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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 eci\-NEs ) 6(i /777` 2/ S. S peesh-A,7-/y7-/a4"-S L; Op Tames G. Strong, Fifth District Kansas HOUSE OF REPRESENTATIVES U. S. WASHINGTON, D. C. July 8, 1926. Mr. George L. Harrison, Federal Reserve Bank, New York City, N. Y. My dear Mr. Harrison: I have yours of July 7th and appreciate very much Governor'itrong's interest in my proposed amendment to the Federal Reserve Act. I have received a large number of letters from bankers all over the United States in reply to my letter of May 21st, many of which are helpful but running through practically all the letters received from the officers of the Federal Reserve Banks They talk of the harm is opposing criticism that looks very much like propaganda. that would come from having the Federal Reserve Board and System attempt to regulate prices of individual commodities such as wheat, etc. and often present he thought that there should be no "radical" amendment to the Federal Reserve Act, all of Which of course is rather hard to bear this hot weather. The further I study the question, however, and the broader my investigation the more positive I am that it is the duty of Congress to direct the Federal Reserve Board and System that it has set up, to use all their powers, so far as may be, to The constitution authorizes the coinage stabiliZe the purchasing power of the dollar. of money and the regulation of the value thereof. Can it be said that we are doing this when the purchasing power of the dollar decreases 50% from one decade to another? The people are entitled to a dollar that when borrowed or loaned in one decade will have the same value when the date for its re-payment rolls round and it seems to me that the argument of those conducting the Federal Reserve System that they ought not to be directed to use all their powers to such end because the people will not understand and criticize them, is very weak and I think they are going to be much more severely criticized if they oppose, as it seems quite plain they are now doing, the establishment of such a policy which Governor Strong and others in the System have testified they are doing their best to carry out. Based upon the large number of lettersreceived on the subject, I am sending out a second letter which will reach you in a few days, carrying new phraseology of the proposed amendments and as a result of the answers to these letters I hope to work out amendments that will direct the perpetuation of the policy, which the Federal heserve Board and System advise they are now endeavoring to carry out, without being subject to the charge of approving radical legislation, and I am looking to Governor Strong to lend me his able aid in doing so. I am sorry that the McFadden Banking Bill failed. I spent a large part of my time in trying to bring about an agreement between the Conferees but the propaganda sent out by the proponents and opponents of branch banking made the same impossible. Sincerely Yours, (Signed) James G. Strong. S:J July 7, 1926. My dear Mr. Congressman: you may remember that on June 8 I wrote to you to say that I had forwarded to Governor ^trong who, as you know, is in Europe, a copy of your letter of may 21 in which you ask for mavestions concerning your proposed amendment to the Federal Reserve Act. I have just received a letter from Governor Strong in which he has asked ma to write to you to say thEt immediately on his return to New York be wants to review the reoord of the testimony before the committee, and that tftor that he would like again to talk with you informally concerning your bill and the suggestions you have received if you oare to have him do so. am writing this merely to /et you know thtt he has the matter still in And and that he is anxious, as I knew he would be, to be of any help that he can La suppleraenting his testimony before the committee, or in reviewing with Tau the suggestions which you have outlined in your circular letter. I am sorry not to have seen you agrin before Congress adjourned, but I hone thst if at any time during the summer or fall you nay happen to pass through New York you will please net fail to let us know. ith kind personal regards, I am, Very truly yours, G. L. HARRISON .aa. James G. ntrong, .ouse of Representatives, adhington, D.C.. ...v., r tit-,f__14°e-k-*teil,,ttAtt, 117 Hon. . t. ,:oore 2 Thanking you for your lettlr, I bog to remain, - Very truly yours, Governor. Hon. Ilion F. loom; House of RoDreaoLtativos, Yeshinc:ton, D. C. 'ashington, E. C., October 24, 1921. -14 r'°"-In dear Congressmen: ao, . . Your favor of the 17th was delayed in reaching me on account of my illness. I have long believed that some well defined method of estnblishing contact between those who need workmen and those who need employment in this country should be undertaken by the Federal Government. The meetings 'which .1 attended in the Depertment of Commerce dur- ing the conference on the subject of employment convinced nB that one of the results of the conference would be a vigorous effort to bring, about that very thing. Plane to that end, I believe, are no being studied. right it not be desirable to have the whole subject dealt with at once rather than by separate procedure such as might result from the passage of the bill vhich you were good enough to send me. be Of course it would/pitiable indeed whre the veterans of the war permitted to suffer the hardships of a long period of unemployment if any means ore possible to avoid it, but after all the same applies to many other classes of people who nor need jobs and I should hope that a program of organizing the unemployment service to deal with the Whole problem could be undertaken as one whole subject rather than to deal with the ex-eorvice men separately. I am taking the liberty of writing Ur. Hoover to Whom you have no doubt likewise written. - , , November S2, 1927. My dear Congressman: with this I be to enclose to you a note of introduction addressed to Governor Norman. It hardly seems neces- sary to give it, but it will afford opportunity when you roach London for you to send it to him in advance so that he may name a convenient hour for a visit at the bank and not be unduly restricted as to time. With cordial regards, believe MG, Sincerely yours, Honorable Louis T. McFadden, CanLon, Pa. PS/RAH enc. 0 http://fraser.stlouisfed.org/ 11111111111 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, 0.2 - e -v-vAA7yr ' ZZ? agh QsosccnfW - 0.8z- ervi)-Lutt,ini tOtT.H, 1IP.11.1.ED ,C.11V.L COIAMI221014 01 Vet -aEr 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 ""c4 9 -A e /e A _.d I. February 23, 1922. PERSONAL My dear Congressman: It was a pleasure to have your kind note of February 22 this morning, and I am writing to assure you that the quiet evening we had together did me a great deal of good, and I only hope that we may have others just like it. Yours sincerely, Honorable Sydney Andersnn, Vo Joint Commission or United States Congress, lashington, D. C. Agricultural Inquiry, HOUSE ..Rs: SYDNEY ANDERSON. MINN.. CHAIRMAN MILLS, N. Y. OGDF . I-1 I. ES D Vi . FRI, FUNK. ILL. HA, AW.SUMNERS,T.0 JOINT COMMISSION OF AGRICULTURAL INQUIRY PETERG.TENM,CK,N.Y. --- IRV/NG S. PAULL, SECRETARY pEi RHN,ITED STATES CONGRESS SENATE MEMBERS: IRVINE L. LENROOT, WIS. ARTHUR CAPPER, KANS. CHARLES L. McNARY, OREG JOSEPH T. ROBINSON, ARK. PAT HARRISON. MISS. CLYDE L. KING, ECONOMIST OF NEW yoEWASHINGTON, D. C. May 20, 1922 MAY 2 5 1922 My dear Mr. Strong: I was talking the other day with a gentleman who seemed to think that credit was manufactured like nitrogen from thin air, the only difference being that he recognized the fact that the nitrogen could not be manufactured, transported and distributed without accumulating an over-burden of costs of services and materials, while he thought that credit could be produced, transported and distributed without cost. I found so much fault with his theory of credit and its distribution, that he finally asked me to tell him what I thought credit was. They say fools rush in where angels fear to tread, so I wrote down the following definition upon which I would like your opinion: Credit is the representation of a portion of (a) the capitalized realizable income of insurable property or services; (b) the prospective realizable value of property in process of marketing; (c) the anticipated realizable value of property to be produced or services to be performed, - expressed in terms of the medium of exchange. If you will give this definition the test of your own analysis and experience and let me know what you think about it, I shall be very much obliged. I am sorry to learn that you have been somewhat under the weather and hope that by the time you get this you will be entirely recovered. Sincerely yours, Hon. Benj. Strong, Governor, Federal Reserve Bank of New York. r "1" TT 4.. t..(31.130/". _ I i; 1 VG . . ' . 4 ny COV 4'1. x.rr, 47::8;101'$ . 6EC? , 1114 y /9,40 /LAY:714,1 '1,Vnt, .Z-Lt ! rot- 114 1. /j. uttlp.j ohr rr ler 2.kViSEA, VIIDELS21:41 c+ r'!J,4 ! .! C' . 133M1!..-.. ! !,4y, 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 ro 11.7li 4:y ,7 M f3gTIAILG14 711 Pi rit on; ;'0 4?- P 11- .8 i2 rr 761:11 trw Loti:rla r0 rgo Governor Strong page 2. posal involving some of the things already suggested, but really contemplating an entirely new installation of intermediate farm credit machinery. I suggested to them that the only possibility of getting any legislation was to agree on something and everybody getting behind it, even if it did not in every respect reflect their individual views, and that the constant injection of new ideas, particularly ideas intended to meet situations more or less local, could only result in muddying the waters, increasing the difficulties already existing in the Committee on Banking and Currency and consequently the difficulties of securing favorable action from it. The Committee on Banking and Currency is an They have a number of members exceedingly hard-boiled committee. who are very difficult to handle, exceedingly tenacious in their views and some of them excessively conservative. The immediate job seems to be, first, to agree finally upon the program, and, second, to inject into the Committee on Banking and currency a real desire to do something. I am enclosing herewith a list of the House Committee. If you know of any way of reaching these gentlemen, you can do some good by using a sharp prod. Sincerely yours, Chairman sqv HOME OF REPRESENTATIVES COMMITTEE ON BANKING AND CURRENCY Louis T. McFadden, of -,ennsylvania Porter H. Dale, of Vermont Edward J. King, of Illinois Frank D. Scott, of Michigan Adolphus P. Nelson, of Wisconsin James G. Strong, of Kansas Leonard S. Echols, of West Virginia Edward S. Brooks, of Pennsylvania Robert Luce, of Massachusetts Clarence MacGregor, 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 cgt11-.A.wnti 44, ',Tu0eLer.A. A001.0* ppop WWI vim° TaPPSL. I povic s; eAtetx Wftfirr Irobe VA5PoflrT sun-tail 1400401.0V egg 171140 p% U04 usux %on .01: me we Awcy Ion 4losic 41) evaitex. ggstirn rigs:goo TI? 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IA'ai014 D. c. 11.0.141,0 EA. -I CO14016E22 , 101P11. owIti .4.1re entois pe gsm 41fir , ,-0.r t'04 it eeei 9 * - COM/0221:Mot yeKicnrInnr. !vomit' 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. 1972 ... .. 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" SYDI-cl' ANDERSON COMMITTEE ON APPROPRIATIONS 3T DISTRICT .INNESOTA HOUSE OF REPRESENTATIVES WASHINGTON Lanesboro, Minn., August 1, 1922. Mr. Benjamin Strong, Federal Reserve Bank, New York, N. Y. My dear Mr. Strong: Your letter of the 13th ultimo addressed to me at Washington has just come to my attention upon my return from a short vacation trip in the Northern part of the State. I expect to be back in Washington about August 6th and it is probable that the development of some matters there in which I am interested will take me to New York very soon thereafter, when I shall be glad to dissect the queer bird to which you refer. Sincerely yours, avton- dki. .9 0 AUG 4 Heed COMMITTEE ON APPROPRIATIONS SYDNEY ANDERSON FIRST DISTRICT MINNESOTA HOUSE OF REPRESENTATIVES WASHINGTON November 17, 1922. Mr. Benjamin Strong, 470 Park Avenue, New York, N. Y. My dear Governor Strong: I returned to Washington late Wednesday afternoon, but I did not get around to the things which had accumulated on my I accordingly wired you today as follows: desk until today. "Am expecting to attend meeting of Academy twenty-fourth and will be glad to accept your invitation to dinner." This letter will confirm that telegram, as well as be an answer to your kind letter of November 12th addressed to MB at Lanesboro which has just reached me here. Unrest and unhappiness among the people of the country was perfectly obvious upon my return to Minnesota, but it found a far greater reflection in the election than any of us had anticipated. It is rather difficult to analyze and assign to specific causes which account for the psychological condition of the country4, but one thing is perfectly clear to my mind and that is that no political party has so far invented a method by which it can keep Congress in session eleven months in the year and continue its control of a majority of the membership, and in my opinion the inability of Members of Congress to get into their own districts to sense public sentiment, to explain the conditions under which we took control, and the efforts which have been made to successfully cope with these conditions are more largely responsible for the election results than any other single factor. I have a feeling, too, that the centralization of governmental activities in various commissions and other agencies at Washington, resulting in the expression of political and economic movements in figures of millions and of billions, incomprehensible to the average voter, have tended to dehumanize the aspect of things to a point which precludes appreciation by the average voter of either conditions or remedies. It seems hopeless to attempt to educate the public to an appreciation of conditions in terms of such magnitude, and some way must be found by which government and economic movements and their causes can be brought within the range of perception of the average voter. I don't know just how 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 CLASS OF SERVICE SYMBOL Telegram Day Letter Blue Night Message Rite NL Night Letter If none of these three symbols appears after the check (number of words) this is a telegram. Otherwiseits character is indicated by the symbol appeaiinp after the check. 0 GO 7T GT 0 *-G DC 2R 91 2A 67 L1T7,1,::OF:TEWZOR " [7_ 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, vioe;- `411,10Y8 -,111411 3VITAT143a351q351 "40 38U0;-, 140T0)1 \W v4E1401>1 _ - RAU 0, 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, `-ii/tAVA et/tc at.It/ GOVERNOR'S OFFICE RECEIVED rwly 95 le 30113,21110c183FIROO 3D1.910 0 oT ,31.0Ue / 7-7 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