that I might fairy send you such
as the enclosed and ask you to use it.,

irour judgment and the

op'ortunity both permit.
With best regards to you,
liMthfully yours,

The Right Honorable Montegu C. Norman,
c/o The Bank of England,
Threadneedle Street,
London, F. C. 2,
aigland.

letter

August 61,

ft

14?..7.

dear Homan:

Your letter of August 22

seta's to call for comment on

First, about Jeremiah Smith

finance comittee

of the League.

Aith

Mr.

Lamont.

I

For a number of reaoone

at once and

that he was

I

tfore come of my colleagues left town

ftw difficulties to be

overcome, but we at

by your cable even more than by your
and will undoubtedly be carried
It

does sec* to me

around

the first of

not be

here.

parties

rats t,r more promptly than

Then I vented
for vac :tion.

letter th,,t the

in another direc-

to take it up if
There were quite a

last succeeded, and I

am glad to note

arran tesent is agreeable to all

out.

highly deciratle for us to he ve

October, if Ur t is convenient,

There, is alweye a

t.-besed Imperative

sought for duty

being

tion and feared that he sight get away from us.
poseibl e

!Itt

ail in September for a visit to Japan

He vise planning to

also learned

matters only.

and the progrkm as to his membership in the

that I should take the matter up eith him
was at first expected.

tko

a visit

with Salter

notwithstanding that Smith will

possibility of misunderstanding, not

only

directly concerned but by tiv-- public also as to an arrangement

by the

f this sort.

I have not written Salter directly about it, but possibly you can convey to him

a suitable wey

in

some of the thoughts in my mind.

is well that the name of this bank is not aaeociateci with
privately or publicly, for he will be quite an independent

One is that it
the

arrant

ement either

individual in

the performance of his duties and will in no sense be an official

representative of

the

the

bank.

Another is as to the chr..recter of tile publicity when

invitetion is extended end accepted

I hope

that

great or re

is

exercised so

that it will avoid the possibility of any unfavorable political or other reaction
Anything of that sort might impair the ffectivenese of the arrangiwent.
here.
Still another point, and one of considerable deportance suggested by Salterle

2

Rt. Hon. Montagu C. Norman

8/31/27.

41ilf

Aleorandem is as to the relation bet-aeen this appointment and any attempt at influ-

ence or control over foreign loans placed in this market. Thie

_ subject which

should be scrupulously avoided for it would arouee the very hostility which we are
seeking to avoid. A good undtratanding, I hope, will be ade poesible by

ti

visit

with Sklter, but in any event I shall rely upon you directly or through Niemeyer to
get some wore. to him in such fashion as you sill decide on these points.

Second, the othr matter io in rteard to my place. Cr. Miller thinks that
January and February are the worst mouths for me to 1 in New York, as finally I
haee enga: en pees. ge on the Conte eianeasiane, sailing on Jenuary 4. I shall take
If ore and Ernest with me, spend c. few days with General Monro, and then settle down

at Algeciras. I do hope that this is a convenient time for you. I have alredey
advised Governor Moreau and am writing Dr. Schacht to -aay and will ;leo write to

some of eur other good friends. Franck will be hi re next week and I will explain

the progrsa to him also.
I

'm so pleaeed and, if I may say so, relieved that you have

cessful in the arran fmente with the Bank of France.
th

en so sue-

And no4- that you are acquiring

proceeds of the Australian loan you will not feel unduly w.akened as a result of

this concession to the French position.
With best regards, I am,
Very sincerely yours,

P. 3. So that you may be fully informed, for th:. moment I shall only
'rite Schacht, Vieeericg and Ebchisaan an

the other central bankers about my plans.

F:t. Hon. Nonte,u C. Norman,
C/o Bank of EnLland,
London, E. C., Enc,lend.

wilt developments before d.riting any of

PERSONAL AND
CAIFI DESTIAL

September 12, 1927

My dear Norman:

ie have had some rather unfortune_e developments in

situation in the lest week, concerning rich I feel
though no letter will be very
are

regard

to our

obligee to trite you, al-

refer

satisfactory ae developments to khich I

still in the etate of flux.
The directors of

the Federal

reduce their (liecount rate in line

Reserve Bank of Chicago decided

not

to

1.ith the other reductions being made, be-

lieving that conditions in their district did not ouggest

a change.

After the

lapse of come time, and after most of the Reserve banks hEd reduced their rates,

the

Federal Reserve Eoerd voted to

Tuesday.

reduce

the rate for them, and al

so last

It has reieed quite a storm, and I fear we shell not hear Lhe

it until Congrces ha3

had e

field dey in overhauling Ise :-gein.

end of

In the eeentime

we have had a very heavy dreg on our re-ervee from New York, in fact, have lost

come =200,000,003 of sold to the reet of the country which is, of course, reflected in impaired bank

reeervea

To-day our bank owns over

here. and in very heavy torrowings

$200,000,000 on di-count:, resides

folio of tills which is rather

some slight advance in other directions.

Under

hae yet hed

Stock Exchange, and th,:re hew been

Retching the sterling rate I do not

any effect, but it is

lie ble to do so at any moment.

ordinary circumstances we would end evor to deal

usual methods, but this

our regular port-

hitt: also. Unfortunately, market rates have

suddenly rdvaneed to 4 1/2 per cent. on Lhe

find th..lt it

from us.

with the situation by

eh.;

controversy about the Chicago rate is going to sake it

exceedingly difficult to do so fora time, prob bly for the balance of this week.
I cannot

describe all of the ins and outs and rights and wrongs of the controversy

and just how it affects our policy

c_nerally,

nor will that be neceseery.to

you

2

Rt. Hon. Niontatu C. Norman

who I am sure understand our problems quitt>. fully.

9/12/27.

I sm, however, c -cling you

fo.
to-day and would tppreciate tte fullest possible' inforsvtion that you can Fend
me in reply by cable, supplrmenting it, if you plesee, by F. letter.

This is a

case where I need to know your position just as fully r's posai -le, both with

regard to your reserve, your rated, your dollar position, what the prospects are:

for further demands for dollars, and what the situation is a to your Treasury's
re.funding program.

Ic say be that our money m rket will s=traighten itselr out., tut there

will he dirriculti 'a for

time in establishing the rate, elthouvh I hope nothing

will develop which will stateririlly interfere with the continuance of a favorable
ezcbirigt polition Tr.nd the .control of the gold 'goverment.

with teat re:ierda,
Sincerely yours,

Fit. Hon. Igoate+,u C. Norman,

Care of the Bank of England,
London, E. C., England.
BS/FtAH

FEDERAL RESERVE BANK

OF NEW YORK
September 13, 1927.64
Ly dear Norman:

I have your letter of September 2, and am obliged

to you for the statement of shipping charges on gold from Australia
to San Francisco and to London.

This will enable us to make a more

accurate calculation of the relative gold points.

The rate for

insurance quoted here from Australia to San Francisco is .125%,
slightly above your rate.

You might wish to include in your cal-

culation the Mint charges in San Francisco which are about .0085%
on sovereigns.

Furthermore with respect to cartage in San Francisco,

it is somewhat more than in New York and should be taken at .005%.
We have checked the particulars given in your

note as to the dollar-sterling gold points and are in substantial
agreement with you.

The rate for insurance between London and

New York is generally quoted in this market at.045%, although I
know of one bank which gets a rate of .0431%.

If you calculate

interest at 4%, you might reduce the assay charges in New York to
.0149% since the figure which you use, .0155%, is, I think, calculated on the basis of 10 days loss of interest at 5% on 2% of the
value of the gold.

With these minor differences your figures are

the same as ours.
Sincerely yours,

P72:7

BEIt . STRONG,
Governor.
:tt. Hon. Montagu C. Norman,
Governor, Bank of England,
London, England.

6,r(eAvittkft7<*d°

ezo 1°0-

FEDERAL RESERVE BANK

OF NEW YORK

September 19, 1927.
2e4

:

My dear Norman:

I have just read Mr. Philip Snowden's article in the Financial Times of
August 23, concerning which I wrote you a week ago.
vague and, I regret to say, inconsistent

It is, unfortunately, so

in some of its conclusions that I am

wondering whether anything should be dons to correct it.

He refers, for in-

stance, to the proposal of the General Conference that bills and deposits in

gold standard countries shall be employed in place of or to supplement gold reserves, as though that policy had been completely ignored except in the case of
Czecho-Slovakia.

The facts are, as you know, that banks of issue now hold bills

and balances in the United States alone exceeding $1,000,000,000, not to mention
a sum at least approaching this now held in London, and considerable amounts in
other gold standard countries.

In fact, as I have written you, I am inclined to

the belief that this development has reached a point where instead of serving to

fortify the maintenance of a gold standard it may, in fact, be undermining the
gold standard because of the duplication of the credit structures in different
parts of the world sustained by a few accumulations of gold in the hands of a few
countries whose currencies are well established upon gold, such as England ana
the United States.

The emphasis which he places upon the rather fantastic notion that we
have a deliberate policy of accumulating gold, and that it is based upon our
belief of the likelihood of an appreciation in value of Fold, is certainly most
mialeading.

I am so sorry to have such articles appear after three or four years'

record which so amply disproves these notions, were the facts understood ana properly
explained.

But possibly you would prefer your traditional course of "letting the

Heathen rage."

Rt.Hon.Montau C. Norman,
0/o BFnk of England,
London, E. C., England.

Faithfully yours,

I

m

/9 -4

:"

; ti,646;4P2.91Ava-41

I

t tAtrei)l-s fr d Akx
0,1 0
bilt-

FEDERAL RESF.RVE BANK

OF NEW YORK
September 21, 1927.

PRIVATE AND CONFIDENTIAL:

Oc41%

My dear Norman:
;cord reaches me that considerable notice has been taken in the press

abroad of what may appear to be a serious controversy between the Federal Reserve

Board and the Federal Reserve Bank of Chicago in regard to the recent reduction of
discount rate, and I think I should write you explaining something of the circumstances.

The language of the Federal Reserve Act on this point is as follows:
Section 14.
"Every Federal reserve bank shall have power **4'****44'*
to establish from time to time, subject to review and
(d)
determination of the Federal Reserve Board, rates of discount
to be charged by the Federal reserve bank for each class of
paper, which shall be fixed with a view of accommodating
commerce and business."

It is difficult of exact construction and has been a disputed point ever since the
Federal Reserve System was established.
to the meaning of the section.

I shall not elaboratethe various views as

They are too many and varied to be recounted.

In the

present instance a policy was proposed at a meeting held in july,fr and with fair

unanimity was adopted by those present in the hope that it would guide the whole
System.

The directors of the Federal Reserve Bank of Chicago did not necessarily

disapprove of the policy as to other Federal reserve banks, especially New York, but
rather held that the local situation within their district gave no indication of the
need for a reduction.

After a delay of a few weeks the Federal Reserve Board under-

took to reduce the rate at Chicago from 4 to 3-1/2 per cent.

The reduction was ac-

cepted by the directors and given immediate effect, and as San Francisco and Minneapolis

promptly followed by similar reductions the whole System now has a 3-1/2 per cent rate

FEDERAL RESERVE BANK OF NEW YORK

Governor Norman

2

9.21.27

I

of count.

In the meantime, however, it has been reported that the Chicago Fed-

eral reserve bank objected to the action of the Board;
Council has taken the same position;

and the Federal Advisory

but the latter has expressed no view as to the

wisdom of the policy of reductions of discount rates.

They merely disapproved the

method adopted by the Board.
Much unfortunate and misleading publicity has been given to the matter,

and there has been considerable surmise as to whether the Chicago bank will test the
powers of the Federal Reserve Board in the courts or whether Congress will be asked
to clarify the Act by amendment.

I hope that neither course will be necessary, but

have no means of knowing what will eventually happen.
The significance of the incident can be much exaggerated.

For thirteen

years the Federal Reserve System has escaped a serious controversy on this point, and
I hope that it can continue to do so without litigation or amendment to the Act.
Governor Crissinger's resignation, announced recently, had no relation to
this development.

He had informed me over a month before of his intention to resign

which he could not do finally without awaiting the return of the President and
Secretary Mellon;

but his engagements already made were such that he could not defer

carrying out his decision even though it did happen to come at an unfortunate moment.
The apprehensions expressed in some of the newspapers that this will
result in a serious controversy throughout the country, I believe are exaggerated.

There may be come discussion when Congress convenes which I hope will be minimized
and result in no material changes in the Federal Reserve Act.

Nor do I feel that

there are likely to be any substantial changes in the policies of the System, - which
in general have enjoyed increasing public approval and support.
Sincerely yours,

The Right Honorable Montagu C. Norman,
The Bank of England,
London, England.

Locoliti
6,trac y(21

Q-4'

FEDERAL RESERVE BANK

OF NEW YORK

September 21, 1927.

My dear Norman:

I am so grateful to you for sending me the clippings.

4cre

I to reciprocate in kind with clippings about this rate dispute I
would tend you a small ship load of papers, but will not burden you

either with the reading of them or give you the uneasiness which might
result from doing so.

It is all most unfortunate.

I have read the clipping, "Blair v. Morgan," with a good aeal
of amusement, as I am sure you did_
With best regards,
Sincerely yours,

Rt. Hon. Montagu C. Norman,
C/o Dank of England,
London, E. C., tngland.
as/RAH

Saptomber 21, lga.

My dear Norman:
I was ,Jad this mornirm. to ?Port your letter of "sptember 13, and to have

the very enlightenicw, explanAion of Mr. Snowden's article emi of

in the way

of inspiration may hs.ve been behibi it.
Of pours1, I as glad to obiehrve that you h,.ve been ,W1UtiOU3 in trenmait-

ting the letter so thet there will be no possibility of its boint published.
You knot how sympethetic I hhve slTayr frit for the verious. difficulties

which you have encountered from time to time, and now we are in a period where
possibly I will

c:e papkin6 your symphly, for the clouds are setting a bit thick,

ae you say fither from the press reports of thp outbreak betmeem
Washington.

and

I hope it cup be adequately dealt with, and bill write you some

particulere shortly.

Many thanke for your intareet in my sugseetion about Mr. Snowden, ana
racer6s to you as :1.1ways.

Sincerely yours,

EL. Hon. Montat;u G. Normla,
C/o Liana: of Lngland,

London,

C., England.

FEDERAL RESERVE BANK

OF NEW YORK

PEhSONAL

September 23, 1927.

ft6
My dear Monty:

Your personal letter of September 14, quoting from Salter's letter,
principally raises the question' as to his possibility of visiting America.

course, he is the best judge.

Of

He doubtless has in mind that Jeremiah Smith, not

bein,:: a New York man and not being a banker, may gain his impressions of the

particular problems in which you and we are interested somewhat secondhand,
although I have the utmost confidence in his judgment and good sense and in his
general knowledge.

I do think that it may be an unnecessary draft upon his time to come
here unle6s the people whom he would wish to meet are available.
definitely not be here.

Morrow will

He has accepted the post of Ambassador to Mexico, and

is to retire from his firm.

I am mighty sorry to see him do it, but he is inspired

by the desire for public service, and now having retired from bunking, his absence
is not so material.

Lemont and Smith return from Japan so as to arrive in New

York about the 8th of November.

So far as I am aware, everyone else concerned

with these matters will be here at that time, and if Salter did decide to

come

and could delay doinp., Co until he returned, it would seem as though that was the
beat plan.

On the other hand, we are all visiting Europe at intervals, and it

would be easy to arrange a meeting there in case he does not visit America.

This is all the comment I am able to make, and I hope you will not hesitate to convey it to him.

Many thanks to you for keeping me so promptly advised.
'pith best regards,

Sincerely yours,

Rt. Hon. Montsoi G. Norman,
Bank of Enland,
London, E. C., England.

FEDERAL RESERVE BANK

Rt. Hon. Montagu

FEDERAL RESERVE BANK OF NEW YORK

2

inadequately informed as to the position of your market and
subject.

recalled?

How much are these American balances in London wh
When do the term deposits mature?

past in that regard?
London?

shat has been

That are your on plans as to mgrket

That are the prospects of heavy purchases of doll

in order to meet payments on the political debt?

Would you

use any part of your dollar resources, and if so, how much

avcilable without serious disarrangement of your plans in c
the note issue should take plate?

Unless I am somewhat more fully informed on these

difficult to lay out our program for the next few months, so

that you send me as full information ES possible and as prom

Correspondence is not only slow but, unfortunately, changes

time to bring about, and just now more time than is usually

the unfortunate dispute which has recently arisen as to disc

writing you well in advance to ask you to enlighten me to th
possible.

with best wishes, believe me,
Sincerely yours,

Rt. Hon. Moningu C. Norman,
Bank of Erv7land,

London, E. C., Ewland.
BS/RAH

!IL

Septmber 27,

PERSONAL

My de::.r. Monty:

IS

I muet reply to your letter of September AF from Thorpe Loute in
teen awc.aped with work and would otherwise be much

this fashion as

delayed in acknowledging it.
Trl

rcult of the appointment at Geneva 11.:_u been fine.

been no publicity and no opportunity for adverte comment.

Est

There here

teat moment

8G much in the papers about 1.:e lecr.eno ant the dieputet :hen arising, that it L:ttme

invitinc trouble t Live any more publicity.

to

Zaltor,a cumin', over

The eu6,,eLtion
trip.

IL struck we az a ,,00d plan.

the 8th of November.
out of the pit:Lure.

L4rent and Leith return f. om Japan on

Of course, Morrow by that time hill
If,

h-Tefort,

e in Mftmico and

fce7F it worth while to tive a talk

York wiwn wt sill .41 nu to,other the time for him CO LOM6 will

with uc

be aftt.r the tra-veltre rtturn,
while.

node on cur yathtin6

blv-, it ie a lone trip and poetably not worth

I thit* I would tt the chief t,eneficiary

1,4o keep the

A1-1

mutter alive.
Cabl:.qa efthan ea about Dr. Stewart since you
tbt. posij.on.

I am sorry

rot

iWie made clear

could not ,;o earlier.

I had he=rd about Kindercley's aiscuion:_ in Brazil froa one of his
New York partnere.

It etruck me that if he were plac.in6 creaita in London for

the purpose of buyin: gold for thir currency reserve it mi6ht prove embarrassin

for:- you, no I told Mr. Oaerwald that

would not conside=r any proposal

with revrd to takine sterling off tnLir h,nde which did not tome cirectly from
the Bank of En-land, which Leased the beet way to turn the matter ovtr to your
attention.

It struck se as containing, the germ of some umbarrawsment.

-2I will write later about the internal matters mentions: in your
note when I have leisure to do so, with my own vies.
If Poacock has not left when this reaches you, would you pass word

It is such a
delitl,ht to be with him that I hats to miss the opportunity. It is hardly

on to him to save time enough for b good visit in Ne-A York?

necessary to send such word to McKenna.

He will probably come in anyway.

Phil' e plane have not fully matured. These young people are very

deli`erate and I am glad of it, but the outlook is
course, will effect my own plans.

c

bit oainoue tel: of

I sill di3cusa an of this sita you before

my plane are allowed to change.

I have written separately last voek about the squabble. The whole

matter is likely to be thrown into Concrees this winter and, unfortunt:tely,

is also likely to delay my

iling as we all at rec that the chi ef cavil has

got to be on hen. if there are ..tij inquiries by committees of the House or
Senate.

It is, of bourse, a fact that our rate plan has been somewhat

disturbed, LW. co far not oeriou.ily anti with no bXcho,ne reactions.

I thoulc greatly appreciate soma more uetails about your refunding
program.

Dui next step is to clean up the balance of the Seconu Lic:irty Loan

4 1/4 per cent. bonds, of which something short of
outstanding when they mature November 15.

-

billion will &Lill be

It will probably be cone by a

moderately short time issue of low rate securities which can easily be cold
even at that season.
Do keep the articles about our ht.nk mat; is coming to me,
any magazine articles which you may come across.

They re very .ial.pful.

There is little to way about our position. I doubt if money 6ets

5

muct

.ove 4 per ce:t if ut all, and at thrt r%te there e,cem:3 to be no

unfavorable rw_ction.
with affectionate regards,
Faithfully youre,

Rt. Hon. Nontt:gu C. Normn,
T%orp Lodge,
8,
Campden Pill,
London, England.

ES/Risti

P7RSONAL:

September 27, 1927.
Dear Monty:

It would almost be worth while to by a share of the stock of
the Bank of England in order to attend your semi-annual meeting some time and
ask the Governor a few questions!

Your enthusiastic answer to the inquiring shareholder about your
bank building reminds me of the famous incident at a oert-in annual meeting
in New York when the Chairms.n, having 1-een asked some embarrassing cuest:on

answered, "Let's vote first and talk afterwards."

Just think !-ow fortunate

we are in having no shareholders meetin.,-,8 except those represented by secret

ballots once a year.
I hope everything went alright at the meeting, and in every
other way besides.
My best to you and Lubbock.

Sincerely yours,

The Right Honorable Montagu C. Norman,
The Dank of England, Lonuon.

October 3, 1927.

PERSONAL:

My dear Norman:

Thank you for your letter of September 23, all of which
I have noted arith much interest.

As regards our Sterling balance, the carrying out of
the spirit of our recent exchange of cables led me today to suggest

to Mr. Crane thrt with Sterling still strong we might as well liquidate
the special account. entirely, le,ving the open balances in the old
accounts exactly as they are.

This will leave ue pe rfectly free to

deal with later developments which may he de-med nepese-ry et the
time.

My beet re,gards to you.

Sincerely yours,

The Right Honorable Montagu C. Norman,

The Pant of England,
Threadneedle Street,
London, E. C. 2, England.

FEDERAL RESERVE BANK

OF NEW YORK
PERSONAL

October 18, 1927.

My dear Norman:

I have received your letter of October

about the Greeks but

fear that there is nothing new to report from here or Washington, except
that I understand they have evidenced a desire to make a settlement.

But even if discussions, which I believe they are to have in Washington
this week, should be fruitful it would of course take time before any
settlement coulc be ratified by either party.
You no doubt have seen press discussions of the various points
of view which have been expressed over here about the control of foreign
borrowings through the State Department.

There has been come criticism

and generally a feeling that at least as to private borrowings the control
should be wholly relaxed.

So far as I am aware, however, there has been

no change in the policy of the State Department, with which you are familiar.
I am glad you keep me posted.

Please let me know if anything new develops.

Believe me,
Faithfully yours,

Right Hon. Vontagu C. Norman,
Governor, Bank of England,
London, Etgland.

October 18, 1927.

My dear Monty:

Thank you for your note of the 10th and the

collection of cuttings regarding the Chicago rate controversy, which I an just reading with great interest.

It does help to ge. this press reaction.
Sincerely yours,

Rt. Hon. Iongegu C. Norman,
C/o Wink of England,

London, E. C., England.
ES/RAH

October 19, 199,7.

ky Lear Mrmant

4iany thanks for your kind note of October 12 enclosing copy of Mr.

Lno,uanis letter of October 7.
I feel much easier in my mind about the matter.

I have never

bad the privilege o ±' meeting Mr. Snowden, your own high regLrc nor him had

more to do with my writing than ponsitly the article iti elf, which I have

since had opportunity to read in full,
The point he nulkee about cooperation is, hf course, of' the greatest
eignilleanoe, but rsiees the euestion which you and I have CiiSCuseec so free

ruently and fully. How can such a situation e.s the present one be met. by any
scheme or device, automatic or mechanical? Must it not be dealt with by this
speciee of management and cooperation such He we have been attempting to give

It, and if so, must not people generally trust someone and, therefore, does
it not re,,olve itself to the simple question, "Do they trust 116'. "
I deeply appreciate Mr. Snowden' 8 letter and point of view, and if

you have opportunity some time to express this to him I should appreciate it.
Sincerely yours,

Right Hon. Montagu C. Norman,
C/o Bank of Eng lend,

London, E. C., England.

October L9, 1927.
IC dear Monty:

Yours of October S euggeete one cr two coemente, especially about
Al.- eci ras.

I have talked with Senator .":lase and with the Gbeirmen of the Fouee
Banking and Currency Committee, eau with verioue other folks, and while there

will be a determined effort to avoid :may tinkering with the Federal Reaerve Act
when Congress; meets, yet it Bee-me to be more than a 7oseibility that an e.ttempt
will be mee.e.

This will certainly disturb my plan. it also may prove unfeneible

to have anything approaching a meeting.

t-i.y

oval idea was to have two or three

visitore at Algeciras at different times, ens oomewhet the reire !It Pomo other
place where I may find the 'leather comfortable.

I have eritten only to you, Nioreeu,

.Ichecht definitely, and more

eent.tively to Viaaering end Be.chmann enj, of course, I
when he

wore rith Franck

s Lerc. The aewepepers any :rtise three meetinge cm extensively that

I a,s,ree great caution will be /leaded.
*,:c1Cennie

but ag.eln he law/ not.

liezely be in New Yen+. shortly and may turn up at the tank;

I have not forgotten the lecture be gave me in London

some years ago, end possibly this is the opportunity to give Mm a Roland for his
L :et night I heel eiener at the Percy Rockefeller134 aria Gaspard Ferrer

and we had a very delightful talk.

Pe

goes .eut before visiting New York,

so I ehell not coo Lim until next month. Baron Schroder turned up there at dinne

also.

I never kne% he was in this country.
In one of your lettere you reproae.ed Tae for making no reference to

2

health.

Rt. Hon. Montagu C. Norman

It seems to be getting along all right, L.na when I

self

13/13/27.

ller

r..

fen

weeks ago he expressed I.: good de .l of satisfaction with the result of hiabcxkm-

ination. The only thing wrong just now is a lame shoulder enured by a turble
I took in the tub tl.e other morning-. But ao bouee were broken.
Eleatic 6i.ve

t

TO Lut7ock and the othsirs at the btrik, and the same

to you rE el f.

Very cinoerely yours,

"on. Montagu C. Norman,
C/o Bank of England,
London, E. C., England.
BVRAH

Pt. Hon. Montagu C. Norman

2

10/19/2?

As this was to be an acceptance credit, and as the whoe London acceptance proceeure on the lower commission beads is simply an added embarrassment in our situation,
the sug.;eetion did not appeal to me a bit.

Coming from the source it did, I thought

the best plan would be to tell them we would do or consider nothing unless it came
directly from you, and there the matter has resteo ever

since.

Also, I have received a note from Joe Swan with a copy of e cable from

'Lazard Bros., London, tranemittec tnrough tee London office of the Guaranty Trust
Company, which indicates that you and others are pursuing the Portuguese negotia
tions somewhat actively.

I )ave told Swan that we knew so little about Portugal

that it was impossible to Give any indication

of

our attitude towards stabilization

there without complete investigation, that offhand we would not be impressed because of the persistent ceficit in their budget and for other reasons, and that
possibly the best plan would be to have the League go aheea with some studies ee

you hee

indicated a preference for that course.

that a League plan will be impossible
may be atteripted.

in

There seems to be

Portelal; end if so, some other scheme

If our cooperation is sought, whether with or without

pices of the League, we would nee(' to know much more
first thing I

su&,eetion

shoula

than ie do at

the aus-

present.

The

like to know is your own attitude and what you have in mind.

4en't you write me?

The gold position and movement ie certainly on a very much more comfortable basic

than it was a

few weeks or

months ago, but

unless I am mistaken, will

again loom up as a problem hhenever any material change in money rater occurs.
If you are going to be a little more free in the price you pay for gold then I
think we should carefully consider what effect that will have upon rates at which

we might buy

sterling,

should

purchases either to gold
it

ust as cheaply as

need arise.

My owe thought has been to confine our

which otherwise would come

possible, and by

to New York and., of course,

implication not

in

competition with

Rt. Hon. Montagu C. Norman

3

10/2/27.

the Band of England, or to buy sterling at a rate which would just head of
moving from London to New York.

gold

h change in your price would matPrially affect

this program _.na possibly make it entirely unnecessary.

The Press reports this morning that Schacht has reduced the price he
pay for gold.

take gold

what in the world does that mean?

will

Surely it is better for him to

hen opportunity arises a.na let.a favorable exchange work normally to

build up his reserve than it

ie

to interpose any obstacle:.

He has not written me

about it, and I do wish he would write a little more freely about some :f these
things.

I hear, however, that he has not been very well.
.4c to the last paragraph of your letter, I do not think th(re is any

possibility of the tyre of interference with our rate policy which you have in
mind.

If anything occurs in ;ashington it will be an attempt, to amend the Act as

to the rate-making power, so nc to clarify the ambiguity of the law and probably
to redu:e the authority of the Federal Reserve Board to make rate changes on their
own initiative.

That attempt, however, would precipitate quite a fight, end one

which wit would greatly regret.

Viesering cabled tre about his propoeed rate chance, but our holiday de-

layed the receipt of the cable.

we would have been glad to buy some guilders to

enable him to avoid this had he felt such a course wise, but he may be right in
letting the position work itself out.

I had hoped that Continental rates would

remain unchanged except in Germany.

All of the above is just to keen you posted.

There is no nee of donee-

qu ence.

With beet regards,
Sincerely yours,

Right Hon. Montagu C. Norm.in,

C/o Fank of Mgl and,
London, E. C., England.

tw,
October 20, 1927.

PERSONAL:

My near Monty:

How intereAing and amazing are tte statements,
misstatements, and imaginings which you sent me!

I am passing

thee along to Dr. Stewart, misspelling and 'dl.
The story about Plackett coming over here must have

been partly malicious: I can't think of any other explanation.

It seems to have originated here, and of course made some of our

people on this side rather hot.

I

very much obliged to

you for the clippings.

Fdthfully yours,

The Right Honorable Montagu C. Norman,
Governor, The Bank of England,
London, F. C. 2, England.

PERSONAL:

C

OP
October 2,0, 19L7.

My dear Borman:

Schacht's action in reducing his price for gold came es a Lit of a
surprise, but suggests that I shouid write you of a project which we have been
considering.

I want your best opinion as promptly as possible, if you feel

willing to give it.

Under our Free Coinage Act the Secretary of the Treasury is authorized to pay cash immediately upon deposit of gold with the Assay Office up to
98 per cent of the value guaranteed by a responsible depositor, and complete
the payment after assay is concluded.

Demands upon the Treasury for :;old for

export !Ire now met at the statutory price. This practice of paying cash for
__;old has prevailed since some time in the 70s and, in effect, results in our

having about the came price for both buying and selling.

As I think I have

explained to you it adds to the efficiency of the mousetrap because it means
that the differential between the gold import point and our mint price for

old is somewhat smaller than the differential between the mint price and
the gold export point.

In other words, it is easier for gold to get in than

it is for it to get out.
I shall not burden :ou with the figures in detail., but merely ask

you to express some opinion upon our project of reverting to the policy
practiced long ago here, and now practiced by ;ou, of rcruiring depositors
of gold with the Treasury to waillra length of time for payment theoretically
equivalent to the time r,,J-;uired to assay and coin the gold.

The Federal

reserve bank would then step in as the "cash market" for gold at

r-

-rice

somewhat below the statutory price, say for a difference roughly representing
the interest loss for the period of about ten days, which would be the

Oct. 20, 1927.

2

estimated delay of the Treasury in making payment.

It seems to me that this will afford a protection to European gold
reserves which is not now possit e under our present system.

If in later

years the situation was reversed and we wished to facilitate an import movement, we could readily overcome the difficulty by allowing interest in transit
much as was common in Europe before the
I await your reaction to this with much interect.
Sincerely yours,

Right Hon. Montagu C. Aorman,
C/o Bank of England,
London, L. C., England.

fi

N 0 .RWAY

4
racliange and 2rices.

Among the countries which were not actual belligerents,

none has passed through a more difficult period since the war than
Norway.

After the crisis of 1920-21, a certain amount of recovery

set in during the last part of 1923 and 1924, the crown being about
14 cents and the price level 250-275, but before industry and finance

had fairly recovered their footing, the decision to revaluate the
crown gradually set in train an uncontrolled wave of speculative

buying which in 1925 lifted the exchange from 15 cents in January
1925 to 22 cents in September of that year, and, after a brief recession to 20 cents, to 26 cents in November 1926, at which point it
was about 96% of parity.

This rapid rise in the exchange, which

was repeatedly deplored in official statements, caused developments
which have proved extremely difficult for Norwegian economy.
Prices declined, the index falling from 279 in January
1925 to 160 in May 1927, and the difficulties of deflation have been
most acute.

THE BANKING SITUATION
The Commercial Banks:

since January 1925, there is available a consolidated
monthly balance sheet of the larger joint stock banks, comprising
about 97% of the banking resources of the country.

This statement

is unusually clear, especially in showing the international position;
and from it can be traced the influx of funds from abroad that carried
the crown from 15 cents in January 1925 to a level just under par,
and the gradual withdrawal of those funds as speculative opportunity
for further profit in the exchange disappeared, and. as business

r)

-3-

-4INTE2,NATIONAL POSr2ION OF NORWAY

-5-

-6-

THI DITLANCP, OF INDEBTMDNESS

Furthermore, Norway has no great outstanding body of
unfunded commercial indebtedness to abroad.

The international posi-

tion shows Norway as a debtor nation, but not to an alarming amount;
nor is this indebtedness showing any tendency to increase.

The

following table shows the "due to" and "due from" abroad of the
country:

Due to abroad

Norway's Debts to and Claims on Foreign Countries.
Jan. 1, 1927
Jan. 1, 1926
Oct. 1, 1924
730

1,025

1,400

1,575

55

Funded

775

1,160

Unfunded*

60

65

1,990

2,240

2,665

Other

Total

Claims on foreign countries
Unfunded*

490

580

730

Funded

245

230

245

20

25

30

Total

755

835

1 005

jet due to abroad

1,235

1,405,7

1,660

Other

* Including debits and credits of banks.
This official tabulation is particularly encouraging

because it shows that the rise in the crown has not necessitated any
increase in foreign borrowing nor any accumulation of speculative
funds in the country liable to withdrawal, which is the more remarkable in view of the. poor earnings both of the fishing and shipping
industries.

From the table it is clear that Norway must have had

a favorable balance of payments over the past two years of about

-7411

/100,000,000 kr. and that the rise in the crown has throughout rested

upon something far more substantial than foreign borrowing or speculation.

Nevertheless, it is probably desirable that a part of the

unfunded commercial indebtedness should be funded as rapidly as
favorable occasions offer.
DE FACTO STABILIZATION
.ior nearly a year, the crown has experienced "de facto"

stabilization about 5% under par.

During this time money rates have

been at a moderate level, and the efflux of foreign balances has been
Although national debt and taxation have risen

readily supported.

enormously compared with pre-war figures, the national finances now
seem in fair shape.

ELEMENTS OF THE PROBLEM
There remain, however, three serious conditions, about
which little information is available.
1.

Local finances do not appear to be in good shape.

Municipalities and other governmental subdivisions increased their
obligations in cheap crowns and must repay in dear crowns.

The total

burden of taxation is one of the highest, if not the highest in the
world.
2.

A large part (probably over half) of the commercial

banking resources of the country is in a kind of receivership.

To

what extent the predicament of the banks is associated with local
finances is uncertain.

Naturally, the statistics of the commercial

banks give no clue to the relative proportion of sound, slow, doubtful and worthless assets.
3.

There has been only partial internal readjustment

to the appreciation of the crown.

The wholesale index for August was 167,

-8-

S
the cost of living. index about 203 and retail food 175.

The volume

of central bank notes and deposits is nearly four times the pre-war
figure.

Currency alone, is three times pre-war, and has shown no

decline in recent months.

The volume of commercial bank deposits

is little lower than when the crown was half its present value; which
may be partly due to the frozen character of the assets.

There has

obviously not been much liquidation in horway, and, in view of the
situation, it is probable that a more severe policy would have been
ruinous.

Still, the fact remains that although readjustment may

properly be prolonged and postponed to more favorable times,
uncertainty must persist until readjustment is reasonably complete.
I Statistics offer only limited help in forecasting the Probability
of success or failure.

The opinion of a competent and well informed

individual, like the Governor of the Norges Bank, is worth more.

\His opinion should also be sought as to the extent of adjustment
of labor costs to the present value of the crown.
Statistically, few, if any, countries have approached
stabilization with credit and currency so expanded, with the commercial banks so frozen, the local finances so involved, and with a
total tax burden so heavy.

The stabilization program should in-

clude plans for handling each of these problems separately and
together.

October, 1927.

Octobr Pl, 1927.
Dear Monty:

In writing you on October 20 a ft,s comments on your views on

the position of foreign balanoes in London, I quite oinittod refe.rtince
to on matL:r which. I think is eso,:ntial to an understanding of the

movement of the sterling rate.
S:e have lead quite a oudd:in enlargement of the amount of foreign

loans placed in this market recently, including such loans as th,
placed by Brazil and oti.ers of like character.

le I earn, as r r< sul t of inquiri:::° among Bose of the bankers,
that a considerable voltam:: of these balances is being transf.,rrLd to
Lowaon, and thin, I feel cur::, has had mucl-: to do 'ith the strength of

sterling.
P1 case consider this a suppl emunt to my L;arl ier I ottiJr and
believe me,
Very Di nee,

Right lion. Montagu C. Normtn,
C/o Bank of izigl and,
London,
BS/RAH

1--

C., rngland.

y you re ,

October 27, 1927.

Deur Norm,in:

We here collected, and send you herewith, some of the

clippings relating; to Stsiv.rt's 37roinr.tent.
he he

He tells me that

sent you none, so this will not be a duplication.

a counterpart of e. batch you sent ze.
Sincerely yours,

The fii4;ht Honorable Uontagu C. iionacn,
The Bank of England,
Lon Lion, E. C. 2,
Engl and.

It is

October 27, 1927.

My dear Norman:

I ea grateful to you for thinking of Iv in connection
wit' those wretched erticl,,-s in th- Panker.

One of t..1.-rt Z had

seen. the other is ncw, and I

any uubs.:quent issues

ho-k;

I can

which have similar articles by Yr. VW I s. They are most mi al cad-

ing and unfair, and in case you feel that some authoritative and
accurate di-suasion of the matt,..ra which he deals with would be

desirable I should be glad to hay-) an etticle pr,.!parcd.
Of cours-: , I an ronderi ng what, i f any, 1 tin ts.nce the

magazine hes in London and, further, wheth,,r WI/Livia ...ritingeinvite

any attention.

here I think trey make littl, imprrseion.
Sincerely yours,

eight Hon. Montagu C. Norrnin,
C/o Bank of i..1-41 and,
i:ngl and.

London, 1. C.
138/RAH

November 9, 1927.

Pt.R.SOMAL

My dear Monty:

Your letter of October 61 calls for P reply fxZsvitt. teat portion

relating to my winter plans.

I still have reservetione for the Biancomtulo

sailing on January 4, ens only some kink-up in Con 8rere aeemi likely to

disturb the plan, but I confeee that is certainly n likelihood and may be
a certainty.

It. will be some time in December before I cen t41 cofinitely.

She should reach Gihra lter n' out the eleventh or twelfth. I eent to plan
to stay vetth General Munro, until ',bout the fifteenth of Jr.nuary and then go

directly to Algecirae for poeesibly three weeks.

It ie a very eteet and

rather dull piece I au. told and I selected it pertly beceuse of climate
and partly because I felt e could hew., ece e tii e i ts there quite undisturbed

by intrusive repreeentetivee of the preen.

you think thet it im7,oseible,

I am me eonteme/atine giving the nerepeper men P little teterent before
sailing, telling them just where 1 em going end why, and telling them furthermore that I em proposing, while r_ broad, to one the repreeentetivee of

the various banks math which we have rech.tione, some et their on offices
and others ehezever 1 mty happen to

eteying ehen they are kind enough

tb be willing to visit me. They can then let, on: all of their eteem in
a preliminary way and

1

would hope that you and aoine of the others could

come to Algecirse but probably not all at the mime time, so as to avoid
giving too such the appearance of N conference.

plea to
be

From Algeciree I want to

to iztibes and stay a solid month loafing.

While there it might

conveeient for Moreau or Riot, and possibly for Bachmann, to visit

me than at Algeciras.

In March I would go to Rome unless indeed Etringher

caste to Antibes, and then, as the weather became more settled I would go

2.

41*

November 9, 1927.

north and endeavor this summer to visit most of the bankers whom I have
not heretofore seen.
mo,Jt of the 6ummer.

This is p. anther ambitious progrra and would occupy
My last stops would tAB Paris and Lon ton.

This is about tne best I can cenu you DOA end,1 Lope, aatie
your inquiry.

Yours most

Right Honorale Montagu C. Norman,
Bank of Sngland,
London, 511ani.

KMC

Nr,

November 9, 1927.

My dear Monty:

Youre of October 25 has just reached me and,

aftor checking Ile.ddy's addrests I shell see thd.t the

letter is duly forwarded.
I' Mr. Stephen Vivian Smith finds his way to

New York I hope he will present himself at the tenth

floor front.
Sincerely you rs,

Rt. Hon. Montagu C. Norman,
13ank of Ems land,

London, E. C., England.

.ovemL,317

S,,

1927.

My dear Norman:

I am eo grateful to you for your

not,

the clippings covering Senator Glatio'd stat:imeat.

of t':ie lett

L,.nd for

matters do

arouse comments abroad to an eAtent that makes it of much value to me
to have the clippings, and I so greatly appreciate your thoughtfulness
in scalding them.

If a e oan reciprocate in any particular matters at ar.y time,
bo

ire that we shall do eo.

I should like to have ar indication of the sort of materiel
that you like to have.
Sincerely youre,

Rt. Hon. Montagu C. Norman,
England,
London, E. C., England.
bank

November 9, 1927.

PERSONAL

My dear Norman:

The encloeed note is not insdired, but is some

indication which I am able quite unofficially to confirm
that negotiations are proceeding, and as soon as I have
word of any progress I shall be glad to advise you.
Sincerely yours,

Rt. Hon. Morqugu C. Norman,

sank of England,
London, E. C., England.

/1,,,t;JJAI

`It'Aro

FEDERAL RESERVE BANK
OF NEWYORK

November 9, 1927.
Yki-gEspii

RR. :4

f 7:

Dear Norman:

You will be interested to know, in presenting various
recomTendations as to the Revenue Bill to be adopted by our
Congress at its next session, Mr. Mellon, Secretary of the Treasury,

has advocated abolishing the tax now levied upon the income from
bankers acceptances when owned by central banks of issue.
-- _

_-

While there is no means of estimating the attitude of
Congress in advance, I happened to be present at the hearing when
the proposal was discussed by the mays and Means Committee of the

House of Representatives, and gathered from the few remarks made
that there was not likely to be serious opposition in the committee.
As soon as there are any more definite developments I
shall be glad to keep you definitely advised.
Sincerely yours,

6:77

Rt. Hon. Montagu C. Norman,
Bank of England,
London, E. C., England.

tor
Novemt.er 10, 1927.

Dear

'.!onty.

It is a terrible thing to be growing. old, and a very
good thing at that time to read about the very young.

You and

I are stepping along into old age at just about the same pace,
and I em glad to have froe you, Old Friend, a reminder of the
fact that there are compF2lentione, and they come principally from

good friends.

ich sftection to you from your fello.s-patriarch.
Sincerely yours,

Rt. Hon. Vo :tazu C. Normen,
Thorp Lodge,
Camden Hill,
London, England.

November 14, 1927.

Dear Monty:

I have received a copy of the English translation
of Dr. Schacntib bock, "The Stabilieation of the Mark," with
your oard enclosed - which i s just another evidence of your
I have not yet II Id an
thoughtfulneez.. Thank you so much.

opportunity to read it, but an looking forwar(1 to doing eo
with the keenest anticipation.
Sinoerely yours,

Rt. Hon. Montagu C. Norman,
Panic of England,

London, E. C., England.

November 15, 1927.

PERSONAL

My dear Norman:

Please accent belated thanks

the intereeting articles

of October 28 and for

for yours

by Professor Cassel and Sir Josieh Stamp.

del Eyed aecnowledging them until I bed read them.

another one of those wearisome cases where they

I suppose it is

ere both wrong.

Can you give me something of the reaction in England fol-

lowing the publication of Gilbert's

noworendum on the German Budget?

I shall try end send you something on the eubject
Very sincerely yours,

Right Fonoreble Montagu C.
Governor, Bank of England,
London, F,nlsnd.

Norman,

pretty soon.

I

November 15, 19E7.

PERSONAL

My dear Norman:

I have your letter of November 4 concerning Polish gold reeuiremente.

As I cabled you on November 1,

1

Peel that, Mlynereki h.e made a

liberal estimate of these recuirements, nevertheless, in all the circumstances I would hesitate in the interest of their entire program to Advise
him to do otherwise.

chile I was at first a bit surprised at the amount

of bis reeuirements it was due solely to the fact that in estimating the
matter in my own mind I had left out of calculation the liability for
140,000,000 zloty of Treasury notes which the Bank of Poland has as3umed.

This omission wan due primarily to the fact that I had figured that the
Bank 88 a practical matter might build up its gold reserve against this
liability as and when it paid out its own notes in lieu of Treasury notes.

I think, however, that their enstruction ef their reeuirements is not
only coneervatively sound but perhaps technically necessary under the terms
of the program.

As you know, we have already sold the Sank of Poland 110,000,000

of ,;old ae of November 10 and expect to give them another $5,00,000 some
time before the end of this month.

How much they may expect to export

from New York I em not certain but I am quite pleased that they have shown
such a cooperative spirit in buying Ruch a large percentage of their re-

quirements here instead of in London as :our cable OWL seemed
was their original purpose.

indicate

:tovembcr 18, 1927.

On tilt,: whole I think they have done ei fine job and I c,nnot

but feel encoura4ed over th., way the Bank is handlinc its part of the
program.
3, .1- v,.

Jae,

:?!iithfuliy ;ours,

BENJ. STRONG,
Governor.

Honorable Monte 0 C. Norvar,
Govcrnor, Bank or 1:t-kjind,

London, England-

Novembc:r 21, 1927.

PERSONAL

My dear Monty:
Your note with the co-,71y of the introduction, shich you have

handed to Ur. Olaf Hamtro and Mr. John Hugh Emith, has duly reached me
and I await their call with much intereet.

Speaking of visitors from your side, I had a brief call from
the Prime Minister's eon, -in-law, Captain Munroe, with very nice neesages from Mr.

Baldsir

and also I had a couple hours with Peacock,

which Were UE delightful ke always, but he was in New York too short a
time for me to see enough of him to aatiefy se.

Most of the time that

McKenna was here I was in tlashintiton but I did not learn that he called
at the batik.

One of Lie managers, Jackson, did call however, end I had

a rather nioa chat with him.

Itonnet is here and I see his frequently.

Friday night we all attended the dinner of the Academy of Political
Science where both Layton end Jeremiah Smith sp-,de speeches.

lunches with me this seek.

Layton

These are but a feu of our callers as we

have been extraordinarily sell favored with visitors this summer F,nd
fall.

best regards to you, as alwoys,
Very sincerely yours,

Right Honorable Montagu C. Norwn,
Governor, Bank of England,
London, England.

tiovember ?2, 1927.

My dear Governor Norman:

This note mill be presented to you ty ry friend,
Honor& Lle LOU16 T. McFadden, who le expecting shortly to

visit London, an6 whom you may recall having met in iashington

at the time of one of our visite.
Con,ressman McFadden is Chair% Ein of the Committee on

Prinking and DIrrency in :.,he House of Representatives, as you

doubtless recall, and is much interested in banking and Manoi&l problems.

be as.-ured that I shall be grateful for any

courtesy you are able to show his.
I b es to remain,

Faithfully yours,

Rt. Hon. Montagu C. Norman,

Pans. o: Engl.nd,
London, E. C., England.

FEDERAL RESERVE BANK
OF NEWYORK
November 28, 1927.

PERSONAL
My dear Norman:

I am glad to have your letter of
hovember 1 and the very interesting note prepared for me by Siepmann on the general
situation in Norway last August.

It will be

most useful for us in connection with the
information which we are trying to build up
on Norway.

On the whole, I am favorably impressed with the situation there and would think that
they might stabilize legally with real prospects
of success.

It seems to me, however, that

there are some weak spots which might well be
watched.

First is the enormous increase in the
debt of the umunicipalitiesT! which has involved
the banks.

On this point I observe that the

solution of the problem is to be sought by way of
a liMunicipalities BankIr with Government capital.

Last week a private banking house here offered
en issue of 06,000,000 - 5

bonds, due in 1967,

of the Kingdom of Norway Municipalities Bank.
I hope they have this problem under strict control
and supervision in Norway.

FEDERAL RESERVE BANK OF NEW YORK

2

November 28, 1927.

Second is the debt and tax burden
which appears to be heavy enough to give rise to
serious concern and to place some doubt upon the
permanency of budget equilibrium.

Our correspondence with Mr. Rygg
concerning the establishment of relations between
our banks has now reached the point where I expect
he may shortly open an account with us.

If so,

perhaps I may see him some time on my next trip.

Your letter of November 15 has just

I observe that for the present

tabilization and central bank

deferred.

any thanks to you and Siepmann

emorandum, believe me,
Faithfully yours,

BI NJ. STRONG,

Governor.

agu C. Norman,
England,

.)T
December

1927.

Dear Mr. Governor:

In acknowledging your personal letter of November P2
to Mr. Strong, which arrived after his departure on Saturday,

I sant to send to you h confirmation of the cable which I sent
to you laet night concerning the Creek eettlement, toAJether

with a statement issued by the Secretary of the Treasury yesterday afternoon, *hied: will give you more of the details of the
proposed agreement.

I think it speaks for itself, and consider-

ing the cable thich Niemeyer and Jeremiah Smith forwarded to Yr.

Strong through you, I suppose it is possible that the settlement
at this time may be helpful to the plane of the Greeks to stabilize.

I know that you will keep us posted of any further
developments along that line.
I

am, my dear Mr. Governor,
Faithfully yours,

Right Hon. Montagu C. Norman,
Governor, Bank of Fngland,
London, England.
GLH.MM
Dace.

(leo A.bor 7, 1927.

PERSO.NAL

icy dear 'dr. Governor:

Lais wall simply acknowledge your personal letter of
Sovember 2I, to !Ir. Strong, concerning your various pl,,ne for
isloseiraa.

Feedlces to cay, hie letter, wnich arrived only

today, nt...e not been red by Mr. Strong, en that I assume you
will dieonue it with him in London.
Believe me, my dear Mr. aerf.facr,

Sincerely yours,

fright H014. MOst:..f

Benk of Fng land,
Londo.1 England.
GVMM

C. Norsn,

December 31, 1927.
Dear Monty:

My hurried trip and the had weather and ev,:rything did

tire ins

bit, and I had h. little upset when I

go.-;, back, n:)thing

serious, but the doctor thought I he.d better stay in bed. or rs
few day e. So here I am, until probably neat fueeety.
I will. not
atteaipt to rice you now of all the kind thoughts I have
and all
the good wishes for the New Year. You certainly have started it
moeL auspiciously, anu I do congratulate you most heart.ly.
"fiords:22).e come of Niemeyer's visit 7_..nd, of

couroe, I ea

delighted. It will give him a knowled.re of our &Praire, and especially :In tioquaintance with our people which art l he of great
advantade to us ',Ind to hi

So he will have a -slim weleama and,

I trust, a goou time as well.
My very be

to you, Old Dear, and much gratitude for

many things.

.4ffectionttely yours,

Rt. Hon. Montagu C. Norman,
Thorpe Lod; e,
Campcen Fill,
8,
London,
C., gn,gland.
le.


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