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F.D. 12A.3
Cb202_.
No
Federal Reserve Bank
<17-40 G
District No. 2
Correspondence Files Division
P19 P'El? S
SUBJECT
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peesh-A,7-/y7-/a4"-S
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Op
Tames G. Strong,
Fifth District Kansas
HOUSE OF REPRESENTATIVES U. S.
WASHINGTON, D. C.
July 8, 1926.
Mr. George L. Harrison,
Federal Reserve Bank,
New York City, N. Y.
My dear Mr. Harrison:
I have yours of July 7th and appreciate very much Governor'itrong's interest
in my proposed amendment to the Federal Reserve Act.
I have received a large number of letters from bankers all over the United
States in reply to my letter of May 21st, many of which are helpful but running through
practically all the letters received from the officers of the Federal Reserve Banks
They talk of the harm
is opposing criticism that looks very much like propaganda.
that would come from having the Federal Reserve Board and System attempt to regulate
prices of individual commodities such as wheat, etc. and often present he thought
that there should be no "radical" amendment to the Federal Reserve Act, all of Which
of course is rather hard to bear this hot weather.
The further I study the question, however, and the broader my investigation
the more positive I am that it is the duty of Congress to direct the Federal Reserve
Board and System that it has set up, to use all their powers, so far as may be, to
The constitution authorizes the coinage
stabiliZe the purchasing power of the dollar.
of money and the regulation of the value thereof. Can it be said that we are doing
this when the purchasing power of the dollar decreases 50% from one decade to another?
The people are entitled to a dollar that when borrowed or loaned in one decade will
have the same value when the date for its re-payment rolls round and it seems to me
that the argument of those conducting the Federal Reserve System that they ought not
to be directed to use all their powers to such end because the people will not understand and criticize them, is very weak and I think they are going to be much more
severely criticized if they oppose, as it seems quite plain they are now doing, the
establishment of such a policy which Governor Strong and others in the System have
testified they are doing their best to carry out.
Based upon the large number of lettersreceived on the subject, I am sending
out a second letter which will reach you in a few days, carrying new phraseology of
the proposed amendments and as a result of the answers to these letters I hope to
work out amendments that will direct the perpetuation of the policy, which the Federal
heserve Board and System advise they are now endeavoring to carry out, without being
subject to the charge of approving radical legislation, and I am looking to Governor
Strong to lend me his able aid in doing so.
I am sorry that the McFadden Banking Bill failed.
I spent a large part
of my time in trying to bring about an agreement between the Conferees but the propaganda sent out by the proponents and opponents of branch banking made the same impossible.
Sincerely Yours,
(Signed) James G. Strong.
S:J
July 7, 1926.
My dear Mr. Congressman:
you may remember that on June 8 I wrote to you to say that I had forwarded
to Governor ^trong who, as you know, is in Europe, a copy of your letter of may 21
in which you ask for mavestions concerning your proposed amendment to the Federal
Reserve Act.
I have just received a letter from Governor Strong in which he has
asked ma to write to you to say thEt immediately on his return to New York be wants
to review the reoord of the testimony before the committee, and that tftor that he
would like again to talk with you informally concerning your bill and the suggestions
you have received if you oare to have him do so.
am writing this merely to /et you know thtt he has the matter still in
And and that he is anxious, as I knew he would be, to be of any help that he can
La suppleraenting his testimony before the committee, or in reviewing with Tau the
suggestions which you have outlined in
your circular letter.
I am sorry not to have seen you agrin before Congress adjourned, but I
hone thst if at any time during
the summer or
fall
you nay happen to pass through
New York you will please net fail to let us know.
ith kind personal regards, I am,
Very truly yours,
G. L. HARRISON
.aa. James G. ntrong,
.ouse of Representatives,
adhington, D.C..
...v.,
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tit-,f__14°e-k-*teil,,ttAtt,
117
Hon.
. t. ,:oore
2
Thanking you for your lettlr, I bog to remain,
-
Very truly yours,
Governor.
Hon. Ilion F. loom;
House of RoDreaoLtativos,
Yeshinc:ton, D. C.
'ashington, E. C., October 24, 1921.
-14 r'°"-In
dear Congressmen:
ao,
.
. Your favor of the 17th was delayed in reaching me on account
of my illness.
I have long believed that some well defined method of estnblishing contact between those who need workmen and those who need
employment in this country should be undertaken by the Federal Government.
The meetings 'which .1 attended in the Depertment of Commerce dur-
ing the conference on the subject of employment convinced nB that one
of the results of the conference would be a vigorous effort to bring,
about that very thing. Plane to that end, I believe, are no being
studied.
right it not be desirable to have the whole subject dealt
with at once rather than by separate procedure such as might result
from the passage of the bill vhich you were good enough to send me.
be
Of course it would/pitiable indeed whre the veterans of the
war permitted to suffer the hardships of a long period of unemployment
if any means ore possible to avoid it, but after all the same applies
to many other classes of people who nor need jobs and I should hope
that a program of organizing the unemployment service to deal with the
Whole problem could be undertaken as one whole subject rather than to
deal with the ex-eorvice men separately.
I am taking the liberty of writing Ur. Hoover to Whom you
have no doubt likewise written.
-
,
,
November S2, 1927.
My dear Congressman:
with this I be to enclose to you a note of introduction addressed to Governor Norman.
It hardly seems neces-
sary to give it, but it will afford opportunity when you roach
London for you to send it to him in advance so that he may
name a convenient hour for a visit at the bank and not be
unduly restricted as to time.
With cordial regards, believe MG,
Sincerely yours,
Honorable Louis T. McFadden,
CanLon, Pa.
PS/RAH
enc.
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Federal Reserve
Bank of St. Louis
February 21., 1922
Sydney Ondereon,
Chttinnan, Joint Copuission of Agricultural InquIry,
United .-Otatee 'ongrese,
Vaehington, D. C.
Dear ir, Chairman:
Governor Strong has aeked me to eend over several of the things
on foreieea exchange which he diecuened 'FLU. you.
First or
Go:16'qm' little eloonoic, vthich an you reeali appeared during our Civil War, and has oome intereoting illustratione of his
eubjee.t thorefror. The idea thot the actue, Ilurchosio,g rower' of the different eurrencies in their reepective countries determines the average exolono,e ooto, thr.of: in curremt2.y oscribed to ?nr. fluetov CnoEtel, won pretty
clearly sot forth by Goudeen. But, in point of fact, Goochen was himself
berrewor from the man to whom vro OlTra practimally all cur modern theory
of the relation of money, prices and exchanges, havid Ricareo. In the
little wooly
he wrote in 1o10, on "The Pr!iore of riullion," are come
illtroinating paragraphs, along about page 113 or 19, of the fOtendard Pelition
o
i.oado'e Ilarl!s, oqted by 1e,,*allooh. So there in nothing so 'very now
about the Caseel theory.
One :oerit of Gregory's little book is to set forth pretty clearly
the r!ter, that, i
linr: for belaneed budge-to and belonend trool.e, the
average writer on this subject gets the cart before the horse.
toining
I am sending you copies of the !lentilly Review of this Bank, conde,aing
ubjcet,
other charts.
tt:
I send also a very intorooting discussion by Dr. (sandier,
of the 1,:atione.1 Enal: of Commerce.
TM;
cf the aharte enclooed shows hcoo the dirf crer.t currencies, converted tt collars, ho.ve been steadily tending towards a °women
point, an they of,.culd on noun. torory. The emnond shows the rue' otions
of oterling about its average price or the last two years. You will eee
hot oven
thie fluctuation, up to the last nouth er :oo, and how n general it hos pretty well gone with the vary rouei estimate of purchasing
oaritiee 1"-:.1.c.11. one may obtain '4 !lividing the Too:tooe irClece of the tee
count ri es.
We triad several difforent indietto =r1 founii ono that*hal., run
fairly wellrith the nctual averno course of ex c.ncr. in the 7.tut tvo
years, using therefor a three or four months moving average.
MIL
aydney Anderson, Tmq.--2
The average book on foreign exchange, and there has been simply
a deluge of than lately, seems utterly to ignore the existing conditions,
where paper currencies of fluctuating value are matched aminat a gold
standard, which itself has undergone a very great fluctuation in value;
so that for all practical purposes at the present time they are nearly, if
not somewhat worse than, useless. In fact I know of few subjects on which
a greater amount of nonsense has been written.
In fact, I do not personally know of a dozen men in the country
who really have a clear understanding of the subject.
from the other side
And this likewise applies, I should think, to the type of menAwho
are likely to be delegates to the Genoa. Conference. If this country'
could send over there two or three first class minds, who have really
mastered the subject, I think it could do a groat deal of good.
Will you kindly advise me in what way I can serve you further?
th high regards,
Very sincerely yours,
70breary 28, 1922
r. ("Mennen:
At the Covernor's au figenti,on, we ere also forwarding to you
nwith the Alnliffe Committee Report, thieb onl somewhat with the
exchanges,and also a copy of its famous predecessor, the Bullion Repert
of 1810, in Pro f (;annant LI edition.
h
We i.re likewise sending Prof. Cageol's menere.nduin to the Breseelt
Conference, which deels very briefly with his view of "the purchasing
parities."
Prof. Cease1 eivee i rether uneompromieing proeentation ot' a
theory which is not his own, but which, as I noted, epos baok straight to
Rteardo. It
evidtelt that other forces, such es, for example, the
Gomm, reparation payments (111AL-the like, iv-4 very nerieuely disturb the
exchanges for a time. The work that we have clone here, port of which is
st;bodied in the ftert of sterling exahaege which we meat you the other day,
1104,30 ntrerely to ceggeet that the truth ebout the matter lies in a rather
middle grnund.
It floes '1 CY1 ae thoue)t one of the rundereents.1 factors, if not the
fundamental erel oemineting factor, wee just this question of purchasing
parity, and that the incidence of other forces, such as unbalanced trede
and the like, is only such as to produce vide fluctuations and perturbetions.
You wi.31 /Into, for example, how evenly eterline exchange ha e swung
out ite average price in the last two years.
It aeons pretty clear that the recent rise in sterling was due,
at lawn in part, to the approade of the purchasing paritiee of the two
currencies. If this be true then the queetion of whether sterling would
go back to its old-time parity would be deeetudent, In part at least, upon
the behaviour of the pri co levels of the two countries. If, for example,
as '.'rof. ()easel euegeeted, we should "inflate some" in this country end
1,/eg3.and should not, it is quite possible that the price lovele might swing
back to the old-time parity and thus make the reestablishment of the former
1.151c1 equivalent of the eound a comparatively easy matter.
But there are other conoidenitions Veida mig'et *inter very serious-
ly into this question.
Hon. Sydney Anderson--2
If there are any of these books that you would like to have for
yourself, we shall be very glad to get thorn for you if you will indicate
the carticular ones you would like.
Believe 46, ,rith very beet regards,
Very sint,erely yours,
_ykiAoy
Chairman, joint Commiesion
United tatee Congr ens ,
Worthington , D. O.
.
f Agricultural Inquiry,
Avtle
tti
SENATE MEMBERS I
IRVINE L. LENROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. McNARY, OREG.
JOSEPH T. ROBINSON, ARK.
PAT HARRISON, MISS.
HOUSE MEMBERS:
SYDNEY ANDERSON. MINN., CHAIRMAN
OG
FR.?
_. MILLS, N.Y.
. H. FUNK, ILL.
HA'
JNI W. SUMNERS, TEX.
PETER G. TEN EYCK, N.Y.
IRVING S. PAULL, SECRETARY
JOINT COMMISSION OF AGRICULTURAL INQUIRY
UNITED STATES CONGRESS
CLYDE L. KING, ECONOMIST
WASHINGTON, D. C.
February 2, 1922
ACkNOWLEDOED
FEB
Hon. Benj. Strong, Governor,
Federal Reserve Bank of New York,
15 Nassau Street,
New York, N.Y.
a
3- 1022
8.
Ty dear Governor Strong:
Your very kind letter of the 30th
ultimo is at hand, and I am delighted to know that you have
sufficiently recovered to be back at your desk.
During the recent agricultural conference, I had an opportunity to talk with a good many people
from the Vest, and quite a little indication of the situation
has drifted in from letters from all over the country.
While
there has been some improvement in the situation, from the
price point of view, the situation still has elements which
are rather alarming, both from an economic and a political
viewpoint.
While I think as a whole farmers are
trying to get along on the basis of a reduced scale of living, and to minimize their credit requirements as much as possible, there are many of them who have paper coming due which
they are "being compelled to renew at rates of interest which
it is perfectly obVious cannot be Supported on the basis of
the present crop prices.
The obvious lack of parity between
the prices of agricultural products and other commodities, has
resulted in a veritable flood of schemes for ameliorating the
situation, including all sorts of proposals for credit or currency inflation, as well as many plans looking to the valorization of some or all of the farm crops.
Some of these proposals are being put forward by people whose interest is primarily in the restoration of farm purchasing power, because
they sell things which the farmer more or less requires.
the
of these plans at least is exceedingly clever, and unfortunately
or perhaps fortunately, is apparently possible of administration, at least for a temporary period.
Governor F,trong
page 2.
I should like very much
tunity to talk with you about this plan
expecting to be in New York on February
could make it convenient to see me some
afternoon, I would be obliged.
to have an opporsome time. I am
10th, and if you
time during the
I should like to say with respect to the
last paragraph of your letter, that I am very conscious of
the fact that if there is anything in the report which is
worthy of commendation, that you are probably more responsible for it than anyone else, and I have a very keen appreciation of the exceedingly helpful attitude which you exhibited
at all times in connection with the entire matter.
Very sincerely yours,
Chairman
sA/v
ove
S,1:100-900
g11ni
tzGi.
4,forvN,
.1,
February 3, 1922.
PERSONAL
My dear Congressman:
It is a real pleasure to have such a kind letter as you wrote to inc on
February 2, and if you carry out your purpose of coming to les York, I should be
delighted to set aside all of the day you mention, February 10, or all of the
afternoon, or any part of the day.
It would also please me very much in case you. are spending the night in
Nes York, to have you stop with me at ay apartment.
I am a very small family -
You may feel that this sill afford
only my daughter, her companion, and myself.
us opportunity for a quiet discussion.
0
'Nbat you write about the conditions in the agricu'Aural sections is, and
It as some appreciation of this
has continuously been, very much in my mind.
difficulty which led inc to try to point out ho s helpless on the one hand the
farmers are; and how
equally.-
helpless on
the other hand the Federal Reserve
System is, in arranging credit facilities adequate to the situation at reasonable
It is easy to fling about reckless charges on the one hand ,
rates of interest.
of extravagance and improvidence- by
by the
bankers.
But
the farmers; and on the other band, of extortion
that is no 4ay to cure this difficulty.
In
some States,
Miseissippi being the most notable example where 91% of the banks in the State are
not members of the Federal Reserve System, the conditions of ghich I have complained,
and concerning which complaint is general and widespread, are and sill be inevitable
so long as reservoirs of credit can not be reached more readily and economically
than is possible in such a State.
Aside from the question of an adequate supply of credit at a reasonable
cost comes this all-important question of prices.
stand, or seem to be willing
to admit, that
the
So few people seem to under-
farmer is just like any other person.
Honorable Sydney
#2
In an
economical sense,
prices; as a
consumer he needs low
In other
to him.
two individuals; as
he is
costs yore of little moment
Anderson
February 3, 1922.
a producer,
he wants high
In the heyday of his prosperity,
prices.
In this day of advereity, they are vital
to him.
words, if the prices of
farm products do not go up, he must
look to salvation through reductions in all other prices, including labor.
were absolutely sound in your report
elio
when you pointed out
that human agencies can
very little to artificially correct the conditions from which the
now suffering.
farmer is
But I maintain that much can be done to render these occurrences
less likely to arise in the future; and when they do
prevent their
You
bearing so heavily upon that
rather callously describe as
arise in
the
future, to
class of producers, which some people
"dirt" farmers.
All of these things I 'would like
reiterate as strongly as I may, my
to discuss with you, and
firm belief that the way to
deal
just now to
with the
situation is not to waste our time in exchanging abuse with ignorant people sho
charge us with all
let them
talk
sorts of crime that we have not committed; but to ignore them,
themselves
devote our attention
of it.
Me here in
out and
to doing
something constructive, and
to abide
by the results
this bank are willing to devote our best energies toward help-
in:: in this matter in any way
long as it does
tire out their audience, and in the meantime to
cur help may be asked, or we may be of value, so
not involve prostituting
our banking system in any way, and es-
pecially in such a say as will result in ultimate further disaster to the very
people that we desire to help.
I am very grateful to you
expressions contained in the last
for your
paragraph.
letter,
lashington, D. C.
the kind
Please let me know about the 10th.
Yours sincerely,
Honorable Sydney Anderson,
Chairman, Joint Commission of
Agricultural Inquiry,
and especially for
HOUSE MEMBERS
SYDNEY ANDERSON, M.N., CHAIRMAN
OGDEN L. MILLS, N.Y.
FR/
-I. FUNK, ILL.
HAT.
W. SUM NERS, TEX.
PE
G. TEN EYCK, N.Y.
JOINT COMMISSION OF AGRICULTURAL INQUIRY
IRVING S. PAULL, SECRETARY
SENATE MEMBERS
IRVINE L. LENROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. McNARY, OREC.
JOSEPH T. ROBINSON, ARK.
PAT HARRISON, MISS.
UNITED STATES CONGRESS
CLYDE L. KING, ECONOMI, ,
WASHINGTON, D. C.
February -E31,1922
AC
Hon. Benjamin Strong,
Federal Reserve Bank,
New York City.
FEB
7
/n^9
W dear Governor Strong:-
I am very glad to have your favor of the 3rd
instant.
I expect to speak on the occasion of the
Convention of the rational Retail Dry Goods Association in
New York on the morning of February 10th. I should be
through there about noon or a little thereafter. If it
is convenient for you, I shall be glad to make an appointment for say, three o'clock in the afternoon, and after
that, my time will be at your disposal.
I shall be glad to conform to any arrangements
you may make.
I am obliged to leave New York for Washington
on the midnight train Friday night.
Thanking you for your letter, I am,
Very sincerely yours,
Chairman.
February 7, 1922.
My dear Congreseman:
Thank you for your note just received.
I
may decide to
attend the Convention of the National Retail Dry Goods Association,
on the 10th, ad i any event shall be ready te join you as soon as
you are free there, at three o'clock or earlier.
My suggeetion is, if ycur time permit, that a part of the
afternoon be spent in going through the more important
elements of
Nothing less mill give an adequate idea
the Federal Reserve Bank.
of the magnitude of the eetabliehment and businese cenducted.
mould aspecialli like
to knoy
to
mhether you mould care
meet say Mr. Jay and Ur. Harrison for a discussion of some of the
reblems 4e are all
interested in, and
whether you mould
to
prefer
do so in the aftarnoen or at dinner at my apartment when y3 could
spend the evening
together.
Non't you
please express your on
preference without hesitation, and I will make all arrangements
acccrdingly.
juet nemI am especially
concerned that
taken to enlarge the membership of the
drawing in a lot of
these
able to discuss at some
Federal
length.
am,
Sincerely yours,
Chairman,Joint ComMiS'sion
oi' Agricultural Inquiry,
http://fraser.stlouisfed.org/
Federal Reserve Bank of
Louis
HqSt.MM
Naehington, D. C.
Reserve System by
state banks, and that, I hope me may
lith kindest regards, I
Hon. Sydney Anderson,
measure be under-
be
HOUSE MEMBERS:
SYDNEY ANDERSON, MINN.. CHAIRMAN
4ILLS. N. Y.
OGDE,
FUNK, ILL.
FRANK
W. SUMNERS. TEX.
HATT
TEN EYCK, N.Y.
PETER
JOINT COMMISSION OF AGRICULTURAL INQUIRY
UNITED STATES CONGRESS
IRVING S. PAULL. SECRETARY
SENATE MEMBERS:
IRVINE L. LENROOT. WIS.
ARTHUR CAPPER. KANS.
CHARLES L. McNARY, OREG.
JOSEPH T. ROBINSON, ARK.
PAT HARRISON, MISS.
CLYDE L. KING. ECONOMIST
WASHINGTON, D. C.
8, 1922
February
Ey dear Governor:
tant just
Yours of the
received.
I shall be very glad t
elements of the Federal Reserve
have dinner with yourself and
/ go
through the
ank, and also to
r. Harrison and Yr. Jay,
with a view to discussion af erward of the matters in
which we are all intereste
Looking forward to seeing you Friday,
I am
Very sincerely yours,
Chairman
on. Benj. Strong, Tovernor,
nk of New York,
Federal Reserve
N.Y.
New York,
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SENATE MEMBERS
IRVINE L. LENROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. McNARY, OREG.
JOSEPH T. ROBINSON. ARK.
PAT HARRISON, MISS.
HOUSE MEMBERS:
SYDNEY ANDERSON. MINN., CHAIRMAN
.. MILLS, N.Y.
FRAn , H. FUNK. ILL.
OGL
JOINT COMMISSION OF AGRICULTURAL INQUIRY
W. SUMNERS. TEX.
PETER G. TEN EyCK, N. Y.
UNITED STATES CONGRESS_
IRVING S. PAULL. SECRETARY
WASHINGTON, D. C.
ACKNO
ECONOMIST
i..eC
FEB 2 3 1922
714
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I.
February 23, 1922.
PERSONAL
My dear Congressman:
It was a pleasure to have your kind note of February 22
this morning, and I am writing to assure you that the quiet
evening we had together did me a great deal of good, and I only
hope that we may have others just like it.
Yours sincerely,
Honorable Sydney Andersnn,
Vo Joint Commission or
United States Congress,
lashington, D. C.
Agricultural
Inquiry,
HOUSE ..Rs:
SYDNEY ANDERSON. MINN.. CHAIRMAN
MILLS, N. Y.
OGDF
.
I-1 I.
ES D Vi .
FRI, FUNK. ILL.
HA, AW.SUMNERS,T.0
JOINT COMMISSION OF AGRICULTURAL INQUIRY
PETERG.TENM,CK,N.Y.
---
IRV/NG S. PAULL, SECRETARY
pEi
RHN,ITED STATES CONGRESS
SENATE MEMBERS:
IRVINE L. LENROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. McNARY, OREG
JOSEPH T. ROBINSON, ARK.
PAT HARRISON. MISS.
CLYDE L. KING, ECONOMIST
OF NEW yoEWASHINGTON, D. C.
May 20, 1922
MAY 2 5 1922
My dear Mr. Strong:
I was talking the other day with a gentleman
who seemed to think that credit was manufactured like nitrogen from
thin air, the only difference being that he recognized the fact
that the nitrogen could not be manufactured, transported and distributed without accumulating an over-burden of costs of services
and materials, while he thought that credit could be produced,
transported and distributed without cost.
I found so much fault with his theory of
credit and its distribution, that he finally asked me to tell him
what I thought credit was. They say fools rush in where angels
fear to tread, so I wrote down the following definition upon which
I would like your opinion:
Credit is the representation of a portion of (a) the
capitalized realizable income of insurable property
or services; (b) the prospective realizable value of
property in process of marketing; (c) the anticipated
realizable value of property to be produced or services to be performed, - expressed in terms of the
medium of exchange.
If you will give this definition the test of
your own analysis and experience and let me know what you think
about it, I shall be very much obliged.
I am sorry to learn that you have been somewhat under the weather and hope that by the time you get this you
will be entirely recovered.
Sincerely yours,
Hon. Benj. Strong, Governor,
Federal Reserve Bank of New York.
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Honorable Sydney Anderson,
May 23, 192?.
United States Congress,
Sashington, D. C.
My dear Congressman:
!cur letter of the 20th is
not so easy to answer as
might seem to be
the case, and I am going to beg for a bit until I can send you two
of which I shall describe as a text book anower, and the other
answers, one
as entirely my
on personal point of vies as to that credit is.
tan't you be sure to
near
future.
let me know in case you come to New York in the
I an so deeply interested in the success of sound legislation in
the interest of the agricultural community, and so discouraged at the present
position of affairs, that I would like
it.
very much to have a chat with you about
My last visits to gashington were on matters 'which kept me so closely
engaged that I could not find time to have a further
meeting with you, and since
returning to New York I have been kept at home because I have not been feeling
particularly well.
It was once suggested to me when I was recently in lashington that
promote this legislation had been prejudiced by my interest in it.
efforts to
If you believe that that was
me know frankly;
but
the case, you sill I am sure not hesitate to let
until I am convinced that it is the case, I
am proposing to
do everything in my power to assist in producing something that is sound and
really
in the interest of
the
farmers.
pith best regards, I am,
Very sincerely yours,
P.S.
Mr. Strong as unable to sign
the above and asked me to do so in
his behalf.
SENATE MEMBERS:
IRVINE L. LENROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. McNARY, OREG
JOSEPH T. ROBINSON, ARK.
PAT HARRISON, MISS.
IN., CHAIRMAN
L.
El=f7
ctt.SJOVT ,COMMISSION OF AGRICULTURAL INQUIRY
.
.4G S. PAULL, SECRETARY
STATES CONGRESS
31 1922 UNITED
CLYDE L. KING, ECONOMIST
WASHINGTON, D. C.
.mszmy, B
Al
0 la"
Nc;;
May 25, 1922
MAY 2 6 .1922
,
My dear Mr. Strong:
Answering yours of the 23rd instant, I am
sorry to say that I do not see any immediate prospect of getting
to New York in the near future, although I may be able to make an
occasion. I am hoping to be able to get away from Washington about
a week from Sunday for a little political work in my own district,
and indidentally I hope to get some rest.
We have had a hearing before the Committee on
Banking and Currency on the Intermediate Farm Credits Bill on Friday and Monday last. As usual the committee did a good deal of
testifying and I found it rather difficult to answer some of the
questions asked, partly because I did not know the answers and partly
because the questions could not be answered without admitting implications which I did not feel it was sound to admit.
Some conferences have been going on recently
looking to an amalgamation of some features of the various bills inI think only two amendments, however, are likely to be
troduced.
adopted, one of them including in the banks for which discounts will
be made by the farm credits department of the Federal Land Banks
the cooperative credit associations which have been authorized and
organized under state laws and which are essentially financial or
banking institutions; and second, the provision carried in Senator
Capper's bill which increases the number of members of the Farm Loan
Board and provides for the appointment of a farm loan commissioner to
have direct administrative control over the department charged with
I do not see very
the discounts of intermediate farm credit paper.
much objection to either of these amendments. In fact I think they
have some merit.
In reference to the last paragraph of your
letter, I think it is quite possibld that some gentlemen may have
tried to use your interest in the intermediate farm credits bill to
prejudice it, but I do not think that that effort has been at all
successful. ,Ls far as I am personally concerned, I appreciate the
help which both you and Harrison have given in the matter.
I know
that it would not have been possible to work the bill out in the form
in which it was finally suggested, without that assistance.
Yr. nomM....page 2.
1922
sERVE
Bat\
YoRK
I sincerely hope that you may get the
needed rest and that your health will continuously improve.
Sincerely
yours,
Chairman
Hon. Benj. Strong, Governor,
Federal Peserve Bank of New York.
Sti.t
.
i1
I
:Fa`,
VI
.
t
;.
)
May 25, 1922.
My dear Congressman:
At last I seem able to clean up some correspondence and am writing
to comment upon your letter of May 20 which interested me very much.
Abet struck me at first was that if your friend had so mistaken a
notion of credit that he believed it could be manufactured like nitrogen, he
might have some 'difficulty in understanding the definition of credit stated
in your letter.
He will probably *ant something simpler than that, and may
I therefore take the
liberty of
referring a little bit to the history of credit
In the sense no doubt in which he approached the subject.
For the purpose of such a
that there are two kinds of credit:
discussion RS
yOu had with him, one may say
The first and more general kind is exposed
by examining the origin of the word "credit" which comes from the Latin verb
"Credere" - to believe; and credit in fact in its general sense and its
application is
belief in
or
trust in a
personal
person.
In its other and narrower sense credit is a promise to pay at some
future date given in
present time.
exchange
for some valaable consideration received at the
This you may understand to be possibly the text book
definition.
You will find in Palgrave's very excellent bictionary of Political Economy
two brief articles on the subject of credit which are well worth reading, and
the following sentence is illuminating:
"Credit supplies the means whereby the transfer of wealth from one
to another is effected for a period of time, at the end of which it is
restored to its owner."
person
Now this modern instrument which we call credit and which so
makes the wheels of commerce turn had various origins in
various parts
largely
of the
TIP
May F5, 1922.
Honorable Sydney Anderson
world, but I think the moat illuminating is
that arising out of the business of
People were in the habit of depositing their valuables -
the goldsmith of London.
The
that is, precious metals - with the goldsmith pending need for their use.
alit
goldsmith issued some sort of receipt or piece of paper to represent the deposit
,
frequently
of the gold; thee, he
Kings of England at
loaned
the gold to borrowers.
The earlier
These thrifty
times imposed forced loans upon the gOldemith.
gentlemen discovered In course of time that the pieces of paper which they issued
against gold deposited with
them could be used in place of money,that they gained
a certain currency, just as the bank note has to-day.
as it was unlikely that all
They also
discovered
that
of the depositors of gold would dell on them all at
the same time to repay the gold deposited, it was therefore possible to issue
notes in excess of the amount of gold actually deposited; that is to
they made loans to
say,
when
the state or to private customers they need not actually pay
out the gold, but could pay out
presented for payment
in gold;
pieces of paper which in due time would be
and in this development originated
one of the
earliest forms of credit inetrumente now expressed in our modern bank note.
One can see how aptly this conforms to the text book definition of
credit of both characters above referred to.
Now one of the elements in credit is the cost of credit.
If one sells
goods on credit, the cost is not represented by a rate of interest, but by an
increase in the selling price-of the goods; whereas when credit is
a party
other than the one selling goods, that party then
the borrower
presumably
extended by
charges interest and
gets his goods at a lower price, offsetting an interest
charge for.the credit.
My difficulty in analyzing your own definition of credit is to determine, first, whether, and to whet extent, you may not have some uncertainty in
your own mind as to the difference between credit and capital, that is, property
or wealth.
They are two very different things.
May 25, 1g22.
Honorable Sydney Anderson
The wealth or capital or property of A nation truly and narrowly stated
is not credit at all; it is the land and what the land conteine and what the
people of the country have taken out of the land end converted into productive
and useful things.
The definition should go a little further to include not
Credit,
only useful things but tnose which are educational and give enjoyment.
on the other hand, is something which has been artificially created, that gives the
holder, on the one hand, the per to purohase thing's - the' le, to Acquire cepital but at the same time imposee upon him the liability of repaying the credit et some
future date.
It seems to me, therefore, that if you undertAke to maintein that credit
represents by enticipation what shell be eRrP0d cut of the rroceee of production
or trede, you are somewhat con:Nein? what is strictly credit, on the one hand,
end whet is strictly property or weelth, on the other hend.
VOlUliteF have been written upon this eubject.
T wish I hsd the
knoriedpe'end capacity to send you a brief wnd illuminetine definition which would
express it ell in one homeopathic prescription.
The best I cen say in conclusion
is that credit is an artificial thing crested by man largely through the instrumentality of banks and printing ereesea, which depends for its cucceseful use upon
the eenerel confidence of the community, and which gives these who possess it a
present purcheeing pewer over goods; that it is not wealth or property, which are
lends arid things; that credit enablee it owner to purchase; and that its function
as to each oener of credit is completed when a purchaee to effeeted be the lige of
tee credit and a aueeoqueet sale is made which liquidates the credit.
Theoretically,
you realize that if ell credit were cancelled, all debts paid and collected, the
world eoul4 actually he no richer eevi no poorer.
Tle would simply have accomplished
a vest hookkeopine operation and then probably would start it all over again.
The
rest of this we must reserve for discussion for which T hoee the opportunity will
come soon.
May 25, 1922.
14
I am glad to say that I am very much better, and am grateful to you
for your good aishes.
With kindest regards, I em,
Very sincerely yours,
Honorable Sydney Anderson,
United Statee Congress,
Washington, D. C.
BS.MM
SENATE MEMBERS:
IRVINE L. LENROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. MCNARY, OREG
JOSEPH T. ROBINSON. ARK.
PAT HARRISON, MISS.
4., CHAIRMAN
CRS. TEX.
ICK, N.Y.
S. PAULL, SECRETARY
JOINT COMMISSION OF AGRICULTURAL INQUIRY
UNITED STATES CONGRESS
CLYDE L. KING, ECONOMIST
WASHINGTON, D. C.
June 3, 1922
JUN 5
1922
Hon. Benj. Strong, Governor,
Federal Reserve Bank of New York.
My dear Mr. Strong:
Yours of the 26th ultimo, in regard to the
situation of the intermediate farm credits bill, is at hand and
contents noted.
Since I saw you last and since I last wrote you,
I have had some conferences with the Secretary of Agriculture, who
feels very keenly that this legislation should be passed now. He
agrees with me that it would be unfortunate if we did no more than
to take Mr. Meyer's suggestion and take care of the live stock situation now. Confidentially, I understand that the President has suggested that Secretary Wallace and Mr. Meyer get together and agree
upon a program, and that he has said he is willing to supnort any
proposition which they can agree upon.
I have suggested to Mr. Wallace that it might perhaps be just as well if they did not come to an agreement immediately,
so that we can have some time to line things up here. I think if
could combine someof the suggestions already madev including those
which I suggested to you in my letter of the 25th;\in one bill, and
could then get a conference of the Committee on Banking and Currency
interested in the various propositions, that we could establish a
nucleus of men in the committee who really want to do something. As
it is now, the membership of the committee as a whole is indifferent
to doing something, and really prefers to do nothing.
I have also had a talk with the Farm Bureau people
with a view to bringing some pressure to bear on the members of the Committees on Banking and Currency, through the members of the Farm Bureau
organizations, and this program is under way. We could get further,
however, if the Farm Bureau people were not constantly injecting new
propositions into the proposal, with the idea of taking care of local
situations, here and there, to which the bill does not seem to be
specially adapted. Only yesterday they presented me with a new pro-
177 4
ro
11.7li
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M
f3gTIAILG14
711
Pi
rit
on;
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4?-
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11-
.8
i2 rr 761:11 trw
Loti:rla r0 rgo
Governor Strong
page 2.
posal involving some of the things already suggested, but
really contemplating an entirely new installation of intermediate farm credit machinery. I suggested to them that the
only possibility of getting any legislation was to agree on
something and everybody getting behind it, even if it did not in
every respect reflect their individual views, and that the constant injection of new ideas, particularly ideas intended to meet
situations more or less local, could only result in muddying the
waters, increasing the difficulties already existing in the Committee on Banking and Currency and consequently the difficulties
of securing favorable action from it.
The Committee on Banking and Currency is an
They have a number of members
exceedingly hard-boiled committee.
who are very difficult to handle, exceedingly tenacious in their
views and some of them excessively conservative. The immediate
job seems to be, first, to agree finally upon the program, and,
second, to inject into the Committee on Banking and currency a real
desire to do something. I am enclosing herewith a list of the House
Committee.
If you know of any way of reaching these gentlemen, you
can do some good by using a sharp prod.
Sincerely yours,
Chairman
sqv
HOME OF REPRESENTATIVES
COMMITTEE ON BANKING AND CURRENCY
Louis T. McFadden, of -,ennsylvania
Porter H. Dale, of Vermont
Edward J. King, of Illinois
Frank D. Scott, of Michigan
Adolphus P. Nelson, of Wisconsin
James G. Strong, of Kansas
Leonard S. Echols, of West Virginia
Edward S. Brooks, of Pennsylvania
Robert Luce, of Massachusetts
Clarence MacGregor, of New York
James W. Dunbar, of Indiana
Lester D. Volk, of New York
T. Frank Appleby, of New Jersey
Henry F. Lawrence, of Missouri
E. Hart Fenn, of Connecticut
Otis Wingo, of Arkansas
Henry B. Steagall, of Alabama
Chas. H. Brand, of Georgia
William F. Stevenson, of South Carolina
Eugene Black, of Texas.
T. Alan Goldsborough, of Maryland.
irttiv.i.v. en
RECEIVED BY
GOVERNOR'S SEG1
JUN
6 1922
HOUSE MEMBERS:
SYC 'Y ANDERSON. MINN.. CHAIRMAN
00.
. MILLS, N. Y.
FRANK H. PUNK. ILL.
HATTON W. SUMNERS. TEX.
PETER G. TEN EYCK, N. Y.
IRVING S. PAULL, SECRETARY
SENATE MEMBERS:
IRVINE L. LENROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. MCNARY. ORES
JOSEPH T. ROBINSON, ARK.
PAT HARRISON, MISS.
JOINT COMMISSION OF AGRICULTURAL INQUIRY
UNITED STATES CONGRESS
CLYDE L. KING. ECONOMIST
WASHINGTON, D. C.
June 3, 1922
Acir(NrrNI.F:'1)(10
JUN
D
1922
Hon. Benj. Strong, Governor,
Federal Reserve Bank of New York.
My dear Mr. Strong:
Yours of the 25th ultimo, at hand, and I
have delayed answering it until I could think about the matter.
Considering the brashness with which I rushed in, I think you
I was perhaps thinking more in terms
let me dawn very easily.
of the thing upon which credit is based, or out of which it
can be liquidated, than in terms of credit in the sense in which
those who create and distribute it think of it.
I was really trying to lay a foundation for
the general suggestion that the maturity of credit shoudl correspond with the time when the value against which the credit
It seems to me that without the conis created can be realized.
ception that credit must at some time or other be liquidated out
of values arising from Property or services, and without the further conception that this realization of the value must correspond with the time when the values can be realized in terms of
money, that the banker will be embarrassed by frozen loans or the
borrower embarrassed by being compelled to liquidate before he has
realized the value against which the credit was issued.
I realize how much has been written and said
upon this subjedt and how inadequate my own knowledge is to attanpt
any definition of credit, but as civilization becomes more complex
and the uses of the things which are simple in their conception
and inception become more complicated, I suppose our conceptions
of these things ioust change. Anyhow, in the effort to get at a
better understanding of things, we try to state them in the light
of our orn conception, even though we add nothing to the sum total of
human wisdom in doing it.
Thank you for the time which you took to answer
I hope that you will have by now entirely recovered, and
my letter.
that you are able to be back at work again.
Sincerely yours,
sA/v
Chairman
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June 5, 192?.
ffy dear Congreeeman:
Referring once more to your inquiry about credit, I am reminded of the
bock that I read some years ago by a Mr. Hawtrey, a statistician of some prominence
in the British Treasury, the title of which etas "Money and Credit", and the first
sentence in the book was substantially the following:
neeney ill) one of those concepts which, like an umbrella or a tea
unlike a buttercup or earthquake, may be defined by the
use or purpose ghich it serves."
spoon, and
The quotation may riot be quite accurate, but exposes a very interesting
thing in the diecuseien of credit; and that is, that serving so great a variety of
purposes
as it does, it is capable of just as great a variety of definitions.
I think the fundamental thing, however, lies in one peoul i ari ty of credit
if it is issued soundly and serves a sound purpose, namely, that it cores into
being in response to a demand and is extinguished at the termination of the demand
which brought it into existence.
I cin not think it can be narrowly defined as
something created in anticipation of future profits and to be extinguished out of
those profits.
ifhat some of our friends fail to bear in mind is that credit and capital
are wholly different things.
Credit is simply one of the lubricants, like money,
which facilitates the operation of this ponderous machine, which performs the
great functions of prc duction and distribution of goods.
All of this sounds to me as I dictate it, and will read to you I am afraid
when you read this letter, as rather pedantic, - but some day soon I hope NS can
have a little chat about credit.
June 5, 1922.
2
I am very much better, and thank you cordially for your inquiry.
Nith kindest regards,
am,
Sincerely yours,
Honorable Sydney Anderson,
Unitnd States Congrss,
iashington, D. C.
BS.181
June 20, 1922.
fit).
My dear Congressman:
If your addrees at Indianapolis wsa prepared in advance or
was taken down and written out, could you favor me with a copy of it?
I should greatly appreciate it.
Hoping that you keep well, end with kindest regards,
I am,
Yours sincerely,
Hbnorsble Sydney Anderson,
United States Conirese,
Naehingten, D. C.
FS. MM
;
HOUSE MEMBERS:
SYDN," ANDERSON, MINN., CHAIRMAN
OGD
. MILLS, N. Y.
FRP, H. FUNK. ILL.
W. SUMNERS, TEX.
HAT1
PETER G. TEN EYCK, N. Y.
I
SENATE MEMBERS:
IRVINE L. LEN ROOT, WIS.
ARTHUR CAPPER, KANS.
CHARLES L. McNARY,
JOSEPH T. ROBINSON, ARK.
PAT HARRISON, MISS.
JOINT COMMISSION OF AGRICULTURAL INQUIRY
UNITED STATES CONGRESS
IRVING S. PAULL, SECRETARY
CLYDE L. KING. ECONOMIST
WASHINGTON, D. C.
AC K
June 23, 1922
NOWLEbGED
JUL 1 3 1922
PERSONAL
My dear Governor Strong:
In compliance with yours of the
20th, I am very glad to enclose herewith a copy of my
address at Indianapolis. I shall be very glad to have
any comment which you may feel at liberty to make with
reference to it.
Yours sincerely,
qa11111:0WATAIRMIIIMIENIIRWR
Chairman
Honorable Benj. Strong, Governor,
Federal Reserve Bank of
New York, N.Y.
P.S.
I expect to be in New York Wednesday
and while I shall be pretty well tied up, I shall make it
a point to see you, even if it is a short visit, while I am
there.
STEECH DELIVERED BEFORE THE NATIONAL ASSOCIATION OF CREDIT MEN'S CONVENTION
4t INDIANLPOLIS ON JUNE 9, 122, BY SYDNEY ANDERSON, CHAIRMAN OF THE
niNT commissioN OF AcaucummIL INJURY
- FINANCING THE FARIER -
I am especially pleased to have this opportunity of addressing the
Credit Men of America becauee in a somewhat humble way I was once a credit man
One of my first jobs was the collection of a dollar a week on some
myself.
iron-bound, copper-riveted, moss-covered furniture contracts.
be a credit adjustor, and most of
Later I got to
my time was spent in trying to realize upon
the mistakes of over optimistic salesmen.
In those, lays a credit man was a sort of combined detective, wizard,
mind reader, prophet, philosopher and friend.
haps in
Too often in those days, and per-
these, the credit man was obliged to undo
the things done by the sales-
man.
I wish to make plain at the beginning the point
I do not claim to be an expert in banking
I speak.
of view from which:
practice or finance.
What I shall say is based entirely upon an investigation made by the Joint
Commission of Agricultural
,Inquiry, of which I am chairman.
tion covered in a rather broad way an inquiry into the
prices,
transportation,
This investiga-
economics of production,
manufacture and distribution of commodities. It also
covered somewhat comprehensively the influence of currency,
credit, interest
and. discount rates upon the production, prices, transportation, and
manufacture
and distribution of goods.
In the course of the investigation we analyzed the movement of
currency, credit, interest and discount rates from the period of the
beginning
of the Federal Reserve System in November, 1914, to Jima, 1921, in order to
establish
the causes and effects of both expansion and deflation.
course of this analysis'we examined some eighteen thousand bank
What I shall say represents conclueions
In the
statements.
which we reached as to the necessities
of additional machinery for farm credit as a result of the investigation.
There are many definitions of credit, both text book and philosophical, but it is a difficult thing to define something
more or less artificial and undefinable.
propose a
new
conceptions:
definition, but commercial
that is
intangible,
I will not have the temerity to
credit seems to me to involve three
first, capital credit which I conceive to be a loan based upon
the capitalized, realizable income of insurable property or services;
(1)
smmarers
second,
Arketing credit which I conceive to be a loan upon the realizable value of
goods in the process of marketing and, third, production credit, which to my
mind represents an advance upon the realizable value of goods to be produced
or services to be rendered.
Al]. of these conceptions
in terms of
contemplate a
loan on the value of property
money to be repaid by the borrower from the income
the sale of goods or the rendition of cervices.
of property,
The only point I am trying
to make here is that credit contemplates that payment will eventually be made
out of the income of property, the sale of goods or
he value of services and
that, therefore, the maturity of credit must coincide
and
correspond with the
realization of the income of the property, the proceeds of the sale or the
value of the services.
barrass the
lender,
Otherwise the frozen
character of the loan will em-
or the necessity of paying the obligation before the
value upon which it is based has been realized will embarrass the borrower,
The farmer is generally considered to have an annual turnover, but
even in the case of grain
the
the period from
fertilizer to make the crop to
the beginning of
the time
the
purchase
of
when the crop is ready for market
and can be sold and distributed in an orderly way may be considerably more than
a year.
The period elapsing from the first
purchase of
breeding stock to the
final sale of progeny in the market may be as much as three years.
such a turn over cannot be adapted
Obviously,
to a six months credit if the paper
As to
be liquidated at maturity, and just as obviously if the tarn over cannot be
adapted to the credit, credit must be adapted to the turnover.
Credit should
be self-liquidating and it can only be self-liquidating, so far as farm production and turnover credit is concerned, if the period of maturity corresponds
to the period of production and sale.
If we are not to
cultural communities and
have recurrent
periods
of frozen loans in agri-
if the production of agricultural
products is to be
promoted by the liberal use of production credit, the maturity
of the credit
must be such as to make possible the payment of the loan out of the proceeds
of the farm at maturity.
It is not long since a mortgage
on the farmer's
farm and farm indebtedness were considered an evidence of lack of
the part of the farmer.
thrift on
This situation has changed, and the necessity for
production and turnover credit for the farmer is recognized as being as
necessary to farming
as to industrial enterprise.,
(2)
The farmer should be able
to get credit at the
bank for the purpose of purchasing equipment for small
improvements, live stock, feed, f4ilizer and other items. It is better for
him to obtain this credit from a credit institution whose business it is to
furnish credit
than from farm implement dealers, merchants,
whose business it is to sell goods.
factors and others
One of the abuses of the
present day
scheme of distribution is the use of credit as an adjunct to salesmanship.
When the
merchant is SO anxious to sell goods that he indulges in the pastime
of selling them beyond the capacity
of the customer to pay
for them
within a
reasonable time he speedily becomes a candidate for the poor house.
In general, there is no law which prevents a bank from making a
Why is the farmer unable to get
longer period than six months.
loan for a
credit for a longer period than six months? The reason seems to me comparatively simple.
deposits and
A very large percentage of
the deposits of banks
demand
are
practically all deposits can be withdrawn upon short notice.
The banker is constantly confronted with the fact that the withdrawal of
deposits may at any time necessitate the liquidation of loans or the
ing of
In either
the Federal Reserve bank.
funds from correspondent banks or
borrow-
case in practice its borrowing power is limited by its ability to offer for
than ninety
discount or as collateral commercial paper having maturity of less
days or agricultural paper having a maturity of lees than six months.
bank, therefore, hesitates to make loans for a
The
longer period than six months,
because there is no place where each paper can be discounted if the needs of
the banker are each as to require immediate use of the credit represented by
them.
The first essential,
over credit of
therefore, to provide farm prodaction and turn-
maturity longer than six months is the establishment of a
discount agency at Which paper of longer
counted or at Which
maturity
than six months
paper of longer maturity will be accepted as
for direct loans to the bank borrower.
Several
proposals
the creation of such a bank of discount. These include,
can be dis-
collateral
have been
first,
made for
the creation
of farm credit departments as a discount agency in the Federal land beaks;
second, the reorganization of the War Finance Corporation as a central bank
of discount; and, third, the creation of an entirely new agency for this
purpose.
I will not discuss the relative merits of these proposals now, as
I am concerned more with the fundamentals of this new machinery than with
http://fraser.stlouisfed.org/
Federal Reserve
Bank of St. Louis
-IL
( re)
the machinery itself.
the one
T shall later refer to the first proposal, which is
recommended by the
Joint Commission.
Such a bank of discount must itself have both canital and credit,
And this capital and credit should preferably be supplied from
private sources.
It seems probable, hoeever, that the capital of any bank of discount created
instance, at
by Federal sanction would in the first
least, have to be
furnished
by the Federal Government.
The soundest method of securing
credit
requirements of the bank of
discount is through the issuance of Short time debentures aeainst paper discounted, or, to
be discounted.
Such debentures, if
paper bearing banking endorsements, would be
Poe sible to
create
secured by
agricultural
readily salable and it should be
for them such a ready market as to make
the debentures a
reasonably flexible security.
a system such as I have proposed would
The operation of
and direct and would involve no change in the farmer's habit or
be quickly put in operation
farm
production
and would furnish credit of the kind
and turnover.
be simple
custom, could
required for
Under this system the farmer who wants a loan
for a year, eighteen months, or three years, could get his
loan from his
banker or his cooperative credit association or live stock loan association
just as he does now.
If the banker did not desire to carry the note until
maturity, he could discount that
note
eith
the farm credit
department of
the
Federal Land bank in the district in which he is located at a rate of discount
fixed by the Federal Farm Loan Board.
These discounts, in the first place,
would be made with the capital of the farm credit department of the Farm
Land bank, but as this capita/ would be clearly inadequate, at times at least,
to furnish the requirements of the farmers for intermediate
credit
department would issue debentures
credit the farm
in anticipation of the added re-
quireeents.
When the debentures are issued they are paid
for by the
investor
and the farm credit department would have the daih behind the debenture.
When
notes were diecaunted for banks with their endorsement, these notes would be
substituted for cash, so that at all times there would be behind the debentures
equal face value of cash or notes plus the additional cash or notes representing the initial capital of the banks.
fel
Briefly, the system would work substantially as the Federal Reserve
sytem works, except the notes
discounted would be notes having maturity of
more than six months and less
than
three years, and that the source of credit
would beefree capital available for investment in short time debentures in-
stead of the reserve contributed by
The assets and
the banks to the Federal Reserve
liabilities of the farm credit
and distinct from the assets
system.
department would be kept
and liabilities devoted
separate
to farm mortgages and
loans, but the assets and liabilities of each farm credit departaent would
be liable for the debentures issued by all other credit departments.
Under such a system farming communities would be able in times of
great credit demands, especially in the newer sections of the country where
credit resources are relatively insufficient, to draw free capital from the
large money centers or communities, where capital tends to concentrate, and
in this way increase the available supply of credit in the agricultural
counties and thus reduce the interest rata upon farm loans.
Such a system would do three things. First, it would enable the
farmer to get cash for production and
turnover purposes and to buy with cash
from the merchant such implements, machinery and fertilizer as he requires
such purposes.
Second, it would give him a credit corresponding to his turn-
over. Third, it would draw capital from
cultural sections and thus tend to
these
for
the money centers into
reduce rates of
interest
the agri-
prevailing in
sections which I regard as generally too high to permit of profitable
farm operation
on the basis of borrowed capital at local interest rates.
Provision should also be made for supplying the credit requirements
of seraers' cooperative associations engaged in marketing operations. There
has been a very great increase in the number and size of farmers' marketing
associations in recent years. The credit requirenents are larger frequently
than local banking resources will accomodate. Practically all of the present
proposals for farm credit contemplate that the bank of discount shall make
direct loans to such associations where the loans are secured by warehouse
receipts or other equivalent control documents. This is a departure from the
strict conception that a bank of discount
should deal only with banks or only
In such paper as has bank endorsements, but it is generally accepted that the
(5)
security represented by warehouse receipts or
staple
commodities may be
agricultural
other control docuuents covering
considered a substantial equivalent to a
There will, in my opinion, be a larger and larger develop-
bank endorsement.
Some provision should be
ment of farmer cooperative marketing associations.
made for financing the credit requirements of
these associations, particularly
in those sections of the country where banking resources are now inadequate
for this purpose.
Farm credit requirements' are not
tend to reach a
The system./ have outlined
They
might not be sufficiently
additional machinery to meet these peak.
difficulty and these peak
the discount
it with the Federal Reserve bank, when such
maturity of six months
the eligibility rule
This
requirements.
requirements could be met by permitting
agency to rediscount paper held by
paper readies a
year.
peak at the beginning of the marketing season, usually in the
month of October.
flexible without
uniform throughout the
or less
and is
of the Federal Reserve system.
otherwise eligible under
Probably a good many
The
notes would be discounted running eight months, nine menthe, or a year.
capital of the bank of discount might be wafficient to carry these notes for
a period of
three,
than six months.
bank and the
four, or six months, until they reached a maturity of less
They could then be rediscounted with
the Federal Reserve
credit represented by them made available for additional
Tying up the middle term credit machinery
of
the
discounts.
country as I
have
proposed with the Federal Reserve system would in no way effect that system
adversely as no paper would be eligible for discount with
bank which is not now eligible. At the same time
the Federal Reserve
the coordination
of the
Piddle term credit system with the Federal Reserve system would eine an
additional
element of flexibility to it.
dealing directly with the
Under this proposal no new aeency
farmer would have to be
created. The farmer's longer
time credit requirements weld be secured in the same way and at the same
ete0
eenirements.
47093'0
eaeee as hie.-0%.
sa A
The period of maturity of his notes would be adapted to his ability
to pay them out of
the
products of his farm. His needs for longer time pro-
duction and turnover credit
could be met without reducing the ability of banks
of the country to furnish the short time credit required by farming or industrial
enterpriees. This system would not put the government in the banking business
(6)
eor require the use of the government' s credit.
There is today a shortage in the production of cattle, sheep,
and to a lessor degree, of hogs. This shortage can only be made good through
such a use of production credit as will make possible a greater utilization
of land. awe building equipment.
The farmer's credit requirements should be
met promptly by the Congress while the need of such credit so thoroughly
demonstrated by the
in the minds of
all
recent period of credit strain is so sharply outlined
of us.
So far as the farmer's
credit requirements as to maturity are
identical with the requirements of business generally,
in the 49.140 way and through the same agency as the
'
industries.
they should be met
requirements of other
The farmer does not desire to put himself outside
of the scope
of the or
credit
installation of
machinery for his peculiar benefit, so far as his credit
requirements are
machinery of the
like those of other
country. He wi shes
no special
industries, but he is entitled to and
should have such special machinery as may be necessavy to meet the condiThe farmer
tions which are peculiar to ferming and farming operations.
is interested in a credit
system that will work
under all circumstances
and that vrill meet all the requirements of business and industry.
The farmer realizes that those who handle his
him his requirements linist also have credit
corresponding to
He recognizes the necessity of credit both for
tions and
that
the credit extended. for
products and sell
their needs.
domestic and export transac-
these purposes is to his advantage
as well as those making immediate use of it.
He is, therefore, interested
in making the banking system function in the most effective way and
that the lessons taula by'our recent experience in expansion
shall not be forgotten.
in seeing
and deflation
lie hopes they will encourage such revision and
adjustment of the system as
will make it the
most efficient aid to coreserce,
industry and agriculture.
With this in mind. I wish to make some observations touching the
general
banking facilities of the country.
The foundation of the banking system of the United States consists
of 33,000 odd national banks, state banks, live stock loan companies, trust
and :savings banks.
Of these 33,000 banks, approximately 9,700 are members
of the Federal Reserve system.
The non-member banks represent 67% of the
total number, and 333 of the total banking power of the banks of the United
States.
,
These non-member banks contribute practically nothing to the general
reserves of the country. The non-somber banks do not have direct access to
the credit reservoir represented by the reuerves of the Federal Reserve banks
in times of credit stringency, either locally or nationally. The ability of
these nonemember banks to meet the requirements of their customers in excess
of their own resources is measured by their ability to borrow from correspondent banks.
In the case of two member banks, the theoretical combined
borrowing capacity of both at the Federal Reserve bank is represented by
the aggregate resource
of both,
whereas in the case of a. non-member and a
member bank, the theoretical combined borrowing capacity of both at the
Federal Reserve
bank is repreeented by the resources of the bank Which is
a member.
When you remember that the amount borrowed by a bank at the Federal
Reserve bank is capable of a theoretical expansion in loans and discounts of
the member bank of from eight to fourteen times the amount borrowed, and an
actual expansion of four and one-half times the amount borrowed, the limitations
upon the ability of these non-member banks to furnish credit to their communities
resulting from their non-meebership in the Federal Reserve system becomes
immediately apparent.
The larger proportion of these non-member banks are located in the
agricultural
states, and non-membership is, therefore, a larger limiting factor
in the ability of the banks to meet the requirements of their customers in
agricultural states than in others.
For example, in the Southern
States
72% of the banks in number and
42% of the banking power is represented in non-member banks, while in the
New England States only 39% in number of banks and 28' of the banking power is
represented in non-member banks.
In the Western States 74% in number and
50% in banking power of all the banks is represented
in non-member banks, while
in the Ematern States only 36% in nueber and 22% in banking power is represented
in non-member banks.
(a)
-77er
An examination of the course of deflation throughout the entire
country, conducted with special reference to the ability of the banks to
met the situation existing daring the recent period of price declines,
thoroughly indicates that the ability of the banks in these states to meet
the needs of their customeru was very greatly limited daring this period by
their non-membership in the Federal Reserve ystem.
This conclusion is
supported by an examination of the loans made by the War Finance Corporation
to banks since October, 1921.
Out of a total of 4,916 loans by the War Finance Corporation to
banks, 599 were made to national banks and 3,417 to state banks, and out of
$147,961,689.90 of each loans, $29,164,423.67 were made to national banks and
$118,797,266.23 were made to state banks.
to live-stock
These loans do not include loans
loan companies, banking institutions for exports
or to
exporters
or tocnoperative marketing associations.
A more detailed examination of the loans made by the War Finance
Corporation indicates the larger eercentage of the loam was made to the
Aler, ineligible state banks.
The first step,
therefore,
which should be taken to more fully meet
the normal and extraordinary requirements of farmers is to make eligible to
the Federal Reserve system the
large number of state banes now ineligible and
to induce these banks as well as the state banks now elibible to become
Ambers of the Federal Reserve aystem. This can be partially done, at least,
by reducing the capital
requirements for entrance into the Federal Reserve
system, and by offering an inducement through
a
larger participation of
.ember banks in the earnings of the Federal Reeerve bank.
In the last seven years we have gone through a period of enormous
expansion of prices and bank loans and s period of contraction of loans and
most perpendicular decline of prices in the history of the country.
Scree
lessons can be learned from an analyaiu of the expansion and contraction of
bank loans during this period.
From 1914 to 1920 the bank loans increased in the New England States
65%, in the Eastern States 94%, in the Middle 7estern States 105%, in the
Southern States 139%, in the Western States 163%, and in the Pacific States
(9)
110%.
The expansion was greatest in those states in nhich aericulture is the
predominating industry. Therefore, at the beginning of the period of decline
in prices le had the largest expansion of bank loans in thoee sections of the
country where declines in prices were first felt.
And now I want to consider for a moment the period of deflation.
In order to establish the course of the movement of credit during the period
of deflation the Comaission had an examination made of the statements of eonle
9,700 banks as of May 4, 1920, and April 28
1921.
For the purpose of this
exaninetion the counties of the United States were divided into three classes:
agricultural, semi-agricultural and non-agricultural, depending upon whether
more than 80% of the production of the county was agricultural, more than
50% and lees than 80%, or less than 50%.
This examination shows that between
May 4, 1920, and April 28, 1921, loans and discounts in agriculturel counties
fell off 1. ;in semi-agricultural counties, 1.3%; and in non-aeriaultural
counties, 4.5%; indicating that there was a larger actual liquidation of loans
in induetrial than in agricultural counties during this reriod.
But these figures tell only half the story. In the same neriod
deposits in agricultural counties declined 11.1%, in semi-agricultural
countiet 5%, and in- non-agriculturea counties 4.4%. The demand deposits
In agricultural counties in all of the Federal Reserve districts fell off to
a much greater extent than in semi-agricultural counties. The greatest falling
off of deposits took place in those Federal Reserve districts -there industry
is predominately agricultural. For example, demand deposits declined in the
New York Federal Reserve District 9.5% compared with 23.6% in the Atlanta
District, 6.8% in the Philadelphia District, 17.2% in the Minneapolis District,
15.1% inthe Boston District compared with 24.3% in the Dallas District and
2.9% in the Cleveland District compared with 18.2% in the Kaneae City District.
While it is impossible to demonstrate conclusively the causes of these
differences, le can estimate them with a fair degree of accuracy. We know
the crop of 1920 was produced at the highest cost in the history of the country
and that the prices received for it were wholly inadequate to liquidate the
debts incurred in producing it. This apparently accounts for the very small
reduction in bank loans which took place in agricultural counties.
(10)
On the other hand, the fartmr drew down his eeposite to pay his
indebtedness to merchants, factors and others, Who in their tarn liquidated
their indebtodnees to wholesalers and leaaufacturers in the Industrial centers
and thus assisted in the liquidation of the loane and discounts in industrial
counties, at the same time helping to keep the deposits in these counties
from declining in the same degree as deposits declined in agricultural
counties.
The second reason is that the borrowings of the fareers from the
banks eere largely onnotes of lose thah six months maturity. It was never
contemplated that a largo part of these notes would be paid at maturity
because it wee not anticipatel that the products of the farm would mature
When the mote metered.
On the contraryedgmrit was expected, when the note
matured. the farmer would pay it by giving a new note. Conoequently, While
more or leee pressure was brought to bear upon the termer to liquidate the
indebtedneae, moat of the bankers recognized the impossibility of hie doing so.
So ee had frozen loans Which embarreseed both the lender and the
borrower.
This situation demonetrates the necessity for such revision,
adjustment and now installation or our banking machinery aa will enable
them to function fully in respect to all classes of credit whieh may be
required to meet the needs of aericulture, industry, trade and commerce.
The test of any machine or organization is tt functioning under
peak requirements. The fanctioning of the banking system daring the extrae
ordinery condition of the past seven years has shown the neeeasity of some
revisions and additions..
Ve shall do well to make them while the leason which teachen their
necessity is fresh in our winds.
June
PERSONAL
19?2.
My dear Congressman;
Thrnk you for your note of the 93rd which is just received,
and in reply to hich I hasten to ask if you cannot arrange to take
lunch with me on lednesday, or pnssibly dine with me that evening.
I shall read the addrees with a great deal of interest.
Yours very truly,
Hcnorable Sydney Anders-3n,
United Staten Conpresc,,,
ilashington, r. C.
BS.W4
July 13, 19??.
PERSONAL
My dear Congressman:
Thank you very much for sending me a. copy of the address
;Mich you delivered at Indianapolis.
to
I have only to-day been able
read it, and did so vith a. great, deal of pleasure and profit.
But you and I rust some day have a talk about ahat credit
is.
From all accounts it's a queer bird Ihose habits are not
very yell understood.
Yours vincerely,
ifonorable Sydney, Anderson,
United States Cimgress,
lashington, D. C.
1972
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SYDI-cl' ANDERSON
COMMITTEE ON APPROPRIATIONS
3T DISTRICT
.INNESOTA
HOUSE OF REPRESENTATIVES
WASHINGTON
Lanesboro, Minn.,
August 1, 1922.
Mr. Benjamin Strong,
Federal Reserve Bank,
New York, N. Y.
My dear Mr. Strong:
Your letter of the 13th ultimo addressed to
me at Washington has just come to my attention upon my
return from a short vacation trip in the Northern part
of the State.
I expect to be back in Washington about August
6th and it is probable that the development of some matters
there in which I am interested will take me to New York
very soon thereafter, when I shall be glad to dissect
the queer bird to which you refer.
Sincerely yours,
avton- dki.
.9
0
AUG 4
Heed
COMMITTEE ON APPROPRIATIONS
SYDNEY ANDERSON
FIRST DISTRICT
MINNESOTA
HOUSE OF REPRESENTATIVES
WASHINGTON
November 17, 1922.
Mr. Benjamin Strong,
470 Park Avenue,
New York, N. Y.
My dear Governor Strong:
I returned to Washington late Wednesday afternoon,
but I did not get around to the things which had accumulated on my
I accordingly wired you today as follows:
desk until today.
"Am expecting to attend meeting of
Academy twenty-fourth and will be glad to accept
your invitation to dinner."
This letter will confirm that telegram, as well as
be an answer to your kind letter of November 12th addressed to MB
at Lanesboro which has just reached me here.
Unrest and unhappiness among the people of the country
was perfectly obvious upon my return to Minnesota, but it found a far
greater reflection in the election than any of us had anticipated.
It is rather difficult to analyze and assign to specific causes which
account for the psychological condition of the country4, but one thing
is perfectly clear to my mind and that is that no political party has
so far invented a method by which it can keep Congress in session
eleven months in the year and continue its control of a majority of
the membership, and in my opinion the inability of Members of Congress
to get into their own districts to sense public sentiment, to explain
the conditions under which we took control, and the efforts which have
been made to successfully cope with these conditions are more largely
responsible for the election results than any other single factor.
I have a feeling, too, that the centralization of
governmental activities in various commissions and other agencies at
Washington, resulting in the expression of political and economic
movements in figures of millions and of billions, incomprehensible
to the average voter, have tended to dehumanize the aspect of things
to a point which precludes appreciation by the average voter of
either conditions or remedies. It seems hopeless to attempt to
educate the public to an appreciation of conditions in terms of such
magnitude, and some way must be found by which government and
economic movements and their causes can be brought within the range
of perception of the average voter.
I don't know just how this is
to be done, but I think it means that it is not only necessary to
enact the play, but it is necessary to properly stage it if we are
going to get it across the foot lights to the common people.
Before I went home I talked with Senator Lenroot and
Secretary Hoover rather briefly at dinner one evening in regard to
the program of the next Congress, and we have agreed to get together
later with some other gentlemen and go into the matter fully. In
the meantime I should be delighted to have an opportunity to talk
over some of these matters with you and to hear your "program".
I am, of course, pleased at the mention of my name
in connection with the House Leadership or the Speakership.
It is
impossible at the moment to forecast the probable political developments, but my guess is that my chances are somewhat less than fiftyfifty at either of them at present. I am by no means certain that
I would accept the House Leadership if I could get it. If I am to
stay in politics, and I am not sure than I will, I doubt if I can
afford the House Leadership either politically or financially.
If I possibly can I am going to try to stay in New
York over Saturday the 25th and Sunday the 26th, and I shall be glad
to talk over as many of these things with you as yourtime will permit.
Sincerely yours,
November 21, 1g22.
Vy dear
COM'ITIVEIMan:
Your letter ofNcvember 17 is just received find I am dellr,ttod
cln dine with we Thursday evening the t,;enty-third.
Dinner Till be at my apartAent, 470 Perk Avon-de, at 7:30 olclock.
t-7 learn tivt
I shall be at the meetinz of the Academy on Friday, probably,
unless some business matter interferes, but Saturday my Deufher and
Ir you ore able to
T
goinz to Lac Army Inti Navy- footbll game.
etr over Sunday, I tops you can give me part of the day, pc,-,sibly
dining vitt uo. VO0 CBM arrange that rAhen I see you on Thursday, as
e1laadiscut...s fi006 of tile matters referred to in your letter.
pith 1,7indest reFards, I am,
Sincerely yours,
Honorable S.,1nr,v Anderson,
'Rouse 9f 071T6TV777;;IT7
D. C.
fiS.Mn
TIvember 177, 192r.
My dear Congressman:
This is just s line to tell you boy mueh I enjoyed your visit and
especially appreciated your willimmebe to give all the time that you do to
the problems in *hich sore of us ale 60 deeply intereeted.
I am greatly tempted to make that address 9t Chicago, and am pro-
pos:Ing to htve t further talk vitt( Prcfessor Gullook to-morrov in Cambridge
and decide then Mist to do about it.
ith best regards, I tin,
Yours sincerely,
Honorable
Aney Anderson,
House of Repreafitirenign-'541shinton, D. C.
HS. 7M
'CLASS OF SERVICE SYMBOL
Telegram
Day Letter
If
Blue
ht Message
Nite
it Letter
NL
of these three symbols
appears after the check number of
words) this is a telegram. Otherwiseits character Is indicated by the
symbol appearineafter the cheek.
R10EI6 ED AT
WESTE
EL
NEWCOMB CARLTON. PRESIDENT
UNION
AM
GEORGE W. E. ATKINS, FIRST VICE-PRESIDENT
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L1T7,1,::OF:TEWZOR
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T:TEV1ZOR E 7Y:
DECEMBER SEVE"TH HAVE ETIGLIGETVIE7.7 HERE
TD CHC.GO EVE-TPT'G DECMBER EI GTE H
7
SYDNEY ANDERSON
COMMITTEE ON APPROPRIATIONS
iRST DISTRICT
MINNESOTA
HOUSE OF REPRESENTATIVES
WASHINGTON
Novemberl28, 1922.
Hon. Benjamin Strong, Governor,
Federal Reserve Bank of New York,'
New York, N. Y.
Hy dear Mr. Strong:
Yours of the 27th is jst at hand, and I sincerely
hope that you will decide to ad)Iress the Farm Bureau Federation at Chicago.
1
1
I had a very dece4trip back to Washington from
New York Sunday night.
1 g eatly enjoyed being with you
and the opportunity to disltss matters of public policy
in which we are both intqested.
/Sincerely yours,
December 2, 1922.
My Dear Congressman:
The three bound volumes of the Hearings before the Joint
Commission of 1gricu1tural Inquiry have been received, and I an
grateful to you for this accession to my library.
'With kindest regards, and hoping to see you soon again,
believe me,
Yours sincerely,
Hono
United States Congress,
Washington, D. C.
M.314
February 20, 1925.
Dear Mr. Ancercon:
lia note will be presented to you by my son,
Philip G. 3trong, who is spending the week-end in
4a shi n8 ton acc.lompani ed by hiss
friend, kr. Milton.
I Lm anAious ths.t he should have the ,privilege
of meeting you, t,bd he may t,t1so desire A pace to the
gull cry of the House.
Shall indeed appreci%te any courtesy you feel
able to show him, and beg to remain, with warmest regards,
Sincerely yours,
Sydney snderixn,
HOLIBC
Pepresentatives,
Aa.t.lington, D. C.
SYDNEY ANDERSON
COMMITTEE ON APPROPRIATIONS
FIR r- DISTRICT
HOUSE OF REPRESENTATIVES
AO< NOw ,601-1(30
LIAR
WASHINGTON
February 27, 1925.
5 1925
Mr. Benj. Strong,
33 Liberty Street,
New York, N. Y.
My dear Governor:
Your letter of the 20th instant, introducing
your son, was presented to me by him and Mr. Hamilton
last Saturday and I was very glad to go with them to
the House and give them such insight into the croceedings as I was able to.
4
Unfortunately, I was leaving for Chicago on
Sunday and consequently was unable to offer to pilot them
around the city during their stay as I would have liked
to do.
I trust you are enjoying the best of health.
I shall be in 7ashington off and on most of the time
during the summer and would enjoy a visit if you can find
the time when you are here.
Sincerely yours,
vioe;-
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Earch 5, 15.
My dear Congreeman:
litany thank-1 for your kind note of February V. The boys
gore delighted with their visit to Washington, alIC1 especibily
ap.preciative of the courtesy which you and Senator Glass showed them,
and I w-,,nt to thank you for givine, tbtra
CC d.
Iwf.,..6inWa-hington this liClek,
to get to the Capitol for a °hat with you, but a i
a (lot, ra+ined t;Yort
o often the
case, I was engaged all dal, long Ind even every evening that I wac
there.
to that you are leaving Con. reee, I want to wish you
happines;.i and uocee in :la.tever you undertake to do.
If at any
time
you feel disposed to let me no something of your plane, and if in
coLneotion lth Lhena I t...n te ot any ervi
to you, I do hope you will
feel quite free to write me or give me opportunity to talk then over
with you.
I 5ha1l mi
seUng you in
shinton.
With kinueJt rtgards -al good wishes, I
Very sincerely yo;.rs,
Honorable Sydney Anderson,-
House of Representatives,
Washington, D. C.
e)
V
Room 14,
Washington.
March 6, 1q2L,
Mr. Benj. Strong,
33 Liberty Street,
New York, N. Y.
My dear Governor:
Your kind letter of the
contents noted.
h instant is at hand and
I am sorry you were unable to get in touch with me
while you were here as I would have enjoyed a talk with you.
As to my plans, I may say that I Was elected president of the Millers' National Federation, with headquarters
at 108 South LaSalle Street, Chicago, in September and will
devote all of my time to the work of the Federation from now
7e will also have a small office here, just where I don't
on.
know yet, but for the time-being I am holding my office in the
Capitol and will continue to until we make a definite change
sometime during the summer.
T. am a;oing to try to maintain my contacts with Members
of Congress and the various departments of the government, and
if at any time I can be of service to you in anyway, I hope
you will feel entirel free to call on me.
Sincerely yours,
President.
C,
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at.It/
GOVERNOR'S OFFICE
RECEIVED
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30113,21110c183FIROO 3D1.910
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OFFICE CORRESPONDENCE
DATE
To
FROM
SUBJECT*
is,44t-p7())
Apri
ff? ,
g
.e,r Mr. Congrostoran:
Immediately after the bearing e of the Youec Banking and
Currency Committee which I attended a year
o, I wait to London, whora
I laad agreed to appear before the oyd f:ommission whi oh was cooducting
an inquiry aeto the Indian currenoy, preliminary to the Plan of reorganitation whioh has now been adopted.
It govee optortur.ity to con-
traat the procedure of one of our c000greeelonel committeoo with tho
cedure of one of the formk1 c;oracti dOLIS of like chorooter which performs
somewhat si mil sr mufti ons for the Bri ti h G'ov rnatent
Zince my return
I have had a long and serious illnese which bee delayed my writing you;
in fact, I had not fully made up my mind to write you about the subjoct
of our committee procedure until 1 hod the good fortune the other day to
road your Godkin lectures on the subject of our Cotigros.s.
This letter is therefore explained by my interest in the committee work in Congress, where, I have frequently been called to make
atatemeoto, and my interest, in your little book, which I read with the
greatest sa.ti ef action -
It hos se.. .med to me in all cases where I have appeared before a.
committee of Congress that much time i
unsted and the opportunity to ob-
tain much valuable materiel mote miosed by the failure to have agenda in
the hands of both mombers of the corittee and those appearing before the
committee, so that the witneeocsi etataaenti would be coneecutive and
comprehensive on the one hand, and so that questions by the members of the
2.
4/29/27.
Ron. Robert Luce.
committee would be di.rected ftt the articul ar part of the subject being
ted1y Pt thoso heerings questions have been sekeo
di sou csod.
relating to ;ubeQtE °that than tho.x which were in my mind to discuss
and for which T hPd already mnde orers.rstion, thusint..-..,rructing the
narratiere, so that once or twice it he f; only bean resumed at a later
horring, sometimes a day or to deferred.
The contrast IrP 8 so marked at the hearings in London that T
lhould like to deseribe to you just how thee was oonducted.
ion comprised nine members, the Chsi rm
The Com-
being a my..aber of the ibuse
,lmons, four of the other ta(mibers being men of great oxrerience in
tho 6ubject woe di aeussed, and the other four being native, Indians
more. or tors interested in the 7:07.!ti.cal. asnoote of the subject.
to thi:; r I rat hi)nri.rtg
P.r5or
furni shed with a very soocifi c statoment, of
T
tho objects of ths
with the t,.;:rate, of the reference by ths body
creating the Corzession, sod with 9:n agenda laying out the s000s of the!
ousel on .
By aroointment T met the Chai rmen of the Comm', esion and
discussed the. methods to b
reek._
ursued at the hearings, which extended over
The subject was irranged to suit our own convenience.
there were three of uc
pp
As
ng ftt the erova t5e, .re anaciffed just
when questions would be asked, in order that consecutive statemonts might
not be interrupted, and whn the qullatioz reriod arrived., the Che,.1 man
first wmploted all the questions which he desired to ask and for which
he had made notes, and than In turn called on each so3mber of theoyam.f.s-
eion to ,ask his questIons for whleh he had made notes.
At th.i conclusion
Tbn. Robert Luce.
4/29/.`,21.
of these nine aeries of questions, fs. wmexchat more ireorra5j. discussion
took place when questions were asked promacuously, ail however di rectz.A
t.o the particular subject h-e bad juet disouseed, and under the
of the Chairmen there was no interrurtion until tie particular line of
questioning then under way had been coneluded.
The hearings only occupied the morning.
The following
morning at my hotel I received a. complete stenographic report in three
copies of the proceedings of the previous day.
This partioular hearing
involved a subct of great complexity; in fact, some very obscure monetary questions Indeed, and yet our fippearanGa, which involved hearing
three peopl e
was certainly concluded in lee than 111. f th tm requi red
for 'my on statement alone nt the hearing, in jashington, and..I confidently
balievo that the results in the more comet form in which they were eo
produeed were of greater value than when larded with a vast tenount
immaterial nud irrievaat di &cushion.
I boon you will receive this letter tt6 not -wr tten in any soirit
of criticism.
Congrese
If I ever have occasion to appear bfor; a commi.ttee of
gairi, I should like to have the priviaege of arranging for a
bearing of thin oluirectsr, to see how it affected the results, and if
there le any way by which hearings of that character, involving the di eousaion of teohnlosi matters, can be reduced to a morn standardized and
effective procedure, I should think the members of Congress would welcome
t.
There is altogether too much misunderstanding btwecn our Congreas and the nubile, and testecially the butaintes TAO): ic anyway.
I
have
Fon. Robert Luce.
4.
hnd occasion to Itper r, number of times and t,fter i'.:Eseit such expori.f.:noe
!,a1
'arra. see,d t bon evt r
mor-
th the, ()once: enti °us , pai netski mg wny 5r
.-hich almost tr. mcinbert of ,,7o1grest; go about their dUt.z.1442 tre all
prom, to treat them twith i strut, just ws they qr. prone to trett uo
th
otrust
Tf you could eptre the t;mc to write in sfAnething of your
.me about thi et I would greatly appreciate it.
Etill bettift, if you
ever in row "fork and cou3d fsvor ffie with advaore notice, I
c<3
111-0Ch the onrortunity of buying you
868
thc Bank, teke, lunch
:re r.nd hay:, sone personal dit4custion of this mstter.
-AU)
Tith rersonsl revrct.o, believe ma
P.:3spr,ctfully yours,
Robert
WPitht.111,
VaesPohusette.
BE4M
ivould
ROBERT LUCE
0'
13T(
'1ST. MASSACHUSETTS
iquttor ufErprryarntatiurvlit.O.
UM/a
asIlingtutt, B. T.
S
Waltham, Mass., May 4, 1927
Yr. Benj. Strong,
33 Liberty Street,
New York City
hy Dear Mr. Strong:-
You have addressed me on the subject nearest my
heart.
About my only keen ambition now is to give
some help toward making the legislative branch of government more efficient.
Studies earnest and prolonged have
convinced me that the gravest danger of democracy lies
in the,inefficiency of the legislative branch, its inability to keep up with the progress of society, its failure to grasp and handle the novel conditions so rapidly
brought by the march of invention and the swiftness of
social change in these unprecedented times.
I have found in my colleagues in the various legis,
lative bodies in which I have served for the greater part
of the last quarter of a century, no lack of patriotism
out a deplorable lack of technical capacity.
Their pur-
poses are admirable, but their methods quite inadequate.
You touch on one of the sore spots.
Committee pro-
cedure all along has made me wish some of my associates
could have profited by watching a meeting of one of the
Boards of Directors of our larger corporations, or a
small group of the same type of men met for some philan
thropic
purpose.
The trouble is that few legislators
ROBERT LUCE
13,
!sr. MASSACHUSETTS
ottsr
Erprtsrntatittrs 31i.#.
asilingtort, B. T.
State or national have been brought in contact with modern
methods of conducting inquiry and reaching judgments.
Two thirds of the members of the House, I suppose, are
lawyers and from small places.
The dilatory ways of the
legal profession are familiar.
Its training is directly
the oposite of that to be had in business.
I have wished we might do in our committee work precisely the sort of thing you tell me you found in England.
But I despair of any quick attainment of it.
Far several
years I have been trying to get the House to change some
of its rules, primarily for the saving of time.
The waste
of that precious article in the House itself is one of the
most grievous aspects of Congressional life to one who is
accustomed to strive for speedy results.
Yet the possi-
bility of self-evident gains makes hardly a dent on the
conservatism of those who control.
In the committee room the situation is worse.
One
of my colleagues on the Comm itte on Banking and Currency
freely admits that much of his questioning is,as he puts
it, "thinking aloud," for the sake of clearing up his own
mind, regaddless of what that process entails on the rest
of us and on the witnesses.
However, in spite of the pessimis0 that gets me
once
in a while, I mean to keep on talking and writing with the
ROBERT LUCE
1ST.
0
IST. MASSACHUSETTS
Wouse of Erprvarittatiors
asilingtott, 13 . 01.
hope that my appeals may find listeners in the next generation if not in this one.
It has been said that all of us
go through life with the ideas we formed in youth.
That
is probably the explanation of why legislative bodies, averaging say fifty years of age, are about thirty years
behind the times in most matters economic.
Perhaps if
my nbtions of what should be done to reform legislative
processes can get the attention of the college boys of today, they will bear fruit a generation later.
To that
end I welcome and am thankful for such information and
suggestion as you have so generously put at my command.
Sooner or later I shall have a chance to transmit it in
directions where it may have practical results.
It was a regret to me to learn of your illness and is
a pleasure to know of your rally from it.
Last year gave
ao.vel(
me. something more than a taste of the same thing, - a bad
attack of arthritis.
That with domestic affliction and
with conflicting committee duties, deprived me of the full
benefit of the hearings to which you contributed so much,
but I mean to study the printed reports of them.
you do not appreciate their influence.
Possibly
I chance to know
something of the interest they have aroused in circles
where men think and argue.
They will have been of impor'
tant use.
Very Truly Yours,
="N
;=4.
Washington, D. C.
Ir'ity 8, 1927.
My dear kr. CongrOman:
Reading your kind letter of Nay 4 struck a very responsive chord because the subject which I wrote you about, that is, the legislative branch of
our government, is no nearer to your heart than is the development of our
Federsil Reserve System near
to mine.
I have, in fact, eeen very much troubled in my cor n mind for a num-
ber of years by the ineffectiveness of cceamittee hearings, for it has been in
attendance at such hearings that I have gained most of my impressions about
our Congress.
They may all be summarized by stating that I am always con-
scious of being in the
presence of a group
of very earnest men, most of them
devoting themselves conscientiously to a great public service, whose efforts
fall short in results of what might be accomplished because of lack of a
businesslike and effective way of conducting,
in any critical spirit whatever.
limitations.
The
only
the
work.
This is
not
written
I can well realize the difficulties and
question in my mind was whether it might not be
possible to submit some simple
and practical suggestions for a change which
would be of interest to such men as yourself, and where by trial the advan-
tage of a
different method would prove to be so striking that it would lead
gradually to a change of practice.
I fully agree with what you say about the influence upon the entire
course of our lives which is always exercised by the ideas formed in youth.
They stand out the strongest, and we are so constituted that their influence
is the strongest.
It is not only because we receive them at the
able period, but because they influence us over a longer
become deeProoted convictions more than do the
impression-
period of time and
impressions
of later life.
Hon. Robert Luce
Cage 2
Washington, E. C.
May 8, 1927.
Your letter induces me to repeat my invitation to have you visit me
in liew York to see the Federal Reserve Bank and to meet my associates and to
take the opportunity for a discussion of the two matters in which we are both
very greatly interested.
I learned with great regret that you have just been through a year of
illness and sorrow.
h!y own has been far from a. pleasant one, for immediately
upon my return from Europe, I was stricken with pneumonia end for sever months
I have been gradually struggling back to reasonable health and strength.
I am ncw much better and able to attend cur semi-annual conference of the
kederal reserve bank officers.
With kindest regards, believe me,
Sincerely yours,
Honorable Robert Luce,
Waltham, Ness.
BS.Wc
But
@FedFRASER