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SER

E

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EGRAM

Y LETI :R

BLV.

IGHT MESSAGE

NITS

IT LETTER

NI

TEL

hese three symbols
e check

number of
telegram. Others indicated by the
after the check.

NEWCOMBNCARLTON. PRESIDENT

If none of these three symbols

GE W. E. ATKINS. FIRST VICE-PRESIDENT

appears after the check (number of
words) this is a telegram. Otherwise its character is indicated by the
symbol appearing after the check.

receipt at destination as shown on all messages, is STANDARD TIME.

OU

R7 JAN

29 PM 0
41

TO GO SLOVi FOR

APPRE7 I ATED USE OF

DC
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*oh of Ompiaott
Sohn, E.C. 2.

8th February, 1927.

by dear Strong,

We have now received the annual salvo of
speeches which we have become accustomed to expect from the
Chairmen of our "Big Five", but it is only necessary to send
you the Reports of the two which deal with a monetary problem
in which we are both interested.

These I send you herewith.

You will see that it is another case of
thieves falling out and honest men coming into their own with you and me playing the part of the honest men!
Believe me,
Yours m

s

incerely,

evort°"A

Benjamin Strong, Esq.




I
It

PERSONAL.

ofitglad,
Sondon,

E.C. 2.

15th February, 1927.
-7

3/7 7 -

Ir dear Strong,

After having looked at Europe from your side
of the water, seeing as one does more easily the wood as a whole,
it has been a little disappointing to come back and see the trees

The whole position is uncertain and

so clearly as one does here.

perhaps halting, or so I judge it to be for two particular
reasons:

First, that we here are suffering from the after effects

of the coal strike, which may be long or short to an extent which
I cannot judge, and that the hopefulness natural to this time of
year is dimmed by the situation in China.

Secondly, that there is

no decision in France and no prospect that I can see of action

being taken- indeed, it looks as if the French were growing more
disposed to wait until the basis of some German settlement has
become clear before they decide how to deal with ratification and
with their internal position.
merely a guess:

This, you will understand, is

I have not heard the prospects so defined in any

quarter.
I

writing to-day to Mr.Harrison as to a

visit to your Bank by our Chief Cashier, Mr.Mahon.

This is in

line with what we both feel as to the need for continual and
growing personal contact.

I hope the date I have suggested will

turn out to be suitable in every way.




Benjamin Strong, Esq.

IPPage 2.

15th February, 1927.

Robert hindersley is sailing for New York by
the boat that takes this letter and expects to stay there one or
two weeks:

his object is to make arrangements for the future as

to the business of the New York House.
As regards

Poland,

I am wondering what is

the outcome of llonnet's proposed visit to you at Biltmore and of

Laynarski's confabulations with the Bankers in New York.

As the

general question of Poland is often cropping up and particularly
now that the relations between Poland and Germany seem to have
worsened,

I have told Mr.Harrison that it would be convenient if

he would keep me generally informed.

Our market situation is not as comfortable as
it ought to be.

Excluding some foolish speculation on a small

scale in one or two directions, the Stock markets are dull.

The

dollar-sterling exchange is weaker than one would wish to see at
this time of year and just permits the shipment of market gold to
New York now that the freight has been slightly reduced.

Money is

rather too easy to make our 5; rate at all effective, and it would
be difficult to make it effective with the general expectation of a
reduction in your rate, for the maturity of a three months' bill
falls long after the 1st April when easier conditions are
traditionally to be expected.

Please urge Phil to write me a couple of lines
now and then about his father, for this is just what he promised to



do.

Page 3.

Benjamin Strong, Esq.

15th February, 1927.

And let me add that it was well worth a trip of 3,000 or

do.

4,000 miles to spend those days with you at the Carpenter Cottage.
With great tharucs and affection,

Yours most sincerely,

Benjamin Strong, Esq.

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Feb. 26,1927

PLAZA ATHENEE
25, Avenue Montaigne
Paris
11111

My dear Ben,

After 48 hours here (less two, to be precise) I am soon going on to Berlin +
thence perhaps to Brusselles, depending on how much of a grind it is. Of course it
(traveling + talking) does keep one on the stretch most of the time.
I came away now because it will be more difficult to do so later (Lubbock,
Trotter change, for instance) + because I am now pushed out of my own house (Flodge).
I must have told you of the dangers which suddenly appeared in several places in the
wiring, any one of which might have set the whole house on fire at any time.
I shall
not be able to occupy the house again till the middle or end of March. And on top
of this Amy has collapsed:
Several weeks in bed: many weeks rest + yet nothing definitely
the matter: Very disappointing + troublesome for you know Amy is the hub of the Universe!!
nothing less.
Here things have of course greatly improved + yet are disappointing. All the
internal things are better... indeed good... Taxes- Budget-short-debt-Circulationdevtseh- price-levels +c. Yet the two crowing acts (to which these others should be
merely introductory) are not in sight. There is apparently no date + no plan for either
ratification or stabilise. The present Parliament lasts till the middle of 1928 + it
seems we are to wait for the next! Poincard is ready to do anything but take the plunge!
So Europe + the world are to wait indefinitely, with the franc more or less pegged until Poincare'makes
to act with a new parliament
this one)
or until he is pushed out... by cumulative uncertainty + disappointment + perhaps by some
wobbling of the Exchange? What I can't get at is the real underlying reason for such
delay: it can't simply be parliamentary opposition: nor the personal disgrace
of "devaluing" the franc: nor lack of advice nor desire for permanent office on the part
of Poincard. What is it?
I cannot understand the Gauls. I suspect some undefined truth
in what I wrote to you a week or so.. as a mere guess.
I wish greatly to know what is happening to your pulse, + sleep + pins +
breathing.. + not a word have I heard for 4 weeks!
I wish also to know your general plans
as soon as they begin to form themselves - for sping + summer - for your next move + for
a later vacation.
At home the continuing burden of the coal strike:
the prospects of the Budgets
(still rather uncertain) + the scale of expenditure (capital as well as current) make
me uneasy... just as they seem to tickle the fancy of your friend W. Churchill! Added
to this we in London are feeling a general malaise which springs, I suppose, from
China + Moscow + is vague + undefined. On the other hand the N.Y. position + market
seems wonderful.
Goodbye, old man.
Ask Phil to write a line.




+ be sure I am Yours
[signed] MN

PLAZA ATHENEE

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I

PERSONAL.

And of englanti,
Son C1011,E.C. 2.
12th March, 1927.

My dear Ben,

I was glad 6o have the cartoon which is
enclosed in your letter of the 16th February because, apropos of
yourself, someone had mentioned it to my Mother and I had
promised to get her a copy.

I was glad too to have your letter of the
15th, and whatever you may say about yourself I can judge from
the number of letters you are ':a-iting that even if you are as

depressed you are a deal more energetic than you were a couple of
months ago!

I take it as a good sign and so I may tell you do

Schacht and I.oreau, both of whom happened to have heard from you
a few days before I saw them.

I am still waiting to hear something more or
less definite about Poland, and if he has not sent me word by the
time this reaches you, I hope you will give Harrison a reminder.

Here the whole question of Poland seems to be entirely quiescent,
and so it was, I believe, at the recent League meeting at Geneva.
Generally speaking, 1927 is goin
barren and disappointing year for Europe.

to be a

The plans vie had

vaguely made or thought about a couple of years ago are receding
towards the horizon.



Stabilisation and reconstruction, which
have

PERSONAL

IWO

Page 2.

15th March, 1927.

BenjamiA Strong, Esq.

have been the vogue since the league first dealt with Austria, have
for the time being passed out of fashion.

In greater or less

degree this is true as remrds Poland, Serbia, Greece, Roumania,
Italy and France, and the effect on the Anti-Tariff Conference,

planned more or leas deliberately by the League for this summer,

will I fear be adverse: you cannot of course expect Anti-Tariff
changes without exchange stability having been assured.

And just

as Paris sets the fashion for silk stockings and hats, so has she

now set the fashion against stabilisation (and indeed ratification)
and in favour of wait and see.

This is the third time Lr-Poincare

has seemed to hold Europe at bay - Cannes, Ruhr and now.

If,

therefore, we are to continue to enjoy the authority of M.Poincare,
we must wait in patience for stabilisation for perhaps a year.
This is the story, though told in less graphic and more impersonal
fashion, that I heard at the Bank of France.

I repeat it to you

as such.

M. Moreau also talked ,about varying the

Agreement under which the Bank of France has to repay the Bank of
England over the next few years.

As far as I can see, it is not

likely that anything will come of his proposal just at present.
As to Berlin, you know as much as I do even whether McGarrah will be able to continue at the Reichsbank,
as seems to be the hope of all his colleagues.



As to Brussels,
there

PLiiSONAL.

Page 3.

Benjamin Strong, Esq.

15th March, 1927.

there seems to be no fly in the ointment, except that in the shape
of funds, they have too much ointment!
The best to Phil and yourself and be sure to
keep me informed of your thoughts and plans.

Yours most sncerely,
/7-

40444.-A-A/V-

Benjamin Strong, Esq.

P.S.

I must have told you that I was evicted from Plodge on

arrival from N.Y. - owing to faulty electric wiring - and shall
hardly be able to live there again before next month.




tanit of angland.

PERSONAL

3ondon.E.c. 2.
14th March, 1927.

My dear Strong,

I now come to try and answer your personal
letter of 18th February which concerns practically nothing but the
amalgamation of our Note Issues.

I will answer you frankly but

vaguely because, though the question of principle seems settled,
the means of carrying out that principle are in a state of flux.
Thus the principle (of amalgamation) having
been settled, we were expecting throughout last fall and winter
that the method of amalgamation would have been decided by some

sort of coLlinittee of enquiry to be set up last month for the purpose.

This committee would have made recommendations as to the amount of
the future fiduciary issue, as to the security for the enlarged
issue, the division of profits and so forth.

Personally, I

el-pected that this committee of enquiry would have been appointed

in just the same way as the Chamberlain Committee which considered
the return to the Gold Standard in 1925:

namely, a small committee

appointed by the Chancellor of the Exchequer to advise the
Government, the Cabinet and himself and empowered to take as much
evidence as they might decide.

Eventually the report of such a

committee would be published but their hearings would not be public.




I have now come to believe that although such
a

PERSONAL
410

Page 2.

Benjamin Strong, Esq.

14th March, 1927.

a committee of enquiry will eventually be appointed, we shall have
to ::ant at least till the summer.

The main reasons for this

-postponement are the uncertainties with which we are confronted at

the present time and which were not anticipated six months ago:
to mention only two - China provides a disturbing and most
uncertain future;

and the Budget which is uncertain but can

hardly fail to lead to much controversy inside and outside
Parliament when the new Finance Bill comes to be discussed.
As regards the advice which we at this Bank
would give to such a committee of enquiry;

we should urge that

the principles of the Act of 1844 be maintained especially
regard to the separation of the Issue and Banking Departments and
a fixed maximum for the fiduciary issue:

recommendations of

thus we accept the

the Cunliffe Committee and of the Chamberlain

mold Standard Committee.

Of course we shoald recommend an

increase in the fiduciary issue commensurate with the Currency
7ote issue which is to be turned over to the Bank:

perhaps we

should recommend ghat such fiduciary issue be a decreasing total
over a period of five or ten years.

And ignoring a number of

details which would fall to be discussed, I need only further say
that we sho ld oppose in any hearings a return to the circulation
of gold coin and should approve the Treasury retaining its .iar-

powers to authorise a temporary excess issue of Notes in an
emergency.



So

PERSONAL
Page 3.

Benjamin Strong, Esq.

1411

So far as I can judge, the number and
influence of those of the public who wish to depart from the
principles of the 1844 Act are almost. negligible:

they include

one Banker (as you know) who is too assiduous in airing his views:
certain professors who no longer convince or even tickle the
public:

doubtless a number of manufacturers and exporters in the

North whose attitude is more understandable than reasonable, and
others, mainly cranks, who think in solitude more than they mix
and argue with others.

Thus, though the whole subject is bound

to be extremely controversial I believe that, given a continuation
of normal conditions, the great mass of our people favour a
continuation of the present principles - enlarged to such an extent
as to amalgamate the .3ank and Currency Note Issues.

I will not

attempt to argue why we think this better than any scheme which
would give some so-called 'element of elasticity to the note issue',

It would take me hours to write a letter on the subject, but I
send you a copy of the current Bankers Magazine which has a
pertinent article on this subject.

Nor, picking up the thread of

your le-,;ter under reply, do I really believe that the principle

upon which the future amalgamated note issue is to be conducted
will really turn out greatly to affect the position of the Bank of
England vis-a-vis the Joint Stock Banks.

But this a,ain is a

long story and I won't stop to argue it.




If,

PERSONAL
Page 4.

Benjamin Strong, Esq.

14th 1.7arch, 1927.

If, on the above or other lines, you could

give us any information, advice or material, you know better than
I do how helpful it would be, or if in opposition you would express
any opinions, they would recDive the greatest consideration if not
as great a welcome!

moment I remain

Benjamin Strong, Esq.




What more can I say?

And so for the







PERSONAL.




1

I
PERSONAL

flank of angland,
Sondmm.2.
25th March, 1927.

My dear Strong,

There are one or two points in your personal
letter of the 25th of last month which I have been meaning to pick
up.

For instance, paragraph 2: Nothing whatever is being done here

to stop or impede the issue of Foreign Loans - except of course in
the case of debtors with unsettled accounts, e.g., France and Serbia.
I do not know why more Foreign Loans have not been issued during the
last month or two, a fact which I regret.

I believe the main

reason to be that the class of Loan which has been sought is not up
to the Bankers' standard in one way or another.
Your paragraph 6:

The sterling exchange has

behaved in just the way we expected it to do: it started the year
weaker than would be normal because of the after-effects of our Coal
Strike: its improvement was impeded by China:but slowly the exchange
rate is growing firmer: it should perhaps be only a question of weeks
before the quotation begins to approach parity.
I think it is true that the French Line cut or
offered to cut freight rate on gold to New York.
a shipment was made possible by this cut.
"Y*

ES.-s.

el 44:4

ofec

Indeed,

I believe

I believe also that the

fo

English and probably other Lines wouldieet this competition.

I

siva
have not enquired minutely into this because I do not see what there
is to be done: in other words, it is most doubtful if all Lines would




combine




PERSONAL

4

28th March, 1927.

Benjamin Strong, Esq.

Page 3.

When writing to you on the 12th March, I said that
in my discussions with Moreau he had included a vague scheme for
varying the Agreement under which the Bank of :Prance has to repay
the Bank of England over the next few years.

Nothing came of

his proposals which were tentative and did not seem clear enough
to be attractive.

But he is making fresh proposals and I hope we

shall find a satisfactory way of dealing with this old War Credit
once and for all.
With kindest regards,

Yours

ery sincerely,

Benjamin Strong, Esq.

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2 April 1927

THORPE LODGE, CAiPDIII HILL, W. 8

A portrait by Gari Meichers exhibited at the Century Club

Dear Ben

Could you throw any light on the above Exhibition
and on the subject of any particular portrait which was there?

Could you indicate the address where copies of any such
portrait may be obtained -- either for a handful of silver or
for a sweet smile?
very serioust

This is not a business letter but it is

Seems you have neglected one of your duties?

Needs your prompt attention.




Ever yours,
M. N.

COPY
8. April 1927.

.44

BANK OF ENGLAND

My dear Ben
There is a particular question about which I write this note -at the earliest possible moment.
I do not know precisely on what lines our Committee will recom,land changes in form or personnel of our administration of the Bank.
But it is clear that they will decide in favour of help from outside
for dealing with outside matters, e.g., reconstruction, League, etc.
We made a step in this direction last year through the arrangement
with Siepmann -- which has been very successful.

Now there seems every chance that we shall make another step to
take effect after the summer. You know Niemeyer: he has an
established position, great ability, and is aged about 44. he does
not mean to stay much longer at the Treasury and could get a good
job any day. So he is to come here, permamently, to do League work
in particular and other work in general. I think he will be a great
so far
addition and I hope the idea will be carried out this year:
I have not said anything
nothing is definite and everything secret.
to Harrison or indeed to any others except our inside friends, but
oelieving this to be a step in the right direction, I wish you to
know and approve it.




With love
(Signed)

M. N.




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art

April 17, 1927

THORPE, LODGE

Campden Hill, W. 8.
Dear old Ben,

This is Easter Sunday and a good one too. I am at Chequers
he has been tired lately and hasl'of
alone with the Baldwins:
course, many troubles on iris back and ought to take all the care
of himself that is possible, for he is (I think) the great asset
of this country. And, what's more, he always asks about youl

I last wrote to you about Niemeyer and hope things will be
fixed up with him in a few days. After he has taken up the job
as a Comptroller (alongside of Harvey) I should like later to get
our Rules altered and make them both into Directors as well as
Officers: And so by degrees have half a aozen sucn Officers some or all of whom might gradually become Directors too so that
we should have a group of who-e-time professionals on the Court.
This is the line which I hope will be taken by the Committee you
know about when they make a Report next month.
But you know tae
idea is only adopted slowly and perhaps unwillingly by some of our
friends.
I hope Miller will give a good Report about you when he goes
over you these days. Then you can make some plans for summer and
let me know them without delay. If you are not coming to Europe,
I will come across the ocean and see you in June or July. Schacht
is willing to do the same -- as we both told Harrison to tell you.
I shall not write about Poland because Harrison knows all about it.
He is a delightful companion and a great help to you, I am sure.
But Poland is a most difficult problem from this end and touches so
many wheels within wheels that it is a question about which I as an individual -- can only proceed with caution anu cannot speak with
certainty.
I am very pleased indeed that the Bank of France are now going
to repay us entirely: it is almost more than I dared to hope when
Moreau and I began to discuss the idea and it relieves us of the last
serious lock-up of the war or post-war period.
Your last letter speaks of the doings of some folks in Wash. and
of your work nearing its end, but I don't see who is to take over
your burden? Please tell me what you have in mind. I still see no
early prospect of definite action in France and though (as in the case
of Poland) some European questions are difficult, there are a good
many waiting. And, after several talks with Monnet I am wondering
if the Financial Committee of the League could not turn itself around
somehow and join hands with some of your people and from a changed or wider

°r`7 127
JIITHORPE LODGE

CAMPDEN HILL. W.8.

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PERSONAL.

Ranh of england,
NO11d0I1, EX.2.

28th April, 1927.

My dear Strong,

I thank you for all the information in your
personal letter of the 15th which has been submitted to those of
my Colleagues who are acquainted with the contents of the letter
to which you are replying.

I should be glad to discuss with Dr.Stewart
the whole question either in London at his convenience or in
New York if I should be so lucky as to pay you a visit this
summer.

Assuming Dr.Stewart were willing and able to
start in London by the 1st January next (and the sooner the
better),

I could be authorised to offer him in one form or

another something between £5,000 and £10,000 a year for two, or
perhaps three, years:
agreement.

or even longer if so arranged by mutual

Before I attempt to define the amount and method of

these payments, Dr.Stewart should consider his liability to
taxation in one or perhaps both countries, and we might be able
to make the payments in such way as would be least onerous to
him.

As to his prospects of contact with myself,
any ansv.er must depend on our internal arrangements over the nex
few

PERSOI.AI.

Page 2.

1

Benjamin Strong, Esq.

28th April, 1927.

CON7IDENTIAL
Benjamin Strong, Es q.

5th =Liy, 1927.

Kis 1ajesty's Treasury,has contributed in large measure to an
effective return to the gold standard.
Believe me,
dear " "r. Governor,

Yours most faithfully,
(S a.) M. NORMAN

Strom*, Esq.

PERSONAL

PERSONAL

Fault of (fivizuth
12th May, 1927.

My dear Strong,

This is a somewhat tardy
acknowledgment of your welcome letter of
the 28th April sending press clippings on
the subject of our recent rate reduction.

The form in which you present them is as
pleasing as the act is kind.
Believe me,

AG
I

jamin Strong, Esa.

1 6,1

incerely,

Yours

Ik'A-t1,,,,,(1

0110."4%

COPY
Sunday,

11/kORPE LODGE

May 22, 1927

Campden Hill, W. 8

Dear Ben,

I have not heard much of you these last days. I guess because you
have been in Washington for the meeting. Three weeks ago, you wrote and took
me to task for keeping Lubbock out of the Polish business and other such discussions.
I don't think this complaint against me is well-founded (less so
perhaps today than in the past). Lubbock has much work of his own to do and
cannot take an active part in all I try to do as well as keep up with his own
work.
In principle, he knows about Poland -- in detail he does not: he
It is
deliberately avoids it and leaves Siepmann to study the whole matter.
Lubbock's choice -- not mine.
But it is true all the same that there are
some current matters (such as Poland) with which Lubbock could not make himself
familiar in detail at present, and which should be left to Siepmann, Harvey,
Niemeyer, and Cecil Lubbock himself takes this view.
I hope you do.
1.

I am most anxious to know your summer plans. By the beginning of August
I must be back in London and Lubbock will be going away.
During June and July I
am at your service if you will only let me know your wishes by cable, but the
time is near when I must make my own plans, either for America or Europe.
2.

I am now settled again at Plodge but Amy is still away and not well
3.
enough to come back. A breakdown is a mysterious illness -- difficult to explain
and still more difficult to get rid of.

I wish I knew what was happening in Paris: the foreigner, perhaps the
speculator, has taken charge of the franc and I rather doubt if Moreau can withstand him.
No country yet has been able to peg the Exchange over a long period
without stabilisation, and I wonder if France is an exception? The dam bursts
either at the top or at the bottom. Meanwhile Moreau, in trying to save himself,
is playing havoc in London. First (to frighten the foreigner) he refused rates --with the resu
devisen but continued to buy at his fixed to sell
demand for dollars fell on the London market alone and the doll
suffered down to gold export and by the market (just when we we
nicely).
Secondly (again to frighten the foreigner) Moreau has
earmark gold here with part of his sterling balances .- with th
market is squeezed and that our gold reserves are diminished an
inconvenienced if he continues (for he has huge balances in Lon
secret and upsetting. His demand for gold is capricious; quite
rates of exchange and at present as difficult to explain as to
tive market.
Moreover, the offending foreigners are not Britis
and etc.
Yet all the trouble falls on London:
That it is to
Once the speculators believed that Moreayii
market in Europe.
will give him no mercy -- none at all..
4.

I do not write about Poland because I know nothing si
in Paris and here and he can tell you all. I was surprised tha
to do with it, except to exhort others. Meanwhile there seems
details of Harrison's scheme.
Perhaps Kindersley will go along
other private Bankers -- that seems to be the last idea.
5.

Schacht has been having his own troubles
much controversy
There is, of course,
to Dawes and reparations on one side and Central Ba

- 2 - winning.
is

Of course, the future of the League IS d
7.
problems to be solved -- and I agree with Monnet an
easily be solved by personal and continuous help f
I wish you luck with McG. an
America or Europ e).
will be smoked out.

With gree
waiting t

(Signed)

[Mo

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PERSONAL.

Bull of anglad,
jondow.2.
31st May, 1927.

my dear Ben,

3
During the last few days I have received your

personal letters of the 16th and 18th of this month telling me of
your talks with Dr.Stewart.

I gather that owing to your kindness

and helpfulness as a go-between, it is now open for me to write
direct and tell Dr.Stewart of our ideas.

This I will do.

I shall of course expect to see Dr.Stewart on your side of the
water and thus to answer any queries or give any explanations he
may need:

this will be much more satisfactory than a long corres-

pondence with him.

I may as well take this opportunity to acknow-

ledge your separate letter of the 18th May, enclosing a copy of
your letter to Dr.Schacht.

By way of answer, I can only say that

I intend to make it my business to sail hence during the second
half of next month, to be at your disposal off an on for the
greater part of July so as to return to London not later than the
1st August.

You must make some decent arrangements about a place

to which we can withdraw:

it will never do to be stewing in

New York with newspapers and reporters and visitors as well as
probably a heat wave!
Incidentally, I notice your remark in this

letter

PERSONAL.
Page 2.

Benjamin Strong, Esq.

31st May, 1927.

PERSONAL.

Cant; of 6ittlanib
74E9101M, E.0 . 2

7th June, 1927.

4 dear Ben,
In continuation of my letter of the
31st May, I write to send you by the same mail a copy

of the letter which I have written to Dr.Stewart.

Your

name of course is taken in vain, for which, as well as
for your help, many thanks.

Yours most sinoere4,

;Al' 1ovs10tovt

Benjamin Strong, Esq.

F.T1111501

WESTERN

CLASS OE SERVICE

Tl

ac

is a full-rate
or Cable- s its char-

SYMBOLS
BLUE

UNION

indicated by

a symbol in the check
or in the address.

NEWCOMB CARLTON: PRESIDENT

Day Letter

NITE

Night Message

LCO

Night Letter
Deferred

CLT

Cable Letter

NL

WLT

Week End Letter

C. WILLEVER. FIRST VICE -PRESIDENT

The filing time as shown in the date line on full-rate tdegrams and day letters, and the time of receipt at destination as shown on all messages, is STANDARD TIME.

RECEIVED AT 40 BROAD STREET, (CENTRAL CABLE OFFICE,) NEW YORK, N. Y.

AtrgAN's

C305C:2i;- PAS 15 RADIO

SS BERENGAR IA- RCNEV1YORK JUL 20 1927

GOVERNOR STR;;NG

33 LIBERTY ST NEWYORK (NY)

GOODBYE AND THANKS AND TAKE THINGS EASY
MONTAGU NORMAN

25 July 1927

On Board the Cunard
R. M. S. ItBerengaria."
Dear old lien

What about it?
Where does it all lead ana what can we do? I always come
away with the same thoughts -- flies in a web: can lift one (but
the personal
only one) foot clear: hard work to keep steady:
touch largely usurped by the mechanics of the web: and so on.
I enjoy being with you, but I am not, quite happy about you
because I can't see the light at the end of the tunnel and am
not sure that you are to be trusted to look after yourself.
I enjoy your lectures anu perhaps I look forward to a time when
you will live, -- far from Washington, in a land flowing with
red wine, -- near to Mother Earth.
For the present take life as easy as ever you can. It is hard
Drop me a line now and again and
to renew and can't be replaced.
take my greet thanks for all things.
Yours affectionately,
(Signed)

M. N.
(Norman)

(0,4 .0,i,7,
CUNARD
R.M-S. BERENGARIAT

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A

PRIVATE & COTFIDENTIAL

and AutEust, 1927.

Dear "r.Goernor,

I write formally to acknowledge the receipt
of your letter of the lath ultimo relative to the employment at
interert of a portion of our balance.
In accordance with the discussion which took
place on the 12th idem between us and "r. Jackson ''.Reynolds, I

shall feel oblied if you will piece the su.-

of /10 million on

deposit at call with the First 7ationa1 Bank of the City of row
Yor3..

In order to obtain the necessery funds please eiscount

or sell sufficient United States Treasury Certificates eue 15th
September next.

As tegreee with you. I enclose, in original

and duplicate, a letter addressee to the First 1:ational rank

which I trust will be setisfactory;

I lenve you to make all

arvene.ements on our behalf from time to time as to the rate of

interest which the money will carry, withdrawals of sums
deposited, or any other matter which may arise in this connection.
Believe me,
dear ''r. Governor,

Yours most faithfully,
(Sd.(1)

Benjamin Strong. ,Esq.

M.NORMkN.

S.S.ZEVIATHAN -

6th August, 1927.

6th August, 1927.

lysdear Strong,

At the hand of lass Holmes, to whom
will you please convoy my thanks, I have received a
book of press clippings regarding our recent meeting
in

York which is the giit of the Federal Reserve

Bank to the Bank of England.

I have previously

expressed to you my aamiration of tile pler_sing way in

which clippings are presented by your Institution, and
it only remains for me to say that we are grateful to
you for your renewed kindness on this occasion.
Believe me,

Yours sincerely,

kU'iCliv;z7D)

Benjamin Strong, Esq.

M. NORMAN

PERSONAL.
Audi of 61,0111 f1,

jondmix.2.
filth August, 1927.

my dear Ben,

Although kindly, Lubbock is so hard a taskmaster that he has not yet allowed me to write to you;

but at

least he assures me that he himself has written to explain this
and to make my excuses.

So if there is any blame lay it on his

shoulders.
2.

Your handling of your rate reduction was

masterly and for the time being has helped us more than I should
have expected, especially along with the easing in your call
money rate.

I cannot make any useful prophesy as to conditions

during later months:

the position here will depend,as you know,

on the inevitable trend due to crop movements as well as on
Berlin and to a lesser extent on Amsterdam.

Schacht's position

does not yet seem to have settled down and Vissering has very
little to spare on the basis of his present rate.

If I can give

you a useful forecast I shall of course do so, but I feel
comfortable for the next six weeks and in any event grateful for
your co-operation and help.
3.

I gave you the best answer possible as to the

proposed issue of a Greek Loan after the September meeting of the
League.

So far as I am able,

I do not intend that any part of
the

PERSONAL.

Benjamin Strong, Esq.

Fage 2.

11th August, 1927.

the Loan shall be issued here unless an issue in New York is
made simultaneously, but there are many ifs.

For instance, the

members of the League Committee take no responsibility for the
issue of a Loan but only approve its conditions apart from price,

and, having done so, then wish to see it out of the way.

And

it is said, with what truth I know not, that there is an
especial willingness in Sweden to help with this Loan in connection with the Greek match monopoly, in which case the lenders
though nominally Swedish would actually be mostly international
and well supplied with funds.

It is also said that in addition

to such usual lenders as Holland and Switzerland, the French
(for some obscure reason) are also willing to be lenders to the
Greeks.

But you can rely on me to try and induce London only

to act with New York and to get others to press the Greeks to
come to a settlement in Viashington.

Let me hear what happens

there.
4.

As regards the

Bank of France, 1,:oreau is

away but Siepmann has paid a very satisfactory visit to Rist in
Paris.

It would seem that now (as all along seemed possible)

they are persuaded of the likelihood of their sterling holdings
running down;

they are not taking, and do not intend to take,

any more gold, and apparently they do not wish to exchange
sterling for dollars because the total of the former is pretty
well stationary.

Nevertheless I arl offering, as a sign of

goodwill

PERSONAL

Benjamin Strong, Esq.

Page 3.

llth August, 1927.

goodwill and in the interests of both of us, to give the Bank
of France $25,000,000 or 030,000,000 for sterling if they wish
it.
5.

Salter wrote to me a few days ago that he

would arrange to go to New York about the 1st October in order
to discuss American membership of the Financial Committee.

I

daresay he has written direct to you as well as to Dwight
Morrow.
6.

I hope we see eye to eye about your sterling

The t12,000,000 more or less that you have here now

assets.

were acquired at the time of Moreau's difficulties and that
fact has been very useful indeed to us both.

But I did not

think the figure should be looked upon as rigid or permanent:
if we get near to Queer Street I may ask you to increase it and
therefore when the reverse takes place I should like to see you
reduce it.

Thus, during this perhaps spasmodic improvement in

the Exchange (due of course to your rate reduction)

I should

like to see a reduction either by your acquiring moderate
amounts of gold in the Market here or selling sterling at your
rate.

And this is separate from the other reason which might

induce you to acquire gold in the Market, viz., that when the
Exchange is distinctly in your favour, the gold is likely
otherwise

PERSONAL
Page 4.

Benjamin Strong, Esq.

11th August, 1927.

410

otherwise to go to New York and so into the mousetrap.

I trust

both of these reasons are clear and will commend themselves to
you.

Believe me,

Yours

st sincerely,

0/144-41LAte
I''.......

Benjamin Strong, Esq.

PERSONAL.

Ault of

0111g land.

Jonclon,E.c. 2.

13th A

list, 1927.

Ey dear Ben,

When I was writing to you on the 11th, I forgot

to mention a point arising from a conversation I had with
M. Franck some days ago.

You know he is sailing for New York at

the end of the month, thence going to the Nest and coming back to
see you towards the end of September.
In the banking way there is nothing particular

E. Franck wishes to do but he asked me how he could best find out
the prospects and methods of increasing the sales in 1:ew York of

Belgian luxury goods, viz., perfumes, silks, lace, leather, and
all the rest.

I advised him to ask you, thinking that you could

find out an answer for him through Mr.Reyburn.
you this warning.
Believe me,

Yours mbst sincerely,

eluitaAA

Benjamin Strong, Esq.

So I just give

20 Aug. 1927

ork

THORPE BODGE
Campden Hill, N. 8.

My dear Ben
I cane t think how your arranaelent with Jere Smith was posit seemed so impossible when I came away (at least
sible now:
before Sept.). There is no question he will be very welcome to
the Committee, but I do not know the steps towards an invitation.
I am finding out.

Nothing has been done about our internal arrangements since I
cane back. There is some sort of a draft Report which is far from
pleasing everybody and disappoints some. But no progress can be
made at holiday times like these and so we must wait for a month.
I am now waiting to hear from Dr. Stewart as to whether he
will be able to come to us for some weeks in the fall -- as a
visitor. This depends on his kr. Case who should have been home
from Europe two weeks ago.
Since the reduction in your rate, our position has been greatly
improved and our control quite satisfactory. This latter is partly due
to the market's uncertainties about the autumn. There is a Government
maturity on Oct. 1st of some £80 million which will be difficult to
On the other hand,
deal with except through the short money market.
one cannot measure the effects of the regular fall payments on the
Exchanges. But as people seem alive to the dangers, perhaps preparations have been made in advance.
Lubbock is away for a month longer and Niemeyer does not come
to us till about Sept. 15.
I have been trying to keep you regularly posted by cable and
I hope you feel I have succeeded. Letters get so much out of date
that I am more anu more inclined to rely on cables to keep you in
touch.

These shipments of gold from Cape Town to Buenos Aires may
become so large as quite to affect our position. They are mostly
clue, of course, to large Argentine crops, largely sold to Europe. The
the more he will lean upon us
more gold is thus drawn from(aaTt
for his reserves and the less fresh gold will come to London for a
period.
Doreau has been away all this month, and I cannot go to Paris
while Lubbock is away. But, as you know, I have made the best arrangement I could with B. of France on the lines you advised. It
seemed to us that when the conversion of £ into 1, was actually
offered, Rist was less anxious to agree to it tan earlier. But
that is arranged and to the advantage of both.

Please tell me how you are and where you are living and
whether Phil is with you. The last letter from you said nothing
about all this. Its questions have all been answered in one way
or another.
Amy is back at Plodge but not yet fit for doing all she
used to do:
Still she is improving.
My love to you,
(Signed)

M. N.
(Norman)

24,

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CONFIDENTIAL.

S
S
s. s laJESTIC

23/8/27
22nd August, lc.)27.

dear Strong,
Your letter of the '.th Lugast and the

photos Lientionod therein have now arrived and I send my

best thanks to you for both,

The ease contlinin,7 the

photos .:as considerably damaced by water which had
unfortunatoly reached the edE7o o2 the prints.

endeavour is boin

An

made to repair the miochiof (which is

probably not serious) and I hope to be able to pace on
the photos in accordance with your wishes.
Believe me,

Yours sineoroly,

(SIGNED) M. NORMAN.

Benjamin Stronl, Esq.

°E4kir

\

ar_

23rd
19Z7.
./Zr

thloh

dear

you

Ctrons's

The cow
loa
h.rkve

cezat

aeoozd12-18.

to

we had

of 'Stabillzatlal,

Itibbook

and rlyaelf

youzproale

boen v;atehInc,

azid

arzlved
boat

than.
ka

04 beh
alf

tor

to-v.
d

of ua both

Zellevo
we

Youra

alneeely,

(SIGNED)

Zcnjarlin

Stronz,
Eaq.

M. NORMAN.

11

...v. um.

....1

J..

"14311

ITn.ur,
,+

1007

0.

o'

7.1.e%r .1.:r.Govalmors

h:iva reoefivea. your lotto:: of
c;11.-,11 ci:c1s.c.31.trea at. otirlte.1..

o

to t'llo

ou

::71.1%-ct

with

bcon Concluoted a:9

I an grot1 intiobtd. to

,;:oz1

yca ..1.:.vo rade 0.7.1 our

dear LI...Cover:1°r*
Belleve
Youra mat

,

Esq.

.

.

o0\11

PERS ONAL.

And of

o-'71

Jondon.E.c. 2.
27th August, 1 ':;L7.

1,:y dear Ben,

I am glad to be warned that Winston is likely
to pay me a call:

I like him and shall be pleased to see him, the
more so if he has been improving the attitude of the
City Bank and
Charley Mitchell towards you.

This raises a question about which I am
enquiring by cable to-day.
If it is true that Speyers and the

National City Bank have arranged to handle Greek
business jointly,
what is to be their attitude towards the
League Loan which it is
proposed to issue in the Autumn:

It must have been Winston who

advised Washington to prevent the issue of Loans to countries who
had not settled their debts with the U.S. and presumably
he

advised the Bankers to listen to Washington.

Is he now advising

Charley Mitchell to hold off from this Greek issue and making
Jimmy Speyer do the

same':'

Rather a queer predicament;

therefore your

personal note of the 16th August is the more helpful.
Yours mosj sincerely,
alerVIAIL/10%

Benjamin Strong, Esq.

,

PERSONAL.
Both of &gland,

joodtmEc2.
29th liugust, 1927.

y dear Strong,
Cis Lubbock from his holiday retreat has sent
me your letter of the 16th August to deal with.

He had evidently

written to you to explain the burdens he insisted on laying upon
me so that he himself could go unburdened for a vacation!
2.

I have been cabling so fully as to the Exchange

position that I can say no more about it except that the news of
the opening of the Conversion Office (i.e., free gold export)

leaves me uncertain as to its probable effect on the Argentine
Exchange and on the Argentine demand for gold.

It is true that

our position may be tender, chiefly because the French skimmed
everything off the Market some three months ago:
should now have been in a strong position.

otherwise we

As it is, things are

a deal better than a few weeks ago they seemed likely to be.
3.

I am glad you are in touch with the Common-

wealth Bank people, and of course a fundamental reason for my
cabling to you on the 5th instant was that you should link up with
them before they linked up with anyone else.

I did not at that

time know that Mr.Collins was to join the other two in New York:

I know Collins and think he can be relied on to be helpful - the
other two I don't know.
4.

Of

*A

PERSONAL.

Inh of 6111and.

2nd September, 1927.

My dear Strong,

Referring to my letter of the 29th of last
month,

I enclose a pro forma statement as to freight charges, &c.,

from Australia to San Francisco and to London, in order that you
may have the figures before you and possibly check them with
Mr.11arrison.

At the same time I may as well enclose a note
as to the dollar-sterling gold points.

I shall be much obliged if

Er.Harrison will kindly check these particulars and inform me if
he is in agreement.
2.

I know he has all the figures in his file.
Mr.77inston called here on the 29th August but

as he was following Charley Mitchell to Scotland that day we did
not have much time together.
the end of the month.

I expect to see him again towards

Meanwhile he confirms what I told you -

that the City Bank have agreed in principle to join Speyers in
handling any Greek Loan that may be authorised by the League, but
that neither of them would move until the Greeks had reached a
settlement at Washington.

Yours mo

l
Benjamin Strong, Esq.
(f

sincerely,

0/11mal4A ,

S

5t:). '...;eptenber,

if dear Bea,
Anon:: the variouc ".7ol-:e2n cues tions

have alseltssoci fron tirae to tirao, I may have
raentionc1 to you the east: of :or.vay: or aii I nay

v.thich w

:iot,

T caiot r

:71b r

Lut r.c..; this aucstion. (after icri
seems within thc,N lact wee:: or t-c:o
to bo toiii; up, I a:a senednc you a 2.70:.lorazldur i. o:2. t:1C
off ar.ft On :201'

S1.1.10

C Ot

;7)"

)

iojE1fl 110,3

tt an for your Daricular

uce.
Yourc most
(CieNzo)

Denjarain Ctronc, Esc.

M. NORA/M.1'i.

COPY

S

PRIVATE

NORWAY

For some years past we have been in touch with the
Norges Bank, and in June 1927 the President wrote that he aid not
look for any immediate return to gold parity, but that the moment
was approaching when preparations must be considered.

"Gne of

the first steps in this direction will be to secure a credit
abroad

...

During the last year or two we have had

numerous offers of stabilisation credits from foreign private
banks and on quite acceptable terms.but, so far, we have declined

to discuss the matter

In the course of our preliminary

...

discussions within the Bank, we have fixed upon an amount of some
£6 millions".

Last month Mr.Siepmann went to Oslo by arrangement to
visit the Norges Bank.
(1)

He ascertained that: -

Although exchange is now within 2 or 3 per cent. of prewar
parity, the policy of the Norges Bank is still to go slow.

(2)

The President would prefer to stabilise de facto in the
course of the next year or so, but to postpone de jure
stabilisation until experience has shown that prewar parity
can be successfully held.

(3)

Though general elections are pending, and the Norges Bank is
a parliamentary bank, no change need be feared in the
policy or Directorate.

(4)

No legislation is required in order to reestablish
convertibility of notes for gold.
is to repeal a Royal Decree.

All that need be done

l'aIVATE
111
(5)

The question of a coin or bullion standard has not yet been
considered:

but the circulation of gold coin was very small

even before the war and the Norges Bank is more likely to

diminish than to increase its gold reserves in course of
time.

Economic adjustments to the improved exchange appear to
be proceeding normally, though prices are still very high and wage
reductions have been delayed.
monetary situation well in hand.

The Norges Bank seem to have the

Foreign balances with private

banks in Norway have been large but are now probably not
dangerously high.

Public finance is in fairly goon order:

the

weak spot seems to be local finance, especially as it affects the
district banks.

My general advice, for which I was asked, has been:
(a)

not to delay over long,

(b)

not to wait at de facto but pass straight to de jure
stabilisation,

(c)

to avoid the expense of needless credits.

This advice, especially on the last point, will not be
very palatable to the President.

He is being offered overdrafts

by private foreign banks but would prefer to deal with Central
Bankers, if he could do so on the same terms.

He admits that the

suggested £6 millions are for ornament rather than for use and I
hope he will reduce his requirements to a manageable figure.

5th September, 1927.

PERSOrAL.

PERSONAL.

11/

Page 3.

Benjamin Strong, Esq.

6th September, 1927.

I have been giving you all the news I can
think of so this is the end for to-day, and
I am,

Yours mo

sincerely,

On't-444.

Benjamin Strong, Esq.

PERSONAL.
;lank of 61011(1,
jOndMI,E.C.2

10th September, 1927.
ry dear Ben,

As soon as your letter of the 31st August
arrived, I telegraphed to Salter that you wished him to be careful as to the character of the Publicity about Jeremiah Smith's
I also wrote to him the same day about your other

appointment:

suggestions and hopes in this connection.

As yet there is no

answer from Salter but it is more likely he will communicate
direct with you than through me.
2.

about Algeciras.

There is just one point we must not forget
I gather you have written to Moreau, Schacht,

Vissering and Bachmann:

that makes four or with us two six.

Some of them don't speak our lingo - that needs an adeouate
companion.

I, for instance, would propose to bring Siepmann.

But you cannot hope to collect six or eight fellows at Algeciras
from all parts of Europe and from America without limelight and
publicity.

The reporters are certain to find out and will be

stopping in the same hotel, and there will be no sort of means of
escape in a public place of that kind as there would be in TTew Yar;.1c

or elsewhere.

Now I am all for meeting at Algeciras, but
don't forget the danger and trouble of publicity especially if the
numbers are increased.
Yours
Benjamin Strong, Esq.

sincerely,
JI1M101.1040%

Fr,

MISC. ISIS 2SM 8-17
FEDERAL
YE SANK
OF NEW YORK

TIMIE

INTEROFFICE

ROUTE SLIP
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DIVISION
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USE THIS FORM INSTEAD OF OFFICE ENVELOPE WHEN POSSISLE.

TO INSURE PRONP`mr AND ACCURATE DELIVERY ALL COMMUNICATIONS SHOULD SE DISTINCTLY

PERSONAL.

13 an I

t

or Citiland,

Jondmac.2.
13th September, 1927.

My dear Strong,

A few days ago I received your personal letter
of the 30th August covering another and longer personal letter
about the article by Mr.Snowden which had appeared in the
Mr.Snowden is now living

'Financial Times' of the 23rd August.

in the country and from what I know of his movements is not
likely to be in London yet awhile.

And so after cogitating over

your letters I decided that the best thing to do was to send your
longer letter straight to him in the country along with the Press
clipping to which your letter referred.
what sort of a fellow you are;

I wrote too, saying

that you wanted to put him right

as to the policy of the Reserve Banks;

and asking him to read

your letter at his leisure and for his own information.

I hope

this will produce the result you desire, and anyway I think it
was almoiltithe only way now to deal with the matter.

All the same I am not sure that you have
judged Snowden's real attitude quite rightly:

you may be making

a mountain out of a molehill, for when I read the article in the
'Financial Times' I did not judge its intention or effect to be
serious.

It has raised no comment or discussion here.

You

must remember the position of the 'Financial Times' and of
Snowden.

PERSONAL
Benjamin Strong, Esq.

Page 2.

Snowden.

13th September, 1927.

He, I should guess, was commissioned to write an

article on a chosen subject suitable for that particular
newspaper.

Now Snowden, though he is a serious man and an ex-

Chancellor, is no banking expert:

he is a poor man and finds the

butter for his bread by writing articles here and there.

When

offered a good fee for a newspaper article, he has to make that
article sufficiently irritating or intriguing for the particular
paper and the 'Financial Times' (a second class sheet which
prides itself on irritation and sore spots and tail twisting)
would not have been content with obvious milk and water.
In other words, the newspaper paid the piper
and called the tune:

the piper played the required tune, within

limits, but in such a way I think that he could maintain vis-a-vis
a critic or his conscience that he was raising questions rather
than making complaints and that for remedy he relied on
co-operation.

Of course, it goes to show that politicians should

not also be journalists.

But taking things as they are, a

politician such as Snowden need not be a bad or unintelligent man
because being a journalist he wants some butter on his bread.
So I hope very much to set your mind at rest
sooner or later, and meanwhile
Believe me,

Yours very sincerely,

AA/64144tAt
Benjamin Strong, Esq.

,&-/e4 irrAf4

e

g cre

13th Soptombor, 192?.

.71y dear 3trolz,

';() have low.; boon on tho lookout for

an opportunity to return ;four kindness in sendinc, us from

time to tiro nowspaper clippin:Ts on subjects of interest.

An opportunity has now occurred in connection with tho
Chica,170

Rato controversy and, mach thoun I ro,--ret

the cause, I aai none the loss 31ad to be ablo to be of

sarvice to you by sendin: a number of clippings concornin7
the affair.

As a counter irritant I send also a clippinc`,

headed 'Blair v Lorgan',

miz7ht amuse you.

Believo me,
Yours oincorely,

Benjamin T6ron7, ::sq.

likCopy of a hand,;ritten letter)

Sept. 18, 1927
Thorpe Lodge, Campden Hill, W. 8.
My dear Ben.

Niemeyer has been with us for a couple of days (which you know marks a real change)
T says everything went fine about Jere Smith. You will not find any bad reaction
from Geneva. Salter it tied up there for 2 or 3 weeks + then comes to London for
will try + fix his coming later to N.Y.-but it depends on his free time.
a couple of daya:
I am still wondering whqt Dr. Stewart 4111 be able to 4th aboyt this fall: you sent me a
message from him + I have since written him, but it looks now as if we would not see him
here till Jan.lst That of course is when he will really be free.

Kindersley is in Brazil + making a deal of trouble by promising Credits + discussing
Schemes for valorising coffee- Certainly more than we want to carry + probably poor
policy.
But his is a difficult firm to deal with +only seem to look on business from just
one angle.
Partly because of his absence (for another month() our internal plans are going slow.
But it is certain that in a few weeks there will be a Report signed with seuv:ral recommendations to which most of'us'(your pals) will be wholly opposed.
I dont know
what will happen then. Its not a question that turns round my position for all seem
1,o want me to continue for a year or 2 years. Its a question of later administration
rotation + all the points you have heard discussed.

Peacock is going to Canada early in Octr. + will likely pass through N.Y. later: you
shd. make a point of seeing him. McKenna is going at the same time as they are both
Directors of the Can.Pac.- a nice paid!' heaven arm in arm with hell?
McKenna is
always chasing the lime-light + alwaysmaking things difficult forpe. he's a bad man.
I had an idea that Cupid was shooting arrows at Phil + am glad this usual + welcome
complaintts developing!
Glad for him + her: ;but it will leave you
- more alone
than ever when he comes to marry. We (not you alone) must consider carefully what
line of life you are going to choose.
A squabble
Seems to have sprung up between the Board + the Chicago R.Bank about their
rate reduct1on.there are frequent allusions to it in our papers out I do not 'understand
just what has happened.
The fact is unfortunate because it has vather distrubd your
rate plans which had been working out so v:very well + because it looks as if Crissinger
had resigned in consequence.
Lubbock is now coming back r,.fter his vacation + the rest of our party will follow him
soon. Siepmann is in Paris 'just to keep toul. Our refunding is not easy but ;is
making progress: of ro;rse Churchill(being hfself) cannot ever make such operations
easy!

With many thoughts + much affection
I am MN

Perhaps I have been sending you too ;many press cuttings + articles from the Bank??
Blame a renewed machine - not me!

.Sept tirp
(S,
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rer S.S."Ieviathan" - 19.9.27.
P7:3o:jfki.

19th September, 1927.

My dear Strong,

I am sending you a copy of the Protocol just

PERSONAL

Bank of ChOanA
361thrit, E.0

.

2

22nd September, 1927.

My dear Strong,

You may perhaps wonder what has happened
to the photographs which you sent to me for signature at
the beginning of August.
their return.
here;

A number of things have delayed

They had to be dried on their arrival

then Schacht was ill and unable to sign;

Rist is in Switzerland.

and now

But the photographs have come

to no harm and your copies should be on their way back
to you in about a week's time.
4
Yours very sincerely,

Benjamin Strong, Esq.

PERSONAL.
Ban 11

of anOnd.
1111(101LEX.2.

23 d September, 1927

10).7
1,:y dear Strong,

I have been much interested in reading
OW.

your letter of the 12th instant (Personal and Confidential)
which gives a good account of the differences which have arisen
between the Board and the Reserve Bank of Chicago, and which
also explains your loss of gold and your discounts.
also for sending the Mialey-Eaton Letter, No.471.

Thank you
I hope to

goodness your money market will straighten itself out and
certainly money rates have been satisfactory during the last
ten days.

Since your letter was received, the appoint
went of I:r.Roy A.Young to succeed Crissinger is announced, and

this I hope will help to smooth out your difficulties.

His name

is new to me.

So far as our position is concerned, I
cannot add much to my cables of the 13th and 15th, especially
the latter (No.169/27).

Owing to repayments and conversions

our market will be upset until the second week in October and
you need not pay too much attention to the rates which may
happen to be quoted between now and then.

our short money rate should run along at 3

Generally speaking,

with three months'

Bills about 44i, but there is so great a demand for the latter
that

F.

4

PERSONAL.

Page 2.

Benjamin Strong, Esq.

23rd September, 1927.

that the rate always tends to weaken if short or call money
You already know

becomes abundant even for a couple of days.

our dollar position, which shows good balances in hand with
the First National Bank and December maturities.

I hope our

and European importers have largely covered their known dollar
requirements for the Fall:

but this cannot be ascertained.

Our Reserve position is satisfactory but our gold holdings are
meagre as they continue to suffer, directly or indirectly,

from the strong Argentine demand as well as by the normal
dribble to many countries which occur almost every day.
As regards conversions:

the maturities of

the 1st October have recently been satisfactorily dealt with,

but a current atte.vt to deal in advance with next Spring's
maturities - a total fo some i',200 millions - has net with a

poor response.

The fact seems to be that as all these Bonds

(which were issueL during the War) come to their maturity, more

and more of the holders wish for short Bonds or Bills and fewer
are willing to refund for 20 or 30 years:

of course the

Treasury's object all the time isto bring about the latter.
Yours mos

incerely,

6

Benjamin StronL, Esq.
"1444L44 ,

CONFIDENTIAL

110

MEMORANDUM
1.

The Bank of England would certainly be willing to give its ful
moral support and assistance to any plan of financial
reconstruction for Portugal recommended by the Financial
Committee of the League of Nations.

An essential part of

such a scheme would be Currency reform, including the legal
stabilisation of the Currency unit.
2.

The Bank cannot undertake to support a scheme other than a
League of Nations scheme, particularly in view of the
political uncertainty in Portugal.

As London is a free market Lazard Bros. & Co. are
of course at liberty, so far as the Bank of England is
concerned, to provide here some portion of an international
Loan under another scheme.
3.

As regards the modalities of the League scheme for Portugal,

it is impossible to say in advance of investigation what mig
be needed.

The League has no cut and dried formula:

and,

as the many variations in the details of past League schemes
show, each case not only needs to be but, in fact, is
considered on its merits.
4.

On the hypothesis that the real position is neither better nor
worse than it is believed to be, it may be conjectured as
follows:-

It would be necessary for the Portuguese Government to

obtain the approval of the Financial Committee for a program

designed to secure permanent Budget equilibrium, whether by

- 4
411
7.

40

If Portugal wished for a League investigation with a view to
Budget and Currency reconstruction, she would have to apply
accordingly to the Council of the League which meets early in
December next.

Such an application would be referred by the

Council to the Financial Committee who would, between then:and
their March Meeting, collaborate with the Portuguese Government
in working out a scheme of reconstruction.

30th September, 1927.

anh of (6ntiland,
00(IMLEX.2.

30th September, 1927.

L

dear Strong,

I think that your letter of the 19th instant
about Philip Snowden's article in the "Financial Til:les" only needs

a brief acknowledgment.

I dealt with it as it were in advance

on the 13th September, and though I have since had no word from
Snowden himself I believe his article should not be taken too
seriously.

here certainly take the view that it is better, as

you say, to "let the Heathen rage".

The exchange position continues to be quite
satisfactory with the help of your easy money rates.

Thus I am

glad you are able to carry out your wish to liquidate still
further your sterling holdings on the lines of the cables which
have passed since the 26th instant.
You will have gathered from my cable (No.

178/27), even if you have not heard from Dr.Stewart himself, that
to our great regret he is not able to pay us a visit this Fall,

and we therefore await his coming about the hew Year with patience
and great pleasure.

In five or six weeks' time you are 11:ely to
have a visit from E.R.Peacock.

You know him so well that I need

not ask you to open your arms wide.

He sails for Canada within
a

PER.64 \,,11

Benjamin Strong, ESQ.

Page 2.

30th September, 1927.

a couple of days, along with McKenna, to attend a meeting of the

C.P.R., but afterwards he will spend a few weeks in Canada and
then go down to New York; while McKenna with his love for limelight and propaganda will be giving addresses and generally
stirring the pot in several of your cities!
5. The weekly cable as to your conditions, which

reached us yesterday, contained a piece of information with which
I am unfamiliar.
TT
.

.

It reads as follows:-

Labour demands smaller than last year and

"labour turnover small."

Does this mean that the shifting of working men from one place to
another and from one industry to another is smaller than usual
and what economic or financial deduction should be drawn?

I

assume it does not imply unemployment but perhaps more settled
conditions.

You need not trouble about this yourself
but ask- Dr.Burgess to send a couple of lines on the subject.
Yours most, sincerely,
1414441.44.

Benjamin Strong, Esq.

ROM!"

/

I

PERSONAL

troll of

ofliglalul.

Sondon,E.c. 2.

5th October, 1927.

my dear Ben,

I just write to say that your three letters
of September 21st have been received:

the two about Blair v.

Morgan and about Mr.Snowden's article require no comment.
I shall be sorry if your plans about
Algeciras have to be changed owing to the disturbance which
may arise from the rate dispute between the Board and the
Reserve Bank of Chicago.

Generally speaking, I shall stick

to the Algeciras plan for January unless and until you say it
is impossible from your standpoint:

but in any case the

meeting needs to be conducted with great caution.

I do not

Know to how many European Bankers you have written or how many
of them you expect would travel to Algeciras?

But whether

you come to Earope for January and February or for a longer
visit,

I am sure that you and I (with such others as you :nay

select) should meet at the earliest possible moment:

once at

Algeciras we could decide about migrating to some other place
in the French Riviera or elsewhere.

Anyway, please keep me

informed of your plans as soon as ever you know them.
Furthermore, I have yor letter of September

23rd acknowleding the Midland Bank reviews.

My impression
is

ME%
Benjamin Strong, Esq.

Page 2.

OP

5th October, 1927.

is that the articles in the end recommend firstly co- operatior

between Central Banks on money policy and the like and
In my view, as we have agreed many

secondly publicity.

times, salvation is likely to be found only through such
On the other hand publicity as to decisions

co-operation.

resulting from co-operation might imrease the profits of
the Midland Bank and others but would mace a public target
out of the decisions and would leave them much more difficult
to achieve.

Therefore, with that unfortunate British

shrinKing instinct of which you sometimes complain, I am
against all publicity:

I take this opportunity also to thanK you
for pulling my leg in your letter of September 27th.

The

meeting went all right but not nearly as far as the reports
have indicated.

With Kindest regards,

Yours m

t sincerely,

014404-0-AAP.
4e450444

Benjamin Strong, Esq.

p IN U

Unlit.)

L.

place about next year till early
in Nov.": a month hence

V J.

-L J

9 Oct. 1927

Thorpe Lodge
Illikampden Hill. W.8.

My dear Ben.

0

I am in the country on Sunday + have none of your letters here to answer. But
I have often written to you lately +there is not much left to tell you. The question
of our internal arrangemets has been gradually coming to a head - finFllly by a
recommendation from a Come that we return permanently to the old system of rotation
after a couple more years, during which time I should be expected to make everything
ready for the return. In principle this prospect is attractive to our older colleagues
who were brought up on rotation + have hardly realised the inwardness + permanence
of the gulf between now and 1914. It also seems to be attractive to Kindersley +
you know the reasons well enough. In practise those of us who realise the gulf(or
think we do) believe that rotation may be attractive as a prospect but in reality
So I guess the recommendation will be
is impossible (-at least in our lifetime)
turned down - after it has somewhat cleared the air - + we shall continue to develop
on the present lines... i.e. with Harvey, Siepmann, Niemeyer, Stewart + so on: +
Any way no
perhaps with the difference that some of them may become Directors.
changes are likely (in the ordinary course) so far as Lubbock + I are concerned for
a couple of years a so.

I tell you all this, but dont write to me at the Bank about it - address to
Flodge. IN case you do not find it possible to go to Algeciras, let me know if
Its for you to say: but I hope for the former.
I should come to N.Y. about Jan 1st.
And you
You have not said much about Phil but I like to think his bky is clear.
GiVe my love
Shall I take no news as good news?
never say a word about yourself.
to Harrison in case he should forget met. + with the same
I am yours[signed] MN

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PERSO.LL.

*WI of &OW.
jondon,E.c. 2.

10th October, 1927.
my dear Strong,
Your letter of the 24th Septelaber raises raany

points and asks many questions which no one could answer precisely:
I can only do so very generally.

Your account here has now been liquidated,

which is satisfactory, and I realise that after the fall and
winter demand for credit with you has run its course, your
domestic portfolio and advances will need also to be liquidated.
This would seem to be natural enough:

I should suppose that,

after the crop movements are completed, the credit which they have
required would flow back and provide the liquidation of that
normal seasonal expansion of credit.

Any expansion which takes place here on
similar lines is on a very small scale.

Our derind is more to

meet the importation of raw materials; and this demand, uhich
usually weighs heavily on the Exchanges during the back end of
the year, seems at the present time to have been so immensely
lightened by the strength of sterling (follo%:ing your rate

movements) that I hope it may be negligible.
As to our money market i)osition, we seem

generally to be in a satisfactory condition for the time of year:
the

IERSONAL
Page 2.

Benjamin Strong, Esq.

10th October, 1927.

the Bank has complete control of the Market - aside from gold
possibilities to which I will refer later.

I have no means of

knowing how great is the total of American balances in London,
but I have no reason to think that it is abnormal, and the only
excess, so to speak, to which one can point results from the
Proceeds of the gold taken over by the Reserve Bank from the Bank
of France and now a debt by London Bankers to New York Bankers.
If I remember rightly the amount was about 212,000,000.

I

imagine that these balances, which are more or less continuous
in the shape of term deposits, will have largely been fixed until
the middle or end of November, and because they will roll along
I should hope would then cause no inconvenience.

With the

exception of the French gold above mentioned, I do not think
that London owes any more short money than usual to foreigners.
There is of course always a large arlount of such money in London

representing the claims on London of other countries;

the

greatest 'claimant' to-day is doubtless the Bank of France.

But

others, such as Holland and Germany, are Drobably lower than
usual.

Similarly I have no means of knowing how great
is the total of American and other foreign investments in London:
they are generally thought to be increasing but on no evidence
that is convincing.

If our tax burden on income is reckoned, I
should

PERSONAL

Page 3.

Benjamin Strong, Esq.

10th October, 1927.

should think such sterling investments are only in speculative
securities or to some extent in Foreign Bonds.

Insofar as I can form plans for the suture, they
are to run along indefinitely with a 4e0 Bank Rate: a full
private rate of discount (I am trying to impress upon our
dealers the need for a continuous and more or less rigid rate of
private discount rather than a rate which fluctuates according
to the passing value of short money): and short money averaging
-

7
71'.

As your call money rate has lately kept low no

inconvenience has been felt by its pulling on London, as seemed
possible a few weeks ago.

Our Government is well supplied with Dollars for
/

its prospective needs and no purchases on that account are
Llikely during the present year.

I am holding our own Dollars in

reserve and,if anything increasing them from time to time as
opportunity offers.

But it is far too early to forecast their

possible use in connection with the amalgamation of the Note
issues: that amalgamation continues to be remote rather than
immediate.

As to the gold position, you know that our
holding now barely exceeds Z1t0,000,000 and that during the last
few weeks practically all the golu that might have been available
for London has been taken directly for Buenos Aires from Cape
Town, together with a moderate amount taken directly from London
to

PERSONAL
Page 4.

Benjamin Strong, Esq.

to Buenos Aires.

10th October, 1927.

The recent shipments from these two points
However, the Argentine

aggregate about ;U0,000,000.

demand seems now to have slackened and there is a prospect of
more regular shipments to London beginning again from the Cape.
Other than the continuous and regular loss from London for
trade and hoarding and innumerable purposes all over the World,
aggregating fully e,100,000 a week, I know of no early and

insistent purchasers:

the Argentine remains a possibility:

Brazil talks of setting up larger gold reserves:
not at all likely to purchase on any large scale:
so to speak, off the map:
is likely to be greedy.

India is
Russia is,

and none of the European countries
Thus a portion or any future arrivals

from the Cape may well stick in London; and as I hinted to you
in an earlier letter, we here will no longer be as chary as
s d

hitherto of occasionally paying over the minimum price o' 77/9
if it should seem wise to do so.
Finally,

I hope that you and I will both

find it possible to retain our rates for months to come at
their

resent levels.

It would indeed be a disappointment

if the present dispute as to your discount changes should
force upon you an unwilling rate policy.

Similarly,

I like
to

PERSONAL
Page 5.

Benjamin Strong, Esq.

10th October, 1927.

to think that the recent advance by Schacht of his Bank Rate
and the probable (I think) advance by Vissering before very
long need not affect the general level.
:;ith warmest regards,

Yours mos

sincerely,

0144_044

Benjamin Strong, Esa.

.

ant

of (eivtaith

10th October, 1927.

my dear Ben,

The signing of the photographs
which you sent me in August has now been
completed and those allotted to you have
been returned today.

I hope they will

reach you safely.
With kind regards,

Yours most sincerely,

Abe144.4..40L44..

CO /4-cial

'c

ikel*ar(g.)
Benjamin Strong, Esq.

Vault

e 6vIatte

10th October, 1927.

my dear 3en,

The present moment appears

opportune for sending you a further
budget of cuttings regarding the Chicago
controversy.

The interest which the

Press here took in the subject seems to
have waned.

Yours most s ncerely,
0.11A44"04A,..

Benjamin Strong, Esq.

11111
4an1i

PERSONAL
lb%

1 angland,

Sonclon, E.C.2.
11th October,

My dear Strong,

The cable which I sent you on the 8th insta

(No.191/27, paragraph 2) has really answered your personal
of the 23rd September.

Salter was here for an hour or two last Fri

and we discussed all sorts of questions including in particu
the possibility of his visitinr-- America this Pall.

It was clear to me that Salter is not very

that he needs a rest (which he ,;2111 not get) and that it wou

be extremely inconvenient, even if possible, for him to go t
Nev York in the near future.

Therefore I am sute you will a.

with me and with him in thinking that he should not go: that
his decision, based partly on the above facts and partly on
cable which he received directly from you last week.

All

arrangements, and especially the publicity, in connection wi

Jeremiah Smith's appointment to the Financial Committee have

so satisfactory that the need for Salter's visit has largely

disappeared: and we have done no more than interpret your le
under reply in reaching his decision.

Of course I am more sorry than I can say t
Dwight Morrow should have ceased to be a banker and that, in

zeal for public service and sacrifice, his wonderful gifts .:

-

PERSONAL
Page 2.

Benjamin Strong, Esq.

11th October, 1927.

be lost to all of us and, for a time at any rate, should be
expended on those good-for-nothing Mexicans.

All of this and

much more I hope you have conveyed to him in appropriate language.
With warmest regards,
Yours mo

sincerely,
OtYkktJatot4

Benjamin Strong, Esq.

PERSONAL.
1111ank

of

(Inglmul.

PERSOI,AL.

Page 2.

S

Benjamin Strong, Esq.

11th October, 1927.

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PERSONAL.

43allit o

611.11illtb
Lltbillt,E.C. 2

12th October, 1927.

I. y dear Strong,

In continuation of my letter to you of
the 13th September on the subject of an article which
appeared in the "Financial Times", I have at length
received a reply from Mr.Snowden.

And now let me carry the matter one
step further by sending you a copy of his reply - and
a very nice reply too:

As I said,

I think you

treated his article too seriously and he says much the
same thing.

Perhaps you need not worry your head any

more about this.

Yours v

sincerely,

Alt4.12./(4

Benjamin Strong, Esq.

COPY

Eden Lodge,
Tilford,
Nr.Farnham,
Surrey.
7th Oct.1927.
Dear Mr .Norman,

I owe you a very abject apology, which I hereby
humbly tender, for the long delay in thanking you for your letter of
the 10th ult. and the enclosure of :.1r.Strong's communication.

Mr.Strong has been too sensitive about the general
observations I made in the article.

If he had seen it all I think

he would not hale been so upset.
I am glad, however, that it has brourht forth such an

extremely interesting and informing statement from him about the
policy of the Federal F.eserve Board.

the deepest interest.

I have read and re-read it \ith

It does not, however, reassure me altogether

as to the usefulness either to America or Europe of the vast proportion of the

rld's gold now held in the United States.

In the

hands, or under the control, of a man of international outlook
Ilr.Strong the possible dangers may not arise, but it might be a

temptation to others in changed industrial conditions in America.
I am glad, as I have said elsewhere, that the two
great Central Banks are in the hands of men who so fully appreciate
their ^Teat moral as well as their financial responsibilities (Can
we separate the two?) and I can sleep peacefully at nights knowing
that all

ill be done for the best.
.11th all good wishes and kindest regards,
I remain,

Yours sincerely,
(3d.)

Rt.Pon.1:ontagu C.Norman, D..0.

PHILIP SNODEN.

Ruth of 60a10

.1030NAL

1-,th Octob,_r, 1c27.

Yly dear Strong,

I do not remember whether
the "Banker" is a magazine which you see
regularly but in case

it is not, I am

sending you, herewith, the September and
October numbers as they contain some
articles which I should like you to see.

amin Strong, Esq.

Yours ver

sincerely,

14'

CC 0 F Yi

Oct 16. 1927
A,

Thorpe Lodge
Campden Hill. W.8.

My dear Ben
Your little note about Poland happened to have just arrived when
G.McG. came in + sat with me for an hour, without mentioning your note.
I
explained to him the whole set-up of this Loan so that he might explain to
you as he said he would do: indeed he seemed already to know quite a lot
about the situation.
I think the Prospectus reads very well - now that I have seen it + I
will try to help along the Bonds in a quiet way.
But what you are up against Oin
what you write) is feeling- deep-rooted: to which figures are an inadeouate answer.
Your friend Kiddy + the like are mild + impartial compared with i3-eeRliiial4seia
with many many others: + and have not been unfriendly in what has appeared here.
There are tiro particular points which I did not underline (or perhaps mentidii)
to McG + which cannot help: 1st the omission of the League + 2ndissue by Lazards
(after several others had originally discussed + considered it) And you know
Kindersley:

Dear old McGarrah was in fine form - friendly + communicative + nice
about you: but he seemed to fear trouble later over this rate-controversy.
I wrote you a week or so ago about ouI.Linternal arrangements.
Our
meeting always takes place round about Sept 20w1: Our decision
as to next
Governors is always published about Nov 8th

Amy has gone away for a few weeks - prevention this time + not cure:
gradually I am sure she is climbing up to the top.
Ever affy yours
[signed] MN

THORPE LODGE
CAMPDEN HILL. W.8.

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PERSONAL

Vault of 60410
18th October, 1927.

1;ly dear Strong,

Remembering your request
about newspaper cuttings, I am sending
you a number of extracts concerning the
recently reported utterances of Senator
Glass and others on the subject of the
control of foreign loans.

trong, Esq.

Yours very sincerely,

46.1%

PERSOHAL.

4P "Ar

Vank of 6414410
7117010.011, E. C . 2

25th October, 1927.

My dear Ben,

Please read this letter and then stick
it up and mail it to old Waddy whose address I cannot
remember.

Stephen Vivian Smith is a son of your
friend Lady Sybil, and so if he should ever find his
way to Mew York you, too, might like to shake him by
the hand.

Yours very

incerely,

0/14.444

Benjamin Strong, Esq.

,

cjvacl
limpv

Bank of bylarth

3 V27

25th October, 1927.

Dear Dr.Burgess,

I have received your letter

of the 13th October and am indebted to you
for explaining to me the expressions
"Labour demand" and "Labour turnover" about
which I wrote to Mr.Strong.
I am grateful too for your

hind reference to our arrangement with
Dr.Stewart: you may be sure that we are
impatient for his c,..rival and we look

forward with pleasure to his sojourn 71th
us.

Believe me,

Yours

:Icerely,
"144.410401,.

Dr.d.2.Burgess.

PERSONAL.

of (gligland,
Soudan,

E.C.2.

26th October, 1927.

my dear Strong,

I have had little to say to you these last

few days, but in order to keep the ball rolling I should like
you to know that courtship between the Dank of Italy and the
Bank of England is proceeding as hopefully as if it were Spring
rather than Autumn.

I think that we shall shortly have quite

a comprehensive and co-operative account and understanding.

This echoes, as it were, what you wrote to
me on the 25th August (paragraph 4) and recognizes that we
cannot rightly or wisely rule out the Bank of Italy because of
its dependence.
stances,

Considering traditions and present circum-

I do not think one should complain, especially if, as

seems possible, the measure of their independence is increasing.
Italy is not a free country in the usual

sense of the word, and certain things are lacking which in a
liberal country like England are apt to be missed; for instance,

freedom of speech, freedom of the Press, freedom of politics
and so on.

But the fact remains that she has made economic

and financial progress and is probably making social progress
too.

It is difficult to know whether the present regime is

becoming acceptable to Italians as a whole;

but at any rate it

has survived a period of strain and it continues.
In

PERSONAL.

tot

Benjamin Strong, Esq.

Page 2.

26th October, 1927.

In this connection :.:r.Beneducci, whose

name of course is familiar to you, came and had a long talk with
me last week.

He is said to be a close friend of Stringher,

and I only mention him for the sake of reporting to you a casual

remark of his to the effect that Stringher had been disappointed
not to find himself in New York among the other birds of his
feather last July:
2.

I just acknowledge your note of the 19th

instant and some day will take the opportunity of telling Er.
Snowden how much you appreciated his letter.

Yours very

incerely,

4116414.etvt

Benjamin Strong, Esq.

.

PEaS0i;AL

ilLutl:

Jt Q_'n.t;latO

28th October, 1927.

Lly dear Strong,

You may like to see the

articles which I am sending you herewith
on the Dawes Plan by Professor Cassel and
Sir Josiah Stamp, also some re ,orts taken

from our Press of the proceedings at the
Convention of the American 3ankers
Association.
Yours

t sincerely,

Asvt.a4A,

erwman..

Benjamin Strong, Esq.

.

FERS01::AL.

anh of en gland,
Sondon,

EX.2.

31st October, 1-:.27,

Lly dear Ben,

I just write to acknowledge the receipt of

your letter of the 18th instant about the Greeks and their discussions in Washington.

There is nothing new here to report on

this subject, except that the Swedish possibilities mentioned in
my letter of the 3rd October rather seem to have faded away.
I have of course seen reports of grumblings

about the control of foreign borrowings through your State
Department but it all seems to be vague and inconclusive.

A few days ago I received also your note of
the 19th October, which provokes me to say nothing more than that
I wish, as soon as you can do so, to have your views as to
Algeciras in a more or less definite form.

For the moment,

I

quite understand your plans must depend on what attempts may be
made to tinker with the Federal Reserve Act towards the. end of
the year.

I am glad you saw Gaspard Farrer and Bruno

Schroder: like yourself, I do not seem to have known that the
latter was going across the Atlantic.
Of course I am delighted to hear of Miller's
satisfaction with your condition and am content to ignore the
result of taking a tub!
Yours

Benjamin Strong, Esq.

sincerely,
010440LAmovi..

1Y,t_

tst

1

PERSONAL.

12-71 3A-1

Amh ofEngland,
Sandell, E.C.2.

1st November, 1927.

1,:y dear Strong,

Your letters of the 20th and 21st October
were written, as you say, to keep me posted and cover a number
of points, few of which really seem to require answers.

But

over the next few days I may refer to one or two of them and
to begin with I will touch only on Portugal.

Paragraph 4 (which occurs on the second page
of your letter of the 20th) mentions a cable from Lazards,

London, to the Guaranty Trust to the effect that we and others
are pursuing the Portuguese negotiations somewhat actively.
On the whole,

I think the reverse would be a true statement of

what has occurred.

I wrote to you on this subject on the 29th

September and since then nothing seems to have happened except
that Lazards have received the report as mentioned at the
bottom of my first page.

I have not seen this report and have

had no conversations about it with hazards or with the
Portuguese:

I should imagine Lazards were anxious to be quit

of the business unless it can be directed through the League
on proper lines and, personally, I doubt whether they or anyone
could or should undertake the business except through the League.
All

PERSONAL.
Page 2.

1st November, 1927.

Benjamin Strong, Esq.

Ott
All I can do therefore is to enclose, for your confidential
use, an estimate for what it is worth of the present situation
in Portugal.

Yours ve y sincerely,

deNtAl>114.1LAAr

Benjamin Strong, Esq.

.

PaRTUGAL
(based on information received from confidential sources)

Population about 64 millions, including adjacent islands.
Funded Debt

External - 2.30 millions net.

Internal -

9 millions, excluding funded debt for

a large amount held by Government Departments,
Savings Banks, etc.

FloatinE Debt External -

Internal -238

millions, which will tend to be

increased by Budget deficits.

Present Budget deficit - £3 millions.

Eo early prospect of a

balance.

Estimated requirements in the near future, several hundred
thousand pounds a month, if the exchange is to remain stable'

to deal with the situation comprehensively, at least £10
and possibly £15 millions.

The Government is a

ilitary Group Dictatorship,

drawn from what are probably the t:st elements in the country,
gut without administrative experience.

It alreadi, has to its

credit the settlement of war debts with England, the settlement
of a long-standing dispute with Spain about the water-power of
the Douro river and an improved administration of the Colonies.
It is an open question whether the Government is or. is not
constitutional;

but it is the best the country has had for a

long time.
Poli Tics.

The population is 1:onarchist in the

country-side and Republican in the towns.

The big- Commercial

men have tended to be Monarchist, but are now showing a desire
to cooperate with the present Government.

Exiled Radical

-2-

2oliticians intrigue continuously against the present
Government and regard economic or financial disturbance as
their best weapon.

The late King Ilanoel does not intrigue

and would not be acceptable to any party.

Currency

depreciation would probably bring down the present Government.
The Colonies are a financial drain, but to a
diminishing extent.

The Home Government gave :C1 nillion to

Mozambique last year and stabilised the currency at 24ku below
par.

Angola is a good proposition in the long run, but likely

to be expensive for some time yet.

Colonial resources would

not be available for any scheme of financial reconstruction.
Once the finances have been squared, a great need
of Portugal is for roads, which would be an indirectly productive investment.

The chief obstacle to financial reconstruction is
the national pride, because it is perfectly certain that
reconstruction could not be safely financed without external
control.

Given sucli control, in fact if not in name, there

would perhaps be a fair chance.

S
P7RSOITAL

1st November, 1027.

My dear Strong,

In reply to your letter of
the 20th October on the subject of Norway,

I

enclose one or t-:io Comments on the

llemorandum you hcxe sent me: and also a

confidential Note (prepared for you
personally by Siopmann) on the general
situation last August, which I hope may be
of use to you.

I will certainly keep you
informed of any further developments.
Yours very sincerely,
(SIGNED)

Benjamin Strong, Esq.

M. NORMAN.

COPY

CONFIDENTIAL

0

NOTES ON A VISIT TO OSLO - 22nd to 24th AUGUST, 1927

If sterling had followed the same course as the Norwegian Crown,

1.

we should have had dollar rates of $6.13 at the end of 1918 and 0.70
a year later.

After fluctuating below this level for the next four

years, the rate would have averaged $2.50 in 1924 and .$3.25 in 1925.

From about $3.10 in June 1925 it would have risen steadily for two
years to $4.70, and we should now be within some 3 per cent of prewar parity.

fficult to contemplate any other

uld be restored and maintained.

l advocate devaluation, and both

s introduced (ana overwhelmingly

ing the deliberate depreciation of
parties, which agree in little

valuation during the election

s doubtful whether, if they came

they preach.

M.Rygg said that the

to say in the matter and that the

tional Bank and the Government,

f pre-war parity.

It is

ist has recently been elected to

he has proved entirely amenable,

ebrand.

nk is said to be paramount in all
which there are only a dozen or

2

local and specialised;

so that some of the chief financial problems

There is now a

borrowing internally through the "Crisis Loan".-

balance and the real crux is whether this balance does not involve
a tax burden and a debt burden which in the long run will prove to
The Bucget has, roughly speaking, kept pace with

be insufferable.
the currency.

It has been halved (Kr.367 millions for 1927/8 as

against Kr.748 millions in 1920/1) while the value of the currency
has been doubled.

There is no reason to anticipate that the

Norwegian Government will require to borrow - either at home or
abroad - for a period of years.
8.

The State undertakings, apart from Railways, Post, Telegraph

and Telephone, are not many.
a mill.

There are some electricity works and

There are no commercial monopolies.

The State under-

takings for the most part show a balance on the right side, but the
Railways are estimated to be run at a loss in 1927/8, in spite of
terrific fares which must certainly be reduced.
9.

The concentration of Government balances with the Norges Bank

would be of more importance if there- were any real money market to
control.

The normal system is for the Government to work on a cash

balance, and the Norges Bank pays interest (now 3%) on Government
money beyond a certain minimum balance.

But for the moment the

Government is rather a borrower than a depositor.

The Norges Bank

is precluded by its Statutes from making advances to the Government,

;;;)?

Note

The "Crisis Loan" of 200 million Kroner was intended to
The idea was that the service of the
be a kind of capital levy.
loan should be met entirely by a special levy upon the owners of
This was the reason for its being kept out of the Budget.
property.
The original conception has been now more or less abandoned by general
consent.

- 5 -

A system of Treasury Bills has also been tried, but the Norges Ba nk

12.
IP

For two years the Norwegian wholesale index has been

consistently abolle gold parity with America.

The view of the

Norges Bank is that the difference of some 20 points, which exists

at present, is not due to any lasting circumstance, such as the
constitution of the index or the choice of a base date.

On the

contrary, the Norwegian index, compiled only a few years ago, was

deliberately made comparable to that of the U.S. Bureau of Labour
Statistics and it particularly includes the articles which most enter
into the international trade of Norway.

The expectation therefore

is that the purchasing power parity theory will in course of time be
vindicated by the further approximation of the Norwegian to the
American index.
13.

Movements of the Note Circulation cannot be correlated with

the internal or external value of Norwegian currency.

The nominal

value of notes in circulation is now roughly three times what it was
before the war.

But it has remained in this neighbourhood since the

beginning of 1926, while wholesale prices in the same period have

fallen from 214 to 165, the cost of living index has fallen from 216
to 201, and the value of paper crowns in terms of gold has increased
by some 30 per cent.

The whole subject of paper currency

circulation is regarded by the Norges Bank as something of a mystery.
There is no reason, so far as they know, for regarding the present
circulation in Norway as abnormal, though it looks too high.

The

best justification that can be furnished is the experience of other.
countries - e.g. Switzerland and Denmark.
of the Norges Bank, page 42).

(See the Annual Report

7

9

adopted.

To my first question I got a not very precise answer.

The level of wages (now more adaptable) and the level of prices would
certainly be determining factors.

But in any event, the distance

that now remained to be covered was so small that the question hardly
arose.

As to the means applied, I was told that the method of the

Norges Bank is much rather to influence exchange by way of credit
policy than to control credit conditions by interfering with exchange.

The items in the Balance Sheet of the Norges Bank directly subject to
the influence of its credit policy may not be very important, but the
items in the Balance Sheets of the other Banks indirectly subject to
such influence are decisive.
18.

Intervention on the exchange market has, of course, been

directed mainly towards preventing a too rapid appreciation of the
Crown.

Hence the loss of about £1 million which the Norges Bank

will have to suffer, although two thirds of the total loss are borne
by the State.

(In Denmark, the total loss amounted to about

£1 million, all of which was shouldered by the National Bank).
There is no unofficial or "free" market in exchange.
Before the formal meeting at which official rates are
fixed, there is daily an informal consultation between the Norgcs
Bank and the Exchange Banks, at which the guidance of the i\lorges Bank

is in practice accepted in regard to the official rate.
19.

The State share of the loss on accumulated foreign exchange

should have been met at the end of 1926.

There was an agreed post-

ponement, until the 15th September 1927.

while I was in Oslo, the

Treasury negotiated with the Norges Bank for a further postponement,
and were met with a blank refusal.

It is therefore to be expected

that two thirds of the loss will be paid in cash next month.

The

- 10 -

remaining third, I gathered, has already been covered by writing down
AI

the assets of the Norges Bank.

For the future, the Norges Bank

will no longer be partner with the State in its exchange transactions. -

It will deal solely for its own account.

At present, the Bank has

not, on balance, either to buy or to sell foreign exchange;

but if

the return to parity is delayed, the winter season may involve the
Bank as a buyer.
20.

When exchange has been restored to parity - Mr.Rygg said he

thought this ought perhaps not to happen for a year or more, but that
circumstances might force the pace - the gold standard can be
reintroduced without legislation.

It is at present held in suspense

by a Royal Decree, which only requires to be revoked in order to
reintroduce the status quo ante.

Before the war, very little gold

was in circulation, because there were Kr.5 notes that took the place
of the Kr.5 gold pieces which, under the terms of the monetary union,
might have been minted in gold, but in Norway never were.

I was told

that on the subject of gold there is really no public opinion.
21.

The present regulations regarding gold cover for the note

circulation date from 1892 (see N.Rygg in "European Currency and

Finance", Serial 9, vol. 1. edited by John Parker Young, Government
Printing Office, Washington 1925).

The contingent system was then

adopted, after some 80 years of hesitation, and the Norges Bank may
now issue (apart from the supplementary circulation, in abeyance

since the beginning of this year) notes for Kr.250 millions (say
£14 millions) more than its stock of gold held in the vaults of the
National Bank or of the Royal Mint.

22.

Before the war, the gold reserve of the Norges Bank amounted

to rather more than £2 millions - it is now roughly £8 millions, and
the Bank therefore has the right to issue £8 plus 14 = £22 millions
of notes.

Its present issue amounts to about £17 millions, or £6

per head of the population, as compared with £2 before the war.

The

strictly necessary gold reserve is therefore upwards of £3 millions,
or roughly £5 millions less than what is actually held.

But the

tendency of legislation has been to aiscriminate against gold held
abroad and still more against the inclusion of foreign exchange,
reckoned as the equivalent of gold, in the "metal" reserves.
Conclusions
23.

Assuming that .the policy of a return to pre-war parity will be

carried out, with the support of the Government and of public opinion,
and given;

(1) a strong Governor in the Norges Bank with security of tenure,
(2) a sufficient control by the Central Bank over monetary
conditions - including rates of interest, the exchange
market, commodity prices, and the total volume of credit,
(3) the prospect of sufficient political stability to ensure
the adoption of a consistent monetary policy for a period
of years,

(4) a balanced budget, not likely to be thrown out of
equilibrium, in spite of a heavy burden of debt and
taxation,

- 12 -

(5) a satisfactory balance of international payments, not likely
to be upset, except temporarily, in which case effective

L/\ )/3--

1S

PERSONAL.
:111h

of
3: 0

Ild011, E.G. 2.

2nd November, 1927.

17.y dear Strong,

In continuation of my letter of yesterday,

I refer again to yours of the 20th October, paragraph 3.

I do

not properly understand what you write of your enquiry from
Lazard Freres, but it seems to be in contradiction to what was
arranged by Kindersley while he was in South America so far as my
information goes.

At one time or another I think I must have

written you a note on this subject.

The transaction of last August in which
Lazards were interested was surely not with Brazil but with
San Paulo:

its object was not currency but coffee:

it was,

had thought, unconnected with any gold transactions:

I

it was not

really an acceptance credit but a cash advance (which does not of
course prevent one long draft for acceptance in accordance with
the usance of South America and for that matter of the Far East).
I do not defend the transaction:

on the contrary,

I disliked it

from the beginning, and I suspect it was undertaken largely as a
forerunner of some form of valorisation loan next year.
I think the answer you gave was wise and, so
far as I au concerned, kindly.

But there perhaps has been some

confusion between this San Paulo one-year advance and the

Brazilian 6e Loan issued by Dillon in 1ew York and by-the usual
Bankers

PERSONAL.
2nd November, 1927.

Benjamin Strong, Esq.

Page 2.

Bankers here in the second week in October.
may cover any Brazilian needs of gold.

The latter obviously

But in this matter of

gold the Government of Brazil might of course do some juggling
with the State of San Paulo and thus confuse the respective
objects of the two transactions.
2.

Let me interpose here a -paragraph on a

totally different subject.

A cable from Washington dated the

31st October, which appeared in the Press, purported to give an
recommendations to the Ways and 'Jeans

outline of

Committee of the House as to tax reductions aggregating
0225,000,000.

The cable went on to say that 1.r.Mellon's pro-

gramme included "the exemption from taxation of income derived
"from American Bankers' acceptances held by foreign Central Banks
"of Issue."

I should be interested to read any remarks on these

prospects.

Yours ve

sincerely,

41404LARAA,

Benjamin Strong, Esq.

of england,

PERSONAL.

Sondon,

E.C.2.

4th November, 1927.

:".y. dear Strong,

I have waited a few days before replying to

your letter of the 20th October on the subject of your buying
price of gold, as the question is one of great interest and
importance and I wished to take counsel with some of our friends
before I sent you an answer.

I realise tnat your proposal might be of

some temporary advantage to us, by making it slightly more
difficult for gold to flow in your direction;
to you for considering it.

and I am grateful

But I feel strongly that on general

principles the interests of international commerce and finance
are best served if the spread between gold points is as narrow
as possible:

the reduction of your buying price would tend to

widen them, and I should therefore view it with regret.
In my opinion, a better way of obtaining the

object you have in view would be for us to increase our buying
price, and, as I have already told you, we shall in future be
prepared, when the occasion arises,to pay practically up to
s

d

77/10i for bullion.
s d

In old days we took in bullion at 77/9 and
s

d

gave out sovereigns at 77/10-2, the difference being based on an
estimate

PERS011.1.

Benjamin Strong, Esq.

Page 2.

4th November, 1927.

estimate of the cost and delay involved in taking the bullion
to the Mint for coinage.
coin,

But now when no one here can demand

and when we are required to sell bullion and not to give

out sovereigns, the difference of 1 d. has no longer any reason
for existing.

Such a difference might be logical in your case,

and in the circumstances it is a curious anomaly that we should
have it and that you should not, but for all that I hope that
you will remain as you are, and that we shall bring our practice
nearer to yours.

Of course the difference between buying and

selling prices, due to considerations of coinage, is an internal
question:

for international purposes gold is gold whether it is

in the form of coin or uncoined bullion, and, in my opinion, the

less difference there is between buying and selling prices the
better it will be for all of us and the smoother the working of
the gold standard.

Yours most

e

incerely,

'tttonita-ot, -

Benjamin Strong, Esq.

a-PM

of (Angland,

PERSONAL

Joncion,

E.C.2.

4th November,1927.

My dear Strong,
Vie ought perhaps not to have been surprised by the

Polish gold requirements.

:..aynarskits figures explain quite

clearly why our anticipations were falsified, and why the Poles
will need to import the £4 millions which they now hold earmarked
here and to buy in London and import before the middle of
They propose to buy £400,000

December a further £1 million.
1:1:'

the 15th November and a further £600,000 between then and

the end of the month.

If we are lucky we may be able to buy

half of this ;?..1 million on the market.

The rest will be

supplied from our own stock at the statutory price.

Shipments

begin next week and should be completed soon after the end of
November.
post,

There is a detailed letter from Karpinski in the

but I write now to let you know that the programme has

already been fixed by cables of which I enclose copies for
your information.
Believe me,
Yours ve

sincerely,

ACV
/10$4...4019t.
Benjamin Strong, Esq.

CONFIDENTIAL.
Decode of cablegram from

MONSIEUR KARPINSKI,

.7--

BANK POLSKI,

WARSAW.

5.56 p.m.

(tine) Weds. 2nd Novr.1927. (date)

4n447(7.7 10.15 p.m.

(time) Weds. 2nd Novr.1927. (date)

Despatched :

(7489) 7/24-3000

INGOTISLI

275.

GOVERNOR FORI:idi

LONDOI :.

Taking into consideration information your letter
28th ultimo request you to buy gold for £400,000
until 15th November further ..t600,000 until end
of November.

Please arrange for shipment gold

held already and newly bought so that total
amount will be available Warsaw not later than
middle of December particulars by mail.

PRESIDE2T KARP INSKI.

CONFIDENTIAL.

Cablegram sent in code to :
_PRESIDENT KARPINSKI,
Despatched

:

5.45 p.m.

BANK POISKI,
(time)

WARS/V:.

Thurs.3rd Novr.197.

(tha

(7496) 8/26 -160Q

276.

Your telegram 275 s

1.

Will buy at market

price or ourselves supply at 77/10-2

£400,000 not later than 15th November and further
£600,000 before 30th November.
2.

Gradual shipments gold already held and above amounts
will begin immediately.

GOVERNOR NORMAN

.

I

V

jamtk

if 6t4020
Wonbolux.2

7th November, 1927.

Lly dear Ben,

I wish you, please, to make the

acquaintance of the bearer of this note, Mr.Olaf
Har.ibro, who is just sailing on his first visit to

New York.

With him goes another old friend of
mine, Lr.A.John Hugh Smith, and for both of them
I beg your kindly reception.
Yours ve

sincerely,

64AtAAA
ILO

Benjamin Strong, Esq.

_D2 .D.,.101y.12ic"- 9.11.27.
-

7:;11

4!y

dear Len,

:Toro is a CO3 y of a le to to you
Olaf Eanbro and John augh Smith, who arc p-xtners, so to s7),._.1:,
in 72.:-4bros Bank.

The foriaer is now the guiding c:lirit;

hrewd, ind=tricus and gradually becoming entfray orthoaox.
(This,

I think, for the same reason that your f:oicfla LI no

stor7 ree:):171eaded hone:.:ty as the best -nolic7!)

The

business wr..s alaalgamated solae few years ago with a Ban::

,n0. and e_tell-

:andel has o-)ealone a.lo-_1:;

in which had really

ther-L.-law of Jour
time with the

will Live him a

li-ence most of the

is intelligent and

4

PERSONAL

of 60a0
titatTlt, E.0 . 2
8th November, 1927.

My dear Ben,

71e were pleased to be able to read the
American Press version of Dr.Stewart's appointnient.

I do not think we produced anything quite so venomous
as the sting in the tail of a comment by the Journal
of Commerce, nor anything so amusing as the account of
the attempts to get into touch with me by telephone
at Plodge.

It is quite true to say that Park 3751

was a busy number on the night of the 5th October.
Yours most sincerely,

....-11.

Benjamin Strong, Esq.

S

Proof s, Subject to Change.

$6,000,000

Kingdom of Norway Municipalities Bank
(Norges Kommunalbank)

External 5% Sinking Fund Gold Bonds
Dated December 1,

Due December 1,

1927

1967

Total authorized bonds of this issue $6,000,000. Interest payable June 1 and December 1. Principal and interest payable in

time of war as well as in time of peace whether the holders are citizens of a friendly or hostile state, at the office of
National Bank of Commerce in New York, Fiscal Agent, in United States gold coin, without deduction for any Norwegian taxes, present or future, except in case of holders otherwise subject to taxation thereon in Norway. Redeemable as a whole or in part by lot at too and interest on December I, 1930 or any interest date thereafter upon six months' notice. Coupon bonds of $1,000 denomination, registerable as to principal.

Cumulative sinking fund, operating semi-annually beginning December 1, 1931, by redemption by lot, with
the right to the Bank to deliver for cancellation to the Fiscal Agent bonds of this issue at their principal amount
in lieu of cash. This sinking fund is calculated to retire all the bonds by maturity.
The following is summarized from information obtained by cable from B. Stuevold Hansen, Chairman of the
Bank, and from other official source,:

Kingdom of Norway Municipalities Bank (Norges Kommunalbank) is the
central banking institution which the Norwegian Government has established for the
purpose of granting loans to Norwegian municipal bodies. The Bank was established pursuant to provisions of Norwegian Law of February 12, 1926 and commenced
business September I, 1927. The Bank has foundation capital of $5,360,000
(Kr. 20,000,000), and reserve fund of $8o4,000 (Kr. 3,000,000) fully subscribed and
paid in by the Norwegian Government. Principal office of the Bank is at Oslo, the
capital of Norway. Operation of the Bank is by the Government through a Board
of three members, the Chairman of the Board being appointed by the King of Norway
and the other two members by the Norwegian Storting. The Bank operates under
the supervision of the Ministry of Finance.
The Bank's resources will be increased beyond the foundation capital and reserve
fund mentioned above by any undivided profits, which must be added to reserve fund,
and by any issuance of participation capital shares as described below.

Organization:

Operations: The Bank grants loans only to Norwegian municipal bodies and similar

political subdivisions in Norway. Norwegian Law provides that when the Bank
grants loans out of funds borrowed by it in foreign currency, it must make such loans
in, and such loans must be repaid in, the same foreign currency. The proceeds of
this loan, therefore, shall be loaned to Norwegian municipal bodies only in United
States Dollars and both principal and interest of such loans must be payable to the

Bank in United States Dollars.

All loans applied for must be approved by the

Ministry of Justice, and prior to granting loans the Bank is directed by Royal Decree
of August 5, 1,927, to assure itself that the financial and economic condition of the
borrower is satisfactory. The Bank enjoys certain powers of restriction on further
financing of municipal bodies to which it grants loans, including power to prohibit
with the consent of the Ministry of Justice, as a condition of the loan, such municipal bodies from future mortgaging of their assets.
The Bank retains 5% of the face amount of every loan granted by it, subject to

the right of the King to regulate or limit this contributory duty, issuing to the

borrower an equivalent par value of participation capital shares in the Bank in the
form of registered non-negotiable certificates; a maximum of 5% per annum dividend
is payable on the participation capital shares, at the discretion of the management.
A sum equal to at least two-thirds of the foundation capital of the Bank, plus its
entire reserve fund, must be kept on deposit in banks or invested in interest bearing
obligations of the Norwegian Government or guaranteed by the Government.
These bonds are the direct obligation of the Bank, which covenants that if in
the future it shall sell, offer for public subscription, or in any manner issue or dispose
of any bonds or loan or create any obligation, secured by lien on any revenue or asset
of the Bank, the bonds of this issue shall be secured equally and ratably therewith.
These $6,000,000 bonds are the first series issued by the Bank to grant loans as
described above, and constitute its total funded debt. The law creating the Bank

Security:

limits the aggregate amount of the bonds issued byi it at any time outstanding to
eight times the sum of its foundation capital and that part of its participation capital
which exceeds

$1,340,000

Note:

All

(Kr. 5,000,000)

conversions of kroner into dollars have been made at par of exchange

($.268o).

Application will be made to list these Bonds on the New York Stock Exchange
Bonds are offered when, as and if issued and received by us, subject to the approval of legal proceedings by our counsel,
Messrs. Cotton & Franklin, of New York, and by Norwegian counsel. It is expected that delivery will be
made in the form of temporary bonds on or about December 15, 1927.

Price

and accrued interest, yielding

Ofering is made on the condition that no statement herein constitutes any representation
or guaranty by Ill; statements made, however, have been accepted by us as accurate.
November, 1927.

Form 8 D 1-M

411/

WHITE. WELD & CO.
14 Wita."...STREET

NOIlleORK

KIND= OF NORWAY YUNICIP;kLITIES BANK
FUPPIinFARY DJ.,t4.

National governments, as well as those of provinces and
municipalties, are accust"med to engace in various non-governmental activities wnicla are believed to benefit their country or
territory as a whole, and which, for various reasons, have not
In tne
been cr cannot be undertaken by private enterprise.
Uniteu States we have the F.daral Tieaerve System with its board
at Washington and the twelve regional banks, a central banking
organ:ezation controlled by the Government, entirely different in
conception from the S'rk o- England, for instance, which is a
private institution, Other examples are the United States
Shipping Board and Emergency Fleet C6rporation, the Hydro-Electric
Power Commission of Ontario(suppl7ing current to the smaller
municipalities) the Canadian National Railways Company, tne
Belgian National Railways Company and the German National Railways Company.
Among the functions of this kind which have teen extensively developed in foreign countries is the provision of credit
facilities for certain large and important elements of the populaPerhaps the folaiign examoles most fainiliar here are the
tion.
Central Bank for Agriculture in Germany, the Murtgac;e :tank of
the Kingdom of Denmark and the National Mortgage Bank of
Argentina, but there are scores of similar institutions, especially in Europe.
For the conduct of such non-governmental activities, it
is usual for governments to operate through a corporate oc4.4, whose
capital stock is entire_y owned by the government, or which is
Such
fully controlled by the government by some other method
corporations are, in effect, departments of the,governnent which
Tne Policies of such corporations are the
operates tiaroue,n them.
policies of the governmeet and of the people the government represents; the reeonsibility of such corporations to the public
the credit o. such coris the responsioility of the Govarnmen
porations is the credit of the government. To the Furopesn
especially, it is unthinkable that a government chcuid leil to
support, financially and otherwise, a corporation whicn it nes
created and wnich it controls and manages.
The Kingdom of Norway Municipalities Bank is a corporaIn its oranization, financial
tion of 'this general type.

structure and mtheds of operation, it rather closely parallels
Perhaps the greatest difference
the Cradit.Cemrtunal de Belgique.
_hit Conmural was created by the
between the tro is that the
Belgian:Government in 1850, whereas the Yeaniolpallties Bank is a
present cy the eT:ae main G.overnment,the the
stablished year.
Norwegian purpose in in creation of both
new-institution,
ti3Onaat howev;r, was the eam, namely, to supply capital
smaller municialities, to stanaf',_iz.,! and secilizc the
Tunicipalitde-3 can sorrow capital and
under wnicn
a certain measure or supervision and cJntrol over the fi
these municibaliti2s.
(.3

The law creatinL, the Municipalities Bank and it
ances approved by Royal resolution of August 5, 1927, ar
what L?ss rigid in their limitation of the bank's activit

in their stipulations as to the precise methods by w.,-,icra
snail op:crate, than is the case Stith the Credit Communal
gigue.. The rason for this probably is that the Credit C
I,
In_gma
1

This information and these statistics are not guaranteed, but
have been obtained from sources we believe to be accurate.

of.
loans to Belgian municipalities and has evolved methods of op_ration which are particularly suited to Belgian conditions and the
requirements of Belgian municipal borrowers; whereas the
panties Bank of Norway, engaging in what for the Norwegian
Government is a new activity, is given treater latitude by statute,
although its operations at every step are under the immediate direction and supervision of the Royal Government.
The purposes in the creation of the Municipalities Bank are
stated in the Royal Resolution above referred to as follows
(literal translation):

"The Community Bank of Norway shall in its activity
contrioute to carry through a sound economy of the financial
administration of the communities.
"In that respect the bank's management shall in its decisions regarding applications for loans duly take into consideration
whether the loans concerned are in accordance with the claims that
may be made on a rational cond*o.ct of the communal finance management.
"The management shall in its considerations of loan applications follow banking and businesslike principles and prior to its
decisions have made clear whether the loan applicant's economic
In this respect
condition offers sufficient security for the bank.
the management shall in connection with the loan application, which
is made out according to a form approved by the concerned department, demand that there oe laid before the same the material necessar:ifor thorough information about the loan applicant's economy.
"The management shall, as far as possible, try to have the
lending activity equally distributed over the entire country."
The new method of supplying capital to Norwegian municipalities is expected greatly to improve the conditions under which they
have done their borrowing heretofore. To finance municipal improvements electric light supply and the like, the smaller municipalities
have been accustomed to borrow from banks, issuing later small bond
loans which have been negotiated locally or, if large enough, placed
in the Oslo market.
Such borrowings and bond issues, pro,iided they
were made in Norway itself, have been sibject to little or no
supervision or restriction, some of the municipalities have borrowed
too heavily, others on terms considered disadvantageous to them.
Under the new system municipalities are not co:epelled to finance
through the Municipalities Bank, and the larger cities such as Oslo,
Bergen, etc., will probably not do so; but the smaller communities
will undoubtedly find that the terms and conditions imposed by the
Municipalities Bank will be :Lore favorable to them than they can
obtain independently, because of the higher credit which the Bank
is expected to enjoy.
This has been the development in France,
Belgium, Spain, Italy and other countries.
An important feature in the constitution of the
Municipalities Bank is the provision of liquid resources. It is
stipulated that a sum equal to et least two-thirds of the foundation
ca;)ital of the Bank, plus its entire reservL, fund, must be kept on
deposit in banks or invested in obligations of the Norwegian
These resources, accordGovernment or guaranteed by the Government.
ing to the law, are to be drawn upon in case of default or delay in
payment of obligations due to the Bank from municipalities which have
borrowed from it.

Another noteworthy feature is the provision in the law that
when tae Bank grants-loeils-fr,7rm funds _.sorrowed-by_i_tin---foreign

currency, it must make such loans in the same foreign currency, and
the borrower must pay interest and repay principal in the same
currency.
This eliminates-cuzrency-risk, so far aa,condholders
of the BtInk_a-fe_co-no-erned.

A. W. KIMBER

New York, November 19, 1927.

PERSONAL.

ct.,

And of engiand,

u/A.41-4-4"a
I

3101111011, E.C.2.

tkut-

_L0.4,(_11L..+4'11"."4

15th November, 1927.

1:y dear Strong,

Since I wrote on the 1st November about

Norway, the story has been carried to the end of a chapter.

At

that time there had already been desultory correspondence on the
general question of a Credit and the Norges Bank then wrote to
say that this question did not require immediate consideration or
solution.

Then came the Parliamentary elections which caused

some nervousness in Norway and to some extent affected the
exchange.

Lr.Rygg, however, wrote that in his opinion the

nervousness would subside promptly and would not recur; but that
as from the 1st instant the Bank Rate was raised.

Therefore it was with some surprise that I
received, a few days later, a further letter stating that the ide
of a Central Bank Credit had been abandoned and that they had
found it necessary to go elsewhere (evidently to private Bankers
but I do not know which).

Mr.Rygg explained that he could only

have dealt with Central Banks on the basis of immediate stabilisa
tion which evidently he was not ready to face:

he wished in the

meantime to be able to deal effectively with the disturbance of
the Norwegian exchange, due, as he put it, to "emotional" causes.
Thus this immediate chapter is at an end.

Although it is perhaps not difficult to see his point of view, I
insisted

PERSONAL.
Page 2.

Benjamin Strong, Esq.

15th November, 1927.

insisted in my reply that I believed it to be best in such cases
for Central Banks to deal only with one another and I hoped that
(on the expiry of his present arrangements) he would return to
the original idea.

Yours vg77 sincerely,

Benjamin Strong, Esq.

is

ti

PERSONAL.
Vanh of O'Ailland,
Iondoo, E.C.2.

_roveLiber, 1927.

1

1.:y dear Strollg,

As to a Loan for the Irish Free State, you
realise that here in London it is

t a simple Tiroblem.

The

sug:estion in your cable of the 4th I:ovember (No.129/27) is, of

course, perfectly right, but I have an idea that these Irish
would sooner get money in HEQQ, than in London.
`le, here, are always in touch with the Bank
of Ireland:

ever so long ago I aizreed with them to do anything

possible to help the Free State Government, either with regard to
a Loan or with regard to the rote issue.

1.:y

feeling has been

that whether or not the Free State solution was wise and whether
or not its Government is good, it has come to stay and we here
should help it all we can.

But somehow the Free State GoverL-

ment does not seem free, officially, to do anything but quarrel
with us or others in London.

Individually we may be the best of

friends, but when it comes, e.g., to borrowing money, I do not

think they would feel free to make the statements which would be
reauired in a Prospectus here.

Similarly, it is difficult for me to convey
to them any suggestions as to where and how their Loan negotiations
in ilew York should be conducted.
eVYours mo

Benjamin Strong, Esa.

sincerely,

AO

4a1T13 of 6gland,

PERSONAL

401p

Jondon,
15th November, 1927.

My dear Strong,

A propos of your letter of the 27th October
and in the hope that 3nu will allow me to supply your need, I am
sending you the November number of "The Banker", which contains
a further article on the Federal Reserve System by Professor
Parker Willis.

I think that this article will answer your

question as to the necessity for writing an antidote: on page 413,

paragraph 2, Professor Willis seems to condemn himself out of his
own mouth.

As to "The Banker", it is not a paradox to say
that it is improving in quality and, as far as I can ascertain,

it is increasing in popularity within the radius of its
coArioci, it
&PICA ;OP k
I ilagine that it publishes Professor Willis
specilised publics
quite disinterestedly, just as it publishes Elynarski, Caillaux,
Snowden, Graham, Pease, &c.

For your entertainment I am sending you a
short story entitled "A Gold Mystery", which appeared recently
in the Financial News.
Yours most sincerely,

1)11/Ult,44

Benjamin Strong, Esq.

PERSONAL

Ilanh of (g ngIand.
JORd011, E.O.2.

21st November, 1927.

My dear Ben,

I just write a few lines in answer to yours of
the 9th instant which arrived this morning and in which you say
that, subject to what may happen in Congress, you expect to ::'each

Algeciras on the 11th or 12th January.
I therefore propose to leave London for

Gibraltar on the 7th January by the "Otranto", whence I will make
my way to Algeciras and await you after your visit to General Munro.
If your plans should be altered by anything that may happen next
month, I count upon you please to send r_e a cable without delay.

We can leave later plans to be settled once vie are at Algeciras: and

meanwhile I shall say nothing to any possible visitors whether or
not you are already in communication with them; nor shall I make
any sort of announcement in the newspapers.
2.

You were doubtless informed when Mr.Dewey sailed

from New York and you therefore know that he has been in Paris for
a few days.

To us here there has been some gossip and a good deal

of mystery about his movements which at first were wrongly reported
and since then do not seem to have been reported at all.

He has

not been to London and even Kindersley is quite unaware of his
plans. But Siepmann happened to be in Paris where he met Mr.Dewey,
who

PERSONAL

4*

Page 2.

21st November, 1927.

Benjamin Strong, Esq.

who left Paris for Warsaw yesterday afternoon along with M.Quesnay
of the Bank of France.

Er.Dewey seems to have spent most of his

time at the Bank of France, to have seen the official Poles and
Poincar4, but none of the Bankers.

All of which I assume is in

accordance with the understanding he must have reached with
Prosser or yourself in New York.
tittle-tattle

tv.A:

--''r-a'I't °I

I merely pass it on as
43''""'G

Yours most s ncerely,

en44.44A
I=Nomm....."""1111.

Benjamin Strong, Esq.

}vt-i4A

11( c Co-0,1A

.

M. 1,7

(-)A stLg4

Inuit of angland,
4ondmE.C.2.

22nd November, 1927.

4-. fel

Ly dear Strong,

During the

last few days I have received from

you several letters, most of which are merely acknowledgments of
earlier letters I had written to you.
case of your personal note

I make an exception in the

of the 9th instant as to the probable

funding of the Greek Debt to your Government.

This is most satis-

factory, especially as I guess from your very few words that the
negotiations are likely to :,roduce a definite result.
keep me informed.

Please

The issue of the Greek Loan, which has already

been authorised by the League, may be discussed early next month
at Geneva, and, subject to the above, the only difficulty now

standing in the way is an uncertain and very controversial settlement bet::een the Greek and French Governments where there are
claims and counter-claims.

I also make an exception in the case of

another letter of yours dated the 9th instant concerning the Bank
of Italy; and I may say that when the time arrives to face the
question, we here will be willing in principle to join with you in

aiding the Bank of Italy towards de jure stabilisation.

This

refers particularly to your third pararaph and is the outcome of
the understanding with the Bank of Italy which I mentioned when
writing to you on the 26th of last month.
Yours
Benjamin Strong, Esq.

t sincerely,

11,1ja611,1,

Ccovux.k.

A_LL/q. 1/4"et-)

.11A05

JJair,

,

I:asoN.1L.

4anh of Ctgland,

jondmw2.
_ovember, 1927.

dear Strong,

In continuation of my letter of the 1st

instant on the subject of Portugal, I am now able to enclose a
copy of a Memorandum which has been prepared for me by Messrs.
Lazard Bros. and which will,

I think, give you the latest -

the very latest - information.

I understand that the Portuguese Government

gill indeed make formal application to the League at its
meeting next month, in which case a scheme night possibly come
before the League in March.

I fear you will not have time to

mention this to Jeremiah Smith, but he will of course be fully
informed once he gets to Geneva and I am for,:iarding letters
with this object to Sir iirthur Salter and to Sir Otto Lliemeyer.

Yours mo

Benjamin Strong, Esq.

sincerely,

COPY

22.11.27

P ORTUGAL
1:_essrs.Lazard Brothers & Company Limited have been

negotiating for the last six months with the Portuguese
Government with regard to the possibility of issuiniz

large

external loan for Portugal in London and other financial
centres.

Lessrs.L.B.& Co. have from the commencement informed

the Portuguese Government that in their opinion no such loan
was possible or should be made without being accompanied by a
comprehensive plan of budgetary reform and currency stabilisation.

For some time the Portuguese Government, being
approached from several other quarters, were not prepared to
consider a scheme of this character.

A few months ago however

they approached ressrs.L.B. & Co. again for their co-operation
and agreed to the latter sending an expert to make a preliminary
investigation into the financial situation.

This investigation

was carried through by 1.1r.Binder of 1:essrs.3inder, Hamlyn

Company, who spent more than a month in Lisbon in preparing his
report.

The report confirmed Eessrs.L.B. & Co. in their view

as to the situation, although it did not reveal any difficulties
so great that they could not, in their opinion, be dealt with
satisfactorily by a comprehensive scheme of reform.
Meanwhile, :.:essrs.L.B.& Co. had approached the

Governor of the Bank of England to know what the Bank's attitude
would be with regard to any such scheme.

Mr.Norman stated that

while he was anxious to do everything he could to help towards
a scheme of reform being carried through, the full support and
co-operation of the Bank of England could not be counted upon
unless the Loan were to come through the usual channels of the
League of Nations.

Er.Brand

11±.Brand of Yessrs.L.I2.& Co. paid a further visit to Lisbon

again to inform the Portuguese Government of the position.

He

stated to them that while in the view of Messrs.L.B.& Co. the
Portuguese budgetary and currency difficulties might be remedied by
a comprehensive scheme, no loan of the amount and character
required could, in. view of the fluctuating political history of the

country in recent years and existing political difficulties, be
issued on the international markets without every factor being
favourable and in particular without the support of the Central
Banks.

Messrs.L.B.& Co. could therefore continue their negotiationg

with the Government only if the latter were prepared to invite the
co- operation of the League of Nations.

The Portuguese Government have now decided to take this
course and are making an immediate application to the Council of
the League to be considered at its forthcoming meeting at the
beginning of December.

The Government hope that a scheme of reform

might be drawn up and agreed to between December and the next
z.eeting of the Council in Earch, so that an issue could be made in
the course of the summer.

If the negotiations are successful and

a loan is issued, the Portuguese Government have agreed, in
consideration of the assistance they have given, to entrust the
issue to Messrs.L.B.& Co. and through them to their associates in
other financial centres on terms to be mutually agreed.

Eessrs.

L.B.& CO. have invited, so far as New York is concerned, the cooperation of the Guaranty Trust who have expressed their interest
in the matter.

It is impossible to say at the moment what would be the
size of the loan required, but it would appear as if anything from
eight to ten million pounds would be wanted.

PERSONAL

Illanit of otogiand,
Ionflon,

III:

E.C. 2.

26th November, 1927.
My dear Strong,

I think the best way for you to judge the

reaction here to the publication of Gilbert's memorandum of the
20th October is to send you some cuttings and this I now do by
way of answer to your letter of the 15th 7ovember.

The effect of publication here, as perhaps in
Germany, was somewhat spoiled by the discussions which had
oreviously taken place in the German press on the assumed contents
of the memorandum.

But the reception here was very good, even if

not very wide: and while few papers could publish so long a
memorandum in full, there was general support and practically no
criticism.

The German Government's reply received little attention

and was, I think, nowhere published i1 full in our newspapers.

But you must not think that because our newspapers
have thus, supported Gilbert that all individuals are of the same
mind.

There is a small but thoughtful and well instructed body

who take a different view: they ,rould probably hold that in

several of his communications to the German Government, including
the last, Gilbert has not been really wise or prudent:
he has meddled with German internal affairs:

because

because he has

implicitly (if not explicitly) hinted that e::cessive foreign

borrowing has deliberately endangered future transfers:

and

because

PERSONAL
Page 2.

Benjamin Strong, Esq.

26th November, 1927.

because his criticism of the German Government may bring disunion
between the creditors and on the Reparation Commission and increase

the difficulties of an ultimate or early German settlement.
I do not hold these views:

I believe our

duty is to support Gilbert through thick and thin whatever he
does and I am quite sure he knows better what he ought to do than
I do.

But it is right that I should mention to you that such

views as the above exist contrary to Gilberts:

only someone of

much wider knowledge than myself of the whole subject can really
judge between the two views.

This, of course, is intended for no eyes
or ears but your own.

Yours nost

incerely,

40
6

Benjamin Strong, Esq.

Cank

thviatO

23th November, 1027.

71ith the Governor's

Compliments.

Supplemental to the newspaper booklet sent
on the 26th 7ovember, 1027.

PERSONAL

:Inh

ogngland,
3511d0U,E.C.2.

28th November, 1927.

My dear Ben,

Please read this in continuation of the
earlier part of my letter of the 21st November.
I an not sure that I shall go by the 'Otranto'
on the 7th January:

I may go a few days earlier via Toulon and

thence by sea to Gibraltar.

But anyway, I count definitely

on meeting you at Algeciras about the middle of January unless

you cable to the contrary within the next week or two.
2.

But you have never told me whom you expect

definitely to be visitors at Algeciras - see your and my personal
letters of 31st August and 10th September.

Let me therefore

please repeat that if any Central Bankers :_re likely to be

there who do not sreak our lingo fluently, it might be wise and
would, I think, be very helpful if I '::ere to get Siepmann to

come along, at lest for Dart of the time that we
Algeciras.

re at

I shejl not do or say anything about this until

you cable me.

From a totally different angle I have
another suggestion to make regarding Algeciras.

Perhaps the chief uncertainty or danger
which confronts Central Bankers on this side of the Atlantic
over

PERSONAL

Page 2.

Banjamin Strong, Esq.

28th Novenber, 1927.

over the next half do-Len years is the purchasing power of gold

and the general price level.

If not an immediate, it is a

very serious question and has been too little considered 1.11) to

the present.

Cassel, as you will remember, has held up his

warning finger on many occasions against the dangers of a
continuing fall in the price level and the Conference at Genoa,

you will also remember, suggested that the danger coulL be met,
or prevented, by a more general use of the 'Gold Exchange
Standard'.

This is a very abstruse and complicated
problem which personally I do not pretend to understand, the
more so as it is based largely on somewhat uncertain statistics.
But I rely for information from the outside about such a subject
as this not, as you mi;tht suppose, on I.:cKenna or Keynes, but on

Sir Henry Strakosch.
Origin:

I am not sure if you know him:

many years in Johannesburg:

a student of economics:
interests:

Austrian

20 years in this country:

a gold producer with general financial

perhaps the main stay in setting up the South

African Reserve Bank:

a member of the Financial Committee of

the League and of the Indian Currency Commission:
public spirit, genial and helpful... and so forth.

full of
I have

,robably told you that if I had been a Dictator he would have
been a Director here years ago.
This

PERSONAL

Page S.

Benjamin Strong, Esq.

28th November, 1927.

This is a problem to which Strakosch has
given much study and it alarms him.

He would say that none of

us are paying sufficient attention to the TA)ssibility of a
future fa_l in prices or are ta]:ing precautions to prepare any

remedy such as was suggested at Genoa, namely smaller gold
reserves through the Gold Exchange Standard., and that you, in

the long run, will feel any trouble just as much as the rest
of the Central Bankers will feel it.

My suggestion therefore is that it might
be helpful if I could persuade Strakosch too to come to
Algeciras for a v.eek:

his visit could be quite casual ana you

would not be committed to any intrigues with him.

So far I

have not said a word about this to Strakosch or to anyone else
and I shall not do so until you cable that you agree to this:
so it follows that I am quite uncertain whether he could come
at all.

Then your plans are clear, you must please
send a word by cable on (1),

(2) and (6): and also (4) overoage.

Yours very sincerely,
tlYb44..440%..

P.S. (4).

Benjamin Strong, Esq.

And

PERSONAL.
Page 4.

P.S.

4.

Benjamin Strong, Esq.

28th November, 1927.

,And while I am at it, I must add another suggestion,

viz., that it might be helpful if Dr.Stewart, too, were to come
to Algeciras on his way to London.

Vie intend, do we not, that,

generally speaking, in the future he shall be an ally.

I would

not like Dr.Stewart to arrive in London while I were away and
therefore (assuming you have not many other visitors) I would be

glad if you cared to ask Dr.Stewart to accompany you to Algeciras,
whence he could make his way to London with me.

I shall be

writing to him in a day or two just to say that we shall be ready
whenever he can turn up at or after the Yew Year.

r,

6"1

:707. 1I:7,

040 1144C

1.

Dr.r,achmarsa

hopes th.:;.t.

the :looting betwee

Central Banks early not year will no

euoestod) a series of individual me
but a regular Conference.

Ye feels

:F

Vissering - and, if necessary,

interests, as smaller Central Banha,
and he proposes to consult with the

The Swiss have no particular fear of a s

but Draachmann is anxious that the

=mooted with gold should some up f
the Governors meet, more esrcoially
in an exceptional position.

The dis

Latin Union has thrown the .1:ss bac
1050 which is clearly unworl:able.

T

be, befere long, a new currency Law;

important that this Law should repr
considered plan.

The suspension of

system is authorised by law only in
its consequent disturbances.

It is

late in the day to plead this excuse

the anomalous state of affairs which

Anti, in the meantime the 1rational L

pressure of private banks (who desir

circulation) and of other influence
possible to withstand much longer.
for a definitive settleuont

ana t

day - the Uational LanIc wishes to b

considered solution, reached in con
Central L'ariks.
3.

The reply to our letter isms been delaye

concerns Bone, not Zurich.

The re

DA,

but has not yet been translated from the Ger:Aan.
Dr.Baehmann would fin

it easier to eorresfond in

German and I told him that if he earea to send letterc
eiTaally
to no in Ger:mn they would reach the Governor

well.

6th Deeenber, 1927.
,,,,c

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