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F.D. 12A.3 9 No 0 Federal Reserve Bank 617-Wevu District No. 2 Correspondence Files Division SUBJECT c. Ntis -re fru 74:q 770 /7.2.7 ?#113: R S v9010 pge4)141"' . 10 THE UNDERSECRETARY OF THE TREASURY. WASHINGTON December 7, 1923. My dear Governor: RIM sending you the enclosed copy of the Secretary's annual report for 1923. Vary truly yours, /Th ARRAED B. WI1MON, Und r SEicretary of tile Treasury. Benjamin Strong, Esq., Governor, Federal Reserve Bank, New York, N. Y. -t, ( C OP Y ) TEM UNDERSECIETARY 4' TEM IIMASURY WASHINGTON January 4, 1924. Dear Mr. Case: I have your letter the brokers of January 3rd in connection with who handle purchases of securities for Government account through the member banks. This is hibit of the smooth working and fair of handling Government purchases. a most excellent ex- distribution of your system We shall bear it in mind when Ile come to a reconsideration of this subject some tine this month. Very truly yours, (Signed) GARRARD B. WINSTON Garrard B. Winston, Under Secretary of the Treasury. J. H. Case, Esq.,' Deputy Governor, Federal Reserve Bank, New York, N. Y. COPY THE UNDERSECRETARY OF THE TREASURY Washington March 22, 1924. My dear Governor: Call money in New York has dropped to a very low figure. Of course, during the early part of this week the Treasury was partially responsible because it had an overdraft with the Federal Reserve Banks, but collections promptly reduced this overdraft, and last night we were out of debt. Liberty bond market, as you know, has been booming. The Our certificates, which we issued at 4 per cent and considered by kr. Case belcw the market at that time, are quoted at a good premium. I see by your daily letter that open market operations have been very active and your holdings are now $175,000,000 with some $6,000,000 purchased for future delivery. I would appreciate very much if you would let me know what you think of the general money situation, and particularly the effect of the investments in Government securities by the Federal Reserve Banks. Very truly yours, (Signed) Garrard B. Kinston, Under Secretary of the Treasury. Benjamin Strong, Esq., Governor, Federal Reserve Bank, New York, N. Y. sty 29, 194. Iiear i,anbe4sador: acknowledge your confidential note of day 13th with reference to the minimum amount which it is expected will be 1;e1 id in aold, cash or available funds on the interest coming due under the 3ritish Debt Funding Agreoment on dune 15th next. if prior to that date it should becwse convenient for your aovernment to make a larger paylat in Lecurities than is contemplated in your note, it would not incoLvenience the Treasury at this time, and the Treasury would accept less ti wt thirty days' notice f the amount of cash to be paid. Inforbotion of any change in yeur Govenisent's plans in this respect if received by the Treasury on or before Thursday, dune 12, 1,L4, will give Sufficient ti:e to arrange the Treasury's financing of June 16th without diaconvenience. -Very sincerely yours, .. oo-letary of tilt: Sir tsme Bayard, Ambassador traordinary and Plenipotentiary, British ,4;mbassy. Aishington, GBW/hwh C. YirA THE UNDERSECRETARY OF THE 4' ActKNOW I_EDOED WASHINGTON JIM 3 - 1924 R June 2, 1924. Dear Governor Strong: I enclose a copy of a letter which the Secretary has received from Mr. Wills, of the Federal Reserve Bank of Cleveland, in connection with the lease of certain space. Very truly yours, ct--7 JL Garrard B. Winston, Under Secretary of the Treasury. Ben:iamin Strong, Esq., Governor, Federal Reserve Bank, New York, N.Y. 1 enclosure 'VQO (,cfckl A!4W:1 F,141. le I ': ,.p8F 97 elf r FEDERAL RESERVE BANK OF CIEVELLUD. May 29, 1924. Hon. A. W. Mellon, cio Treasury Building, Washington, D. C. My dear Mr. Mellon: Chairman Adams, of the Republican National Committee, called at my office today and informed me that you were somewhat concerned about the effect of the Republican National Committee occupying offices in our building. He asked me to write you the circumstances surrbunding the occupancy, which he felt sure would convince you that the committee used good judgment in seeking and obtaining this location and that this bPnk, instead of being subject to criticism for making the lease, waald have been subject to just criticism if the transaction bad been refused. We are renting space to the public on the fifth, sixth and seventh floors of our building, to which there is separate access than through our banking room, there being a building entrance on SuperUor Avenue leading to the building elevators. It so happens that our building is situated across from the headquaxters hotel, and between the headquarters hotel and the public auditorium. The offices of the three leading newspapers in Cleveland are also in the same square with our bank. Consequently, it was very natural that the local Arrangements Committee shauld obtain space in our building for their executive and clerical force. I might say that this committee is a citizens' committee and is non-partisan in its make-up. Later, at the suggestion of this citizens' committee, the Republican National Committee applied to us for space for their clerical and accounting force, and we rented them space in the same manner as we had the local Arrangements Committee. The sole reason for their coming to our building was on account of its location, and both committees are meeting our requirements with respect to rental on a short time basis, which includes payment for partitions, etc. There are five other tenants on the same floor with the Republican National Committee. It was purely a business matter and was passed on by our Executive Committee and our Board of Directors, and we felt that, having the only desirable location for these people, we would have been remiss in our duty towards the interests of the bp** as well as the community in not renting this space, from which we are glad to receive an income and which is better suited to their needs than any other space in Cleveland. -2- hope that this information will dissolve any doubts that are in your mind. Sincerely yours, D. C. WILLS. WT. 15 75M-12-23 FEnERAL RESERVE BANK OF NEW YORK TELEGRAM WIRE TRANSFER DIVISION PRIVATE WIRE-INCOMING A 110BDBO WASHN 22 fi:DtVaTf,._ STRON FRIDAY IS CABINET 'DAY AND DOUBT AVAILABILITY FOR MEETING IN MORNING. SECRETARY WILL BE AT BILTMORE HOTEL TONIGHT WHERE YOU CAN PROBABLY REACH HIM 356P WINS-FUN )12:11 101111MMINIMOr WT. 15 75M-12-23 TELEGRAM FEDERAL RESERVE BANK OF NEW YORK .W1 -TR ANSF ER A2) ION PRIVATE WIRE-INCOMING 86EDX WASH N 1235T 3 STRONG titfiv 1,924 SECRETARY WILL SEE YOU AND YOUNG AT LUNCHEON HIS APARTM NI FRIDAY NEXT AT ONE THIRTY. ADVISE ME WHETHER THIS SATISFACTORY TO uAJW juNWINSTON AL iiESERYt wvi YOriti tat'. 144P WT. IS 75B1.12-23 TELEGRAM FFnERAL RESERVE BANK OF NEW YORK WIRE TRANSFER DIVISION PRIVATE WIRE-INCOMING 14ibux WASHN 105P 5 PENJAMIN STRONG /1 1,0' '"" JUN c SINCE YOUNG CANNOT BE HERE TOMORROW AN(D SINCE WE ARO'RET1 WELL CROWDED UP IN WASHINGTN ANYWAY, SECRETARY SUGGESTS04 HAVE MEETING THE WEEK AFTER CONVENTION. G B WINSTON 212P U0 W/1° THE UNDERSECRETARY OF THE TREASURY WASHINGTON A CK NO W LEDGED JUN 1 9 1924 June 19, 1924. My dear Governor: This is simply to confirm the meeting of Mr. Owen D, Young at a dinner to be given by Mr. Mellon at his apartment at 7:30 p.m., June 24th. I understand this has already been given your Secretary over the telephone. Very truly yours, Gar girl B. Winston, leer Se retary of the Treasury. Banjanin Strong, Esq., Governor, Federal Reserve Bank, Nam York, N. Y. .kSEI 81 640; ae10 alltIvoo oi \=.1-cla al aleT lo ,a,A16eem icteuit-z,ecis ale In aolieW, .1M1 AY1 brs ta,:e.bnaI ,4.11seliP ed o leurak P in &Ina ,g .dtkE aue, t.m.q OE:T in ,e4o4lelet eet levo.lzmnItleee Irroy. .a7n.eT: 0a0;taa1w .a rtrI8E6IT ecNt to TIP4610ke -toe' 71!" ps.7. 44TOld'a nlantsteE oTrinE evmeosZla/ebe: ,/oalevo0 .7 .7 ofloY we7 THE UNDERSECRETARY OF THE TREASURY WASHINGTON ACKNOW EIWIED . JUL 1 7 1194 July 16,1924. R Dear Governor: I have your letter of the 15th in connection with Mr. Saunders' interest in John Guilfoyle, formerly head of ing Division of the Bureau of Engraving and Printing. W13 head of that Division for over to run it properly. cipal sore-spot in to years. the EngravGuilfoyle He has been uneble From what I can gather it has been the prinan organization not too sound throughout. If we are ever to get our currency on a proper basis we must get the Bureau of Engraving and Printing efficiency. functioning with some degree of Since Guilfoyle couldn't run his Division there is nothing else to do but to get rid of him and try someone else. I, of course, have no interest in the matter at all except the responsibility which the Treasury has to see that its currency printing program establishes some margin of safety. We have none nor. Very truly yours, G U der Benjamin Strong, Esq., Governor, Federal Reserve Bank, New York, N. Y. rard B. Winston, cretary of the Treasury. oY91 AT3H3BeflaCIVIU - 3HT FIT :,-,--iLkAa511- ' 0TI/IttlE.;AV/ - .M1Q1,81 ijt :1 OM 70.0 144eCi ..gptkU 1!. ap.t.z.:,?:. J3.t udi ' : -voi6n,1 aii,1 'to bzJ yl'14;nr.,c,"1 0317c11.1v0 tid4 ni trtI bas 301Aurz fo.ExccI1ku0 'lc; 3 au atif:4 dad.911 naed .er7alqy-614 1P7o AC410iVIOjA44 10 K,.Y! 0,4 1,t "farf.tiy 1, an, a 4E17, se-pAe, 311'1 tY: . uott:g/ole,t brxtfoa oat ofti irfaixnaaR 114.1cItric qu_toa .Nto ,roati levn 1121 SW d r',.,,ti)J t1180'111 F fi Li turi Itg/' rid Lim gild nxxoliff Tt Y,700X0 11.03 ft 3, " II$J&W j -sig.ent), 4j/4!ç,. :t1 Vio _ate reOti ::-001( 't4", Al ISM a woe. Lt.rJ ri 5V . ai 14. arid 10 03a01J'6 t nced 14111'.4 *tit 7 THE UNDERSECRETARY OF THE TREASURY WASHINGTON August 7, 1924. 1974 My dear G vernot 71.1;. VT& receiVed_eraiii your secretary the book Taxable Capacity", by Stamp, which you recommended that I read for my education. I will be glad to do so. I appreciate your thought- fulness in remembering the book. Sincerely yours, Benjamin Strong, Esq., Governor, Federal Reserve Bank, New York, N.Y. A _. fiftWf1T, 04141,14 A ljG e 114 EY 8E07 THE UNDERSECRETARY OF THE TREASURY WASHINGTON PERSONAL Deco Dear Governor Strong: ,* ,DEC. liS 124 I have asked Mi*. Elting, Collector at the Port, to get in touch with you direct so that we can handle the arrivals an the 26th expeditiously and circumspectly. Very truly yours, rard B. Winston, retary of the Treasury. Benjamin Strong, Esq., Governor, Federal-Reserve Bank, New York, N. Y. THE UNDERSECRETARY OF THE TREASURY WASHINGTON Q-ui ek1/44 -44 CIA 0Q" e- < ti CD (7ebruary 24, 1925. My dear Governor: I am sending you under separate cover an autographed etching of Mt. Mellon. Mr. Mellon was a bit too modest to send these out himself, but I know that you will appreciate having a picture of the Secretary in the bank. Will you acknowledge receipt direct to Mr. Mellon. Very truly yours, Und rard B. Winston, etary of the Treasury. Benjamin Strong, Esq., Governor, Federal Reserve Bank, New 'Turk, N. Y. 9 31 slA GOVERNOR'S OFFICE RECEIVED ii,trg 1925 :go ACI(M g gl, / THE UNDER SECRETARY OF THE TREASURY 4VVLAUD GE.D WASHINGTON JUN " 1 1925 ry s May 29, 1925. Dear Ben: I have your letter of Lay 26th. The Special Delivery Section of the Post Office reports no trace here or at the New York office of that letter which I sent you. know what has become of it. Very truly yours, Benj. strong, Asq., Governor, Federal Reserve Bank, New York, N.Y. I do not 9 GOVERNOR'S OFFICE RECEIVED JUN -I. 1925 WT. 15 75M 12-24 TELEGRAM FEDERAL RESERVE BANK OF NEW YORK PRIVATE WIRE-INCOMING W 2U5 BDS WASHN 430P JUNE 2 GOVR PERSONAL HAS REGISTERED LETTER OF MAY 25TH BEEN RECD AND FULLY UNDERSTOOD WINSTON 540P ACKNOWLEDGED JUN - 2 1925 44. WIRE TRANSFER DIVISION *Is te' e - JUN AM RNOR'S OFFICE $25 fUEPi..,!-7,17: RAIN. THE UNDERSECRETARY OF THE TREASURY WASHINGTON 1..t . Ca r June 3, 1926. A CV NOW! ,E VIED JUN - El 1925 *.zs Dear Bent I have your letter of June 1st and have taken the matter up again with the Post Office Department. Please note that my house address has been Changed to 2026 R Street, N.W., telephone North 8081. Let me know when you receive this letter. Sincerely yours, Benjamin Strong, Esq., Governor, Federal Reserve Bank, New York, N.Y. tJa ismikmikT cto -San etiS tgeNsS evuti bite SeL nsit, to is:Jel toot svad-V .311t,03.114Bgea MMO $1103 ed,/ niaas bestrado mod sad aussbba eauoti TA Sad3 eSon sessiS .L808 Arso4 ezodgele$ ,.W.N ,SeentE J..' .4101.1 aids ev Lew" Dot nedw worai 801 SIPA " ,eruin y,leveoaie zucritt almat,Erad ,lowurfaD vnessa Lirsebeci .y.N otmoYweW Z711 THE UNDERSECRETARY OF THE TREASURY WASH I NGTON August 10, 1925. Dear Mr. Case: I acknowledge r ceipt of your letter of kk August 7th enclosin copy of letter from Governor Strong, giving the elgian financial situation. This is exceedin v interesting to me. Very truly yours, G rard B. Winston, IlnderOcrebary of the Treasury. Irmamivg::6) AUG J. H. Case, Esq., Deputy Governor, Federal Reebrve Bank, New York, N. Y. a THE LA FOLLETTE PROGRAM FROM A CASH STANUOINT. Apolitical platform states its principles in such a general way that it is somewhat difficult to determine the cost to the country of the application of those principles to specific legislation, Many planks in the program, however, carry with them by necessary inference certain items of expense or increase or decrease in revenue which can be fairly accurately estimated and their effect on the Federal Budget determined. The LaFollette platform, so far as it affects revenue, may be divided into planks (1) increasing expenditures, (2) decreasing revenues, (3) creasing expenditures, and (4) increasing revenues, de- The net result of these estimates applied to the Receipts and Expenditures of the Government would be the cost of the adoption by the country of the LaFollette program. Increased Expenditures. Public ownership of the Nation's waterpower and the creation of aNational super waterpower èystem supply light The value of existing waterpower plants in the country is estimated at $1,500,000,000. (Federal Power Commission). The Government has already spent $114,000,000 with $51,000,000 more necessary to complete the Muscle Shoals project. It is quite obvious that the expenditures which might be incurred if the Government entered into this field are practically limitless. In view of the result to Government finances of specific planks of the program, expenditures for this indefinite purpose are not considered. Public ownership of the railroads. It is estimated that the value of the railroads as of December 31, 1922, determined in accordance with legislation originally recommended by Mr. LaFollette, was $18,828,582,000 (Bureau of Railroad Economics) and to this must be added the capital 2 improvements to date. The LaFollette program demands the reduction of freight rates to approximately pre-war levels. Since the net operating income of these railroads in 1923, an exceptionally good year, wag only a little over 5 per cent on this valuation, money borrowed to purchase the railroads would not earn interest with decreased freight rates, and anything like $18,828,582,000 of Government bonds could not be financed. It is assumed, therefore, that immediate public ownership is impracticable, but that the plank does mean public operation. The cost to the Government of the 26 months of Government operation and the 6 months guaranty period was $1,696,000,000, or $636,000,000 a year. Congress). 68th (House Document No. 148 The cost of Government operation now, *hen the full effect of the increase in wages is felt, would not be lees than during the war, or, say, $636,000,000 a year. Legislation for the relief of the American farmer. There were various bills pending in the last session of Congress for this purpose, running from $1,000,000,000 (H.R. 733), through $500,000,000 (H.R. 566), and $305,300 ,000:(S, 185), to $200,000,000 (H.R. tins Assume.$200,000,000 as the cost. r% Postal Salary Adjustment Measure. (S. 1898). . The estimated cost of this bill was $68,000,000 per year. immediate cash payment of the bonus. The presentlaw is of the insurance type condemned by the LaFollette program. It will cost the Federal Government about $150,000,000 a year. The bill vetoed by President Herding, which also was an insurance bill in its main feature but with more liberal loan facilities, was estimated to cost about $250,000,000 a year for the firs years. average b of the 3 veterans* adjusted servide certificate under the existing law is $382, and the average face value of these certificates is $962. entitled is 3,038,283 men. The number (Conference Report to Congress). The LaFollette program does not consider the bill in the form vetoed by President Harding as satisfactory, since it is insurance. The extreme position, of course, would be the payment within the next few years of the face value of the adjusted service certificates in cad', about $3,000,000,000. If, however, it is irtended simply to pay the base of these certificates, which average $382, in the next two years, the cost would be $1,150,000,000 plus $65,000,000 for those who died or had small credits. This would mean $610,000,000 a year, less the estimated payment under the existing law of $150,000,000, an addition to expenditures of $460,000,000. II. Decreased Revenue. Drastic reduction of the exorbitant duties McCumber tariff legislation. rovided in the Fordne The Fordney-McCumber law increased customs revenues from $308,000,000 in 1921 to the present figure of $545,000,000 for 1924. A drastic reduction would probably bring the Governmentts revenues to what they were before the present law, a loss of $237,000,000. Reduction of taxes on individual incomes and leJtimate business, and immediate reductions IMOD moderate ircomes. To decrease individual income taxes by 50 per cent where the income is moderate, that is, less than $10,000 a year, and by 25 per cent where the income exceeds $10,000 a year, would mean a loss of revenue of $146,000,000 a year (based on estimates furnished the Finance Committee of the Senate). A reduction of 50 per cent on the income of all corporations earning less than $50,000 a year -- presumably -4.,. "legitimate business" -- would reduce revenue by $40,000,000. of Income - 1921). This would be a total loss of revenue of $186,000,000. Reduced Expenditures. III. (1) (Statistics Curtailment of the usomoomo now annually expended for the Army and Navy in preparation for future wars. The cost of the Army and Navy for 1924 (Budget - 1925) was $655,000,000, not $800,000,000, of which $59,000,000 was for non-military purposes, such as river and harbor improvements, the Panama Canal, and hospitals and soldierst homes, and $15,000,000 of the Navy's expenditures was for scrapping the naval vessels in accordance with the Reduction of Armament Treaty. There was therefore, $581,000,000 subject to curtailment. What constitutes "preparation for future wars" is difficult to determine. The citizens and reserve officers training camp, West Point, and Annapolis require less than $10,000,000. the Navy requires $57,000,000. The increase in To reduce the military forces of the country and at the same time to carry out the requirements of the LaFollette program (a) collection of accumulated interest on foreign debts; (b) revision of the Veribilles Treaty, and (c) international guarantee of public referendums On peace and war, is obviously impossible. Assuming, however, that these parts of the program are abandoned, the Army and Navy have pretty well been out to the limit, and if we are to have simply a police force adequate to our responsibilities as a nation, it is unlikely that further cuts exceeding $100,000,000 could be made. IV. Increased Revenues. Recovery of money on fraudulent war contracts. and. oil leas. .ts have been brought and diligently pushed on alleged war frauds, but -5 the Government has as yet been unable to obtain revenue from this source, and it is unlikely other counsel will be more successful. The revenue would be most uncertain and, if recoverable at all, long postponed. (2) Collect accumulated interest on the $11,000,000.000 owing us by foreign governments. Great Britain, .Fin/and and Hungary, owing us some $4,587,000,000, nearly one-half of this amount, have already adjusted their debts, and the interest is beirg received. interest due from those nations. There is no accumulated We are also being paid current interest on certain obligations received from the sale of surplus war supplies aggregating $437,000,000. Eliminating the Russian war debt of $187,000,000, the principal interest items consist of those due on the obligations of Belgium, France and Italy. worth about 6 to the dollar. dollar. France borrowed from us when the franc was It now requires about 20 francs to buy a When Italy borrowed the rate averaged 12 to the dollar; it is now 25 to the dollar. In other words, France would have to pay over 3 times and Italy twice in their own currency what they borrowed. is similar. Belgium's case It is quite plain these countries cannot give us better terns than England, and in all probabilities, not nearly as good. The past due interest on the British debt was funded, that is, added to the principal, and then the whole bears current interest at 3 per cent. If agreements similar to the British were made, there could be no accrued interest and the total annual current interest from these three nations would be $194,000,000. Under the Dawes plan Germany will not begin to pay the Allies as much as this sum and the British interest until after 1928. It is therefore probable that any agreement will involve a postponement of even current interest payments, and a most liberal estimate of additional revenue would be $100,000,000 - 6 - current interest from the three nations for the next few years. (3). Large increase in the inheritance tax rates on large estates. The estimated increase in revenue from an increase in inheritance tax rates from 25 per cent to 40 per cent is $12,000,000 per year, To raise the Federal tax rate to 75 per cent might increase revenue in the first year by $30,000,000 (based on 1921 returns, the latest published). 75 per cent Federal tax rate, plus the various State rates to which property of a decedent is subjected, plus the loss in realizing the cash with which to ,pay these taxes, would probably amount to more than 100 per cent of the estate, 75 per cent is, therefore, the limit, and such Federal taxes could not be levied without deprivizg the States of the revenue they have heretofore derived from this source. (4) Excess profits taxes. The excess profits tax when first levied in the war year of 1918 yielded $2,505,000,000 revenue. From that figure its yield steadily and rapidly decreased until the last year of its existence, 1921, it produced only $335,000,000, a reduction of about 87 per cent in three years, in the first year. Its probabl9 yield if re-enacted would be $350,000,000 T 7 SUMMARY A summary of the losses and gains to the United States Treasury from the adoption of the LaFollette program is as follows: Losses I. Increased Expenditures. (none allowed for) Public ownership of waterpower Public ownership of railroads Relief of the farmer Postal salaries Cash bonus II. $ 636,000,000 200,000,000 68,000,000 460,000,000 Decreased Revenue. Customs Duties 237,000,000 Individual and legitimate business taxes III, Gains 186,000,000 Reduced Expenditures. (1) Army and Navy IV. Increased Revenues. War contracts $ 100,000,000 (none allowed for) 100,000,000 Foreign interest 30,000,000 Estate tax 350,000,000 Excess profits tax $1,787,003,000 $580,000,000 580,000,000 Net Loss . $1,207,000,000 AO- -8 The best estimate today indicates a $25,000,000 Governmental surplus in 1925 but the President has insisted upon saving an additional $83,000,000 in expenditures making a surplus of $108,000,000, (President's address June 30, 1924). to the surplus after $1,099,000,000. Applying the net loss on the LaFollette program making the saving, would result in a deficit of In other words the LaFollette program is not within a billion, one hundred million dollars of being practical on present revenues. This program includes the collection of all taxes possible from large inheritances, and excess profits, the reduction of ircome taxes and customs duties, and is opposed to a sales tax. With such limitations on getting additional revenue the money could not be found to adopt the program and still to pay the ordinary costs of government. Since a government can only pay out from what it takes in and if it wants to spend more it must collect more from the people, it is obvious that the LaFollette program is not irtended for actual use. An application of the simp]e rule that two and two make four is the best test of a political promise. 0%1 THE ONDRR3ECRETAHY OF THE THEA.3URY W.A3HINGTON August 27, 1925, Dear Mr, Oases Mr, Ripolit Gliwio, Marge 410 Affaires of the Polish Legation, was in to see me toslw,i as to the attitude of the Treasury on credits to be extended to the National Bank of koland by the Podera,1 Reserve Bank of New York similar to those extended to the flank of T.Jacjand It is expected that negotiations on this matter will be begun in London with Governor -3trong, I told the gentlemeaa that Mr. Mellon would take no position with respect to such oredits until the matter had. been negotiated with Governor 3trig and the entire matter came to Lir. Mellon in concrete eliare 'Nhen next you are writing Governor 3trong let him know that the Treasury declined to take any position in this matter until it heard from him, for it is po3sible that the report may get out of Treasury approval, "I have known such things to happen with other diplomats, Very truly your s, (newt) Garrard. B. Winston, Undersecretary of the Treasury, J. H, Case, Laq,, Deputy Governor, Federal Reserve Bank, New York, N, THE UNDERSECRETARY OF THE TREASURY WASHINGTON ACKNOWLEDGED January 19, 1926. IJ ,;).0 B. S. Dear Ben: Just as a matter of record, I am advised by Mr. Hamlin that the Federal Reserve Board, by a vote of 4 to 2, determined to make no recommen- dation for the repeal of the 15-day provision for loans secured by Government bonds. The previous vote had been 3 to 3, the Governor changed his vote, and Dr. Miller spent most of the morning arguing that the Governor was inconsistent. Sincerely yours, Benjamin Strong, Esq., Governor, Federal Reserve Bank, New York, N.Y. CI Sr, /-% v0 A0c-:: ov..I 03 . THE UNDERSECRETARY OF THE TREASURY WASHINGTON February 12, 1926. 001/Q, 31 y Dear Ben: We are exceedingly busy, but there does not seem to be The Senate will pass the tax bill to-day very much change. or tomorrow. After maintaining a bill in fair shape until a couple of days ago, the Senate broke down and repealed every tax in sight. As it stands novrwe would be over 300 million dollars in the red next year. I never saw a more childish performance. It ,reminds me of some spoiled child who comes in and throws all of his belongings around and expects the nurse, in this case the House of Representatives, to pick them up and put them in shape again. Imagine a deliberative body with the reputation that the Senate is supposed to have legislating on a fiscal matter without regard to finance! We are going to have considerable trouble with the Italian settlement in the Senate. It looks like the Democrats would make a party issue of it and will, of course, be joined by the Radical Republicans. It seems to me poor politics, but it is politics. Ku Klux is at the bottom of it. The The ostensible purpose is to find some issue on which the Administration can be licked. As of possible I enclose a copy of a letter which the Secretary sent the Iinterest yesterday, which expresses our views of a failure to ratify President . the settlement. I also enclose a quotation from a letter from Fred -2- Sterling in London of a report he had from one of the Times correspondents. I lunched with Kemmerer and the Polish Minister the other week, and got Kemmerer's views on the Polish situation. They need about $20,000,000 to stabilize, but they apparently are contemplating borrowing $50,000,000 to $100,000,000. Kemmerer said he thought it was a mistake to borrow any money beyond their crying necessities, and I put in a word along the same lines. and Schacht. We discussed you, Norman, The Minister said that you were the only member of the triumvgrate whose views were sincere; that Norman looks at matters only from the standpoint of the Bank of England, and Schacht from that of Germany. My awn impression of Norman rather bears out this criticism, and, of course, it takes a long time for any that his motives are unselfish. German to convince us I feel that the strength of the situa- tion lies in the Pact that these men are intelligent as well as nation- ally selfish, and intelligent selfishness works for the end you are after-the fiscal stabilization of Europe. We sent the Greeks back. The Yugoslays are still with us. I think we can come to an agreement along a line which seems to me fair--the payment on the same basis as the Italian for the first 15 years, but with somewhat easier terms during that period, then to mount rapidly to a 3110 interest basis at the end of the 25th year. It is true -3- the country is greatly impoverished. Their total foreign war debt, if settled on the British-American basis straight, would not exceed $10,000,000 a year, and their share in German reparations is $20,000,000 a year. If the country cannot recover in 25 years, settlement is not worth much anyway. Their indebtedness to us is $61,000,000. Whether we can effect this settlement until the Italian matter is out of the Senate, I don't yet know. When Italy is through I think we can then approach France, and with that matter cleaned up there is nothing more to be done with foreign debts--at least for the next decade. A committee from the Federal Reserve Banks presented the Secretary yesterday the plan for a pension fund for Federal Reserve Bank employees. This, as you will recall, does not have the approval of the Board, but Mr. Mellon is in favor of it. It is proposed to arrange to have a bill introduced. I have heard nothing at all about ally-plans for myself. you come back good and strong. Yours sincerely. a-A.~41...40C* Benjamin Strong, Esq., Oasis. Hotel, Farm Springs, California2 enclosures. I hope 71 z5'.4247. 'Volpi said to him that the United States Government had a mistress, and like a true gentleman, although he did not bow to her in public places, he slept with her at night, and his mistress was called Wall Street; Parker Gilbert was put where he is to-day by Wall Street and not by the United States Government. Wall Street has recently formed an International Club, the members of which were Strong and Norman, together with a servant named Schacht, who is being given members' privileges. The Club wanted Volpi to join, but he refused until France was elected a member as well. The United States Government considered it necessary to collect the debts, but it was a very foolish and shortsighted policy, since what happens in reality is that when that Government makes an agreement, Wall Street immediately pumps back all the money into Europe by making enormous Italy settled, with the United States and immediately loans. obtained a large loan; and who knows -whether Italy can continue paying? In his opinion it is very.I/oubtful if England is going to get her ;A millions a year. A The United States believes she has a strongle-hold on credits, and for the time being she has, but given a little time the Allies must and will get together and cooperate successfully in combating this performance". February 10, 1926. Dear Mr. President: In connection with our discussion of possible opposition in the Senate to the Italian debt settlement, I should like to call your attention to some practical factors which are involved. Until comparatively recently, I think it has been the general impression in Europe that interAllied debts would be cancelled or in some way cleared against the German reparations. I think this was particularly true in Italy, where until Mussolini took charge the Government has let the people believe they would never have to pay their war debts. At one time aaso there was quite a respectable body of opinion in America that we should cancel these obligations. To dispel this belief in cancellation and to bring about an adjustment of the mar debts as commercial obligations there were three influences which, in my opinion, were persuasive upon our debtors. The first, and perhaps the strongest of these, was the belief that an international obligation must be met so that a debtor would retain its credit among its fellownations and in its next emergency be able to obtain financial aid. This is a little more selfish than the purely moral view that irrespective of future benefits one ought to pay one's debts. Once a nation, either through expediency or idealism, recognises the desirability of paying its debt, it is necessary that it come to a funding agreement with its creditor. It is quite obvious that none of our debtors could pay their debts in accordance with the terms of the obligations held by our Treasury, which are payable on demand. The debt has to be funded, within the capacity of the debtor, over a long period of years, and in order that its budget may be balanced and its currency stabilized, the debtor must know exactly how much each year it must pay out of government revenues in the satisfaction of the debt. In other words, not only must there be an extension of time for the payment of the entire debt, but the expendi- tures on this account for the next few years must be definitely ascertained. About a year ago we began pressing our debtors for set.. tlements. At about the same time, England announced its intention of restoring the gold standard. As an essential element in its pro- gram the London market had to be closed to foreign loans because such loans mould have meant a drain of gold upon England which would have made a maintenance,of the gold standard in its eatlier months uncer.. tam. There was onlione other large market for foreign loans in the world, the market in this country. As a matter of administrative policy it was determined to deny recourse to our money market by the debtor nations or their nationals until the nation negotiated a-settlement of its debt to the United States. These three influences which have brought about debt settle- ments are, then, the desire of the debtor nation to be able to say that it recognized its international obligation and agreed to settle within its capacity; the necessity for determination, particularly in the earlier years, of the revenue requirements of the debtor nation to meet its foreign obligations; and finally, the desire of the debtor nation to obtain new capital abroad for the stabilization of its currency and for the reestablishment of its industries. Assuming that the Italian debt settlement is not accepted by the Senate, I should like to consider what arguments can be presented to Italy which would influence it in negotiating with us a new and more onerous settlement. Italy came to America with a representative delegation and with a very thorough preparation of its facts. The delegation presented Italy's case to a bipartisan American Commission, composed of three members of the Cabinet, a Senator, two Representatives, and two members of the public. After thorough dis- cussion a settlement was arrived at which in the opinion of the American Commission fairly represents Italy's capacity to pay. The settlement was approved by you and was passed by the House of Representatives. If now the Senate failed to approve the settlement, I think it mould be obvious to the world that the reason was political and not fiscal. Italy, within its capacity, has met its international obligation in the view of the expert American Commission. Neither in America nor Europe would her moral Credit be hurt if then she refused to repegOtiate. No government could stand in Italy which undertook in a new settlement to pay more than the expert American Commission had -4-- said was fair. The Government, therefore, could safely assume that its budget was balanced if it provided on its books for the amount called for by the American settlement. The Italian Government has borrowed in the American market the $100,000,000 that it needed for Government purposes. The closing of the American money market now would simply mean that Italian industries and municipalities would go to the London market, which is now open to foreign flotations. It is my conclusion, therefore, that the only practical effect on Italy of a failure to approve the debt settlement would be that Italy 'mould be relieved, for the present at any rate, of any payments and no settlement more favorable to the United States would likely be made in the future, I have spoken of Italy alone because that is the immediate I feel that a failure to approve the Italian question now pending. settlement would render doubtful the possibility of an early settlement with France. le would certainly be placed in an undesiratle light in urope and we might retard the reestablishment in that Continent of sound fiscal systems. Here in America we can ill afford to hamper the customers which alone permit our large exports. Without a market to dispose of our surplus, our own prosperity would be threatened. Faithfully yours, (Signed) A. W. Mellon, Secretary of the Treasury. The President, The White House. 7 -444 "..X"-- SLA04, .9317.1. , HOTEL CHATHAM PARIS , etr-k- t-4 CHATHAMEL- PARIS et-,1 0-12,, ct_ I 3 C - -Of It-Cde et. JL r e r 'ecc, C. cL 7 tr'PL-4.-,^Ar, Cc,.4 C G-41, 6.2e C4ilA.,---.4..0,., io,i . ot,t j ......tw re..04.1t416-.4 I...e.....044............. 42'-(.1 o"Lt e"-e-et C.X" fri. q,71. C'"40'kret.", HOTEL CHATHAM PARIS CHATHAMEL-PARIS (3) eit - AtAgg,A, \ 1!>-,?.- A ( 'CC IttAca.. te,\X ftk 41ligraw' .4, C.r. ,aligagesk 4 e e 1 j il,sammwoa. fi) 1.! (04441 e-tr- THE UNDERSECRETARY OF THE TREASURY WASHINGTON June 22, 1926. Dear Ben: My guess that the Bank of France was not preparing any plan and do not want any plan has been confirmed by the report that I received authoritatively to the effect that the disagreement on the experts commission is on the part of the Bank's representatives on that commission. This is probably just a little more of the narrow viewpoint which to us is the most disturbing feature in the French situation. I understand that our debt ratification is in a rather bad way in Paris just now. The hardest thing to contend against are these volunteer Americans who tell France that she should not pay anything or that she might make reservations. Our Senate definitely will not ratify the agreement until France does and will not ratify any agreement with the reservations I have seen suggested making payments contingent upon German payments. The Finance Committee had Dwight Morrow before it all day Friday. I was asked to appear but did not go on the stand. The Democrats were trying to get some campaign material out of Dwight, but they were not very successful. In the course of his examination he said that his firm would be unwilling to loan money to France if it did not ratify the debt. He did not specifically mention credit. I feel, however, that our bankers will be slow to advance credits except contingent upon ratification, since the bankers might find it impossible -2- to sell a loan funding the credits. If I was to guess at the ultimate outcome, I would say that France will ratify the debt agreement without reservations. Any other course will prevent it attaining monetary stability and monetary stability it must have. Harrison came down the other day and the two of us went over your four letters on France and Italy and explained the general situation to the Board. I do not know how much they understood. With the excep- tion of Hamlin, I think the Whole matter is a bit over their heads. It was, however, easier to explain with Miller absent because we did the talking. Harrison and I had a rather peculiar mixup. He thought I was going to raise the question of India and for some reason I changed my mind and thought it inadvisable, and I had exactly the same idea about him. So we said nothing about India. When we left the meeting we straightened out our ideas, and to-day I saw the members of the Board who are in Washington, Platt, Hamlin, and James, and gave them a general description of the Indian situation. I laid stress on the fact that the entire matter had to be handled in the greatest confidence; that it might be a very serious blow to this country, and that in consultation with Mx. Mellon he had asked you to see if something could not be done for the good of this country. I put it this way, as you know, not because you did not have the initiative but because I thought it was more politic if it should appear you were acting under the suggestions of the Treasury. I also had a long talk with Senator Smoot and told him all you have done to protect his silver interests. The Secretary got a letter -3- the other lay from a Mr. Reynolds, Tice President of the United States Smelting and Refining Company, suggesting that the Administration make some protest Against India going to the gold standard. I wrote him that we were thoroughly aware of the situation but that in view of Indian politics the matter had to be handled with the greatest discretion. I got a reply recognizing the hint and asking me to call on him and Kelly and some other man if I was in New York. If he is in touch with Kelly I am sure that we will have no more fool suggestions. It would be a fine thing to have all the western Senators demanding that India do what we want than to. Congress is having difficulty in agreeing on adjournment. There is so much pork in the rivers and harbors bill and so much politics in the farm legislation that the two houses have not agreed. There is a possibility they mill be here all summer - a pleasant prospect for me. Our surplus this fiscal year will be about 390 million and our debt reduction about 850 million. Glancing over your letter of June 7th, I might add that it will be politically embarassing for your bank to advance a credit to France before France ratifies the debt. This is a delicate thing to handle because the French resent pressure. Sincerely, Benjamin Strong, Esq., C/o Bank of England, London, England. THE UNDERSECRETARY OF THE TREASURY WASHINGTON June 16, 1926. Dear Ben: I had two strenuous days in Paris after leaving you and I was glad to get out of the town because I was afraid that the sidewalks were getting so slippery if I walked around much I would fall down. Berenger wanted me to see Briand, and I naturally having nothing to say to him wished to avoid him. pointment. My early departure prevented an ap- I had an uneventful trip home with all of the Catholic prelates, landed without publicity and came right down to Washington. Newspaper men here, however, insisted on my saying something, and I enclose a report of the interview which appeared in the Times. not think I have hurt anything. I do Of course, the interview is much more optimistic than any of us feel, but I do not desire to take the attitude Houghton took with the papers on European conditions. Harrison is coming down tomorrow and we are going before the Board and tell them something of what is going on in Europe. I am told that both Cunningham and Crissinger are quite seriously ill and our nature may work out a solution of/difficulties on the Board. I understand that Wetmore suggested Dave Forgan as a possible member. Forgan has not been a particularly successful banker but he has, as you know, a delightful personality and probably some good Scotch common sense. I wish you would give me the names of some desirable members. We all sit around and criticize but it is awfully hard to make constructive suggestions. The recent primaries have been a bit disturbing to the Old Guard, but Mr. Mellon feels that it is nothing more than what usually happens in an off year. It must be remembered that the Senators now up for reelection were carried in on the high tide of the Harding vote. There has been a good deal of demand for farm legislation. think Mr. Mellon put the last nail in the coffin of the McNaryHaugen bill in a letter copy of which I enclose. I enjoyed being with you more than I can say and I hope that sometime again soon we can take a trip with a little less work in it. Take good care of yourself and do not come back until you are thoroughly rested. I think your subordinates are able to run the bank during the summer. Sincerely, Benj. Strong, Esq., C/o Bank of England, London, England. 2 enclosures. I THE UNDERSECRETARY OF THE TREASURY WASHINGTON July le, 3926. Dear Ben: I have just received your letter of July lot. has left Washington and sails tomorrow morning. Mr. Mellon He will tell you the situation over here, and is prepared to discuss your relations with the Board. not consider it. Miller. Complimented as I am by your suggestion, I would Life ie too short to spend it listening to Dr. The job I now have is much more satisfactory than the one you mention. I just want to let you have this information when you are talking matters over with Mr. Mellon. Things move so rapidly over on your side that it is hard to comment on them. I would be completely out of date when you got my letter. I have seldom seen such persistent effort on the part of any European statesman to put this country in wrong as Churchill's. He is gratuitous in his slurs on our harsh treatment of our debtors. I should like nothing more than the opportunity to tell the facts with reference to England's treatment of her relief del,tors and ours; of England's confiscation of private German property; of England's divvy with France of the Russian gold surrendered by Germany; of England's abstraction of our army costs paid by Germany.. I feel as you do that the burden of the English debt settlement to America is a bit unfair considering that England was the first to come up and set- tle. There may in the future come adjustment. an opportunity to effect a re- .2- I enclose a copy of a letter of Mk. Mellon's to Mk. Peabody; who took occasion publicly to criticize our treatment of our debtors. I purposely brought out England's situation as compared with the others so that the subject might be better understood in this country. But if Mr. Churohill believes that the American people will become more friendly to England by his stirring up antagonism, I disagree with him. As a matter of fact, England has treated no debtor as leniently as we have, and her grandstand play that she is willing to cancel what is owed her if we will cancel what she awes us, won't bear analysis. Who would not be willing to release a bankrupt debtor if one's creditors would release us in a like amount? it is. But I do think England is This may sound a bit wara tempered; making a mistake, and in her own in- terests ought to behave more friendly. Sincerely yours, Benjamin Strong, Esq., clo The Bank of England, London, England. 1 enclosure. TREASURY DEPARILI=, FOR Ika3LIATE R7M3AS2, June 14, 1926. Letter of Secretary of the Treasury Mellon to Congressmen Haugen, Dickinson and Anthony in response to their request for his views on one of the Agricultural bills. June 14, 1926. My dear Congressmen: In accordance with your request made on the occasion of your recent visit to the Treasury, I am submitting my views on H. R. 7893, as amended and now Pending in the Senate, providing for the establishment of a Federal Farm Board to control and dispose of the surplus of certain "basic agricultural commodities". The purpose intended to be accomplished by the bill is to raise the prices of wheat, corn, cotton, and livestock above world prices. A board known as the Federal Farm Board, for which is appropriated $250,000,000, plus $300,000 for inmediata expenses, is to arrange with cooperative associations and other dealers to purchase, store or export the surplus of these commodities beyond the demand for home consumption. The taking of this surplus off the home market is to raise the price in the home market. The surplus is to be sold abroad even if the foreign price is belo7 cost. The loss on the storage, or on the sale of the surplus abroad, is to be paid in the first instance out of the fund appropriated from the Treasury. It is proposed to reimburse the fund by a.fee ("equalization fee") or tax on all of these commodities sold by the farmer. In other words, it is hoped to raise prices on part of the crop by taking a loss on a smaller part of it; and the method by which this is to be done is to divide the crop into two parts - the larger to be sold to American consumers at high prices and the smaller part to be sold abroad cheaper prices or even below the cost of production. to foreign consumers at The loss incurred in giv- ing this advantage to foreign consumers is to be covered by money from the Treasury and from the higher prices paid by American consumers.. ame It is, of course, apparent at once that the effect of the bill will be to increase the cost of livirg to every consumer of the five basic agricultural commodities in this country. The %qualization fee", while it purports to be paid by the farmer, will be included in the increased price of the commodity and will, in the end, be borne not by the farmer but by the consumer. The net result will be that the American consumer will pay the increased domestic price which of necessity must include the "equalization fee" or the loss incurred in selling the surplus abroad. We shall have the unusual spectacle of the American consumirg public payirg a bonus to the producers of five major agricultural commodities with a resulting decrease in the purchasing 7ower of wages, and at the same time contributing a subsidy to the foreign oonsumers, who under the proposed plan will secure American commodities at prices below the American level. European labor could purchase American :?roducts at a lower price and could live more cheaply than AmericaA labor. Foreign industrIal costs would be lowered and the foreign competitor assisted, in underselling American products abroad and in our home market. --I can see no permanent relief for American agriculture through subsidizing foreign competition; and, that, in my opinion, is what the bill, if it becomes a law, will do. The so-called "equalization fee" is in reality a tax on every bushel of wheat or corn or head of live stock or bale of cotton sold by the farmer in this country; and the amount of the tax is to be fixed, levied and collected by the proposed Farm Board. The constitutionality of such a tax, fixed not by the Congress but by a board, imposed in such a manner and for such a purpose, is at least extremely doubtful and might render ineffectunl any legislation embracing such a feature. But in any event there would seem to - 3 be insuperable difficulties in collecting such a tax. The bill provides that the Board may require every person engaged in processing or in purchasing any of the five basic commodities "to file returns under oath and to report, in respect of his processing or purchasing of such commodity, the amount of equalization fees payable thereon and such otherfncts as may be necessary for the payment or collection of the equalization fees; to collect the equalization fee from the producer and to account therefor; and to issue to the producer a serial receipt for the commodity". Every person who fails to account for such "equalization fee" shall be liable for such fee and to a penalty of one-half the amount of such fee. It is necessary only to remember the multitude of transactions which take place each year in the sale of cotton, corn, wheat, cattle and swine, to realize how vast would be the machinery necessary for the auditing of such returns, the collection from the farmer of such a tax and for its transmission to the "equalization funds" in the hands of the Farm Board; The intricacies of the income tax and prohibition enforcement appear simple by comparison. That would be the net result of all this effort? In the end, the fanner might receive, if the plan worked successfully, a small increase in the price of his commodities. But in order to accomplish this result, the bill sets up a cumbersome machinery, involving not only the fixing of prices by the Farm Board, but a control on their part over the agricultural industry and a power in levying taxes never before given to any board or agency of the Government in this country. The bill imposes upon the Farm Board the responsibility for determining what is a "fair and reasonable price" for the five basic commodities and their food products. It is provided that, in contracting with cooperatives or cor- porations or other dealers in these commodities, no payment of losses shall be .made by the Board unless the purchase is made at a price which, in the opinion of the Board, is not in excess of a fair and reasonable price; and no sale shall be made in respect of which a loss would be sustained unless such sale is authorized by the Board. Furthermore, it is provided that advances by the Board shall be payable on demand whenever the Board finds "that the market price in the principal markets of the Unitad States for the basic agricultural commodity, or its food products, in respect of which the advance is made, is in excess of a fair and reasonable price". Under these provisions it would be necessary for the Board to enter into or approve a vast number of contracts, nocessitating the employment of an enormous bureaucratic staff of government lawyers, auditors and inspectors. From a practical standpoint, I am unable to see how any Board, no matter how able or efficient, could possibly arrive at a proper determination of a "fair and reasonable price" and the many other complex questions assigned to them. This is particularly true in view of the variety in quality and standards of products which must be dealt with under the terms of this bill. The purchasers and processors of farm commodities are to be reimbursed for any "losses, costs and charges" sustained in removing the surplus from the market and maintaining in this country a price in excess of world markets This is in effect a guarantee by the Federal government against loss from storage at home or sale abroad. As our past average export alone of the five basic agricultural commodities has been about $1,500,000,000 per annum, it is possible to got some idea of the extent of financial liability which the Farm Board or the Government will incur under the guaranty provisions of In the end it seems to me that the bill will defeat the very purpose which it seeks to accomplish. The chief obstacle to farm prosperity is avowedly the disposal of the surplus. The payment of a subsidy or the levying of an "equalization fee" or the artificial increase in any other way of the price of farm commodities, will inevitably result both in stimulating further production on the part of the farmer and in decreasing consumption on the part of the buying Public, thus bringing about a still greater surplus of products% Furthermore, if a subsidy of this kind is given to five agricultural commodities, the Government could not logically refuse to give the same treatment to the textile, boot and shoe, coal and other industries which are finding some difficulty in disposing of their surplus products. In general a surplus is taken care of by a decrease in production or by an increase in consumption4. The natural result of the proposed bill wilt be to increase production through higher prices for the particular .commodities dealt with in the bill, and for the same reason to decrease demand. That is, the bill proposes to correct an economic condition by ignoring two of the most powerful economic laws, .vhich in the long run must control. It seems to me that we can advance further in aid to the farmer if we try to work with and not against the teachings of experience. - 6 - A way out of the difficulties lies in the elimination of waste between the producer and the consumer, so that the farmer may receive a higher net rrice and yet the ultimate consumer may not have to pay more. This purpose can be approached through more orderly marketing and cooperation. The second way is to increase the demand for our surplus and thus raise the price, not to our consumers alone but to the world. Farming differs from most industries in that the output largely fixes the price, Whereas in manufacturing the price largely controls output. For this reason, it would seem desir- able to find some method not, only of adjusting production, but of distributing and marketing products in the most efficient manner possible. Perhaps cooperative marketing to the extent that it can be developed, may help to solve the farmer's difficulties. There are, of course, many inherent weaknesses in cooperative marketing, particularly when great and widely spread industries, such as cotton, wheat, corn and livestock, must be organized. But it is along this line, in working out the best methods of distributing and marketing, that the Government can be of most help to the farmer. - 7 - Same of the measures which have beer introduced for this purpose and are now pending in Congress attempt to place upon the Government too much financial responsibility for organizing, capitalizing and assisting business operations of doubtful merit. If public funds are to be employed, the same care should be exercised as muld be taken by the average business man in using his arn capital. They should not be thrown away as a bonus or subsidy to promote enterprises which could never succeed on their economic merits. I believe there is a large field for the improvement of our farm conditions in the improvement of world conditions. An increased demand abroad betters prices here without throwing the entire burden, as the bill proposes to do, on our own people and in favor of the foreigner. War increased production in America but the after effects have left many of the countries of Europe with currencies of rapidly diminishing external purchasing power. customer. Europe is indeed our best It is in the real interest of the American farmer that the American Debt Commission has negotiated settlements with the debtor nations clearly within their ability to pay. This is but one step in the restoration of monetary stability but it does represent a great constructive work and one which the Administration has now practically concluded. America's further aid cannot be governmental but depends upon the intelligence and courage of our bankers and investors in giving assistance to those countries willing to help themselves with a. sound Program of stabilization. I feel confident that within another year many of the nations whose buying from us is now paralyzed by a demoralized currency will have recognized and adopted plans for permanent VP' 8 -- restoration of stable money. With this reform the purchasing power of Europa should increase and with it the demand for, and the price of, our surplus. In conclusion, I do not believe the principles contained in the bill now under consideration are sound or that the plan proposed workable or "beneficial to agriculture. would prove either The unfortunate condition in which many American farmers find themselves today will be aggravated, not improved, by unsound legislation. We cannot successfully oppose fundamental economic la7s. Sincerely yours, A. W. mELLaY Secretary of the Treasury. Hon. Gilbert N. Haucen, Hon. L. J. Dickinson, Hon. Daniel E. Anthony, Jr., House of Representatives.. July 14, 1926. Dear Sir: By reference from the President, I have your letter of June 30, 1926, urging cancellation by the United States of the so-called war debts. Your arguments are confused, but I believe your points can be fairly summarized as follows: As a legal proposition, taking into account the message of Presidentr Wilson, the debates in Congress and the First Liberty Loan Act authorizing advances to our Allies, the United States made a gift and not a loan and neither party expected repayment. As an equitable proposition, advances were made while the Allies were fighting our battle for us and before we could put an adequate military force in the field, and, therefore, the loans represent part of the cost to us of the war and should be cancelled. As a charitable proposition, America being wealthy and prosperous and the European countries being poor and heavily taxed, we should in the interests of humanity, cancel the debts. The initial authority for the advances to foreign governments occurs in the First Liberty Loan Act, passed just after we declared war. As a lawyer, you know that the interpretation of legislation unambiguous on its face is determined from its language and not from expressions in debates on the floor of the Congress. But even ignoring this rule of construction, a reading of President Tilsonls message and of the debates showd no ground for your arguments. The most that can be said of any expression you quote is a willingness on the part of the speaker to make the loans even if our - 2 -- debtors may not be good risks. of the advances. This is far from an intention to make a gift Lot us, however, consider the Act itself. The law is de- clared to be "for the purpose of more effectually providing for the national security and defense and prosecuting the war by establishing credits in United States for foreign governments". fhe A reading of section 2 is convincing that loans and not subsidies were intended. The United States is authorized to purchase at par the obligations of foreign governments. As to rate of in- terest and other essentials the foreign governments' obligations are to have the same terms and conditions as United States obligations (Liberty Bonds) issued under the authority of the Act. Arrangements are to be made for pur- chasing the foreign government obligations and for the subsequent payment thereof before maturity. If United States bonds are converted into bonds bearing a higher interest rate, the obligations of foreign governments are likewise to be converted. In section 3 of the same Act, the Secretary of the Treasury is authorized to receive on or before maturity payment of the foreign government obligations; to sell the obligations at not less than the purchase price, and to apply the proceeds of any payments made on account of the obligations to the retirement of the debt of the United States. It is clear that when the advances ware made to our Allies they knew and we knew they were loans, not gifts. From the time of the original advances to date no responsi- ble authority in the United States Government has suggested cancellation, and each of our debtor nations, except Russia, has recognized the debt created by the advances and has offered to pay. The only question for discussion in each settlement has been the extent of the capacity of the debtor to make payment of an acknowledged liability. Your second proposition is that the Allies held the line with men until we could deliver an army and, therefore, cash advances made during this -3- C period by the United States were our contribution to the general cause of Le- the war and should- be cancelled. I shall not dispute with you the exact date when we became an effective force on the western front nor as to the time or extent of our service at sea. We will assume America as you infer contributed nothing military or naval to the common cause but only gave financial support. Even then you will have to admit that advances made to our Allies after the Armistice, when the war was over, cannot be considered as a contribution pending effective entry into battle or as saving American lives. We can eliminate at once, therefore, loans made entirely after the Armistice to Finland, Esthonia, Latvia, Lithuania, Poland, Czechoslovakia, Hungary, Austria, Armenia and Rumania. The Allies to which we did make ad- vances while the war was on are England, France, Italy, Belgium, Serbia and Russia. As the figure,' I shall give will show, if we admit your argument is sound, England alone is concerned. The debt settlements have been negotiated on the basis of the capacity of the particular debtor to pay. as called for by their terms. Nona could pay its signed obligations Accordingly, payment of the principal had to be extended and the period of 62 years set in the British agreement has been followed in all other agreements. If the debtor nation paid the United States a rate of interest on the postponed installments equivalent to the cost of money to us, we would receive in present value payment of the full debt. Since, however, such an interest rate is beyond the capacity of any of our debtors to pay, the United States has, of necessity, accepted loss than the full value of the debt to the extent the interest to be received under the settlement is below the cost of money to the United States, now about per cent. 4 Looking at the matter from the standpoint of the debtor nation, the debtor has received a concession in its debt to the extent the interest to be paid by it is below the cost of money to the debtor. The obligations - 4 taken by us from our debtors carry the interest rate of 5% per annum. Since ,..... this rate is less than most of the debtor nations now have to pay for money, the rate of 5% is certainly a fair measure of the real burden put upon them by the settlements. Let us see what relation the burden of our debt settlements bears to our loans after the armistice. In this way we can determine accurately real contribution in money to the joint cause of the war. In the case of England, post-armistice_advances with interest amounted to $660,000,000, and _ _ . the present value of the entire debt settlement is $3,297,000,000. It must illour ba remembered that England borrowed a large proportion of its debt to us for purely commercial as distinguished from war purposes -- to meet its commercial obligations maturing in America, to furnish India with silver, to buy food to be resold to its civilian purJulation,and to maintain exchange. Out loans to England were not so much to provide war supplies as to furnish sterling for home and foreign needs and to save England from borrowing from its own people. Francois after-the-war indebtedness with interest amounts to $1,555,000,000. The settlement negotiated by Ambassador Berenger with the American Debt Funding Commission has a present value of $1,681,000,000. Belgium's post-armistice borrowings with interest were $258,000,000, and the present value of the settlement is $192,000,000. In addition, Belgium has a share of the German reparations sufficient to pay her prearmistice debt to America, With Italy the situation is similar. Its post-armistice indebted- ness with interest is $800,000,000, and the present value of its debt ment is $426,000,000. It is the same as regards Serbia. settle- In view of these facts, in what respect do you still believe America has been unfair to its Allies? - 5-- The statement is made in your letter that the French debt settlement takes annually about 60 per cent of the German reparation payments which France is to receive. I believe you are not correctly informed. France, in addition to reparations already received from Germany, is to be paid under the Dawes Plan 52 per cent of a maximum reached three years from now of 2,500,000,000 gold marks ($625,000,000) after certain charges, about $300,000,000 annually. The maximum annual payment required of France under our settlement is $125,000,000 reached after the 16th year. I think you will find that the reparations receivable from Germany by Belgium, France and Italy are more than the payments those nations have agreed to make on their indebtedness to both the United States and to England. I come now to your third proposition: that to preserve our selfrespect and retain the affection of fcfreign nations for America we must as a charity cancel the debts. A Creditor is never popular, but a debtor without credit is not in an enviable position. attitude when first of all others i Englandls prompt and courageous' sought a settlement of its debt seems to me to have been rewarded in her present sound financial position, a rock in the turbulent seas of monetary instability now washing over the other allied nations. Are you so sure that your policy of cancellation will mean a happier future for a world which will enly continue to trust those who keep a promise once -made? When cancellation of debts is viewed from the standpoint of the United States you fail to recognize that the Debt Commission, the President and the Congress act not in their individual capacities according to sentiment, but as trustees for those whom they represent, the American people. If these forein debts are cancelled the United States is not released from its obligation to pay the vary bonds which were sold to our citizens to make the advances to the foreign governments. We must collect through taxation from our - 6 - people if our debtors do not pay to us what they can. You call this a "specious reason", but nevertheless, again as a lawyer, you must know the duty of a trustee. Ware these trustees as certain as you seem to be that their cestui aai trusty. the American people, demand a cancellation of the debts, it is within the province of popular government to carry out that mandate. But neither generally from the people, nor in the press, nor at all from the chosen representatives of the people in Congress has cone this demand. I have, as irrsr_e you, and every other good citizen, a profound sympa- thy for the countries suffering from the after-results of the great war which we in America have to a large extent escaped. But I feel that a recognition of their exterrvl obligations by the EnroT,ean nations and an undertaking bravely to meet them within their capacity as each country has done, is a moral force of great service to permanent prosperity in the world. agree with you that England is on the edge of destruction. I can not It is most sound of heart, as its recent solution of a general strike has shown to all. Other countries are in monetary difficulties, but the very acuteness of the disease has brought a clear understanding of the causes and of the proper remedies. Dark as the financial s1.now appears, I believe Europe is to-day closer to a permanent sound solution of its economic troubles that at any, time since the war. The danger is there, but with it the courage to fight. despair of Europe. Very truly yours, (Signed) A.W. MELON Secretary of the Treasury. Frederick W. Peabody, Esq., Counsellor-at-Law, Ashbarnham, Massachusetts. I do not July 16, 1926. Dear gr. Crissingart Early last spring a situation arose which was fraught with great danger to the mining industry of the United States and which also threatened to depreciate the value back of an important part of our currency. A political movement was started in India for the aaoption by India of the geld standard and a Royal Commission, consisting of Englishmen and Indians, began holding hearines in London. i knowledge of the possibility of India's departing from silver currency would have seriously depreciated the value of silver and if India dtd actually go to a eold standard we might expect permanent cheapening of silver,. This would affect not only the silver mines but most of the copper, lead and zinc mines in the United States and with them the smelting industry. The Treasury vas particularly in- terested because it holds nearly 500,000,000 silver dollars. Any publicity was then and-still is to be avoided. I did not feel at that time free to discuss this subject except with those who must be used. Informal request was made for American testimony at the hearings, and I asked Governor Strong to make the best presentation he could to the Royal Commission and to protect the Treasury and American interests. I have been informed that Mr. Strong's testimony and that of the ex- perts' he employed at my suvestion lure effective. The expenses in this matter aggregate *13,883.35, and I have asked the Federal Reserve Bank of New York, which thus incurred the ex- pense, to charge the some to Fiscal Agency ExpensesNow-reimbursable. This letter is to advise you of the charges on the books of the Federal Reserve Bank of Kew York. Mr. Winston, who I understand has already spoken informally to the meMbers of the Board on this sublect, will be 77lad to give you any further information which you may desire. Very truly yours, pubso,)A. Jena Secretary of the Treasury. Hon. D. R. Crissinger, Governor, Federal Reserve Board, Washington, D. C. 01116)&1 TipAi, WAA44-- - COPY July 15, 1926. Dear Mr. Crissinger: Early last wring a situation arose which was fraught with great danger to the mining industry of the United States and which also threatened to depreciate the value back of an important part of our currency. A political movement was started in India for the adoption by India of the gold standard and a Royal Commission, consisting of Englishmen and Indians, began holding hearings in London. A knowledge of the possibility of India's departing from silver currency would have seriously depreciated the value of silver and if India did actually go to a gold standard we might expect permanent cheapening of silver. This would affect not only the silver mines but most of the copper, lead and zinc mines in the United States and with them the smelting industry. The Treasury was particularly in- terested because it holds nearly 500,000,000 silver dollars. licity was then and still is to be avoided. Any pub- I did not feel at that time free to discuss this subject except with those who must be used. Informal request was made for American testimony at the hearings, and I asked Governor Strong to make the best presentation he could to the Royal Commission and to protect the Treasury and American interests. I have been informed that Mr. Strongts testimony and that of the experts' he employed at my suggestion were effective. The expense3in this matter aggregate t175,687-35, and I have asked the Federal Reserve Bank of New York, which thus incurred the expense, to charge the same to Fiscal Agency Expenses - Non-reimbursable. 2 This letter is to advise you of the charges on the books of the Federal Reserve Bank of New York. Mr. Winston, who I understand has already spoken informally to the members of the Board on this subject, will be glad to give you any further information which you may desire. Very truly yours, (Signed) A. W. Mellon Secretary of the Treasury. Hon. D. R. Crissinger, Governor, Federal Reserve Board, Washington, D. C. 0 THE UNDERSECRETARY OF THE TREASURY Washington July 20, 1926. Dear Mr. Jay: With reference to Mr. Mellon's letter to Governor Crissinger covering the expenses of the silver inquiry, I am advised that the Board to,lay adopted a resolution the substance of which is that the letter was received and read, that there was some discussion as to the amount, but it was decided that the matter was entirely within the discretion of the Secretary of the Treasury. I think thie is satisfactory. Very truly yours, (signed) Garrard B. Winston, Undersecretary of the Treasury. Pierre Jay, Esq., Federal Reserve Agent, Federal Reserve Bank, New York, N.Y. Ambassador Berenger, of France, Is Here Shown Signing the French Debt Agreement, and the signatures Are Those Of the Other Signers of the Agreement. Secretary Mellon Is Shown Seated at Ambassador Ilerenger's Right, and Undersecretary Winston at His Left The Undersecretary of the Treasury While the Secretary of the Treasury, Mr. Mellon, Is Abroad It Is His Right Hand Man, Garrard B. Winston, Who Commands the U. S. Treasury tangled financial condition in which so many European nations THE themselves today inevitably infind ment and for his untiring and successful efforts to reduce the tax burden and to evolve a better balanced tax system. The third man to whom the country is indebted for the smooth running of its governmental finances is the Undersecretary of the Treasury, Garrard B. Winston, of Chicago. Mr. Winston is the secretary's right-hand man, in whose By H. 0. BISHOP vites comparison with the smooth manner in which our Treasury at Washington is conducting the vast financial operations of the United States government. At a time when Belgium is forced to place dictatorial powers in the hands of her king and to make a battle for the franc ability and resourcefulness the secretary has the most as determined as the heroic stand which she made in implicit confidence. They make a great combination. On 1914 against Germany; at a time also when Italy is length- the one hand is the older man with his almost faultless ening the hours of work and making strenuous efforts to judgment, as the result of years of experience in great save the lira; and when France, driven by factions, is in financial affairs, with his keen insight into the heart of desperate need of a strong man who can mobilize her un- the most complicated problem and his simplicity of landoubtedly great resources and stop the downward plunge guage and lucidity in statement, which make the most of the franc, America is engaged in putting into operation difficult matters, such as taxation and war debts, seem the second revenue law, greatly reducing taxes, within a simple and understandable to the average man. On the two-year period, and is piling up a governmental surplus other hand, is the younger undersecretary, with his quick, made possible by national economy and efficient financial brilliant and resourceful mind, trained to jump into a administration. legal battle and fight hard for the success of his client, Who is responsible for this happy state of affairs? who in this case happens to be the Treasury of the United Primarily, of course, credit must go to President Coolidge, States and the great body of American taxpayers. who has made economy the watchword of his administraMr. Winston is still a young man; but when he came to tion. To Secretary Mellon also must go the thanks of the the Treasury, he already had reached the top in the legal country for the exercise of his unequalled financial judg- profession. After graduating (Continued on page 60) The Trend of National Affairs Congress reassembles in regular session in December, following the special session of the WHEN at which the impeachment of Judge EngSenate lish will, by agreement, be taken up, fourteen measures of importance which have been endorsed by President Coolidge, will await its consideration during a period of three monthsfor this is the year of the short ses- sion, and unless President Coolidge calls Congress into special session, vacation adjournment will be taken on March 4, 1927. Of these measures, one, ratification of the French debt settlement, may be eliminated by refusal of the French parliament to accept it. The President has recommended coal legislation, giving the government greater power in case of another national emergency; permission for regional consolidations and marketing associations under the supervision of the Department of Commerce may be asked for. The Rivers and Harbors bill, which has passed the House, provides a larger sum for such improvements than has been carried by any similar measure in a number of years. President Coolidge does not favor government operation of Muscle Shoals in view of the unfortunate experience of the government in other industrial operations. Some measure affecting this property may be passed at the next session of Congress, which will provide for the production of nitrates and water power. Some changes in the immigration law are anticipated, not in the direction, however, of letting down the bars to an influx of aliens. The immigration smuggling business needs more drastic regulation. Doubtless legisla- tion will be had looking to the return of impounded alien property to its owners, in connection with which an investigation of the conduct of the Alien Property Custodian's office from the beginning is in prospect. The President will probably renew his recommendation of a measure permitting reorganization of the departments with a view to greater efficiency and economy in the public service. Radio legislation was left hanging in the air at the close of the long session of Congress. The House passed a bill providing for supervision of the radio by existing agencies of the government under the Department of Commerce, but the Senate is pressing for the creation of a new bureau with a full set of high salaried com- forth during the long session. From March until September, if nothing arises necessitating an extra session, Con- gress and the country will have a long breathing spell. delusion that the United States was enriched by THE war is deeply rooted throughout the world. the De- spite the fact that official statistics explode it, this utterly unwarranted theory, responsible for much of the hatred of America existing in Europe, not only has been free from attack by responsible American statesmen, but has been approved by them in thousands of public utter- This strange policy has worked immeasurable harm not only to the United States but to Europe, since the only hope of European recovery is through adoption ances. of the means whjch are actually responsible for the great growth of American wealth. It has been repeatedly pointed out in these columns that the growth of our national wealth during the eight year period 1904-1912 was over seventy per cent in dollars of practically equal value, that during the succeeding longer period 1912-1922 the increase was about seventy per cent, but a report of the Federal Trade Commission shows that the actual increase during the ten-year period including the war was sixteen per cent in dollars of equivalent value, so that our pre-war growth in wealth was slowed down more than three fourths during the war period. Since 1922 the growth in our national wealth has been resumed at about the pre-war rate. In the face of these indisputable facts, one wonders at the effrontery or ignorance which attributes America's growth in wealth to the World War, especially when we are told that it has been at the expense of "impoverished Europe." The national wealth of France increased more than twice as rapidly, depreciation of the dollar taken into account, from 1912 to 1922 than it did from 1904 to 1912. Of all the sophistry dealt out to the American people by statesmen and near statesmen during and since the war this theory of American enrichment by the war is the flimsiest. America's growth in wealth is clearly due to one thing. and one thing onlymore work, thought and enterprise applied to the utilization of natural resources, more production under sound, stable institutions, and laws which permit the existence of adequate rewards for labor and missioners and employes. Additional railroad legislation enterprise. It is not even a matter of greater natural may be urged by President Coolidge, permitting volun- resources, for the United States is comparable as an ecotary consolidation of railroads under the supervision of nomic unit only with the whole of Europe, and the Eurothe Interstate Commerce Commission. It is believed that pean nations, with their colonies, possess a larger store such consolidation will permit the operation and devel- of natural resources than does the United States. That opment of smaller lines by the bigger systems with bene- Europeans persist in keeping their continent a crazy quilt fit to all concerned. Senator James E. Watson, of In- of rival, warring nationalities, with development stunted diana, will succeed the late Senator Cummins as chair- and the peace disturbed by multiplied customs and other man of the Senate Interstate and Foreign Commerce barriers, is not the responsibility of the United States. Committee, and will have such legislation in hand. A recent report of the Department of Commerce, Farm relief is sure to be one of the dominant subjects quoted in the last issue of the National Republic, furof discussion in Congress this winter. The McNary- nishes the explanation of American growth in national Haugen bill, or a similar measure, is sure to be back on wealth. With six per cent of the world's population the the map. The President may have some suggestions in United States produces approximately fifty per cent of his annual message. While there is talk of tariff revi- the world's utilized national resources. We have built sionSenator Capper having stated that the farmers half the railroad mileage of the world; operate threewill demand an increase in rates on some agricultural fourths of the world's telephone equipment; make and products it does not seem probable that this Pandora's use nine-tenths of the world's automobiles; our developed box will be opened, although it is realized that in justice horse power is equivalent to the labor of three billion to American producers there should be upward revision slaves in mechanical energy. In five years the generation in a number of schedules. The disputes which have attended the operation of the government merchant marine will come before Congress. President Coolidge believes that the Shipping Board should be answerable to the executive, and assigned to the jurisdiction of some department. Congress may be asked to increase the authority of the governor general of the Philippines, to the end that there may be no further attempts by legislative politicos to hamstring the administration of the islands. There being no campaign in prospect in 1927, it is prob- able that the short session will be characterized by more business and less political oratory than was poured of electrical power has increased fifty per cent. We have 600 industrial research laboratories. Average wages in the United States are three times as high as they are in Berlin or Brussels, four times as high as in Milan, Vienna or Warsaw, and twice as high as in Amsterdam or London, measured in the purchasing power of these wages. In America industry has mixed engineering brains with labor. Because of increasing efficiency in production the output of our wage earners increased sixty per cent in quantity from 1914 to 1923, while their number increased only twenty-seven per cent. Secretary Hoover estimates that while during the past twenty-five years industrial employes have increased in number sixty-five per cent, NATIONAL REPUBLIC 60 The Undersecretary of the Treasury (Continued from page 7) "We pay him $100 a week" he's worth every cent of it. Came here years ago asking for 44AND severalgot just thata small a job. He job at a small salary. "Then I forgot about himhardly knew he was on the payroll until one day I got a letter from the International Correspondence Schools telling me that he had enrolled for a course of home study. It was remarkable the way he went ahead. "We pay him $100 a week now and he's going to be earning even a larger salary some day. I wish we had more men like him." HOW do you stand when your employer ...checks up his men for promotion? Does he think of you? Is there any reason why you should be selected? Ask yourself these questions fairly. You must face them if you expect advancement and more money. One hour after supper each night spent with the I. C. S. in your own home will prepare you for the position you want in the work you like best. Mail Coupon for Free Booklet INTERNATIONAL CORRESPONDENCE SCHOOLS Box p,550, Scranton, Penna. 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You charge $1.50, make $1.44. Ten orders daily easy; samples, information free. World Monogram, Dept. 157, Newark, N. J. EARN $25 WEEKLY, SPARE TIME writing for newspapers, magazines. Experience unnecessary. Details free. Press Syndicate, 1147, St. Louis, Mo. NO JOKE TO BE DEAF Every Deaf Person Knows That I make myself hear, after being deaf for 25 year, with these Artif cia I Ear aDrumeb I wear them day ?and night. They stop head Incises and ringing' ears. They are perfectly comfortable. No / one sees them. Write me and 117,V1 ZI.ge'V.Itde1;relga; Medicated Ear Drum you hear. Address from Yale, he began the practice of tically all the debtor countries. Debtlaw in Chicago and in a few years be- funding agreements have been made came a member of the firm of Winton, with Belgium, Czechoslovakia, EsthonStrawn & Shaw, one of the greatest ia, Finland, France, Great Britain, Hunfirms in Chicago and well known gary, Italy, Jugoslavia, Latvia, Lithuania, Poland and Roumania, making throughout the country. During the war Mr. Winston left his the total amount which has been fundlaw practice and in August, 1917, was ed to date $11,521,850,000. commissioned major of artillery, 0. R. Mr. Winston made a flying trip to C. He later saw service overseas and Europe early in the summer and visithas a fine war record for his work in ed London, Paris and Rome, where he commanding an artillery battalion. met various government leaders, inAfter the war was over, he went back cluding Mussolini. The war has made to his law practice in Chicago. He re- America the greatest creditor nation mained there until the summer of 1923, in the world; and the financial interwhen Secretary Mellon asked him to ests of this government and of the come to Washington as his chief as- country generally are affected by consistant in carrying on the work of the ditions abroad, so that it has become increasingly necessary for responsible Treasury. government officials to keep posted as undersecretary is second in com- regards the developments taking place THE and is the directing' head of from day to day in Europe.does Secremand Mr. Winston believes, as the department in the absence of the tary Mellon, that the debt settlements secretary. During Secretary Mellon's which have been made with foreign absence in Europe this summer, Mr. contribute Winston is in charge of the entire de- nations willEurope and to the greater that, as partment with all its bureaus and stability of become more and Euromore offices. He is authorized to act for the pean nations they be able secretary in any branch of the depart- prosperous, more will more of to absorb and our prodment and to represent him in dealings and pay for and particularly our farm prodwith the Federal Reserve Board, the ucts, of which there is always a surplus War Finance Corporation and the ucts, country. As regards Europe, Farm Loan Board. He is charged with in this the supervision of the finances, of for- the Treasury has pursued a construcprimarily, of course, eign loans, and advances and loans to tive policy, looking the American taxof railroads under the transportation act, to the interest forgetting that, in the 1920. He also has direct supervision of payer, but notthe American taxpayer the fiscal bureaus, offices and divisions, end, not only American 'producer naincluding the Commissioner of Ac- but the a whole will benefit and the the most if counts and Deposits; Division of Book- tion as pursued promotes also the rekeeping and Warrants; Division of De- policy and prosperity of Europe. posits; Treasurer of the United States; covery Comptroller of the Currency; Federal As regards domestic policies, the Farm Loan Bureau; Section of Statis- Treasury has urged lower and more tics; Government Actuary; Commis- scientific income and inheritance taxes sioner of the Public Debt; Division of in the belief that the load must be Eu Loans and Currency; Register of the light as possible on the individual and Treasury; Division of Public Debt Ac- also on business and industry. During counts and Audit; Division of Paper the great fight which has been conCustody; Bureau of Engraving and ducted for three years for tax reform, Printing; Mint Bureau; Secret Service Mr. Winston has made a number of speeches; and, like Secretary Mellon, Division; Disbursing Clerk. As one writer recently said, in speak- he is particularly pleased with the ing of the duties which the undersecre- achievement of Congress in bringing tary is called upon to perform: "The about a reform of the taxes. undersecretary must have sound judg- It is a great, constructive work which ment, for he is one of the world's great- the Treasury is doing, with results est financiers. Not only must he pur- which are already apparent in the chase government securities for the prosperous condition of the governsinking fund, but with the secretary, ment's finances and of the country. he must know when and how to float new issues to carry through the govVACANT LAND AREAS ernment's vast refunding operations in such a way as not to disturb the busi- Vacant and unappropriated lands in ness of the country. So smoothly have continental United States exclusive of Secretary Mellon and Undersecretary national forests and other reserved Winston conducted the Treasury's areas totalled 199,146,786 acres, accordgreat financial operations that the ing to a tabulation made public at country has hardly been aware of how the Interior Department. The taburapidly we have been emerging from lation records that at this time tht the period of readjustment which in- government has 142,109,401 acres of surevitably follows a great war." veyed public domain vacant and unappropriated while 57,040,385 acres reSSIBLY the two outstanding main unsurveyed. A recapitulation of achievements of the present admin- the public land by states shows that PO istration of the Treasury have been the Nevada has the largest area with 5.3,reform of the tax system and the fund- 925,693 acres. Utah is second on the ing of the foreign debts. In helping list with 26,872,218 acres and California to carry out these policies of Secre- third with 20,667,431 acres. The state tary Mellon, Mr. Winston has had a having the smallest area of public very important part. As secretary of land is Florida with 4,458 acres. CLASSLargest CatalogAND PINS the World War Foreign Debt CommisRINGS Issued Sent FREE sion, of which Secretary Mellon is Ring as shown with any one or two letters in chairman, Mr. Winston has taken part No government, any more than an center and HS, GS, or SS beside shield, suer long be respected more, St.5o each. Sterling silver. Samples in all the difficult and long-drawn-out individual, will negotiations leading to the settlements without being truly respectable. loaned class officers. Special orders filled. GEO.P.WAY, Artif icial Ear DrumCo. (Inc.) 144,3offman Bldg., 2539 Woodward, Detroit, Mich. Metal Arts Co., Inc. 7753 South Avenue, Rochester, N. Y. which have been arrived at with prac- Madison. NATIONAL REPUBLIC Save the Oldest Fort In America! (Continued from page 54) about 200,000 bricks. Some rough stone and lime, of which a note will be given by Major L'Enf ant." Under the direction of Secretary and Major L'Enfant, Fort Washington was rebuilt practically as it stands today. Major L'Enfant, by the way, was the engineer who planned the city of Washington. Early in 1861, when the dark clouds of civil war began to appear on the horizon, the first order issued for the protection of Washington was in reference to old Fort Washington. Isaac Toucey, Secretary of the Navy, directed Col. John Harris, commandant of the marine corps, to send a force of marines to Fort Washington to protect public property. The work was turned over to Captain A. S. Taylor and forty marines. It was occupied as a fort during the entire progress of the Civil War. The old fort stood ready to do her duty during the Spanish-American War and the World War. She stands there Monroe as AP-43-d Easy Play Any Instrument C ! You Can In a Few Months This Delightful New Easy Way! Quickest because natural and pleasant. Grateful students say they learn in a fraction of the time old dull methods required. You play direct from the notes. And the cost is only a few cents a lesson! music is no longer a dif- you can write to your instructor and get ficult task. If you can read the a full, prompt, personal reply! LEARNING you can now quickly The Surest Way To Be Popular and alphabet, Have a Good Time learn to play your favorite instrument! Do you sit "on the A delightful new method has made it sidelines" at a party? positively easy to become a capable perPick Your Are you out of it beformer within just a few months. And Instrument cause you can't play? Many, many people are! the cost is only a fraction of what peo'Cello Organ ple used to spend on the old, slow methods! today, grim and determined, not of You don't need a private teacher, this great value as a fort under existing conditions of warfare, but a constant reminder of the heroic past. It would be well-nigh sacrilege to sell this historic spot to the promoters of some real estate development or for any private purpose. Congress should except Fort Washington from the tracts to be disposed of in order that money may be procured to provide proper quarters for the army at existing military posts. The small amount Fort Washington would bring can be otherwise provided. The oldest fort in America should be new way. You study entirely at home, in the privacy of your own room, with no one to interrupt or embarrass you. And, strange as it may seem, you'll enjoy every minute of itbecause the new method is agreeable as well as rapid. No Tricks or StuntsYou Learn from the distance of thought betwixt the speaker and the hearer. The consideration of time and place, of you and me, of profit and hurt, tyranize over most men's minds. When the spiritual energy is di- rected on something outward, then it is a thought. With a geometry of sunbeams, the soul lays the foundations of nature. A man is like a bit of Labrador spar, which has no lustre as you turn it in your hand, until you come to a particular angle; then it shows deep and beautiful colors. Life is not intellectual or critical, but sturdy. Its chief good is for wellmixed people who can enjoy what they find, without question. To finish the moment, to find the journey's end in every step in the road, to live the greatest number of good hours, is wisdom. Coolness and absence of heat and baste indicate fine qualities. Society always consists, in greatest part, of young and foolish persons. It is so much easier to do what one has done before, than to do a new thing, that there is a perpetual tendency to set a mode. 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If you are really anxious to become a good player on your favorite instrument, mail the coupon nowtoday. Instruments supplied when needed, cash or credit. U. S. School of Music, 46310 Brunswick Bldg., New York City. =M =I 1111111 IN U. S. SCHOOL OF MUSIC, 46310 Brunswick Bldg., New York City. Please send me your free book, "Music Lessons in Your Own Home," with introduction by Dr. Frank Crane, Demonstration Lesson and particulars of your Special Offer. I am interested in the following course: Have you above instrument? Name (Please Write Plainly) Address State City ENTRY BLANKESSAY CONTEST National Essay Dept., NATIONAL REPUBLIC, 425 Tenth St. N. W., Washington, D. C. Gentlemen: I hereby enter my name in your NATIONAL ESSAY CONTEST. Name Address City Age (Please write very plainly) State Grade (state whether high school or lower) Teacher's name Name of school Remarks THE UNDERSECRETARY OF THE TREASURY WASHINGTON July 21, 1926. Dear Ben: I have your letter of July 8th. Board on expenses The letter Mr. Mellon sent to the for the silver inquiry, copy of which I sent you with my last letter, was considered by the Board. There was some discussion, particularly I believe on James' part, as to the amount, but it was finally resolved that the matter was one entirely within the discretion of the Secretary of the Treasury. I think this is a satisfactory solu- tion. In my letter to you of a few days ago I commented on Churchill's attitude. As you have, of course, seen in the papers, he has now called the Secretary a liar, but he himself did not have the facts. a release showing how the money was actually spent in America. I enclose I think we can safely assume that at least half of it represented exchange where England got the sterling, food to be resold to British civilian popula- tion, commercial maturities, and silver, so I don't fear the accuracy of Mr. Mellon's statement. On the other hand, Churchill claims that the British furnished three billion in America from their own individual resources, which is not true. $1,853,000,000 of this three billion was reimbursed ]gland at the time by the other allies out of money borrowed from us. . Technically speaking, the only money they actually furnished in America out of their own individual resources is some $700,000,000. All this is most distressing. If Churchill wants to start a fight -2- he will undoubtedly get one. Senator Borah called me up last night with the intention of replying to Churchill, but I asked him to wait until he saw the figures in the paper which the Treasury had given out. I have not heard from him again and I think possibly he will drop any statement. The British may be tired of paying their debt, and editorial comment rather accepts this view, but they are not going about getting a revision in a very diplomatic manner. The eastern seaboard may be- lieve that we have treated our debtors harshly, but exactly to the contrary is the general view once you cross into the Mississippi Valley. You may have to consider some of this sentiment yourself. As I recall, the credit to the Bank of England runs out the first of next year. I do not know thether the British monetary conditions mill re- quire a renewal of the credit, but if they do it would be most unfortunate to have stirred up a hostile attitude on this side. Sincerely, Benj. Strong, Esq., C/o Bank of England, London, England. TREASURY DF.PARTMEET FOR IMMEDIATE RELEASE July 20, 1926. The Treasury issued today the following statement: A statement of the British account with the United States in connection with war loans shows the following reported expenditures in the United States: $1,330,607,883.09 Munitions including remounts Munitions for other governments Exchange and cotton purchases Cereals Other foods Tobacco Other supplies Shipping Reimbursements 205,4959801.10 1,682,419,875.31 19375,379,343.57 1,169,153,585.05 99,174,858.34 215,331,787.01 48,890,000,00 19,302,357.55 387,732,633.50 353,501,561.66 16,000,000.00 261,643,388.81 7,029,965.94 477459e29.01 Interest Maturities Relief Silver Food for northern Russia Miscellaneous 7,219,4089669.94 Total reported expenditures These expenditures were met as follows: By reimbursement from the other allies out of funds loaned to those allies by the United States By dollar payments by the United States Government for British currencies By proceeds of ruPee credits in gold from India By cash from Britain's "own independent resources" Funded in debt settlement with the United States 1,853,6139246.37 449,496,227.55 81,352,908.06 760,128,929.52 4,074,818,358.44 7,219,408,669.94 From England's total reported expenditures in America from April to November 1, 19209 there should be deducted the $1,853,000,000 6, 1917, expenditures for Which Great Britain was simply the purchasing agent for the other allies and for which Great Britain was paid by the other allies from money loaned to -2-- This amount was not provided from England's "omn than by the United States. independent resources". This leaves 45,366,000,000. Of this amount, 419662,0009000 represents "Exchange and cotton purchases". The greater part of this expenditure was for the maintenance of sterling exchange not necessary for purchases in America, but which enabled England to make purchases in other countries at an undepreciated exchange rate. tobacco. 4296439000,000 was for food and A part of this item is probably included in the account out of vhiCh England was reimbursed by the other allies and a part was resold by England to its own civil population. To the extant of this resale England avoided the necessity of floating loans in its own country. 450796779000 was for interest and principal of England's commercial obligations maturing in America. $26190009000 was for silver. The total principal advances to England after the Armistice were 456190009000. THE UNDERSECRETARY OF THE TREASURY WASH I NGTON July 17, 1926. Dear Ben: I had a talk yesterday with Mr. Robertson, of the United States Smelting Refining & Mining Company, on silver. He is anxious to have Europe resume the use of silver in subsidiary coinage. I told him that the first step must be monetary stabilization, because no country could use any metal in coinage of a real bullion value so long as it did not know ht/far its currency was going to slide, and that his association would be most helpful in obtaining a sentiment in the lest for reestablish- ment of stability in Europe and for the participation of the Federal Reserve System and American bankers. This he is going to try. I had not before considered this feature, but here is a thought on which I should like your ideas. The real question of currency stabili- zation is psychological, the restoration of confidence of the people in their currencies. Now, from time immemorial silver has been a part of the currency systems of the world; the people are used to silver, and even though its bullion value is less than its original face valuesnevertheless, there is a point in possible future inflation below which a silver coin will not go. It is cheaper, it is for subsidiary coinage, since the true, to a government to use base metals seignorage is practically 100%. Thera is, however, a seignorage profit in any subsidiary silver coinage, varying, with the silver content. governments of the The question which must be considered by the countries returning to sound money is whether the psychological value of vatting out silver subsidiary coinage is worth the additional cost; or, to state it of the additional seignorage profit. another way, is worth the loss Our experience in this country with shinplasters was not satisfactory. If you agree with me that this question deserves consideration as a part, although perhaps a minor one -- in the stabilization program, you will undoubtedly have the opportunity to present the idea to those who seek your advice. You know better than anyone that the silver industry is iaportant to America and anything that helps it along helps all of us along. I enclose a copy of a letter of Mr. Mellonts to Governor Crissinger having reference to silver, which I am mare will interest you. Sincerely yours, Benjamin Strong, Esq., cio The Bank of England, London, England. 1 enclosure. THE UNDERSECRETARY OF THE TREASURY WASHINGTON August 19, 1926. PERSONAL Dear Ben: I have your two letters of August 3rd, and am glad to hear what you have done in connection with the use of silver for subsidiary coinage in Europe. I won't discuss this subject with Robertson. I have read the report of the Royal Commission on the Indian Currency, and I agree with your cablegram that this is the most that we could have hoped that I could not find in the with the surplus silver for. As I wrote Burgess, the thing report was what coins. I assume was going to be done they will be sold as bul- lion, and if so, this will have some direct effect on the price of silver in addition to whatever happens through Indian psychology and sale of silver hoards. George Harrison comments on this handles himself very well. from people who know. I have had I thought you would be glad to hear it. Will you be good enough to keep ms posted on changes in the financial situation in Europe from time to time as they come to your notice. Yours sincerely, Benlamin Strong, Esq., c/o Bank of England, London, England. THE UNDERSECRETARY OF THE TREASURY WASHINGTON August 30, 1926. Dear Ben: PERSONAL Mr. Jay has sent me a copy of your letter of August 11th to him in reference to the Indian silver report. I think you did the best that you could, and certainly the best that ought to have been done considering India's necessities. the United States which is involved. It is India, and not I have heard no criticism of the report from the silver people, but its effect here is as yet so little understood that it has not created, extensive comment in It would certainly be well to have Professor Sprague the papers. analyze the report so that when you return it can be properly presented to the public. I have a letter from the Secretary, and he seems quite well and cheerful except that he must have been worried a little about Ailsa. This debt cancellation talk, it seems to me, is unfortunate. I should like to see what Europe would say if there was some one in this country with authority to make a statement on behalf of the United States about as follaws: war we loaned you about ten billion dollars. from our owl people. "During and after the We borrowed this money If we are not repaid we will have to assume the debt and collect it from our taxpayers. We have always considered that this money was a loan to be repaid, but in seeking to adjust the repayment we have entered into refunding agreements which in the opinion of the American Debt Commission and of the representatives of the debtor nation duly authorized to negotiate the settlement have appeared fair and within the capacity of the debtor. We believe, therefore, that these settlements are fair both to you and to ourselves. the debts by force. We will never, of course, attempt to collect There appears, however, to be a feeling in your country that the debts are not due or cannot be paid. We will, therefore, abandon the agreements which your representatives have signed and leave it to you to determine what, if anything, you believe you should pay on your debt to us". If such a statement could be made, I believe every one of our debtors would recognize their debt and pay in accordance with their capacity, which would probably be on the basis of the existing debt settlements. If a sentiment for debt cancellation arises in America sufficiently strong to influence Congress, and we voluntarily offer to cancel the debts then I believe that we here could stand the expense and that the world would be better off. But this pressure from Europe to force a cancellation, in its analysis is simply a repudiation of the debts, and"with repudiation naturally will follow a disinclination on the part of the American investor to -3- invest money with the defaulting nations. I am glad to hear that you are coming back soon, because I want to hear all about your adventures in the financial wilderness. Yours sincerely, Benjamin Strong, Esq., c/o Bank of England, London, England. OFFICE OF THE UNDERSECRETARY OF THE TREASURY WASHINGTON Septemb 25, 1926. Dear Governor Strong: am enel.'=ing a copy of the National Republic for tains an article abo tober, 1926, which conUr. Winston. Be would never show it to yo and I know you will be ins terested to read I .,gine you are glad to be back in the United S tes again. Sincerely yours, Benjamin Strong, Esq., Governor, ederal Reserve Bank of New *fork, New York C ty. Enclosure THE UNDERSECRETARY OF THE TREASURY Washington January 27, 1927. Dear Mr. President: I hereby tender my resignation as Undersecretary of the Treasury, and ask that it be accepted to take effect February 1, 1927. For some time past I have wished to return to private life. I feel now that the work with which I have been partio- ularly charged in the Treasury is done, and I have made arrangements to resume the practice of law as a member of a firm in New York. It has been over three and a-half years since I came to the Treasury. I have found it a period of absorbing interest; and I shall always count it the highest privilege to have had this opportunity pf serving with Mr. Mellon and to have had a part in carrying out the ideas and policies of your Administration. Faithfully yours, (Signed) GA2RARD E. WINSTON Undersecretary of the Treasury, The President, The White House. THE SEC:ETA,Y OF THE TaEASTI:Y 7ashington January 31, 1927. Dear Winston; Your letter referring to your resignation is Then you first told me that it would eceived. oe necessary on account of your personal interests to resign as Undersecretary and to resume practice of your profession, I more than ever realized how much your assistance and support and the association with you had meant to me in carrying on my official work. I have had all along a sense of satisfaction and reliance upon your ready response and resourcefulness in disposing of the many problems always before us. Your clear analysis and facility of concise statement have been invaluable. I shall most deeply miss your congenial cooperation and the intimate association I have had with you; this intimate contact will always remain with me a very You carry with you my very pleasant memory. warm reg.:rds and my best wishes for success and I trust we happiness in your new occupation. may have frequent opportunities of meeting in the future. Sincerely yours, (Signed) Hon. Garrard B. Winston, Undersecretary of the Treasury. A. W. MELLON. THE UNDERSECRETARY OF THE TREASURY WASH! NGTON February 1, 1927. Dear Ben: I have closed up here as Undersecretary and I enclose copies of my letters of resignation to the President and Mr. Mellon and their acceptance. Next to the association with Mr. Mellon the most enjoyable relationship I have had is that with you and I am not going to let my severance from the Treasury mean my separation from your companionship when you come back to New York. Perhaps we might even motor around abroad together again if we can find someone to lend us a car. I have been delighted to hear from Governor Norman how much better you are and I hope that you will be back in New York in the Spring when I start to work with Shearman and Sterling. Yours sincerely, Benjamin Strong, Esq., Biltmore Forest, Biltmore, North Carolina. 1 enclosure. THE WHITE HOUSE Washington January 29, 1927. My dear Mr. Winston: Your request to be permitted to resign as Undersecretary of the Treasury, to take effect on February 1st next, has been received. It is with real regret that I accept it. I realize however that, having served the National Government for more than three and onehalf years, you are entitled to relinquish your post. In the discharge of your duties you have shown very marked ability and rendered service of the first order. It is a satisfaction to know that we had in office a man of your character. The work which you have done in helping to refund considerable parts of our national debt, settle the obliga_ tions due to us from other countries, take part in two material reductions of taxation, besides the general work of the Treasury, has all been discharged in a way as to merit the highest approval. I trust that in your new situation you will find a great deal of satisfaction. With kindest regards, I am Very truly yours, (Signed) Hon. Garrard B. Winston, Treasury Building, Washington, D. C. CALVIN. COOLIDGE. THE UNDEaSECRETAaY OF THE MEASURY Washington January 28, 1927. Dear Mr. Mellon: It is with real regret that I am resigning as your Undersecretary. Daring the years I have been with you there have arisen many trou:olesome questions of policy, some merely vexatious, solfe most perplexing, and some dangerous to good government. Always I have gone down the corridor to you and found a calm, a wise and a certain answer. It has been a great training to learn from your experience and to watch the application of your sound judgment to the problems faced by the Treasury. In all our discussions together you have made me feel quite free. I shall miss most of all my close association with you the happiest years I have known. I have, Mr. Mellon, the highest respect and the deepest affection for you. is hard indeed to leave you, Sincerely yours, (Signed) Eon. A. W. Mellon, Secretary of the Treasury. GARRARD B. WINSTON. It