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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( I/ 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 \- antez larateam mprir. j 54 1111L11 04.xtt ' 0 .11,r am Pt SEP 3 f \--° 7 191/ ,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