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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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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..







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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.

0





http://fraser.stlouisfed.org/
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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,

Hq 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

/ go

through the

elements of the Federal Reserve
have dinner with yourself and

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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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

Honorable Sydney Anderson

world, but I think the moat illuminating is

May F5, 1922.

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

discovered

a certain currency, just as the bank note has to-day.

as it was unlikely that all

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.

They

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

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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,
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.

of New York




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


-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.

eaeee as hie.-0%.47093'0
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.







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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
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

Blue

ht Message

it Letter
If

Nite

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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DC 2R 91 2A

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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 his
s

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,




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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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GOVERNOR'S OFFICE

RECEIVED

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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

mor-

'arra. see,d t bon evt r

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.
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




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