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C AB L E

December 5, 1914.

'61"

Sol'"

James Brown,
Hotel Ritz,
London,

Wiggin Ami I know nothing of cash scheme suggested by Davison and understood he and Morgan generally approved plan outlined our report of
Which he has, copy.

We asked him cooperate with you in negotiations

following Paish return as
you would agree.

I cannot

he

was sailing other business and felt sure

His firm's assistance and advice most important.

agree to change of plan

without

to any

plan involving

status

gold fund unless kept informed.

like to hear his plan.

full details

and must

object

pledge further gold shipments, or change in
Please tell Davison we would

Will consult Wiggin to-morrow.
Benj. Strong, Jr.

-

34m York City, Doc. 7, 1914,

Jamey; BroWn

'Iota' Ate,

Andons

Viggin andI bulicvo you and Davison can agree on plan and policy which

Will be eatiefaCtory hero hut vould appreciate advice of any radical
Chanze in plan we reconnended#




Benj. Strong', Jr.
.1r/VOLip40




December 14tn, 1914.

r Jim;
Trivnks for your note of the 27th ult. and the
clipping from the London Times of 1;owriber 27th.

I have frequently wondered at ar George's

generosity with the mrspaper men over here, on dobt-

less you did, and fear it may have led him into difficulties at home.
Gables reaching me through Jack Morgan indi-

cate 'oregress in the neotiatiess in Jianon, bat I understand that you were obliged to leave bore thw ' ere
concluded.

I hope everything is satisfactory.
Very truly yuurti,

James Brown,

69 Wall :Arcot,
Nov York City.
BZJr/VCIA

Dictated by r. strong, but

signed in his absence.




Docaftber 14th, 1914.

Dom- Sirs

Referring to our telephone conversation
regarding the pamphlet sent to Jr. Strong, "V;ar and

Finance", the matter of forwarding this to Mr. Thatcher
Brown was called to hisfattontion, and he has asked to

be allowed to retain this a fe,a days longer, if it will
not cause too much inconvenience.

Ur. Strong is very

anxious to read this pamphlet and expects to be able
to do so :within a few days.

Very truly yours,

"nl°
59 Wan. Street,
:Icr,-; York City.




February 17th, 1915.

Dear Sirs
At

r. Strong

direction, I n

sondiue; you herewith the three copies of

NO. 5 with regard to bankers
acceptances, which you requested in your

favor of the 15th inst.
Very truly yours,

Secretary to Mr. Strong.
Janes Brawn, 3sq.,
59 Wall Stre,A,
New York City.
VCM




COPY

March 9, 1915.
(dated 8th)

ACCEPTANCES.

BANK OF ENGLAND.

Bank of England requires two English names, of which
one must be acceptor.
or London agency.

Bank will not take acceptances foreigner

(stop)

British name is person or firm of

which at least one partner domiciled in England.

can refuse any bill and especially

(stop)

Bank

eserves right reject any name

or company where greater portion capital controlled in foreign
country.

Bank does not discriminate in normal times with regard
to drawer, although at present would certainly enquire into orgin
acceptances indicating enemy finance.




BENJ. ST7ZONG-, Jr.

May 10th,

1915.

Dear Jim:

You haven't done anything.

The meeting

was not mine anyway,. and we only gave it house room.

1011 tell you the whole sdbry when I see you.

Very truly yours,

JamellwarAUT-laqA.

59 7411 Stree *
New York City.
BS Jr/VCII




JaBli3

JUly 6th,

1915 .

Dear Jim:

I would be glad to hare you keep- ne posted on

the latest developnerts in connection with the French
matter we were discussing.
Mt0 v::arburg is shortly going away, and if
Changes occur in the plan which woUld make it desirable

to have further conforance with him on the subject, it
will be necessary for me to take it up, with him in the
course of the next week.

Very truly yours,

'It,

Brown ;ro4e
Company,
59 Wall Street, New Yrok City
BB Jr/VG11

-

PEYSONAL.

September 28th, 1915.

Dear Jim:
Replying to yours of the 23rd, I see no reason why the drafts
described in the extract from your manager's letter would not be eligible for our purchase.

The Character of the drafts as described in his

letter is apparently such that they fall within the provision* of the
last regulation covering bankers acceptances.
iecessary for the acceptor to file a statement

It would, of course, be

with

us, agreeing to

file such statements from time to time; to stamp the drafts in the customer:: form and undertake to

answer inquiries in regard to any specific

Iraft whit* we might at any time purchase.

Please do not consider this to be a final official ruling

on the matter, but it is my
more specific shape

off-hand view and when the business takes

if you think it advisable to write formally giv-

ing the particulars, I will be very glad indeed to sand a definite and
official reply Just as promptly as possible.
Very truly yours,

J;MeselavewntipeZtq.,

59 'TairlITimet,

New York City,
BS Jr/VC/1







COPY

December 10, 1915.

My dear Jim:

By reference to the Federal Reserve Act, you will observe
that the provisions of Sections 13 and 14 in regard to acceptances

which may be made by national banks and in which Federal reserve
banks are permitted to invest, are exceedingly vague,

In Section 13,

the acceptance which a national bank may make is described as one
The

which is "based upon the importation or exportation of goods,"

language is slightly changed when describing what kind of drafts or
bills of exchange Federal reserve banks may discount, the statute
stating that they must be bills "growing out of transactions involving the importaion or exportation of goods."

The whole struc-

ture of the Act indicates that it was the purpose of Congress to confine the investment of the Federal reserve banks to paper of various
kinds, including bills which had had their origin in commercial transactions, rather than in finance or speculative transactions.

One dif-

ficulty which constantly arises is the line of demarcation between
bills which are drawn for financing, as distinguished from those drawn
for commercial purposes.

any bills, such as those arranged by you

in connection with the French credit, take the form of finance bills,
although the purpose of their origin is commercial.

It has always been my belief that the Bank of England and
the English banks and discount houses generally dealt with this matter, not according to any fixed rule, but by a general understanding




To James Brown, Esq.,

- 2 -

12/10/15.

among themselves that prime bills, viz:- those which bear two first
class English names are always available at the Bank of England,

whether they were drawn for commercial purposes or for the purpose
of making exchange, whether they were originally in the form of documentary bills or were, in fact, clean bills secured by collateral.

I am writing to inquire whether you will be good enough
to make inquiry of Mr. Norman, in your own name, but in my behalf,

as to whether, generally, my supposition is correct that the discount
market of London, and partifularly the Bank of England, does not discriminate against bills which are in the form of finance drafts,

where, by reason of the character of the drawer and acceptor and endorser or endorsers, general knowledge of their business and the purposes for which the drafts are drawn, gives them reason to believe
that they do not arise from speculative ventures or are not drawn for
the purpose of carrying stocks, financing corporations, etc.

In

other words, is it not a fact that the so-called discrimination against

finance bills in the London market which occasionally arises, is not
a discrimination against the form in which the bills are drawn, but
against the purpose for which the bills are drawn, which at times become generally known to the market by reason of extensive operations
being conducted by the drawer an

acceptor?

If you could persuade Mr. Norman to make a carefully prepared
statement of the policy of the bank in the London market in regard to

the bills, it would be of great service to us in our work, and I can
assure you it will be greatly appreciated.
Very truly yours,
James Brown, Es
.7a1l




January 10th, 1916.

Dear Jim:

Just a note to remind yo/ that I would

like a letter of introduction to your former partner, Mr. Z:ontaga Norman.

iy plan for sailing on the first is about
matured and I would regret very much visiting London

laut an opportunity to see M. Norman.

Very truly yours,

Mr.

d?m,.AM5d1
Street,

New York City.
Jr/VGU




January 2Ah 1914; 04'

Dear Jimt

Your note of the 22nd inst. enclosing
letters of introduction to Mr. Wood and TIV. L:on-

tagu was received this morning and T am looking

forward with pleasure and interest to meeting
these gentlemen and greatly appreciate your cour-

tesy in affording me this opoovtunity.
Sincerely yours,

James Brawn, Esq.,

59 7a11 Street,
Yew York City.
VCM

larch

*th,

1916.

Dear Jim:
Thanks for

your note which has just reached me.

I was somewhat delayed in my London excursion,

owing to my having spent a few days at Cannes as well as
spending a little more time in Paris than I had planned
to do..

I have had a very agreeable visit 1,*th your
London office, lunching with the partners. r. Norman
was out of town all last week, but I expect to see him
this week.

,h kindest regards,
Sincerely yours,

39'all Street,

New York City.







June 14th, 1916.

Dear Jim:

It is distressing to learn of your illness.
I have bbeh through the mumps and know how unpleasant
the

experience is.

One of my boys is just now

quaran-

tined at echool awaiting developments, as he apparettly

was exposed

recently to some cases of mumps.

I hope

he escapes.

Trusting that you will be around in good
shape very shortly, I am,
Sincerely yours,

James Brown, Esq.,
Box 166, Locust Valley,
Long Island.

BS Jr/VCM

Estes Park, Col.,
September 4th, 1916.
,/"V'e 1, 4

Dear Jim:

Don't gather from the delay in anewerlm your letter

of August 4th that it was not greatly eppreciet4di and warmly
I liavc been obliged to let -.44-..leirbiele(ail accumulate,
welcomed.

again, because I was laid up./

for a

N\i,

i eoemd then
\e)
ihingse) e going better now and

partly because I had no otenogranS HirR
I have almost caught up with m

om the office of various
/f nd of the evelorment of the new credit,
interviews wit:. y
fact none of the officers, have
etc. Of ceeire,e, . T reman
The bye

_
/ 'uch experierieee--ierhad very

°reign transactions, but the best

way to 1 arn is tojio at it and I am sure they will give every
possibl

siat.jx(C

.

in your plan, ae I have no doubt has been

evidenced already.

decision to pay off the first $20,000,000 credit
and to arrange a new one was very wise and I an glad you did it.
It incretcos the prestige of the drawers throughout the market, and
Th

removes the many objection' to a roundabout renewal arrangement,
(which some of our friends warned uo would be attempted when the

°legibility quection was first thrashed out.)
You must not gather from those pictures that Treman

showed you that no businesssis done up here.



I have a little




To

Sept. 4, 1916.

James Brown, Esq.

office where, later, I hope to get in a lot of work and among
other things where I hope to have opportunity to answer many
letters from you.

Fortunately, some of the work of the bank

can be done out here just !Is well as at home, and that is all
that reconciles me to my banishment.

I cannot play golf,

alai

though there is a small golf course here, nor have I yet been

able to ride horseback, but I am able to do a 0
ilttle fifa.ing
and now that the Park is practically emptied_ptourists and
,
"----gueF.ts, I'hope to get out fairly re ularly.
1

You are to be congra

the con

ion of that

iculties, all of which

French loan in the face of
I realized without your mantic

is a great succes7

i

Of course, the loan
bscribe ix sukserike for

them.

--

I mun
1

a few of the note

nd wish

ad taken more.

certainly
is "so an his waye", but I should think this loan would apha d o un
\\\a

peal

tand Mr.

Forgan.

He

him moreian most bankers on account of his national...

ity.
What you say about Sir tdwin Holden interests me tre

When I was in London, it struck me that the old
man was weakening a good deal on account of illness and the
harassments of the war. He has been carrying a tremendous

mendoaely.

amount of responsibility without anything like adequate assistance in his bank. I would not be surprised at any time to hear
of his breaking down. In fact, when I was there, he made an
address at the Manchester Chamber of Commerce in which he referred to efforts of American bankers

to undermine Lombard Street's




James Brown,

To

Lee..

Sept. 4, 1916.

supremacy and he was so overcome by the mere thought that the
old man broke down and wept, all of which was dealt with by
the prees in a most lurid fashion.
I hope that you and your associates in this co-aspira-

cy to undermine Lombard Street never overlook the fret

that

the

strongest influence that man be applied is the e*te of discount.
f

24- 1.

in London is an oirKument that few

in New York against 5i

:

bankers can resist.

Behind that, hew

reeLTdreaet the question of

gold payment and if we have a greatERwos of bil

\

omiciled in

their

New York and the reeerve baniste"/e una

e to do

making them convertible on de

c1d for export, we will

lose every bit of th

ao

gained by

part by

tile exigencies of

the wer.
I am d

take op,
on Aiha

Club

1

*ted to

nity now\e107

from you, Jim, and hope you

ki14é

_014

to write me and keep me posted

s doing.II miss our meetings at the Metropolitan

II

much.

....//

WtiehWeret regards,
Very sincerely youro,

James Brown. 7ad

Th1Tr

New York

City.

0-K°4'

PERSONAL.

November 7th, 1915.

Deae

Jim:

am writing with some heeitation a

a ratter which

we could much better dispose of by conferencer, let me say in
that connection, that I miss our
much

ions Tery

meetin(seffeedelt

indeed.
The question has arisn

and il continue to arise,

as to whether our policy in fix

on bills of private
ed out. This letter

bankers hae yet been satiefeezteeeily

will explain to you

con

the'd fficulty.

/dential

i

reserve banks,

nepired by

Each of the

e desire to establish and main-

ktwleve

tain as complete autono \\as

permits, fixes in its ern die-

tlisr"

'.

cretion its r

for buying bills. 71e here in New York ere only
able to carru t their -I etructions and do not endeavor to influence them in %,c blie n2 the amount or cbarecter of the bills which
.e.
_.- e /
I

they authorize

u'

eil,T-47

buy for them.

In the cese of bills acceeted by national and state banks
where sworn statements are filed with ue, all the reserve banks authorize pretty liberal lines. In the cese of erivate baekers, they
establish fairly liberal lines also where they
figures.

are furnished with

Then it comes to 10141T firms like your own and'a number

of others who give confidential information to the New York Reserve
alone, each of the

other

any line and, second,

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

reserve

banks hesitate first

to do more then

authorize a very

to authorize
moderate

pur-

-2-

To

Nov. 7, 1916.

James Brown, Esq.

The result of this situation is to give the Reserve Bank

of New York an almost

unlimited order for bills of national and

state banks and narrow margins for these

private bankers who have

furnished their statements to all twelve of the reserve banks and
such a restricted margin in the case of those

firms

that only give
them justice in

us their figures that we are really not able to
dealing with their bille.

The ?eaeral Reserve Bank of Nsi York is

the whole System.

If circumstances

ee

out 40

of

raction in

itated a

naturally,beeeffec id first by discontinue/
prtvate b k s a e*eding to whether they had

our purchases, it would
ing lines extended to

or had not furnished statements and

fall on the New Yprk ban

tak

e4itably

the burden would all

11 the bills of those
statements to all the reserve

sirs o

private bankers who hadln t furnish 4
banks.

The
out any recom,
i

they cannot ,g4

ge t banks

n-

he System outside of New York with-

dations lflm us have

tatemey.

declined to buy

I am writing thie

to ask you to co'h14sr-Whether it may

any bills where

letter, therefore,

not be desirable

for your

firm

to make arrangements with, say Boston and Philadelphia, where you

that they also will have figures and will take
bills of your firm just as liberally as we will in Nov York.
have offices co

you decide

If

J

to do that I think I would recommend your doing the same

in Chicago and possibly Cleveland and St. Louis.




the

To

NOT. 7, 1916.

James Brown, Esq.

sing the matter at the bank, it might be
well for you to send me an expression of yr
Before di

1 hope you kee!) well, bucy and prosperous.
With w5rmest regards, believe me,

Faithfully yours,

James Pro-m, Erg.,

Care 4:esers. Br.own Brothers Company,

49 'fall ,9treet,
hew York City.

\./

BS/VCE




4.




December 4th, 1916.

leEEBOVAL.

Dear Jim:

Your two letters of Deceaber let bay
If you fine it poesible to

uet renched me.

Roston and Philadelphia, I believe it would be e

but sugge,ttalking it over wi

ggestien ebout
cloth while

nary pruderce indidetes the

d Treman fire', ae ordieir tekine the matter up

privately with Aiken and Rho

the matter is approached

of

I cannot t

ciate your leeters and
wieh you on all of these new

how nech I miss e

problems that se

now and create new embarrass-

mente ever'-

ere is really no occaeion for me to cemment or the ac
tion of tee Reserve B
ebove all things, I must and shculd
be boy

their pr

to my associ
neemen

s an except an to acceptance credits,

d re direct relation to the ,:ctivitiee of

the reserve barks.

Ely own theory cf the situation is that our eEcurity for
the future lies in having a mass of .foreign loans which can be
handed back with thanks ee.en the time comes instead of the dieorderly end dieorgrnitieg export of gold. Of course, I don't
wart to !rake bad loans, but ar yet I have net seen any evidence
-

of bad loans being made or attempted.




2
James Brown, Esq.

To

Dec. 4, 1916.

They say 1 am making very good progress out here towards

recovery, tut as yet make no promises as to the date of my return.
I have put on weight end think I have gdtten the better of the
"hugs."
But the last stages of a colliplete cure of my difficulties are always tedious and slow and I hay- at reached the
point where it is safe to push matters by ta ng active exercise.
You can imagine how irksome this is
Warmest regards, old man, and many thi

James Brown, Esq.,
59

all Ctreet,

Jcw York City.

35/VOW

for your letters.




December 4th, 1916.
Dear Jim:

Your special delivery letter of Dber let reoched
I have reald it with great c. e and am unable

me last evening.

to understand exactly your point inolicy.
At the meeting to which
by James H. Simpson of the Ban

ou refer, addre
were made
rpool
Dr. Risser, a well,wasson of the Credit Ly-

known economist of 7unich a

ted me here for two or three

The last named bas 3u

onnaie.

days ón his !iestern t
You must

ememer that

be aecomplished 'y he operations
means employed to

flict.

oint o.

L

1st.
2nd,

soxn

e various objects to
the reserve bank and the
metimes appear to be in conere

the difficulties:

We must maintain steady rates,

make our rates as uniform as possible,
out great discrimination between various

sea of bills,

ust encourage the develepthent of dollar acceptances by maintaining rates which compare
favorably with those of London,
4th.

lie must make the hill holdings of the reeerve
banks their principal source of income and
sufficient to cover expenses and the greater
part of their dividend requirements,

5th

We must accumulate ail& &lode stthtaA Ur:Wm* xliittki4tik

filikesieweAcmodomaxtitsuatatkeix our portfolic

now so that if necessary ee can tighten up
at times by withdrawing from the market,

-2-

To

James Brown, Esq.

6th.

Dec. 4, 1916.

We must avoid

antagonizing member banks by

keeping ourrates

too low,

.4

We must protect the New York aarket against a
a great flood of funds of the other reserve
banks and can only do so by giving reasonable consideration to the v'eaT of the banks
for which we are acting.

7th.

1 think you will realize that

there

thought

food for

in endeavoring to meet all the considerations a'vs listed.

rtain to en-

one point, we have encountered diffic
to come.

counter the same difficulty for y

market is still the criterion o
volume

tendency

development

mate against any patti
ount of bill

ich we reasona

exceeds the amount

am your lett

I gather

all bill

I am not

ffer
I

becomes om-

of any one acceptor

should carry.

rather indirectly that you
on is to advance

o avoid

think the w

throw a large

to

Not desiring to discrim-

of bills into the reserve

barrassing when the

money

Our

ny little bulge in the

market

stock exchange money

On

our nate for

Per

at all sure that you are right.

the New York accepting institutions or
y bills under present conditions and
too
as a whole, so long as the volume is as re-

that any

have n

felt

rms are

ccepting

that the re
stricted as

it now

is, should have no difficulty in

meeting any

situation which might arise resulting in a bulge in call

money rates.

The difficulty is increased, however, if we are unable to distrub-

ute all the

bills purchased among all reserve banks.

I refer par-

ticularly to bills of those private bankers who are unwilling to

give the necessary information so that their
by all twelve of the reserve.



banks.

bills are freely taken

To

James Brown,

Dee. 4, 1916.

Fee.

Of course, reading between the lines, I gather that
something has occurred to ditturb you in this matter or you
Please do not hesitate

would net have written my as you have.

to take it up frankly with the officers of the bank.
txny

idea and the d,-

or our difficulties would be

id be greatly fa-

velopment of a real outside market for bills

Ott tiir practice of

cilitated if the New lork banks would

ance credits

guaranteein g discount on renewal )ills drawn unde

uying

and would also,abeedon the pract
This would throw a much ler

paper.

hills on the market and

develop not only volume but
ent.

their o

is more actual than apparich has dealt with this mat-

Your house is one

ter in the right way
I see n.

te any materiel advance in

eason

Their

rates by the reser

rn their dividends in full

count is not
the rece

investment ac-

announcement

in !ny

niin t'o result

of cons

erablji

lower

r

ning by the

end

Reserve Board is certain

larger gold imports with the likelihood
es by or after the end of the year.

Why,

J.




eeei

'ere

hould we

ance our rates!

Ihope you also appreciate

the difficulty which we en--;

counter in dealing with bills in a market whcre endorsements are
not naturally and automa.4ically added to bills by

through the

hands of the bill and

Cu' passing

discount houses which are in the

habit of endorsing and rhich have large responsibility.
It distresses me to be absent at a time when so much
of importance is going on, but

reports I

get from the office

4
To

James Brown, Esq.

Dec. 4, 1916.

really satisfy me that their policy is careful and conservative
and one which I believe in the end will bring result.
Thank you very much for writing me.

other letters with interest.
4ith ,atrm regards,

Faithfully yours,

James Brown, T]sq.,
59

'L,11 Street,

New York City.
BS/VGM




await your

ember 14th, 1916.

December 10th

I was very glad to have your letter
which nffords me opportunity to add a little t
4th, and which I must ask you to ret

a

the rate for

the custom of banks and trust

easy money market

companies gng 2

The fact that for some

1 money rates and rates
Z

bnnk

ast 1 and usually
otan s will closely approxis usually "pegged" in an

more, so that the r

at 2

between a

sible obligations and single

name commercial paper

the sa

confidence.

a

in value

acceptance searing two or more

months

of the

reement except that in

We are in sub

a low money market the actu

imate

letter

en points:

Let ma review again the
let.

my

for bank acceptarces were abou4

or slig L4 y above, was coincidence rather than

design.

we agree upon.
3rd.

This alio we agree upon except that 1 do not

think that your assumption that we have been the only buyer it
correct.

I will refer

4th.

to that

later.

I think you do not

understaa

th'

;"'If there

was one central bank, the situation would bc, very different.
There are twelve banks, each reasonably autonomous and most of




2
To

James Brown, Esq.

Dec. 14, 1916.

them desirous of earning at least their expenses and something
for dividends.

If we undertake to represent all

in the New York market and then, having

excluded

twelve banks
them from di-

rect operations, decline to buy bills in sufficient

volume to

give them reasonable earnings, our position i

he New York mar-

ket would be lost,

eugh us and the

they would decline to act t

result would be far more serious, so f
than

the

one which has existed.

as rat

Your asgumen

tions of a central bank, but a

pera-

anks in a bill market

its infancy..

5th.

This

tly failed to follow.

Until the last few

has been

bills.

Raisi

Reserve Bank of New York

carrying

ve million

our

te and thr.

as they m

dollars of

ng these bills on the market

e slightest effect ed would no
on the market

because

e volume is no

with

heory

ing.with

th

Vancing a theory which

hardly applies to operations

is in

ld be all

tuation and

right if applied to a fully devel

which

are concerned,

which

actual sit

in our portfo

large enough.

correct enough

Vion.

whereas, we are deal-

When we get t100,000,000 of bills

market by raising our rates,
influence in addition to the senti-

withdraw from the

it will have some reallYmarked
mental influence, but

Again you are dealing

at

present the volume is too small to make

any real change in our market conditions.

Furthermore, the other

reserve banks which we are feeding with bills from the Ne* York
market ere not yet strong enough in enrnings to be very gracious




about making this sacrifice unless- necessity

can be shown.




-3To

Dec. 14, 1916.

James Brown, Esq.

Whit you say is right enough and that is where

6th.

the conflict arises between the interests of theireserve banks

,nd the interests of

member banks.

We agree about.

7th.

criticism of your position is t

at this matter entirely through the eyes of

t you are looking
an who understands
lly five hundred

the rules of --iJombard Street where th

millions of sterling bills in circulation and is
apply

the

rules governing Lcmb

eavoring to

t's bill marke

to a mnr-

dy not more than 10

ket where at the outside th
of that volume of bills, in

ink you fail to consider

that there are two obje

d by the operations of the
estion of earnings

reserve banks, qui

or less conflicting.

and that these tw

eats a volume of bills drawn

The fir

Philadelphia.

in dollars

lacks

,

banking machine

This country

in foreign countribs to facilitate

t use the banking machinery of other nations; n other words e must make it necessary for the other
rse. There is just one way to do that,
rry ou
fellow
those

awings.

viz: to mnke it

profitable for him by keeping rates down.

do not mean by that such abnormally low rates es would make us
the only buyer, which is far from being the case, but such steady

rates at levels with which London cannotcompete,that drawers of
bills in South America and the East really cannot afford to draw
on London as against hew York.

You probably do not realize that




To

James Brown, Es.

Dec. 14, 1916.

the reserve banks are purchasing

probably less than

one-third

of all the bills now being drawn and that this proportion will
continue to decreese as the volume increases.

I have main-

tined end expect to continue to maintain the aolicy, if possible, of keeping a steady and fairly low rate

r bills so es to

enec,urage the development of volume, otherwis

we will never

Do you realize

have a bill market.

ago, there

were not more than ter or twelve names in the max

that we

here are 250

'tihrreae, to-day I

could buy'?

1 refer to creating volume,

.

es. 5hen

volume alone in dollars

ors nnd the greaest in-

but volume in names and numbe
aucement for the use of t

exchange is to make it

profitable and the r

reins evidenced every

day by the conetan

e number of names appearing

in the market.

that with rates sufficiently

attractive,

acceptan

eign countries will be seeking
credits

in

thi

suffici

tly attractive

their o

connections,

inese in

face of

foreign bankers.

We

ntryi

Aereas, if rates are not

n comparison with rates

afforded through

bankers must go out and hunt this buskinds of obstacles now being erected by
have credit to sell;if we keep the price of

that credit low enough other money centers cannot compete with us.
The second consideration, subordinate to the first and
somewhat conflicting with it, is to broaden the market and develop a very large number of buyers of bills so that a surplus




To

Dec. 14, 1616.

James Brown, Esq.

supply can always be promptly distributed.

As to that, I have

not the slightest concern for it is absolutely within our control.

There are to-day nearly 30,000 incorporated banks in the

United States in addition to all the private bankers, all of which
The houseu nojiealing in bills

are potentially bill buyers.

arc circulerizing every bank in the TTnited St

es and according

to my obecrvation, they would have no difficul

in distributing

one or two thousand millions of good bills witho

e slightest
active.

delay the minute the rates were

ittle more a

We wolild accomplish this dis

ovever, at the ca.crifice

of the prompt development

I an perfectly contented

to let the broader market fcr ba

think you should, that

ment of volume, kno

country for such bills the

there is an unlimi

minute the volume d velope.
there is

C

Did ,u know, for instance, that
to have the New York State

s

amended so

banking

ceptances await the c!velop-

uthorize savings banks in New York

buy such bilL as are eligible for reserve banks to buy*

State

tand a similar

1 unde
fact is,

m, you a-

and overlook
.

an is under way in lassachusetts.

The

ltogether too much worried about the market

necessity for developing drawings.

In conclusion, let me say that this situation boils down

to a conflict of interest between the bankers who open credite and
accept bills ana whose bueinees will grow very rapidly au long as
our discount rates are very low, and iht interests of a-great body

-6-To

James Brown, Feq.

Dec. 14, 1916.

of banks that would like to buy bills if the rates were higher.
Take my word for it that the first ntep can only be: successfully
taken by keeping low rates and the second step will come along
automatically.

Please pardon this essay. I want au to know exactly
my position, want the benefit of your criticis and if I am wrong
time alone will show, but I am going t stick i out if my influlicy.
ence 'with the banks can hold them to their prcaen




James Brown, Eisq-si

59 Wall Street,
New York City.
BS/VCM

cif Itnt.as Artatrrt
Ilhat
Piloin fork




September 2, 1914.

Dear Er. Str.ong:
AS requested in your letter of the

1st inst., I-hand you herewith check for ,92.14,

being my share of the expense for the private car
used on our recent trip to Wasthington.

Yours very truly,

Benj. Strong, Jr., Lsq.,
16 Wall street,
Lew York City.

(gm-Inez

5,4 Nal
Xeto fork

September 14, 1914.

ERSONAL:




Mr. Benj. Strong, Jr.,
re si d en. t ,

Bankers Trust Company,

16 Wall Street, New York, N. Y.

Dear Ben:

I was very much disturbed the other day to hear
from you that at the lact meeting in Washington there was
some disposition on the part of the Federal Reserve Board.

to feel, now that short telm notes issued by the City of
New York, and held. in London, were to be taken care of by
the shipment of gold. or exchange, that the need of the
proposed syndicate which was to be formed for the purpose
of creating an exchange fund. of $150,000,000 had. passed.
I cannot understand. the basis on which this idea
has taken hold. of the Reserve Board., and. think there must
be some misapprehension.
The syndicate formed for the payment of the debt
of the City of New York agrees to provide $82,000,000 in
e:2c.change or gold for the specific purpose of paying the
revenue warrants as they come due. Assume for a moment
that gold would have to be provided for the whole amount.
Not one single dollar of exchange would be created. against
this gold. It would be shipped to Ottawa and. the corresponding
amount would. be disbursed in London and Faris to holders of
New York City warrants.

-2-

Alssume for a moment that half the amount is

0




provided in gold and half the amount provided in exchange.
Not a dollar of exchange will be drawn against the gold,
as instanced above, and the amount that is provided in

exchange will make additional demands on the New York
exchange market, and is likely to absorb for the next
sixty days all the exchange created by grain bills and
other exports.

Instead, therefore, of making the proposed exchange fund unnecessary, it really makes it more imperative.
If the demand for exchange for the New York City payment
should be as I describe, and of this I have good reason
to believe that it will be, there would not be left a pound
of exchange that could be purchased by the merchants of
New York and the various large importing centers of this
country for remittance in payment of their, at present,
overdue obligations under the Lnglish moratorium.
The figures recently requested by the Clearing
House Committees in New York, 2hiladelphia and Boston have

placed those committees in a position to know what the past
due indebtedness to England of the merchahts in these
centers is at the present time; also, what nearby maturities
amount to.

The payment of the New York City warrants

held in London and 2aris will, it

true, create a more

favorable sentiment toward the United States, but sentiment
will not pay acceptances past due and reaccepted under

moratorium.

Until means are provided for the merchants

of this country to send gold or exchange in payment of
'their obligations, the London Market will not relax toward
us.

he moment that partial settlement is made on account

of these acceptances, England will be willing to open frdsh

credits that will make it unnecessary for us to pay the

balances for some time, and they may then be paid through
shipments of grain and other exports.

I doubt whether it has occured to the Federal
Reserve Board that at the present moment banks and institutions and private bankers in this country whose commercial
credits on London are readily negotiated in the Far East
and all over the world are being discriminated against,

bedause the London Agents or Eouses of the American issuers
have been obliged to avail of the moratorium, and that these
commercial bills of exchange have been rdaccepted instead
of having been paid.

The discrimination referred to results

in a very substantial diminution of the. imports into the

United States for some time to come, with its resultant
effect on the Governmental revenues.

It also indirectly

prevents the free opening, in England, of credits in this
country for the purchase of grain and other exports, and,
to that extent, diminishes the supply of exchange on London
in Lew York.

This whole situation will be changed over night

by the formation of a $150,000,000 gold exchange syndicate,
and the immediate shipment of a moderate amount of gold,




-4-

specifically for the settlement of the obligations of
our merchants.

The moment this move is made, and the

first shipment reaches Ottawa, and the syndicate begins
to offer exchange, I am convinced that the tension in
England will relax, and that credits will be opened to
an extent that will create more exchange than the merchants will need.

I do not want to bore you with a lot of arguments that you are probably thoroughly conversant with,
but there is one more point which I wish to call particularly to your attention.

The original moratorium

was dated August 4th, and ran until September 4th.

This

moratorium was partiaAy extended (entirely as t
bills of exhhance) until October 4th.

Today is the

fourteenth of September, and there is very little time
remaining

between now and October 4th, to work out

details of a plan to enable the merchants to begin to
cover their acceptances under moratorium on October 4th.
You, of course, know I have a partner on the Board of the
Bank of England, with whom I have been in constant correspondence by cable and letter.

quite between ourselves

the Bank and the Government feels so strongly that this
country is holding back its gold unnecessarily that I
should not be surprised if the present moratorium should
not be extended on October 4th.

12 exchange is not

available between now and then to meet obligations then




-5-

0




due, the situation for our merchants will be embarrassing
in the extreme.

There are millions of dollars accumulated

on deposit in the banks of this country, now waiting to
be transferred to England.

Our merchants will be solvent

as far as this country is concerned, but if they cannot
meet their foreign debts at that time their credit will
be irreparably injured, even if bankruptcy does not follow,
and it will take a generation or more to live down the
consequences to them and to this country at large.
i.s having a most direct bearing on this whole

subject I enclose a condensation of the English moratorium
as set forth in the English Gazette, excluding matters
that have no bearing on AaArican merchants; also a digest
of matters of interest to American merchants in connection
with moratorium on time drafts in Great Britain and Ireland.
I also enclose the official publications from which this
condensation mentioned above is taken, which, however, is
my file copy, and which I would like to have returned
after you have finished 1:7ith it.

5

Y-4/o:s very

-,

t71)

(EUGLOSURES)

C

CONDEMATION OF THE ENGLISH MORATORIUM AS
fET FCATH IN CLIPPINCIS FROM THE OFFICIAL GAZETTE
SHOWING ONLY MATTERS lEF-ECTING AMERICAN MERCHANTS

V

IN RESPECT TO DRAFTS.
AUGUST 4, 1914 - PROCLAMATION
EREAS

it is expedient that payment of certain bills of

Exchange should be postponed.
We do hereby proclaim:

If on the presentation for payment of

a bill of exchange other than a cheque or bill on demand, which
has been accepted before the beginning of the fourth day of
August the acceptor re-accepts the bill, that bill shall, be
deemed to be due

nd.be payable on a date one calendar month

after the date of its original maturity, and to be a bill for
the original amount thereof increased by the amount of interest
thereon calculated from the date of re-acceptance to the new
date of payment at the Bank of England rate current on the date
of the re-acceptance of the Bill.
THE 6th DAY OF AUGUST 1914.

In addition to the provision already made by Our Proclamation,
second August relating to postponement of payment of certain bills
of exchange.

We do hereby ,roclaim:

Save as hereinafter provided all payments

due before Fourth September in respect of

a cheque or bill on demand

drawn before the Fourth August, or in respect of any negotiable
instrument dated before that time or in respect of any contr_ct
made before that time, shall be due one calendar month after payment
originally became duelor on the Fourth September whichever is the
later date, payments so postponed shall if not otherwise carrying
interestland if specific demand is made for payment and payment is
refused, carry interest until payment as from the Fourth August,



if due, before that day, and as from the date on which they become
.4.e

if on or after that day, at the Bank rate current on the

Seventh August.

THIS PROCLAMATION SHALL NOT APPLY TO:

(5) any payment in respect of any debt from any Person resident
outside the British Islands,
1st SEPTEHBER 1914,

PROOLAMATIO N.
WHEREAS,

We have issued Proclamation in relation to the

postponement of payments.

ATEREAS, it is desirable in the best interests of Our Realm
at the present juncture that all persons who can discharge their
liabilities should do so without delay, but it is at the same
said

time for certain purposes expedient that Our/Proclamations should
be varied.
WE DO HEREBY PROCLAIM:

Our Proclamation, second August, shall have effect as if
the period of two calendar months were substituted therein for
the period of one calendar month, and the sum mentioned in any
form of re-acceptance thereunder shall be deemed to be varied
accordingly without the necessity of further re-acceptance,
Out said Proclamation, shall have effect as if the fourth
day of October were substituted therein for the fourth day of
September therein whereverthat date occurs, and as if two calendar
months were substituted therein for one calendar month,
FROM:

Supplement, LONDON GAZETTE,
Sent.1,1914
Published by authority.




DIGEST OF MATTERS OF INTEREST TO AMERICAN
--IRCHAUTS IN CONNECTION WITH MORATORIUM
T

TI T1E DRAFTS IN GREAT BRITAIN & IRELAND.

OCLAMATION AUGUST 4, 1914 says that:

drafts payable at 1 day after sight, 30-60, 90-120 days
or any other period after sight if they have been accepted
before August 4,1914, need not be paid when due, but when
due may be re-accepted payable one month later, plus a
months interest at the Bank of England
interest on the day of re-acceptance.

minimum rate of
This rate was 5,,

for most of the month of August.
PROCLAMATION AUGUST 6

1914:

Excepting eleven

classes of payment specially mentioned extends the
Moratorium in a measure to cheoues or drafts on demand
or contracts made before August 4.

and was not extended

Proclamations do

This exrired Sept.4th,

It specifically says that the

not apply to debts owing by any person

outside the British Islands.

PROCLAMATION SEPT. 1st( insists that all persons
o can discharge their debts should do so and extendsthe
Proclamation of August 21,0only,another month,







Fa 0

C., A LEy -F-E_
TUESDAY, 4 AUGUST, 1914.

Lc)tJ

E

NI

BY THE KING.

A PROCLAMATION
FOR POSTPONING THE PAYMENT OF CERTAIN BILLS OF EXCHANGE.

GEORGE R.I.

in view of the critical situation in Europe and the financial difficulties

WHEREAS thereby it is expedient that the payment of certa,in_bills of exchange
caused
should be postponed as appears in this Proclamation

Now, THEREFORE, WE have thought fit, by and with the advice of Our Privy Council,

to issue this Our Royal Proclamation, and We do hereby proclaim, direct, and ordain as

follows :

vi#599-tAion,for payment of a bill of eAeudge4pther than a cheque or hill
If 04k
on demand; winch has been accepted before the beginning of the fourth day of August,
nineteen hiindred and fourteen, the acceptor re-acceAs tie bill by a cleflprAtion on the face
of the bill in the form set out hereunder, that bill shall, for all purposes, including the
liability of any drawer or indorser or any other party thereto, be deemed to be due and be
payable on a date one calendar month aka the date of its original maturity instead of on
the date of its original maturity, and to be a bill for the original amount thereof increve4,
I
I
I
he amount of interest thereon calculated from the date of re-ac 'I
0

I

4te o payment at the Bank o England rate current on the date o the re-aeceptatkce
of the Bill.

Form of Re-Acceptance.
Re-accepted under Proclamation for £

(insert increased sum).

Signature
Date,

Given at Our Court at Buckingham Palace, this second day of August, in the year
of our Lord one thousand nine hundred and fourteen, and in the Fifth year ot
Our Reign.

GOD SAVE THE KING.




THE LONDON GAZETTE, 7 AUGUST, 1914.

6190

At the Court at Buckingham Palace,
The 6th day of August, 1914.
BY THE KING.
A PROCLAMATION
FOR EXTENDING THE POSTPONEMENT OF PAYMENTS ALLOWED TO BE MADE BY THE
PROCLAMATION OF THE 2ND AUGUST, 1914, TO CERTAIN OTHER PAYMENTS.
..

i VZ

A
v,.
,

'

GEORGE R.I.
HEREAS under the Postponement of Payments Act, 1914, His Majesty has power by
Proclamation to authorize the postponement of the payment of any bill of exchange
or of any negotiable instrument or of any other payment in pursuance of any contract to

,

W

such extent for such time and subject to such conditions or other provisions as may be
specified in the Proclamation :

1

And whereas it is expedient that provision should be made for the purpose of such
postponement of payment in additio to the provision alread made b Our Proc . II , I I f
dated the second day o
ugplt, nineteen a un re and fourteen, relating to the
postponement of a ment of certain bills of exchan!e.
Now, THEREFORE, We have thought fit, by and with the advice of Our Privy Council,
to issue this Our Royal Proclamation, and We do hereby proclaim, direct, and ordain as

follows :

Save as hereinafter prod,d,jLpayments which have become due and payable before
the date of this Proclama ion, or which will become due and payable on any day before
the beginning of the Fourth day of September, nineteen hundred and fourteen, in respect
a any bill of exchange (being a cheque or bill on demand) which was drawn before the
beginning of the Fourth day of August, nineteen hundred and fourteen, or in respect of

anegotiable

i.(not being a bill of exchange) dated before that time, or in

respect of any contract made before that time, shall be deemed to be due and payable
I
; I due
on a day one calendar mont4 after the day on which the p ment ori

and payable, or on the Fourth day of September, nineteen hun red and fourteen,
whichever is the later date, instead of on the day on which the payment originally
became due ; but a II ents so sost oned hal if not otherwise carr in interest, and
payment and payment is r i e , carry interest until
if s ecific
is. .d is made

nt as from the Fourth day of August, nineteen hundred and fourteen, if they become
- sae
ue and
payable if they become due and paya e n or after t t day at the Bank of England rate
curre,ut on the Seventh day ,of August, nineteen hundred and fourteen ; but nothing in
this Proclamation shall prevent payments being made before the expiration of the month
for which they are so postponed.

ue and payable before that du, nd as from the ate os which the

his proclamation shall not applLt,o_;=
any payment in respect of wages or salary ;

any payment in respect of a liability which when incurred did not exceed
five pounds in amount ;
any payment in respect of rates or taxes
any payment in respect of maritime freight ;
II t n
(5) an s t t I
serson resident outside the
an dA
pritis h. Islands, or from any firm, company or institution whose prmcipa
place of business is outside the British Islands, not being a debt incurred in

I'

II

the British Islands by a person, firm, company or institution having a
business establishment or branch business establishment in the British
Islands.

I




Wert:

THE LONDON GAZETTE, 7 AUGUST, 1914.

6191

(6) any payment in respect of any dividend or interest payable in respect of
any stocks, funds, or securities (other than real or heritable securities) in

which trustees are, under Section One of the Trustee Act, 1893, or any other
Act for the time being in force, authorized to invest;
(7) any liability of a bank of issue in respect of bank notes issued by that bank ;

any payment to be made by or on behalf of His Majesty

or

any

Government Department, including the payment of old ago pensions ;

any payment to be made by any person or society in pursuance of the
National Insurance Act, 1911, or any Act amending that Act (whether in the
nature of contributions, benefits, or otherwise);

any payment under the Workmen's Compensation Act, 1906, or any Act
amending the same ;

any payment in respect of the withdrawal of a deposit by a depositor in a
trustee savings bank ;

Nothing, in this Proclamation shall affect any bills of exchange to which Our
Proclamation dated the Second day of August, nineteen hundred and fourteen, relating
to the postponement of payment of certain bills of exchange applies.

--

Given at Our Court at Buckingham Palace, this Sixth day of August, in the year
of our Lord, one thousand nine hundred and fourteen, and in the Fifth year of
Our Reign.

GOD SAVE THE KING.




TUESDAY, 1 SEPTEMBER, 1914.
By THE KING.

A PROCLAMATION
ARYING the Proclamations in respect of
'
the Postponement of Payments, dated

respectively the second day of August, the
sixth day of August, and the twelfth day of
August, nineteen hundred and fourteen.
GEORGE R.I.

WHEREAS under the Postponement of

Payments Act, 1914, We have power, by Proclamation, to authorize the postponement of
the payment of any bill of exchange, or of any
negotiable instrument, or any other payment
in pursuance of any contract, to such extent,
and for such time, and subject to such conditions or other provisions as may be specified in
the Proclamation :
AND WHEREAS in' pursuance of that power,

We have issued Proclamations in relation to
postponenent of payinents due before We
were in a state of war or due in respect. of con-

tracts made before that time, dated the sixth
day of August, and the twelfth day of August,
nineteen hundred and fourteen ; and on the
second day of August, nineteen hundred and

fourteen, We also issued a Proclamation
which is confirmed by the said Postponement
of Payments Act, 1914, and is deemed to have
been issued under that Act:
AND WHEREAS, under the said Act, We have
power to vary, extend or revoke, any Proclamation under that Act by a subsequent Proclamation :

AND WHEREAS it is desirable in the best
interests of Our Realm at the present juncture
that all ersons w1.2.:)._Ii_c_licl_g_iar.te liatheir
bilities should do so without delay, but it is at
the same time for certain purposes expedien
that Our said Proclamations should be varied.
as hereinafter appears:
Now, THEREFORE, We have thought fit, by
and with the advice of Our Privy .Council, tcr

issue this Our Royal Proclamation, and We
do hereby proclaim, direct, and ordain as

follows:

1. Oar said Proclamation, dated the second
day of,,A.ugust, nineteen hundred and fourteen,
shall have effect as if the seriod of two calendar
months were substituted therein for the period
of one calendar month,; nd t
mentioned

in any form of re-acceptance thereunder shal

be deemed to be varied accordingly without the
necessity of further re-acceptance.

Our said Proclamation, dated the sixth

day of August, nineteen hundred and fourteen,
as extended by Our said Proclamation, dated

the twelfth day of August, nineteen hundred
and fourteen, shall have effect as if the fourth
daAr of October were substituted therein for_Ilm.
rtiurth day of September therein wherever that
date occurs, and as if two calendar months were

substituted therein for one calendar month.
Nothing in this Proclamation shall affect
the payment of interest under the Proclamations extended thereby, or prevent payments
being made before the expiration of the period
for which they are postponed.

Given at Our Court at Buckingham
Palace, this first day of September,
in the year of our Lord one thousand

nine hundred and fourteen, and in
the Fifth year of Our Reign.
GOD SAVE THE KING.

,tt4,11

Artmela Arca=
.54 16.11

r.ti-e,et

Nrkr fork

September 16, 1914.

..RSONIL L:




2. Benj. Strong, Jr.,
16 Wall St., Lew York City.
Dear Ben:

Referring to my letter of the 14th and yours
of the 15th, let me quote the following telegram to one
of my London partners:

"Can you state with
accuracy amount of United
extended under moratorium
of United States bills to
moratorium,"

any degree of
States bills
and percentage
the total in

and the reply reading:

"Impossible obtain recuired
information."

i take this opportunity of enclosing a copy of
the official notice of the Bank of England to e_Iscor-i-

-oved bills of exchange, etc., followed by a comment
in the London Statist on this subject,- all this in reference to our conversation at lunch the other day.
Yo l- c very tru

)1w
izecc,c....

(ErecLosuRs)

zoo..

h.LTRACT YROM TEE STATIST AUGUST 15, 1914.

"The Bank of England are prepared on the application of
the holder of any approved Bill of Exchange accepted before the
4th day of August, 1914, to discount at any time before its due

date at bank rate without recourse to such holderand upon its
maturity the Bank of England willlin order to assist the resumption of normal business operations, give the acceptor the opportunity until further notice of postponing payment.linterest being
payable in the meantime at 2 percent. over Bank rate varying.

Arrangements will be made to carry this scheme into effect so as to
preserve all existing obligations.
The Bank of England will be prepared for this purpose to
approve such bills of exchange as are customarily discounted by

them, and also good trade bills and the acceptances of such foreign
and colonial firms and bank agencies as are established in Great
Britain.
It is of course true that under the arrangement just con-

cluded by the Chancellor of the 7xchequer with the Bank of England
all bills not met at maturity can be renewed, or)rather, that pay-

ments in connections with bills for which funds have not been re-

ceived by the accepting houses from their clients can be indefinitely
.)ostponed, and that the accepting houses are thus safeguarded against

demands for payment of bills tbat cannot be collected for the amount
from foreign nations.




;paattes3
3Vall

Oyster Bay, Lone: Island, N.Y.
Noverber 8, 1914.

tx.a

New fsrk




Benjamin

StrorE4Esq.,

Governor, Federal Reserve Bank of New York,
62 Cear Street, New Yo City, N. Y.

Dear Ben:

Only the other day I rec e ived the enclosed pamphlet ,
entitled "War and the Financial System", from Captain Montagu
Nonnan, my partner, and a Director of the Bank of England.
After you have read it, d11 you send it tap Mr. Thatcher M.
Brown, at 59 Wall Street?
I send. it to you at ,onc e becaus e of it a bearing on
our recent report to the Federal Reserve Board and the

Secretary of the Treasury, and becaase it contains a running
account of the financial emergency measures taken on the
other side, shorn of their dull, legal phraseology.

What is particularly striking is the lack of cooperation on the 'art of the Joint Stock Banks with the Bank
of England during the first part of the crisis, which cores
as a surprise to me, and I think \Trill be to you. At this
distance one had supposed that the "Old Lady of Threadneedle
Street" and the Joint Stock Banks had been working in entire
It would sear)as th. ()ugh, no twiths tanding,..the die harronz,T.

jointed nature of our system, the banks in this couhtry had
co-operated much more cordiall,y than the English banks, and,




9

in bringing this about, I feel Eu.re that you are one of
the few that a re entitled to great credit.
The pamphlet is really extracted from the
Economic journal of September, which is a bulky production.
The author is a ply fes Dor of ecohomics, and an extremely
clever man, who has been recently acting as a sort of adviser
to the Government, especially on Indian Currenv questions.
Captain Norman says that he writes from an independent
standpoint, acid without prejudice.
ly
Yours v exy try,

Iktct,

)5""i7=1/!-

-e,

BROWN BROTHERS & C?,
NEW YORK, PHILADELPHIA, BOSTON,

BROWN, SHIPLEY & C?,

67

59 WALL STREET, NEW YORK

LONDON

TELEPHONE HANOVER 514 0

November 13, 1914.

Benjamin Strong, Esq.,
62 Cedar Street,
New York, N.Y.
Dear Sir:-

In the absence of Yr. James Brown, and
in accordance with his instructions, we enclose here-

with cheque for 11.78, covering Mr. Brown's share of
the expenses of your trip to Washington.
Very

(Enclosure)




rulir your




Lovember 2,, 1914.

Nov

'25

i914 2

tronE, jr., .sq.,
Benj.
Governor, Federal aeserve Banl: of .W.07: York,
62 Cedar :-,treet, Lew York, J. Y.

Dear Ur. 5trong:

I beg to acknowledge receipt of your
letter of Lovember 20th, to Mr. Brown, enclosing copy.
of letter of same date to Lion. W. G. McAdoo,

Your

letter has been forwarded to 1.Ix. Brorin, in Luroi:e.

Respectfull:,




BENJ. STRONG,
PER:SONA.L,

111

F -iora,DEF .,-.4

171914

4011`

-bduRT. E.C.

c4cA,---

c

'51

E.RVE BANK

FEDER

t

1,e(c.47

7

rz-Q

cn:

0(

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c.

2S2-c-c c

g e-




4
1111"1
,

.,

'

.

.

;

NOVEMBER

,.

.

-

-

-

1914.

STOCK EXCHANGE.
ARGENTINE RAILS BUOYANT.
Business in Stock Exchange securities con-

tinued to broaden, and the general tone remained firm.

It was reported that applicants for the larger

amounts of the War Loan would receive about

96 per cent. of the sums applied for.
The chid feature was the continued demand for
Argentine railway securities, and buyers again experienced difficulty in obtaining stock even at the
higher level of prices established.
After some discussion it was decided to quote
Canadian Pacific and certain American shares exdividend yesterday instead of on December I.
Business in mining shares was
but prices
were well maintained. Among oil shares North
quieter'
Caucasian was again prominent with a. further rise to

24s. 6d. ; last week's output shows an increase on
that of the preceding week.
In the miscellaneous group, Forestal Land, Furness
Withy, and Vickers shares improved, and Lever
Brothers " C "Preference retained its.recent advance.
Hudson'. Bay shares changed hands in small parcels
up to 61316. Brazilian Traction stock was firmer
at 5 2i.

in the following tables will be found some approxi-

mate quotations which were mentioned yesterday :
BRITISH F131003.
ENCLIUTIILS.

Caledonian
Great Cent., Oct.

par 14 pall

1War Loan ..

081s

0534-6]

I

ROME RAILWAYS.
9-10
London and N.-W.
8-9
Metropolitan
1
612-1712 Met. District

..

..
..
Great North., Defd.
Great Western
..
Do., Prat/.
Great Eastern

Paters.

SECTIRITIES.

..1
Canada 4%, 1910-901
Consols

Mhiltind Def.

t181p-012

..

Grand Trunk s
Do, 3rd Pref.

..

11312-1412
8012-2112
1712-1812
02,2-812

8-0
North British Def...
North-Eastern
112-114
lane. and York. ..
72-4
8.-Eastern Def.
28-29
L. Brighton, Def. ..
64-6
, Underground Ord_ 178-2 is
London Chatham ..
9-10
Do., income Bds.
77-9
CANADIAN AND AMERICAN SHARES.
C/tnadlan Paclfie
82-4.,
ISouthern Pacific ..
11653*

48124

10512-612

1

Do., Notes
Atchison
Union Pacift3

..

10012-7

80-90
11212-13.

9-10

2312-4

FOREIGN RAILWAY STOCK&

Antofagasta Notes par lapin. Leopoldina..

B.A. Paeltie
6210-312 Mexican Railway ..
ILA. Gt. 8th., OnL
06-8
Do., 1st Pref.
B.A. West., Ord,
06-0
Do., 2nd Pref.
Cent. Argentinc,Ord 9112-9212 San Paulo ..
Do., Notes
.. 1014-214 United p1 llov"1

26-7
26-8
92-4
66-u
189-91

-a

PID
TELEGRAPHIC ADDRESS
RITZOTEL- LONDON

BENJ.
PER3:I:1\7AL.
/1,2,

sa




7c..4--e-4-4-

)1;1

Ck

e

Def`GCA/1:"3----4-,

-

RETURN OF SIR GEORGE PAISH.
(mom oval ow N CORRESPONDENT.)

WASIUNGTON, Nov. 22.

Sir George Paish is returning to England this

week M order to consult with the British Government
and bankers about the proposals for dealing with the
international money situation put forward by
American bankers nearly three weeks ago.
While there is some disappointment that after

so much delay London is still unable to make up
its mind, it is recognized that even if the proposals
come to nothing the visit of Sir 0. Paish has been
far from fruitless. It has brought Washington, New

York, and London into closer touch than any amount
of official correspondence could have done.
(mom OIIIL CORRESPONDENT.)

OTTAWA, Nov. 21.
Mr. White, the Finance Minister, left for New York

to-day to meet Sir G. Patch to discuss financial
problems affecting Canada and Great Britain.
12

TRAFFIC REuEiPTS.




a
Ci

WESTE4JaNi UNION

Form 2589 K

WESTERN UNION

TER

DAY

..RGE W. E. ATKINS, VICE-PRESIDENT

NEWCOMB CARLTON, PRESIDENT

iiRECEIVED COLLECT COLLECT BLUE
22 Ny x 44

T

BELVIDERE B.ROOKS, VICE-PRESIDENT

3EX

LONDON DEC 5 VIA GREEHwICH CT ofiC 6,14
BENJAMIN STRONO

903 PARK AVE
DAVISON TRYING GET ME CHANGE

!II, HAVE NO OBJECTIONS BUT

0T

HIS STATUS DOES HE REPRESENT
-AANGEO REPLY FULLY ANu
ITZ
JAMES



BROWN

IF

NY

CREDIT SCHEME TO CASH SCHEME

FATHOM HIS INVENT WHAT IS
STRONG ,fiGGIN VIEWS HAVE THEY
IMPORTANT

CHANGE

SITUATION REPLY

UNION .

314
DI!ZECT UNITED STATE

ANGLO-AMERICAN
,thb

J. 61 0

RAM /

CABL

pERSONAL*

NEWCOMBARLTON, PRESIDENT

GEORGE W. E. ATKINS, VICE-PRESIDEW d<

BELVIDERE BROOKS, VICE-PRESIDENT

(7)
tte,L

Received at 16 BROAD STREET, NEW YORK44z.
CN

X

NS-.17/8

LONDON
CLT

69

FST 39

GOVERNOR

STRONG

FEDERAL BANK
NYK

YOURS RECEIVED GLAD OF HIS FIRMS ASSISTANCE GATHERED TODAY SCHEME

WAS RESULT OF TALK WITH
A '7EK SO SHALL

COMMITTEES
7ITH

"r

ENGLISHMEN dN OCEAN LATTERS

SEE HIM REFORE IVY RETURN BUT

POSITION IS CLEAR TO FINANCIAL AUTHORITIES AGREED

DAVISON THAT NO CHANGE BE MADE AND ANY RESULT OF HIS

CONFERENCES SHALL BE CABLED TO COMMITTEE FOR




BOSS AWAY

JAMES BROWN

APPROVAL




0
FEOL=8/-14

OF

YORI(

Nekli
IiieSeRt/69/1411(

4° 41I
.9

04
lirf:
-4

jlante.6 Amtvnt
5,3 lama 01.4

February 15, 1915.

Pre iv Vorit




Peei/4/4
17

,

z'49/6-

Dear Ben:

Will you have someone hand the
bearer

three cores of your recent ruling

with regard to

Acceptances?
Yours very trul

Benjamin Strong, Jr., Esq.

zi antes ATAIrtint
a1

XeeL

Plett, fark




February 18, 1915.

FILING DEPT.
F1S 2 0 1915
FEDERA IESERVE BANK

Miss V. C. McLaren,
Secretary to Benj.Strong, Jr.,Esq.,
62 Cedar Street, New York,
Y.

r.

Dear Madam:

//

Ar. James Br017

wishes to thank Mr. Strong

for the three copies/Of Regulation No. 5, in re bankers' acceptances,/received with your letter of the
17th inst.

///

Yours truly,

Eave you yet returned to Mr.Brown
the pamphlet "War and Finance"? See
your letter of December 14th.

( C )

-A40°

antes AhxtttrIt
5,4 /1/.11 *Irt.et

At Ottawa, Ont.,

WrIty kftwit.

/2.
March02
1915.

PERSONAL.




Dear Ben:

I am reminded, on looking over the Bank
of England's statement in the Ottawa paper this

morning that up to the time I left New York, on
Tuesday, you had not returned my Bank of England
historic statement.

The comparisons are now getting

interesting, and I hope that you will have completed
your own copy, and be able to return it to me the
first part of the week.

I shall be in New York

again on Monday morning.

I an out here for some fresh air and a
change in scene.

There certainly is lots of fresh

air, and plenty of scene.

Hockey, sking, and sundry

other sports are the work I am doing.

I shall be a

new man by the time I return.

JIifI
fittd."

d
.

Benj. Strong, ffr., Esq.

.414

161j4
#1-44-'14

stittrk,
ae iWzat
Ngt.




May 5, 1915.

Gr--A

Dear Ben:
The

enclosed clipping

Sun of this morning.

is from the New York

I am wondering what my firm

has done to be excluded from a meeting of this kind
when three other

international

firms were represented.

Yours very truly,

Benj. Strong, Jr., Esq.,
62 Cedar Street, New York City.

,antela

3 ,9-111-11
.Alrvp.tit
NOW V70At

May 5, 1915.

-1,t,r1-v2.r




Dear Ben:

The enclosed clipping is from the New York
Sun of this morning.

I am wondering what my firm

has done to be excluded from a meeting of this kind
when three other international firms were represented.
Yours very truly,

Benj. Strong, Jr., Esq.,
62 Cedar Street, New York City.




NEW YORK MORNING SUN, WEDNESDAY, MAY

BANKERS CONFER ON

STOCK HELD ABROAD

Study Figures Presented at
Meeting Held at Reserve
Bank.
Leading bankers and railroad men

conferred yesterday at the Federal Reserve Bank concerning the amount of
American securities held abroad. They
were invited to the conference by Benjamin Strong, Jr., of khe Reserve Bank.
Among those who attended were
Frank A. Vanderlip, president of the
National City Bank ; Frederick Strauss
of J. & W. Seligman & Co.; Jacob H.
Schiff of Kuhn. Loeb & Co.; L. F. Loree,
president of the Delaware and Hudson
Railroad; Frank Trumbull, president of
the Chesapeake and Ohio; E. L. Mar-

ston of Blair & Co.; F. I. Kent, vicepresident of the Bankers Trust Company, and T. WLamont of J. P. Morgan & Co.
When bankers began an inquiry last
fall regarding the indebtedness of the
United States to Europe 4t that time, so
as to take measures to relieve the exchange situation, it was also decided to
find out the amount of American securities held abroad.
The meeting yesterday considered

some figures that had been prepared.

These were not considered as final. The
figures had been prepared from direct
inquiry among financial institutions
abroad. It is therefore thought that

when published they will provide the
first authoritative statement of this
question, which is of extreme interest
to the financial community. None of
those at the conference yesterday would
discuss the figures.
Those in charge of the conference denied that it had any special significance.
,.oming at this time. It was also denied

,t it was connected with the arrangement of a large British credit which Is
expected here.

5,1915.

ante.z igrviun
54330.117MM''''

December 11, 191F.

Nein Vork




I
i

/

f

13enjamin Strong, Esq.,

Governor, Federal Reserve Bank h" New York,
New York, N. Y.

/

Dear Ben:

/
your letter of

1 am in receipt

December 10th, and am writ ng to Mr. Montagu
Norman today,

enclosiYg
(C.

copy of your let-

ter, and asking him to1repare the memorandum
suggested.

Yours very t
>ate-fr-cc




FEDERAL

19152
npe IS

RtIERVEifillilf
OFIIEW YORR

11DM

r)
i./ [1:

r
;..

nes Alreinn

January 21, 1916.

a,3

Nein' Vorit




44,
Dear Ben:

Aor

111,9

I enclose two letters of introduction,
which I sincerely trust you will present.
I am dropping a personal line to NI'.

James Leigh Wood, who I hope you will find at the
office when you call.

You will find him a

most attractive and lovable fellow, and a man of
great ability, although not originally trained
in the commercial end of our business, and there-

fore not as competent to give you information on
discount and acceptance matters as Montagu C. Norman.

Wood, however, is perhaps closer in touch with
general market conditions in London than Norman,
and talks with him will give you an opportunity to
look at the other side of the picture.

Denjamin Strong, Jr., Esq.,
62 Cedar Street,
New York, N. Y.

arrte Onstun
5e Ma Ozreet

February 26, 1916.

Xottx Vlorit




Dear Ban:

Just a line to let you know that there is now
no chance of my crossing the water while you are on the
other side.

In one way I an relieved that it is not

necessary, and, on the other hand, I regret the opportunity that I will lose of being there with you, and exchanging views on the spot.

I know you are having

an interesting time, and I sncerely hope that you are
getting some rest and recreation.

As the Englishman

says, I am, as usual, "going strong", and while the nego-

tiations of which I spoke to you are still in the preliminary
stage, they are moving to my satisfaction.
Sincerely yol
ck

Benj. Strong, Jr., Esq.,
C;(o Messrs. Morgan, Grenfell & Co.,
London, England.

Mr.

J. H. Tritton.

(Barclay

Company Ltd., London,England)

Ti

In the 'Journal" the figures of the Imperial
Gold Coin held by bankers, including the Bank of
England, on the last week-day in June have been
published from 1907 to 1913.
For Tuesday, June 30th, 1914, the Chancellor
of the Excheouer has been good enough to supply me
7:ith the detailed figures, and also for Wednesday,
June, 30th, 1915, as follows:
*

1914
1915

£82,794,963
110,188,109

In giving this information to the House of
Commons on December 6th last in round figures he
added that the Deputy Master of the Mint estimated
an additional £75,000,000 to be.in circulation on
June 30th, last year.
Thfe marked increase in this
country's gold in the banks frdm £33,000,000 in 1907
to £110,000,000 in 1915 is particularly gratifying
to one who has consistently advocated the necessity
of larger gold reserves.
The increase to which Mr. Tritton refers is so
striking that we append the figures since 1907, when
the return was first made:
Year
1907
1908
1909
1910
1911
1912
1913
1914
1915

Day of Week
'Saturday
Tuesday
Wednesday
Thursday
Friday
Saturday
Monday
Tuesday
7ednesday

Amount
i',33,296,802

50,369,167
49,221,974
44,214,173
54,009,977
60,640,681
69,524,127
82,794,963
110,188,109

These figures are exclusive of gold bullion
and foreign gold coin.

_Liie above copied from "Journal oi the Institute of Bankers, February
1916 issue, part II vol. =VII




WxtL

cfreet

torit

oc us t Valley, L.I., Aug? 4,

1916

Dear Ben:

I was reminded very strongly of you the other day
when I called at the Federal Reserve Bank of New York to
discuss a new proposition, and while Mr. Trenaine (I think
that is his name), the Acting Governor, Mr. Curtis and
Mr. Kinsel were very cordial and evidently anxious to fa-

oinate new acceptance business as far as they could, I
missed your perception and ready comprehension, and the approval which was accorded to my suggestions, while cordial,
was not as satisfactory to me personally as yours would have

been, because I had a feeling that perhaps the gentlemen I
was talking to might not have understood the proposition
thoroughly.

Mr. Tremaine and I have had several talks together
I like him. He is frank, and does not etend
since then.
to understand the intricacies of the acceptance business;
nevertheless, his judgment is exceedingly good.
reminder of you is almost a month old, but
'although I intended every Sunday since then to drop you a
line my mind has been so fully occupied that I could not
Today being the fourth of August, and the Anniversary
do so.
\This

kr\r,

of the day on Ahich England declared war on Germany, I am
again reminded of you and the important part that you began

on the first of August and continued to take with unquestioned



-2-

credit to yourself from that day until you were obliged to
leave New York for your health.

Trenaine read me extracts from a letter from
you, which interested me greatly, and. showed me the photographs of your cottage not far from the hotel in the National
Park in the Rockies of Colorado.
I am no t going to talk
business to you, because the surroundings that I saw in the
photographs do not lerx1 to it, and were I in your place for
a month or so of sojourn in such a locality I would hate any
man who suggested a thought that made my mind /*avert to active

business when I had been training it to occupy itself with
trivial things.
Even here, when I match two or three
days off at my home on Long Island., with my mind made up to

think of anything except business, I am cross when the telephone rings and someone insists upon my bringing my mind, back
to business.
It does no harm to reminisce, however, and

I am sure you must have enjoyed. the retrospect since you left
the active world and have had time to look back on the things
you have successfully accomplished. within the last two years.
ed
I think I hear you say that more then half you wish/to do has
been le ft undo ne.
That is undoubtedly true, but I have a
firm conviction that it was only the lack of time and physical
strength and the orrosition of ignoP°Rhich prevented your
accomplishing all you wished
the tremendous task that
you set yourself to accomplish.
I dozitt suppose your back allows you to play golf,
although I imagine that even in the National Park, many

thousand feet above the sea, there is a golf course.



I

-3-

managed to get ma game for the last two Sunday mornings,
and while I enjoyed the excercise and took more of it than
I would have had I played the game to my satisfaction, I
can't say that I enjoyed the golf.

Yesterday and today

I played eighteen holes each morning, and began to get my
eye in some times and my hand in at other times, but never,
it seetnd to me, both at

the

same time.

I hope to acciplish wonders.

Such is

Tomorrow and. Sunday

hope,

without which

we would have abandonel all athletic games a long time ago.

My excuse for taking a few days off is the successful closing and flotation of the 3100,000,000 French loan,

which Morgans and ourselves have been negotiating for the last
seven months.

looking back on the negotiations, Morgan and

I agreed the other day that we world have saved ourselves
much

trouble

and many di Moult 3.s if, as early as last Feb-

ruary, we had insisted upon the French Government recalling
their then representatives in this country and substituting
men of character.

an

I never in my life have dealth with such

impossible couple, and,

looking back on the final nego-

tiations, I am somewhat surprised that we did not fall into
some of The traps laid by them to trip us up and improve
their political situatiln at our expense.

It is said that

the laborer is worthy of his hire, but in this case the hire
was no adequate compensation for the annoyances, and even
insults,which were almo,st daily occurrences during the last

two months of the negotiation.

Confidentially, our sub-

scriptions in the first twenty-four hours were 4>72,000,000
and
for the $94,500,000 V although we telegraphed notices all over



-4--

the country and closed the subscription the next day at noon,
the total subscript ions were over 33.15,000,oco without any
subscription from Morgans and ourselves.
What pleased me
more than anything else was the result of my trip to Chicago.
and St. Louis.
The Illinois Trust & Savings, Continental,
Commercial, First Securities Co.
all came inhandsomely.
The only one persisting in his antagonism to foreign loans was old Forgan, who declined, with

a statement that his institution did. not make speculative investments.

You will be interested t6 know that the old Bank
of France credit begins to mature on the fifth of September,
and that I have received authority to draw to meet the acceptances as they mature.
You; will be still, more interested,
however, to know that we are discus sing with the Bank of
France the tens of a new commercial export credit for
$25,000,000, which I hope to be able to close within the
next two or three weeks.
Morgan, Lazard Freres and
ourselves have also issued a credit for $5,000,000 to the
Chemin du fer d'Orleans, and the best news of all is that
several revolving credits, running for a year, have been
opened, drafts being drawn by American drawers at ninety
with no renewals
days sight,/with dooumeetts attached, on French merchants
under the authority of French banks.
While I ern not connected with it, I understand that a large syndicate credit
Is being negotiated to finance Egyptian cotton with dollar
acceptances for account of London banks, and I am Informed.

that Sir Edward Holden has finally capitulated, and is now



-5advocating the relief of the London money market by this

0

I can't state this as a
fact, but, if it is so, it is a noteworthy conversion to

method of financing in New York.

the American doll ar acceptance.

I said I was not going to talk business, and yet
I have.
At the same time, I am not sure that it will not
be a pleasure to you to know in a general way only vvhat has
been going on since you left New York. I don't expect you

to answer this, because I noticed that your letter to
Mr. Tremaine was in your handwriting.
If you hate the
physical labor of writing as much as I do, for Heaven's
sake don't write.
If you have anybody to dictate to, you
may be sure I would like to hear from you.
Sin erely your




A AP

-

A1E:rates -,D3rOttnt

5411P-alltrea
Pleb, torit

474

PERSONAL

December 1, 1916.

Dear Ben:

It would seem as if I meant to punish you for
letting a month pass before you answered my letter of August 4

by putting off my reply to yours of September 4 for nearly
twice the time.

It is'not so, however.

You know how busy tre world is,

and I must confess that since the first United Kingdom short
loan was floated, i have deliberately left undone what did not

have to be done and kept my Secretary away from the farm on my
days off, so that I would be force. to play golf, instead of talking him to death.

As a result, I am, as our English cousins say,

"awfully fit" and ready for four or five months

of

beastly, yet

attractive, Bew York.

This is Thanksgiving Day and you can thank a perfect
deluge of rain for keeping me in my log cabin and making me scribble this to you.

I will save you from having to decipher my scrawls

by having it typed tomorrow.
I miss you very much, Ben.

There are so many things to

be talked over, and to be kept straight or to be straightened out.
I sometimes wish I was a director or advisor or whatever they are

called of the Federal Reserve Bank of New York, so that
exert my influence to prevent errors rather than
made, have to do double work to correct them.




,

.1.

could

after they are

I have only felt

71r,

Ben Strong, Jr., p.2
December 1, 1916
the need of this since your absence.

Jack Morgan knows and should

have helped, but what, with yachting and his own business, I generally find i know whats up before he does, and now, of course; he
is abroad and out of reach.

I know
done well.,

you will be glad to hear that Treman has really

he has filled the place far better than a 14ew york

man, with equal capacity, could have done.
side and created no jealousies.

He came from tne out-

he is diplomatic and very tnought-

HIS reasoning is sound, and, while he may not have nad much

ful.

experience in foreign transactions, he must have had a broad busi-- >c,
ness training, and his common sense stands him in good stead.

v;hen/

he has studied a question, he forms a decided opinion of his own,
surprisingly broad,it has seemed to me,

who can have had but limited opportunities.
than either Curtis or Jay.

a man from upstate

for

he is a far better banker

Incidentally, you must have left a very

good character for me because his deference to my opinion is positively embarrassing.

Y

I had a long talk with Mr. Treman on Tuesday about the
Federal Reserve Board's latest "mistake".

When 1 first read their

published notice, i could not believe my eyes.

I could only think

of a man fighting drunk, who hits out in all directions regardless
of

consequences.

If tney found it necessary to correct the methods

of your old Company and to admonish tne banks against too heavy in-

vestments in any class of security, there were proper ways of doing
it quietly without upsetting the whole situation,

if they were

afraid of English and French Treasury bills, a word to the twelve



Ben Strong, Ar., p.3
December 1, 1916

O
governors tnat could be passed along to the member banks would.
have been sufficient.

In fact, the Comptroller of tne currency

was the proper person to have suggested, through the bank examiners, that lines of foreign holdings should be reduced.

In-

cidentally, I did not know until Lednesday tnat h.P.D.is visit

to Washington was to put the Treasury Bill question up to the
Board.

If he had asked my advice, I would have done everything

to dissuade him from such a course.

what he deserved, and I told him so.

He invited disaster and got

he said he had been strongly

advised in the best quarters to follow that coarse.
say who the advisors were.

he did not

They wre poor that is sure.

They are

responsible for everybody's being hit, including 4. L. & Co.'s
municipal loans, for which my guess is that the underwriters are
the only subscribers.

Thank our lucky star we have practically

commitments out, and our participation in

4.

L.

Co.'s loans was on-

ly c250,000., so you see I am not crying because I am hurt, but
because or the otner fellow and for the future.
One more stab at the Federal deserve Board, and i have
finished.

By

what earthly right was it constituted the guardian

of the investor?

As to acceptances and a real discount market,

the work of nearly two years has been undone at one fell svoop.
You may not agree with me entirely.
we would talk it out.

If you were here,

I appreciate you may not wish to do so in

black and white, so i am going to write you a separate letter re



no

Ben Strong, Jr., p.4
December 1, 1916

acceptances and the discount market that will be less inciaherent,

and that you will be able to reply to.

hOW that i think of it

I seem to have illustrated my own simile in this letter for you

might well think 1 am fignting drunk and hitting out at everybody and everything.

1 tnink you can read between the lines,

however, better than most men.

Is there no prospect of your return to the land of the
living within a reasonable time? Do give me some encouragement.




Very truly yourai_

cilantro

LlX)X,It

59 Walt ".treet.
Nt.tu V.ottt

December 1, 1216.

PERSONAL




Dear Ben:

Your letter of November 7th was very
welcome for itself, and particularly so because
of the subject.

I found it easy to read between the
lines, and, for the present, have made such arrangements as will obviate any embarrassment should
our line at the Federal Reserve Bank of New York

There will always be several bidders

be full.

at the Federal Reserve Bank's regular rate prepared
to take up any excess.

I had been watching

the quotations, prepared to take the necessary
step when it became necessary, but your letter
made me move in anticipation of the necessity.

I

think this was wise and I appreciate your writing.
Now as to your suggestion for a more
radical cure.

You know how loath I was to

change the old custom and depart from an experience
of a hundred years, which had stood many tests.

To

make a statement to you and yours was one thing,

doing so in eleven other centers to twice as many
other men is quite another.

Boston and

Philadelphia might not be as difficult, but I judge

C4aattrz

talon

utLfrtreet
Xetr,

December 1, 1216.

PERSONAL




Dear Ben:

Your letter of November 7th was very
welcome for itself, and particularly so because
of the subject.

I found it easy to read between the
lines, and, for the present, have made such arrangements as will obviate any embarrassment should
our line at the Federal Reserve Bank of New York

There will always be several bidders

be full.

at the Federal Reserve Bank's regular rate prepared
to take up any excess.

the quotations, prepared to take the necessary
step when it became necessary, but your letter
made me move in anticipation of the necessity.
think this was wise and I appreciate your writing.
Now as to your suggestion for a more
radical cure.

You know how loath I was to

change the old custom and depart from an experience
of a hundred years, which had stood many tests.

To

make a statement to you and yours was one thing,

doing so in eleven other centers to twice as many
other men is quite another.

Boston and

Philadelphia might not be as difficult, but I judge




12-1-1916.

-2-

B.S.

from your letter that these alone, while they would
help, would not really meet the whole difficulty, and
that for real results I would have to go farther from
home.

The real trouble is that the Federal Reserve Bank of New York, in its pardonable zeal to
stamp the acceptance business with its approval, has
consistently outbid the market instead of protecting
the market, but I won't go into that now.
Very truly

y.0

Ahh,

',ITAND72p.
,

Benj. Strong, Esq.,
4100 Montview Boulevard,
Denver, Colorado.

(blames

:18 ram

December 1, 1916.

5e Null 5txet
Nvto Vork




40( AA,
1916

Dear Ben:

You will recall that at the dinner of the
New York branch of the American Bankers

three or four winters ago a

Association

speech was made by Simp-

son, of the Bank of Liverpool, on the Bank of England

and the English Discount Market; by Boison, of the
Credit Lyonnais, on the Bank of France and the French
Discount Market; and another by, I think, Dr. Kreise,
re Germany.

Incidentally, Boison is out West now

studying our situation, and I think will be attached to
the French Finance Commission later on.

Well, I am going to attempt to describe to
you, from the point

of

view of an outsider, what I think

has taken place since dollar acceptances first appeared
In this market in any quantity; why I think the policy
of the Federal Reserve Bank of New York was right at

first; where I think it has erred since; and howl think
it is possible to correct its error and take its true
position without creating distrust and spoiling the great
good it did in the beginning, so that at the first American
Bankers Association dinner after the war you will be able
to describe the successful creation of a real discount




B.S.Jr.

-2-

12-1-1916.

market in the United States.
Remember I am writing without inside knowledge,

and can only judge by what I can see in the market.

Re-

member, also, that I know you have a broad discount market
for dollar acceptances at

heart

just as sincerely as I

have, and what we both want is to build for the future to
the best of

our

ability.

When the banks in New York first began to accept
the Federal Reserve Bank of New York was a keen bidder for
bills, and went out of its way to show its
business by buying freely.

approval

of the

Call money was a drug at 2%

and under, and your minimum rate stood at 2% for a long
time.

It was wise to give the business a good start,

but I think it was unwise to keep your

bid so high for

such a long time, even after the money market drew away
from you.

The banks could not afford to buy bills in

competition with you because, to work out their reserves,
they had to average better than 2-1/2%, and so bought

commeigial paper and made stock exchange time loans, and
many of them kept their own acceptances on the theory that
they were making the guaranteed rate of discount that was
generally prevalent

instead of only the difference between

that rate and what the acceptances would sell for:

The

result was inevitable--as bills came into the market they

all went to you as practically the only and the highest
bidder.

Your portfolio got larger and larger and

finally you began to try to correct the position by lowering

12-1-1915

-3-

B.S.Jr.

0




The first change did not, I believe, bring

your bids.

results, and I doubt if your present rate of 2-1/2 - 3/4
has done so either, because in the meantime money rates

had hardened gearally, and you were still about on a parity
with call money.

as if you held

about

Finally, in November, it seemed to me

70% of the estimated outstanding ac-

ceptances in this country.

Vary naturally, as your lines are fixed by your
own capital without regard to the relative value of the
acceptance (I think I am right in this), you began to appreciate

the

embarrassment to you and to the acceptor of

being obliged to refuse to buy,, specially because you knew

there was no outsile market at anything near your rates.
Unfortunately for the very proper moves you were making to

withdraw from "the market", the two United Kingdom loans
decreased the surplus of

the New York

banks, both call and

time money shot up, and you still remained in the position
of

outbidding

the market when you did not want bills.

On

top of all this, and as far as the public is concerned

without warning, out comes the Federal Reserve Board's
elaborate notice advising against all foreign unsecured
loans, acceptances, trdasury bills, etc.

The notice

was susceptible of any interpretation that anyone wanted
to read into it.

The picture I have drawn may not be strictly
accurate as to rates and dates, but I think it is near
enough to the truth to provide a setting for my moral.




-4-

B.S.Jr.

12-1-1916

What the dollar acceptance market needs now is an
anchor to windward.

This situation has been brought about,

first by your own position, and by the announcement of a new
policy of the Federal Reserve Board.
Don't change your rates.

Don't let anyone think

either here or abroad (the latter would be fatal) that a
flurry in call money disturbs you in the least.

Don't

let the public suspect that you now wish to discriminate
against bills under renewal credits that were issued with
Keep on buying whether you

your express approval.
like it or not.

If anyone is near his line get Mr.

Treman to send for

Give
him so privately

him and tell

him a chance to take any(Acess up from the Federal Reserve
Bank or arrange to have it done for his account.
I may be wrong, but I think the rise in call
money rates is sentimental and temporary.

We may, and I

expect,will, have a 3% to 4% rate until after the turn of
the year, but after that lower rates again.

time comes you can begin to correct your position, but not
until then.

Even then it must be done gradually.

In

other words you must draw away so slowly that the banks
begin to hold acceptances without realizing why they have
become attractive, and before they realize it they will
have taken the market away fromiyou, and you will be
relieved.

It may take six months to arrive at..this

result, you may succeed in three.

occurrence I think you will.

Without some unforseen

When the Federal R.B.does, it will




B.S.Jr.

12-1-1916.

in my opinion, hold the strongest position in the world,
and be prepared to exercise its true function, namely,
of keeping rates down in time of stress by relieving the
market of its acceptances for the time being.
I did not go into this fully with Mr. Treman
on Tuesday, but I advised him very strongly not to change
his rates at present.

He knows nothing of the above

suggestion for taking care bf excess lines.

I would

ntht have thought of doing so without consulting you,-first,

because that point may not have been reached yet, and,
second, because there may be other reasons that I,Qn the
outside, know nothing about that would make my plan unwise.
I leave you to falow this up, or to ask me to do so.

If

you should telegraph me to make the suggestion, I would
do so ex Ben Strong and take my own case as an illustration.
In your letter of September 4th you express the
hope that in this conspiracy against Lombard Street we
should never overlook the fact that the strongest influence
that can be applied is rate of discount, and that 2-1/2% in

New York and 5-1/2% in London is an argument that few
bankers can resist.
I agree,wirth this very pronounded qualification.

Unless the rate of discolnt in New York is a genuine open
market discount rate governed by actual money conditions,
it is no argument with either bankers or merchants.

Lombarl

Strdet is watching this keenly and keeps well informed.

In




B.S.Jr.

-6-

12-1-1911

my opinion they have so far not been worried.

They

know that the Federal Reserve Bank is and has been the

market, and I imagine have been waiting for this very
moment to see us fail in the object we have set out to
accomplish.

This is the moment of trial.

We

must meet the test even if in the end the difference in
discount rate should not be so much in our favor.
Very truly you s

Benj. Strong, Esq.,
4100 Montview Boulevard,
Denver, Colorado.

Arntrz Cinarrt
34 Wail *tx.e.ei
Ng/L.

V.k

4

ID
PERSONAL




December 10, 1916.

31:i2
-4r41;

11%,

Benj. Strong., Esq.,
4100 Montview Boulevard,
Denver, Colorado.
Dear Ben:

I received your letter of December 4th, in
answer to mine of December 1st, very promptly, and I
was glad to get it.

Since I wrote you will have

seen from the papers that the situation is changed;
the money market has eased, as I felt it would, and
Friday afternoon the Federal Reserve Bank discount
rate was raised to 3 and 3-2/8%.

I was glad that

the rate was notchanged until after the money market
eased.

I

an assure you, however, that there were

many in high places who thought the rate should have
been jumped as soon as call money became scarce, but I
advised against this, and evidently others felt as
I did.

You say that something must have disturbed
me to make me write you as I did.

You are quite

correct in this, but it was nothing of a personal
nature or in any way connected with my firm's business.
I was disturbed, and still am disturbed, about the
lack of a real, open market for acceptances, and, frankly,

your letter does not give me tee satisfactory explanations
I hioped you would give as to why such a market had not




B.S.

-2-

12-10-1916.

been encouraged by the Federal Reserve Bank.
I rangnize the difficulties of your situation,

and perhaps the best way to show where I differ with
you is to take your difficulties one by one and comment on them.

I agree that you must maintain steady rates,

but I believe that the rate maintained should be based
more nearly on the rate for commercial paper than on
the call money rate.

I agree to your second proposition.

I agree to the third also, except that I do
not believe it good policy to maintain rates which
compare favorably with those of London if in doing so
has to be
the Federal Reserve Bank im/the only buyer.
With your fourth I do not agree, and cannot
quite follow your reasoning.

It may be necessary from

a political point of view, and because the Federal
Reserve Bank is a quasi-government institution, that it
is wise to make sufficient income to cover expenses

and dividend requirements, but from a broad point of
view,if, in order to do so, the Bank takes all the
bills from the market at rates that are unrenumerative
for other buyers, it seems to me it weakens its power
to come in and relieve the market at the time of a
flurry in money.

Your fifth reason I do not follow.

It would

seem to me as if the way to tighten up, that is, to put




B.S.

-3-

12-10-1916.

on the brakes, would be to raise your rate, i.e., lower

your bid to a point where the market takes the bills
instead of their being brought to the Federal Reserve
Bank, because then banks and institutions would buy them
in preference to putting money out at the call rate, which,

under the circumstances you describe, would undoubtedly
be very low, and, as the process went on, and the banks
continued to invest in bills, the call rate and bill
rate would draw nearer together.

hand, you intended to follow this method when you spoke
of withdrawing from the market, we are in accord.

Quite

the opposite was proposed last week, namely, maintaining
the rate and ceasing to buy bills.
Your sixth I do not follow at all.

If any

antagonism from the member banks were possible, you certainly must have created it during the last two years,
for your rate has been so low that they could not afford
to do business on the same basis.

With your seventh I agree.
To sum up, my dear Ben, I want the United States

to come out of this war with a broad, real, open discount
market.

I want, in other words, that banks and trust

companies, and even individuals, should get into the habit
of investing a certain part of their funds in acceptances,
just as they now invest part of them in call money and
part in commercial paper.

I feel that to bring this




12-10-1916.

-4--

about the earning power from investment in acceptances
must, for some time, be attractive, and that brokers
must be encouraged to deal in acceptances between institutions.

I do not believe that this can be

brought about if the Federal Reserve Bank is a continual
buyer at rates that are not attractive to institutions,

and that no matter how much we may wish to have the disparity between New York and London rate's appear favorable

to this market we fail in accomplishing our purpose
unless the rate is a real, open market rate, at which
millions of dollars of acceptances can be turned over
without the aid of the Federal Reserve Bank.
My complaint is that after two years of experience
very little progress has been made in this direction, and
my wish is that the creation of a broad, outside market
should be the special object df the Federal reserve bank
for the next twelve months irrespective of profit f6r
itself, and I believe that no step can be taken which will
go further toward insuring the continuance of the dollar
acceptance after the war than the creation of an outside
market for acceptances.

As I said before, I am sure that you and I are
both working toward the same end.

You may be traveling

a different road to accomplish the purpose.
you would set out your plan and arguments.

I wish

It is quite

possible that in the end your way may be the best, and I
am open to conviction.

Very

ruly your

FEDERAL RESERVE BANK
OF NEW YORK

a.

James Brown
59 Wall St.
New York.

April 11, 1917.

PRIVATE

Pierre Jay, Esq.,
Federal Reserve Bank of New York,
New York, N. Y.
Dear Mr. Jay:

I am to-day in receipt of two letters from Mr. S. G. Archibald,

our representative and attorney in Paris, in answer to inquiries which I
made of him on your behalf, and from which I extract the following for your
information;




"You desired my opinion on the following question;
"What is the value, of tile undertaking of the Bank of
Frpnce to export gold if necessary? or rather: Can the Bank
of France legally undertake to export gold?

"The answer to this question is simple: Before the
war, the Bank of France could export gold; on the 3rd of July,
1915 the Government passed a decree prohibiting the export of
gold, but the Bank of France was especially excepted from the
operation of this decree.
Consequently, at the present moment, it is legal for the bank to export gold and the bank can
therefore legally contract to do so.
"I rather imagined that this situation was perfectly
well knownto you and that the question which you really wished
to put inc was as to the legal value of the undertaking of the
Bank of France with regard to the future, and in the event of
the prohibition to export gold being made general and the Bank
of France being included in such prohibition.
this question I can only say that the French Parliament, like
the English Parliament, can just about do anything they please;
if they choose to prohibit the export of gold and so prevent
the Bank of Frahce from fulfilling its obligations, they can do
so, just as the English Parliament could do in respect of the
Bank of England.
The practical effect of this would be to 'bankrupt
the Bank of France and ruin the credit of the country and I should
regard the possibility of any prohibition as to the export of gold
by the Bank of France, Which would affect undertakings already
entered into by the Bank, as being entirely out of the realm of
practical politics * * * *"

"I wrote you on the 20th of March giving you my opinion

.

RESERVE. SANK

NEW YORK




-2 -

as to the right of the Bank Of France to contract
to export gold.
As a matter of fact, it hardly seems
a questton on which a legal opinion could be asked,
from the moment that it is conceded that the Parliament
are not limited in any way as to the laws they make.
There is nothing which is
This is the case in France.
*ultra vires' of the French Parliament and consequently
they can do what they please.
Practically, of
everYbody is entitled to their opinion as to what they would
or would not do.
I believe they still are sane and will
continue so * *
*
*
Whi,le the above is not entirely satisfactory from a legal point

of view, and therefore may not be of sufficient value to justify the
FederalFeserve Board in basing its acts upon it, I agree with Mr.
Archibald and cannot conceive a condition under which the Trench Parliament would prevent the Bank of France from entering into contracts
already in existence.
Very truly yours,
(Signed) . James Brown.

L.

-,

,I

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j
54 1111L11 04.xtt '

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am

Pt

SEP 3

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7

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,4.0-77..,
Sept iacr 1, 1917.

'It:

WINO IMMO WIC
Dear Ben:

iraelven

llk

When I telephoned you the
other day I wanted you to lunch with me.

Now, instead, I am going to suggest that,
on either Tuesday or Wednesday morning of next week, you have your bag
packed so that after business you and
I can get into a motor and run down to
my house, dine, spend the night and return in the morning.

I am keeping bachelor's hall
at present, so no dress clothes are
necessary.

V ry truly
viei.kor,m,...ww...,Wmiali4MMar-01031,062Ntw

//-

Benj. Strong, Esq., Governor,
Federal Reserve Bank of New York
New York, N. Y.




fk

atgO

\4\1

I

a

°t\

PERSON11

°'5" December 18

1917.

Benjamin Strong, Esp,
Federal Reserve 3ank,
New York.:
Dear Ben:

I was sorry you could
not see me today.

Only because I am

so fearful that y u will get away tomorrow without

eeing me. I drop you

this line to ulge you ntit to overlook

my request fof a short interview.
matter is on




of great importance.

Very truly y

rs,

The

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