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A3dnesday, :arch 22nd: 4N AM After dictating this mornin I went directly to Sir Robert Balfour's office, meeting his partner, Mr. Williamson, and accepted an invitation for dinner next Monday night. Had a very pleasant chat about business between Great Britian and the United States. He says thnt England's imports must necessarily be curtailed for a while, but CO& the assistance of our credit after the war is over it will all come back. They do a large business on the l'acific Coast, all the way from Vancouver to Chilian ports. From there I went to Lorgan, Grenfell A: Company for mail and had a little chat with Grenfell. Teased him a bit in retard to the censorship, which resulted in Hontagu Norman quoting to me almost the exact language container"_ in Boissevain's letter about I told him it was all very amusing, and he agreed that we could mutually enjoy the joke. Grenfell says he is confident that Lord Cunliffe and I have laid the basis for a most important development, and that he is delighted at the attitude which the Reserve Bank System displays towards the Bank of England and is ecrnally pleased tha Lord Cunliffe vie%..s the Possibility of this arrangement with such satisfaction. He urged me to go in nnd see him from time to time at the Bank of itagland before I sail. From there went to the London County and Westminster Bank for lunch with Mr. Leaf and his directors. Most of the Board appeared to be there, but I do not recall all of the names. La-. Edward Brown of Bro n Brothers 7,, Co., Lord Cavendish, Sir Alfred Dent, Lir. Henry C. Hasbro, Henry Cochran Sturgeas, Arthur Hill wero those whom I remember. of diacussioa of Mexican matters '1.11ring lunch, as T1r. Hill is Chairaan of one of the Mexican Railways, and Sturgess of Nothiag, however, that had any bearing upon my trip. another. After lunch 11±. Hanbro, Brown, Lir. Leaf sad I had quite a long discussion in regard to bills. Mr. Brom thought paobably £250,000,000 sterling was the average amount of bills held in the London market prior to the war. j.gr. Hambro thought about £350,000,000 sterling and possibly 400,000,000, of which about £20,000,000 were German bank agency bills. The largest class of bills, in amount, wore trade bills accepted both by merchants, merchant bankers and acceptance houses, and the Joint stock banks. There was aiaays, hoevcr, a very large volume of bills drawn by bank on bank which would technically pass as finance bills, but were regarded as being elually as good, and in many cases bettor, than trade bills. by the Bank of, e i t i e r 6 . 4 1 - 1 v These bills wore not discriminated against gland if t3 y bore one good aiglish ne.mey i c k o cft a'd d144.;1N- #4 .1 4.. 41C( 16 T er Discrimination was exercised both by the market and the Bank of EngL:nd in resaect of the amonnyof bills accepted by any one acceptor in the market and e=periaace eaabled them to tell ;tether bills were being drawn for puroses not regarded as sound. They spoke af bills drawn by Sonth American Covernments or bankers in anticipation of bills and loans here. Thought there was a possibility of that business having been overdone a lit ,le before the war, that the mar et did not discriminate against them and the Banes of England discountee them. I think they have regarded, generally speaking, the .t.terican finance bill, accepted by a clearing bank, as one of the prinest in the market. I was surprised to hear :12., Hambro, who is undoubtedly well posted, say that there were .tot over 40' 'in this market of the normal volume of bills now which would mean possibly $700,0(_0,0 13 to $00C,000,0')0 as agLAAst a normal volume of one and one half to two billion dollars. Almost every ba .ker here with whom I have discussed the auestion of Lille, says that we will never h-ve c bill market in America if ,;e. cliscriminate against finance bills or bills drawn in the form of finance bills. '2hey spoke of the large volume of bills in this market drawn by financial institutions end English exporters, drawn for 45,000 anything on the drawn. without to indicate the purpose for which it in These would generally be regarded -r drawn for exchange purposes alless current re,ort of transactions of which the market had knowledge, led them to conclude that they were drawn for cote other specific purpose such as in anticipation of issues of securities etc. We also had some dis.ussion of the oreration of the Clearing House, of which the following brief account (sent to Ix. Jay today,) gives the eseential features: In recent years the practice of giving iumedit,te credit on checks has boon growing among the London Joint Stock Balks as a result of more severe competition- -the items being credited One their books as part their customers and charged onmust bear in mind, however, immediately toof their available cash. Al that three days is the maxi as distance here, measured by transit time both ways, End that the total of "country" checks cleared through the bankers clearing house in London was £1,389,000,000 sterling in 1913, and A1914. an average day. of, 1,370,000,000 sterling in say, only zy,ol p,oc sterling per business Allowing three &l ye, I have no doubt from what they tell me that the percentage of this carried as cash is still but a small part of the total. The gentlemen seemed to agree that the practice was an unsound one, and should be curbed. In fact, they were rather amused when I referred to it, as it had been discussed considerably among themselves as beillg.one of the unfortunate results of keen competition. Allowance should also of course, be made for the fact that there are other clearing centers besides London where similar nraetices may develop, and there is undoubtedly some float created by giving imraedi ate credit for chocks payable in the Uetropolitan District for which the cleart:Ig house settlement is deferred for one day only. All the bankers call attentio to the fact that distances here are so much shorter than ours that this problem is not as serious as it would be with us. 2rom the London County & Westminster Bank I stopped in for a moment to see Sir Christopher Ilugent at the Union Discount Company. market. I asked him what 't.b He said, no different, generally, than that which the market kept on bills. They could tell,as a rule, either by incuiry or by rates quoted by the bill brokers, whether any 41 particular name was ayspearing in the market in =carp of what the market regarded as legitimate. This he described as the resistance of the market which was essential and easily detected. The bank had, however, reouired the private accept- ing houses, which publish no ct'tement, to give them each year the amount of their capital and wealth but rot ask them for the amount of their acceptances outstr.ndinF. He thought the bank should do so and let it be known that they were requiring that information. There was some agitation at the present time XhereA requiring private bankers to disclose the amount of their capital and the amount o their acceptf-mce colmitmentn. Said he did .lot think that large purchases of sterling bills were just now being made in London by American banks. He did think that sterling bills purchased in the United States, maybe/ carried in larger volume in portfolio,here than was the case soma months ago. Had some discussion with him about the possibility of discount companies in how York. He, however, inclined to tho view that it would be a good thing for both couAtrie3 if English banks and financial institutions had agencies in New York, and we had agencies over here. whole, I thigh he is right. Prom his office sto ped see Lord Pairfax but he was out. On the to Then to the knerican ilmbassy and missed Ambassador Fags but had a short visit with Captain Symington and than returned to the hotel. Willard Straight fai7ed to turn up but !It. Wolcott called in to see me and to say that ho was leaving the next 2orning for _aris to discuss another French c:--edit ith the French bankers as he understood they wanted to arrange for 00,000,000. Asked me if I would have a talk with Bonb.ight :.hop I returned to New York. I e---lained to 7:olcott that I thoughe. celstake had been made in the method of handling the bills in New York. and he snit: he agreed with me thoroughly', and that they Should be handled through brpkers and distributed throughout the street. (Today, the 24th, in looking over bills in fir Felix Schusterve office I was interested to see that there were conniderab-_e amounts of Ainsia bile in a bundle of about Z1,0q0,000 sterling that I examined, siuilar to those that I saw in the office of the Union Discount Conran. which are being handled by Baring, Those bills aro distributed through thet= 14skers and discount houses, and are not handled direct by the accepting banks). ::olcott asked me if I felt willinE to take letter home for some lady, which I told him I would not be -able to do. He Cid not understand the regulatione,in regard to carrying private meil,which had been put into operation since he came over. Wolcott also said that arrangelents were under way for a culet meeting some evening soon with Lord Kitchener. Ho was :aot cuite cure whetl:er it woule possible or not but would know on his return from Paris early newt week. Sir Henry Babington Smith came in for tea, at 4:30, and invited me to spend Sunday with him in the country which I was obliged to decline. We had a very interesting discussion about the situatioL in the East. He made the interesting statement that notwithstanding the criticism of the Gallipoli campaign, 411,- 11111 C. .:ednesday afternoon dictation: Liareh 22nd, 1916. Since dictating the foregoing yesterday afternoon, I have today lunched .1.-th directors of the London County C; Jestminster Bank Ltd., and had a little further talk with 1.Ir. Leaf and some of his associates at that bank in regard to the question of float. They tell me that in recent years the practice of giving immediate credit on checks has been growing among the London Joint Stock Banks as a result of more severe competititin -- the items be2.ng credited imiediate y to their customers and charged on their books as a part of their available cash. One must bear in mind, however, that three days is the maximum distance here, measured by transit time both ways, and that the total of "country" checks cleared through the bankers clearing house in London was 1,389,000,000 sterling in 1913, and £1,370,000,000 sterling in 1914, an average of, say, only £46,000,000 sterling rer business day. Al no doubt from what they tell me that the percentage of this carried as cash is still but a small part of the total. The gentlemen seemed to agree that the practice was an undound one, and should be curbed. In fact, they were rather amused -. hen I referred to it,as it had been discussed considerably among themselves as being one of the unfortunate results of keen comnetition. Allowance should also, of course, be made for the fact that there are other clearing centers besides London where similar practices may develop, and there is undoubtedly so7Tie float created by giving imrsdiL.te credit for checks payable in the lietro-oolitan District for which the Clearing House settlement is deferred for one day only. All the bankers call attention to the fact that distances here are so much shorter than ours that this problem is not as serious as it would be with us. cost of standing as to fineness, abrasion, price, .a fit shipping etc.,etc., all of which, however, can be worked out by discusAt the celclusion of the interview I had a private talk sion. he Netherlands exchange situation. with Uontagn Norman recelx.ding I am taking the position that it is none of my business to discuss or in an7 way interest ;Ayrelf in the b3ookade matter. That it was a govern-lental matter which rested between the British, Holland and United States sovern:lents. That I did believe, and maintain, that if an American citizen or an Americnn bank owed money to citizens of Netherlands or to a Netherlands bank, that the indebtedness uould 1,e paid blockade or no blockade, and if other means of paying it could not be found it would naturally be paid by settliT aside the rota, and if the gold could be made the basis o? an issue of notes or other creit onerations by the Bank of Netherlands, that was of no co Lila nonce to us. Ir. fforman a&its the soundness of thstposition, but on the other hand says that the enearelent between the Overseas Trust and the British Government is o-r a character which dust be respected in spirit as well as in letter. and an arranresiont for ear-mar:: ing gold in the way I had sucgested would be of the egreemrnt, and reenl.t i. Groat Britian carl. Holland. .n evasion of the spirit serious state of a fairs be-Veen The matter war .1o actively wider consideration and rerresentativen of the Overseas Trust were in London. Mile he eie not en;-, so, I gathered that the situation was rether strained. I told him, of course, that the ,uestion of illegality of the blockade was not a ouestion that concerned me. That in point of fact, I retarded the blockade as mite which was of course teiribly mismanaged, in the end General dithea had his way in regard to Salonika and it was upon his definite positive insistenoe that the Salonika landing w and it had now been provei that Jarit lutely correct. judgment was Sir Henry, as in, the case of all oth with whom I have talked. hare, seemed to be very much bet posted and to have a better and more friendly feeling in to American opinion in respect to the war on account of visited aaerica during the war period. Had dinner ith Captain Symington at the Sav then went to the Hippodrome. ay Thursd Larch 23rd: Stoeped at Lorgan, Gianfell & Company for nai from there went right to the Bank of gland in response note from Grenfell the night before. and 4h, C;H 414e. Saw Lord Cunliff DepuLy Goveraor of the Bank of 'an.- and sir. Montagu Norman, discussing again quite fully the which we had outlined in former conversations. It is apparent that all three of these gentlemen are most fri to the nur eetion. e discussea it in every aspect fo one hour, and finally agreed to spend some time on rriaa 24th, in preparing a memorandum of conversations for sub mutually, to our resaedtive banias at the proper time. only difficulty developing from the conversations is the complex one of dealing with gold, which necessitates an illegal, but out of my battiwack. He refereike/to a letter in Mete wtuz, le *e.. ,1,4 10 regard to sales of German securities through Dutch bankers Wee 4 almost e literal quotation from a letter I had just received from Boiesevain & Company and I joked him a bit about the censorship, reading to him 90 extrect from the letter which caused a good laugh. 3 r. roeman told me that he understood that we were already receiving gold on deposit at the Feeeral Reserve Bank for account of the Bank of :ietherlands, and that there was some hitch or difficulty in regard to charges, our suggestion having been 1/20t7a of 36 per annum per month. I told him I felt quite sure thr.t no deposits had yet been arranged but he was euall-e posieive that they had.frogi it(ctet)Nrt-ktti) Pros there eent to the London e southeastern bank for luncheon at 0A0 o'clock, meeting elle. Hamblin, Sir J. Fortescue Flannery, Lord Claude Hamilton, an(' some other directors of the bank. They were all -lost friendly but it was euite plainly aeearent that, as et every other lunch of this character I hate attended, ell were *cost interested in American polities and watchine aneLionsly to see if things etiOit turn in the direction of possible participation by tho United States in the war situation. sifter luncheon eeent something over an hour :with Sir Felix Schuster and went through, eith him, tif.10 a batch of over 21,000,000 sterling which hie bans :. had just purchased. r I was greatly interested to observe the very small pro option of tAte acceptances by the private accepting houses, most of them being acceptances of the Joint Stock Banks, and provincial and continental banks. There were only tee or three lots that appeared to be finance bills, concerning which 40 Sir relk.: said the market would ,-.ot discriminate as they knew 4, generally the Oh<-.,racter of the transactions. Ile said that while the supply of bills was now very much restricted, as I could see from these purch.:13ez, it was still possible to get them. Bills of their character are sellinz Lt about 5,J discount. Talked with hir . about the domestic exche.nges here :.:ad he said it was unforItuna-cely a growing pv.etice to give iiinedi-te credit for country items. arrangement It was a matter of ith each depositor, but of course, only those of excellent standing enjoyed the privilege. I asked him how the bt._Iks carried the chocks on their otatemmt. sore of them carried them as cash. thrt He Ris own baiik had done so until 12 or l5 years ago Alen he sto:Ted the practice believing it unsound, and now they included it in their item of "Money at short not They alv.ays cosidered, however, even when chocks received on deposit vere drawn on their omn binds/hes, that giving Laaediate credit was si ;iply a form of advances .1 their customer, s they would Dot consider the check -eas good until it had been presented at the branch to ascertain if the cheek in all respects was rePular. After leaving Oir dressed at the hotel end stopped. at ;ro. Page's where 1 he0 a nice talk with Hrs. Page, met Mr. Loughlin and his wife, ar1 le.cs had a short talk with L5r. Page. hotel and spent ::bout wiz cussing their plans. when returned to the our with Str-a ight and ierkins. Advised them to see :ir. Still-aan before -,oroueeding very far here.-- though his advice would be of great help. Dined at Sir Seymour King's house, t ose present being 410 Lady King and L:r. Vassar-Smith. taking over old matters with Sir Seymour, who really seemed fu t et btu to t* a de)toted frier. oi fatherks re urged lae to visit A them at their house when I retIrnea to London on my next trip. I have abbe a. groat many peelae, including those at dinner last :light, in regard to the possible C,aration of the war, and believe the best judgment here is, on the whole, that the wa:c can not cud until the spring or summer of 1917. iainy believe that it will laut until the fall of next year. There is an underlying current o hope, however, that Germany may colltpse sooner than this. Pridz.y, :.:arch 24th: 1,0 Spent the zlorning dictating mail and diary, and -re- 111 paring a rough outline of memorandum for Lord Cunliffe. Stopped at Ilor7nn, Grenfell :7: Company for mail and received a cable from Jay which referred to the discussion about charges, of which :1±. Norman had already advised me! '::ent to the Bank of Englnd at twelve o'clock and met the Deputy Governor Isarnr4. that 11:r. Norman was engaged. -Jle went all over the ;Amorandum carefully, and later on Sr. Norman came in and he read it over. They both thought that the matter would re uire careful attention and consideration as to detail, but after all the agreemcnt was not of particular importance--the most important thing being experience. We had a long discussion about technical methods of handling various matters, particularly the establishment of an agreed price for finessing gold which the Deputy Governor felt 7ould be a very useful arrangement eliminating much confusion and at, difficulty in managing geed accountilib -77 s cr*P. The Bank of England paid, by law, 774:09dper ounce for gold which if presented to the :.ant the oner would nroduce n roverign 77:10,4 the difference being what the market eemar.Q.1.117 is willing to allow the Bank of England for giving the owner credit instea' of waiting the return from the ilint :Which is a rather slow nrocess. In the course of tho conversation it developed quite clearly that the war situation had lee the Bank of Engind to abandon the practice of allowing no interest on any balance, arZ as a c ifrefrat- OLIO a matter of fact they were now allowing interest on certain special accounts which I gathered were a 'Portion of the funds left by the Joint Stock Banks and poesibl: some others. was agreed that in some of these matters It experience weer-111-1nttat---- 71rkr disclose( where our understanding might be inadeeuate to 0.4.Q cover situations that might arise ,Awe would have to meet them by agreement at the tine. It was understood that Lord Cunliffe would look the meorandum over and we would take it up again on Monday if he had opportunity to examine it. Had a brief chat with :Iontacv. Norman about the Nether- lands gold situation. He intimated that it was a rather serious matter just now. Theywero discussing it with the representatives of the Netherlands people. 0.7kett? I 9444WARC t7le &Ito policy 10 alonf, the lines of our last discussion I told him that, of course, that was entirely out of my line and a matter (our for the respective governElents to deal with, but elf the gold deposited in New York, we must of course receive the WM deposits if we could agree upon terms. ;7(1 said they were takinc steps to make sure that all my cables and communications on the subject were gathered together and examined,and foltaArtfloND I judged that he also referrer_ to the o: Tice -- been gotig by wireless so far as I as aware. may have The whole matter is really a joke in a sense, for it is perfectly aprparent that all our communications on the subject are cr.refully examined before discussing them with me. Lunched with the Court- - all of the directors treating me most cordially, and apnarently not knowing the object of Lly presence. Met Lord Revelstoke Cpp.401 41V 4D with whom I had a very pleasant chat about 614=114=4QC in France. After luncheon went with Mr. Padgett, Chief of the Bill Division, and he showed me the way they kept their records, purchased their bills, and generally treated with them. part of the business just now is exceedingly quiet. That The bank, when buying bills from the aarket, appa*ently considers that the market consists of the discount houses, bill brokers, and bafzs organized to do business in the 3ast and in the Colonies. This business, consisting of 'e discountlisbills, is always done at bank rate. at of 1, They also cake seven day loans on bills above the ba,lk rate. Loans to their orn customers are largely done at the market rate nd the bank rate does not control loans made through agencies in the krovinces, which are all of course to customers. I asked him how they die- critinated in the matter of finance bills. lie said, that if you were to address that ,liestion to Lord Ounliffe he would say they could tell by the "smell In fact, 4 they did not discriminate against finance bills such for instrnce as those drawn by American banks in June or July every :Tear. They diseri:ainated against excessive amounts of these bills, ex- amined them :awe closely than trade bills and as a rule know something about the general purose for which bills of this character are drawn--but it is :.lore a matter of iAstinet and experience than anything else. Certainly not a matter of 147u;4,d fixed rule. IP Every bill bore twol\obligations one of One of these may be the obligati -m Ilust be the accantor. 4111 of the bill broker or eiscount house and in t=le form of a general letter or liability agreement accompanying each bunch of bills, in which the obligor undertakes to furnish endorsements if requested. riT.1i is simply to avoid the mechanical trouble of endorsinc bills. The bank also advances on certain securities, charging a higher than bank rate. The abwe statement relates to the practices followed in normal times. These have necessarily been considerably :Iodified during the period of the war. Samples of scYne of Ale Tres used were furnished me. From there, Z.r. Padgett and I went dorn to the Bureau where Ale bills are handled and collected but I did not have tine to discuss bills at great length, as the man 14 charge A.shed to explain the operation of the bank and of the clearings. :rich of it was a re4tition of what Mr. Martin Holland ex:lained--the only imnortant fact brought out, different from the exaanation by lir. Holland was that checks on Scotch and Iria banks were not collected directly through the country check department of the London Clearing House. she Bank of England with certain specific exceptions, such as checks of Lhe Disbursing Officer of the Govern7:ent, only sendSitems to the clearingraf time hermits, I ex,.lect to get a fuller statement of this ma ter before leaving. From there went directly to the .7ar Office -_]? rot x.'Cameron Forbes to kee'.) our aHviitment 7ith Lord Xitchener. O 1 eilt about z.:n hour with him ,Lnd had a very interesting chat. Returned to the hotel and Sir Charles Adis of the Hong :Kong tz Shanghai Banking Corporation called. HUnsicker stopped in. Later Colonel Spent the rest of the evening dictating. Dilled in the evening with Interview with Lord Kitchener London, March 24, 1916 On l'riday, March 24, 1916, on the invitation of Lord Kitchener, Ir. 1.-trong, of the Federal Leserve Bank, view York, and i9r. Forbes, Eeceiver of the Brazil Fiailvey Company, presented themselves at the V.ar Department and were shortly after received. r thich he had brought about the creation of a military school modelled 410 upon 'est Point. He said there was no school in England there the discipline was so sharp and severe as it was at Test Point and that it took t democratic country to be really stern in its disciplinary measures; that the Australian school thich had been accordingly established vas stricter than any other school in the British Empire. Cominu to the question of present and future relation: betteen our countr es, Lord Kitchener expressed the hope that the United States vould change its attitude and break off diplomatic relations tith Germany, in that tay publicly taking up the position of -erec,_ Anti-German. lie seemed to think it was wholly unnecessary that the United States should become sufficiently Pro-Ally as to take 41 an active participation in the tar, merely that te should oflicially and authoritatively express our condemnation of Germany's barbarism and methods, thus putting ourselves squarely on the side of the treat fundamental principle of right for which the Allies fit hting, which dividual. v.ere as really the principle of freedom of the in- Be felt that this action of the United States vould make the Germans feel that they had practically the thole lorld against them and this vould bring about a sense of the helplessness of their position which v.ould have most potent effects. he stated thzt in his judgment there vould be no real and satisfactory end to the ter until the military control of Germany tee terminated; that such termination and really the only satisfactory terminttion of the var tould be brought about by an internal revolution in Germany; that there tas within Germany now a great the unrest in Germany to a point tht vould :et the ,.erman people r to thinkin,_ whether they were really ri,ht; whether the:/ hadn't been misled; whether after all their rulers hadn't led them into violating - the fundamental principles of justice and right. Consciousness th/t they had been misled lia-trer-d-ertrrg-biri.; he felt would be the controlling factor in.leadin, them to brin_ about that internal revolution which he felt necessary to end the war and he expressed it as his opinion that this action by the United States would serve to be the last straw and bring, about an early termination of the var. Be didn't give a period within which this vould come about but left us with the impression that he thou_ht it vould come about vithin six months. He took occasion to express great admiration for the United. Sttter. Lhen Mr. Stron_ sugested that our people hadn't yet become entirely assimilated he replied "Oh, wh.t a country it will be when that time comes". He said tUt peace could not be stilled in Berlin. he thou; ht -4- that when peace came the armies would still be in the trenches and probfbly not very ffr from their present loc.tions. Lord Kitchener vas very interesting end very positive about the unfortunate effects of , premature peace or an unsatisfactory or indeterminate conclusion to the war. Unless an end :.ere made to this military spirit end control of Germany he felt peace would only last at the outside seven years, zt which time Germany would start again and it was reasontble to suppose that they would be more successful in their diplomacy a second time and succeed in catchinc. the Allies disunited. Ee expressed the difficulty of obteinin, and maintainin, e satisfactory concert by the Allies. was most That this had been done in the present instance fortunate and he expressed confidence in the power of -5- found their way close to the heart's blood of the commercial life 4111 and got a strangle hold, as it vere, upon the intimate financial workings of the country. He instanced Italy, thick even now hadn't decl red tLr on Germany because of the German etren th in their financial institutions. he spoke of Russia, there their influence, he said, in lines of finance was paramount, and even England and France, he said, were honeycombed with German financi.rs and German influence in their financial structure. He said after the war they vould be clever enough to see thtt the United 6taters was the place there the :reatest amount of money could be found and that as the place \here they would lay their plans for the strongest intervention. Ee told us of the extreordinarAsubtle way in which the 410 Germans had obtained control of the manufacture of explosives. He himself had been out of the country for thirty or forty veers; his service had been all foreign; he didn't knot until the war broke out home conuitions. Ee was astonished, when be called the manuficturers of explosives in, to find that they were all Germans; many of them couldn't even speak znglish, and although the companies had made contracts and aEreements for delivery, they rere constantly falling short. The thole thing had to be purged of German influence before they could begin with efficiency. It took time to train men up to handle this business and do it properly. The Germans h:d even taken the fcctory ffor the manufacture of ben:oine bodily to Holland; there we none menu- / frctured in the United Kingdom, and they vere compelled to take necessary measures to return it. This had been accomplished and 1Ln. land is not only supplying herself but also her Allies ti ith this -6- necessary ingredient for explosives. lb Mr. Stron, mentioned the growth of a certain irritation respecting the attitude of the United States. Lord Kitchener interrupted to disclaim the existence of such an irritation. 1e said it was rather a mieunderstanding or lack of appreciation of the policy of our ,;overnment. Mr. Stron then said that if it was not irritation it might become iriitation as the result of the ag_re:ive and r;,:.ther boastful attitude of the American presr regarding our financial strength on the one hand and on the other hand of the propogande now teing undertaken by the British presr to promote the continuance of the war commercially after the military var hLd ended. Mr. strong said th! t nothing would so surely establish a bests for future were as attempts to interfere between the com7ercial reltions of mtions by unnatural means, such for instance as protective tariffs, preferential treatment of Allies, etc. Lord Kitchener said that this movement was not directed toward the United States but against ,,iermany, to which Mr. strong replied that he understood that to be the case now but that possibly if the Unied States held aloof until pcf-ce dc,d c4t 6242z d. wash clatiams4 it would nevertheless come to apply to the United States. Mr. Strong went on to explain the situation as to American public opinion in regard to there matters. The United statee hid never had a foreign policy in the sense that .6uropean nations h&d. Ite sole interests of the United States in foreigr matter:. consisted ^ of a certain respect for Vias.in6ton's advice in http://fraser.stlouisfed.org/ regard Federal Reserve Bank of St. Louis to foreign entanglements which might involve them in the &Er), 4 great r Enjand no-nue_ t opinio -8- what 'Vashington cautioned them as being entangling alliances would 40 prevent the approval by the United States Senate of any treaty of offensive and defensive military alliance; that such an agreement could not be expected to meet tith the approval. of the United States in the reasonably nerr future. Lord Kitchener, vithout definint the exact nature of the agreement, expressed the hope lhat En, land and the United States vould enter into some relation that would result in bringing all English speaking people toeti.er in a determination to prevent recurrence of Germany's aggression and make it impossible for tie German military spirit ever again to become formidable in influencing rorld development or bringing about general war. Lord Kitchener spoke 'with grevt earnestness in regard to Lmerica's hope that it act as mediator. He said that if the Allies wen the war, and he expressed his confidence in their determination and power to do so, the mediation of the United Stater rould not be sought or welcomed; there would be no need of a mediator. It ..as only if the vcr vent against them that "goinL against them" it any mediation could be considered. is presumed he includes some such condition as a stale rute, in which ease mediation mithbe profitable. Mr. Forbes put the direct nuestion as to what steps rere necessary to bring about peace. Ir. StronE cuLgested that perhaps the Allies mijit announce the terms upon which they would accept peace and let Germany come to then then they Juiddimilip. saw the hopelessness of obtaining anythin_ better. Lord Kitchener -9- being announced could put heart into the other side and stiffen 40 their determination. he said that is wh/t Ihikland was hoping Germany vould do, but they would not consider doing it. (Note: apropos of this, it is interesting to observe that the British Prime -linister already, at the beginninc, of the war, has done something; of this sort. This indict ted exactly what England is fi_hting for and that it proposes to get, including; a very general statement of terms.) Lord Kitchener emphasized the extremely improved position that the United testes tould have in influencing; the situation after the war if she had ranged herself souarely on the side of the Allies by breskin,, off terms with Gerany in case the Allies, as he expects, are victorious, an expectAtion which would be much more likely to be reali ed were the United State to take this step. Lord Kitchener, as we were saying goodby, spoke very bitterly of the German atrocities, their duplicity and their thoroughly underhand 'tanner of conducting the tar. Be characterized their policy as foul play of the most dastardly sort; in comparison he said the Dervishes, the Boers and the Turks, with all of whom be had conducted warfare, were gentlemen; that they fou, ht each with their code of honor. he told us that the Turkish soldiers refused to do the dirty underhand things ordered by their German officers. Be sal, that after fi,hting with any of the others Ut;-,t he was Lltd to be friends tith them; that he would shake the hand of his enemy and made special mention of General Smuts, who is comrandin, a campaign under his orders not and with vhom he had fought over 410 an important part of a continent, but he said that he never tented to shako hands with a German foe. r Friday , Larch .4th: Dined at Sir Frederick Huth Jackson's residence, the cccipany ex:insisting of hiself and Lady Jackson, Hrs. Rurciman anti aunciman of the Cabinet and President of the Board of Trade, :.1r. Jackson's brother-in-law, and one other gentlennn whose name I did not :et. Spent most of the evening after dinner discussing the British labor question with :Ir. Runcimnn who seemed to be exceedingly well informed. After he and his wife had left, Sir Frederick asked me to join him in his library, and he told me a good many interesting incidents connected with the crisis here in 1914; particularly in regard to the issue of currency notes. There is no doubt but that these Englishman are great fellows for criticizing each other, but I constantly gain the impression that hey gener- or has . Jackson tesies and im. ent and over here, n connec- ly perma- t a number the safest restrictions on Germany and the bellicose nations will be an arrangement between England and the United States. Lord Reading has shorn me the greatest cordiality although I know that he is an exceedingly busy man. He expressed a strong desire to come to the United States again. He concurs with me absolutely that the Poenle of the United States cannot be expected to fight for such an abstract proposition as democracy (whatever that Means) That it will take strong German provocations to even cause a severance of diplomatic relations, the Lusitania case now having lost its snap. He believeShowever, that it would bring the war to a much speedier conclusion if we severed diplomatic relations aith Germany, and that it would lead to e formation of ecta English public opinion that would put the peace terms very much in the hands of .gland and the United States. Prom there sto:.Ted in at Dorgan, Grenfell Company for mail and had a chat with Grenfell about the domestic bill business. He says that the Bank of England has very little contact with that business nor does his own firm. drawn by certain special trades Domestic bills are largely and not at all by others. The shipbuilding, lumber, woolens, building, and certain of the textile trades. The bills are dram and accepted generally by the larger dealers and not by the retail trade. At the present time the ship- building and the shipping business is so prosperous and so largely cogducted on a cash basis that the bills have absolutely disaTTeared from the market. Before the war the construction of big liners was very largely financed by fri.4,k bills drawn by the building company on the shinnina. company which were rerularly sold through 411.- OP the bills brokers and discount houses, and by them distributed throughout the market. kg& Bills drawn by HQJL on say the P & 0, the White Star, Cunard or Oceaniateamahip Cos., were regarded as first class in every way and would be taken by the Bank of England without any hesitation. At times there were many millions of these bills in the market. They were generally liquidated when the shin was completed and debentures or other securities issued. Occasionally, they would be renewed by new bills being issued to provide funds to meet the maturing ones. On the way back to the hotel left my card for Sir. George Paish who was not in the city. Lunched :.ith Captain Symington, a Russian Naval Attache; and an Admiral of the Russian Navy who was in London on adairelty busine-s. Played scuash with Captain Symington after lunch and returned to the hotel. had a call from Shiverick, and at eir-ht o'clock wont with Straight and Perkins to 'Ir. and i:Ars. 7:aldorf Astor's home for dinner to meet Bole of the members of the "Round Table". Asters were very cordial, gave us a simple war dinner, but the discussion at the table was exceedingly interesting. Those present; A. J. Balfour, Ca:cr, Br. nd. and Hitchins, all of the 'RouniCA,Table", and a deisnann, a Hebrew in the goverment inert; .faxlaibk service who has just perfected a process for geducing high explosives at the whiskey distilleries, practically all of which have been ta'i:en over by the Govern-lent. This man is of great learning and a prominent Zionist promoter, and he alpeared to me an unfathomable Jew. ,2% Balfour and .1:rs. Astor spent most of the dinner in a running 411 10 fire of raillery, and there was not much serious discussion. :Ir. Balfour is a charming old gentleman of the old school English politician type and undoubtedly a man of much learning with Astor is violently pro-English and great personal charm. was very outspolml in expressing the hone that some Americans had been killed o:1 the steamer "Sussex" so that we might finally be forced Into a situation with Germany. I sat next to 1.1r. Brand who impressed me as being an e::ceedinrly intelligent and able fellow. Among t:lis class of men, the present agitation for continuing the war commercially, after the military war is over, against Germany, does not find favor. Everywhere I hear discussion of the difficulties expectedswith the labor question after the war, and on wLich I think theply apprehensions Ere s ;ewhat unfounded. The: re no; incurring some difficulties with -orking men who are badly led, and follow somewhat the principles of our colored labor. Feel that they need just so They do their 7ork largely by much to live on. ieee viork, and after a man has made a certain amount --all that they feel they need to live on, they are not inclined to work further, believing that the surplus profit accruing from their efforts are an unjust additional contribution to capital in which they do not share. Those around the table impressed me rather as being idealists, but it was an exceedingly pleasant evening. Sunday, :.:arch 20th: Larch Luth, 1916: Ra(1, breakfast with Ambassador and :57s Page at nine o'clock and spent the morning there until 11:30. Ambassador Page is exceedingly keen to discuss nany matters of great interest to me and to him as well, and he mace clear to me,without equivocation, what his feeling was in regard to the war and I explai:ied to him corlletely our own attitude towards it. the object of Lly visit here, and the program so far carried out which he seemed to think was a snlendid thing. I also exi;)lained the Dutch exchange difficulties and the position I had taken at the Bank of England, as well as the seriousness of the present position bet,.._ en England Holland. He see-led to find no objections to the stateraent of my attitudeibut he did_ say that there was a good deal of prosl-astination in the home office in dealing with him on the subject, explaining the repeated notes coat lIned the saggestio fol7ow later on". that"further elaboration would We ha a long talk about Colonel House's visit, and he told no of a particularly interesting meeting when Lloyd George pressed certain questions on House which the latter evaded answering-others present being Austin AI, Letui 1.1r. and C114,4,6444:1) and Ascuith as I recall. Page are both charming simple peonle and very much appreciated here for their -,7ork, their hospitality and simplicity. Returned to the hotel, Montagu Norman stopping in at -L:elve o'clock. We walked out to his house for luncheon, nnd Curiz luncheon, and afterwards until 5:30 :12.:1. we discussed at great length, the i:hole econonic situation in England and 410. AR France also the political tuestion as it affected the United States, the importz_nce of relations bet,een the Federal Reserve system and the Bank of Eng]i.nd and Banque de France, the Ditch exchange, and the blockade matter. He will be :n ear_lest advocate of the Bank of England arrangement, and says that next to the question of finance of the British nation there is nothing so close to Lord Cunliffe's heart as getting the right kind of a relationship established. He thoroughly understands the rosition I have taken in regard to the illegality of the Dutch blockade and agrees that the matter should be dealt .;ith between Holland and England in the first instance, and that we can do nothing else but handle our end of the matter, as sugrested in our many conversations. I pointed out to him that an agreement between England and Holl_nd in re7ard to transactions between the TAted States and Germany might involve a violation of our rirhts---that it was a matter I had very little information about but that certainly we could not enter into any agreement, or becole a party in anyway which would actually or by OU 0-4PTOOtt e1 bteihrtiNg a P4AAT tmAgicifi blockade or embargo which 4.1111440.44n, cornit us to we regarded as illegal. Thal I wa only interested in the banking end of it, and that if they were going to apply a sieve to this commerce, the indebtedness resulting bet:.een the two countries on such transactions that cid pass through the "sieve" must be settled. If their sieve was so fine that it arrested transactions that our Government considered proper, then that was a matter for the respective -.overnments tp deal with, and a with which I had no concern. ire enchanged a good deal of good natured banter about the censorship, but I am satisfied that every scrap of communication on this subject is in his hands, and has been thoroughly studied. I was glad to ascertai- that there were no real black marks against one of my close ar.sociatesi although he is of course looked upon with some doubt. (make a note of the interesting matter told me about a member of the .resident's Oabinet). Before I left a lir. Booth called. He has an important position under Lloyd George in the L:unitions Department. He is a member of the firm of shipping people 'of that name, and I gathered from some remarks that were exchanged /7 that he was about to be elected a director of the Bank of England. He Imo very much interested, and asked me many auestions about our new banking system. .1301 lieturned to the hotelgoing did di:1.-ier with C reading before and to some ;:Ilekemyer and Mt. Shiverick at Ciros. onarcl-11: Canoe at Morgan, Grenfell ,^7 Co-npany for mail t:md Amin(' another cable from the office about Dutch exchange. Received too late however to get a reply off today or to catch my earlier cable. From Lorgan, Grenfell !', Company went to Baring Brothers, to call upon 11r. Farrar who was not in the city, and not feeling very well, but I saw Lord Revelstoke and had a nice chat with him for fifteen or twenty minutes. Pound him, like :cost Englishmen just now, very much interested in American poi/dais, all of course with just one object in mind. Repeated my invariable story on the suct of American public opinion, with which he was polite enough to agree but subsequent discussion rather like the others, are rather skeptical of our good faith testations of good faith. 3:11d pro- He (7id not say this directly, but /I thought his manner implied it a bit. Prom there called on :,:r. Bell and found that he had an accumulation of forms re- garding domestic collections which would require too much time for explanation this morning so I agreed to stop tomorrow. Met Lord Fairfax in the office and said goodbye to him. Then called at flr. Skinner's (U S Consul) office who asked what I thought about the taking of securities from Dutch boats. 7e went over it in some detail and I explained to him the views that I had expressed to some English bankers et alf) iiontagn Norman and thought that he was inclined to agree with me that that should be our attitude. ( I understood him to feel that it could hardly be c:_lected that the AdlAiralty would peruit 0 these securities to go forward when they were satisfied they were of German origin. It looks very much to me as though the situation with Holland was getting rather tense, and -)robably the entire dispute grows out of this very matter. when called on Sir Edward Holden, ,nd found him quite miserable. He is full of comllaint about the Government handling of the loan matter. He thi.kg the Govern...lent should enter into a co latit7lent to li lit the income tax so that the new issue of bonds would pay e..4:5s;70 net after allowance for a maximum income tax collected at the source. from the view held by This is rather different Lord Cunliffe, in appare.tly these matters, has great weight, lioicanna pmebektx. relying upon oitagu :Torman. him considerably. Had suite a chat with Sir Edward about d bills of exchange. t in He says they interior banking system. re a very imaortnnt Some of the bills, y those drawn by cotton brokers on spinners, by ship- rs on shia-owners, and by the woolen trade as well as , reach the London bill market and are re:-arded as first next in fact to the clearing baate-ze acceptances in ases. About one half of the bils held by the London c:: Llidland Bankthe roughly estimates, are of that type, etting them through their branch offices who get them heir customers who draw the bills and discount them. o not consider these coming )ver their counter as ary reserve as they do their import bills. Some of them are of sufficient excellence to be classed as floate4-- a 41 floater being considered the very beet collateral for Jay to day or seven day money, as they are aLiays available at the Dank of England even in preference to any other paper. He said one of the chief features of the domestic bill ezehange401 A an economic sense is it insures the A of bills by merchants. prompt payment The little men here, that is the ekettfrr' retail trade, do not eft very much. The acceptances were more in the larger businesses--bet-,Teen manufacturers, whole- salers and generally the large de:_lers in the wholesale lines. The 'dime varied considerably but rarely more than three months. Bills dra-m to cover ship construction were sometimes given one or two renewals but they were, nevertheless, available at the gap:'/ and =mg generally regarded as very good when the acceptor was high grade. From there sto-ped in to see Sir Pelix Schuster to say good bye, and learned that he was at the Treasury. Drove i mediately to Captain Hall's °Mee at the Admiralty and had suite a chat with him. he was quite He says very little but i gathered that uzzled by this latest outbreak on the part of the Gornans in sinking the "Sussex". It seemed poscibly to be inspired by Germany to avoid the rigors and hazards of another winters campaign, and siuply siLowed a disposition to spread ruin broadcast in order to force discussion of peace. He felt absolutely convinced that they would not sink en American Line boat. He told me that Larshallfs story of the "Sussex" disaster, as published, was absolutely correct. He had just tailzed with Marshall and there was absolutely guests present. Many of them were -ereha sts from the city, but some were bankers whom I already kne7; including Sir Charles Addis, Sir CLristonher Nugent and . Brandt. Aong them was one gentlelen whose name I failed to get and who is a director in the Bank of England. After dinner Sir :.obert made a. few remarks quite comnlilentary in regard to the rederal :leserve S;;-stem, and asked if I would explain it, the organization and the operations. I made a brief discription of the defects of our old situatim, and what was aimed to be accomplished by the new system, explaining the organisation and functions'of the reserve banks etc. They all seemed very much interested and after I was through asked a great many Questions which I am sorry to say indicated a considerable lack of ::nowledge of banking in the United States. hero was a good deal of criticism in the city of the lack of flexibility in the Eliglish banking situation and anparezItly a growing desire to :.codify it so that the Bank of England would co and a larger gold reserve. After dinner a number of those present asked if some of the features of our new banking system were not applicable to the Bank of England. Tuesda:, .arch 28th: Called at Eorgan, Grenfell t Company for mail. Grenfell for a few minutes. Saw From there went to Lloyds Bank. =r. Bell sent or two of his men who understood about the clearing house and check collection matters, and we had a long discussion of methods. . 1110 I have discovered from this con- versation and from talks with others, including Sir re?ix Schuster, that E. :Jartin Holland, while well nosted on the machinery of the Cleari_T Kouse is not at all well rosted generally as to the Practice of the big banks. Martin's Bank while a clearing bank is a small concern, very conservative, and has only t.elve or fifteen branches. Unfortunately, sone of the information he gave -le the other day wao Inrelliable, and I also learned incidentally that he was somewhat inclined to give information on subjects on which he wrL not thoroughly informed, not with an inte_tion of misleading but rather haphazard and -ossi:ly to avoid appearing uninformed. The sub - stance of my conversations with these gentlemen, this -lorning, disclosed the follo:-Lig state of facts: CLEARUG HOUSE: Items sent to the Clearing ::uoe are divided by district; that is, Town, ::.etropolitan P-n1 Country, exactly as formerly described. There are items drawn not only on the clearing banks but on all banks in Magi nd and Wales which have clearing agents in London. banks Bills domiciled in these re lil:ewise sent to the Clearing House. On the other h.nd, all ite is on the Scotch and Irish banks are collected direct. The deferred tune is as formerly stated, and the met-lod of settlement as formerly stated. used were furnished me by Lloyd's Bank. Sam.-7es of all forma The important matter is the custom in relation to the credit of checks. The Scotch banks Ii ve an absolute cast-iron agreement not to give immediate credit on country checks except the custoner pairs a discount covering the period of time required for collection in each instance. The tine allowed is aot oily sufficient to cover the collection cost but any interest loss involved as The sane Sts the practice in Ireland although I do not under- stand that the banks there have a rigid agreement. throughout the Provinces The balks -:--eacies throughout the Provinces also give immediate credit in many instances, although they invariably make a deduction of interest. But, they tell me that n a very large number of instances the banks in the Prolnces s'ill receive checks for deferred credit. I am inclined to thiak that the oeinion o? this, generally, was that more checks wore deferred than were given 'mediate credit. In the city of London immediate credit is given very largely for checks payable throughout En land and ;"ales, but deferred credit is generally given those payable in Scott,- nd and Ireland, and in a Cition a collection charge the ecuivalent of .:hat Scotch and Irish banks charge, is invariably made against the de-ositor of checks on those banks. This is either in form of a deduc- tio:1 from the amount credited, or a deduction for, say, ten days from the interest account. Lloyd's bank has a rule, which these gentlemen believed Prevailed in come form in most of tho for big banks, by t:hich all checks sass 4,000 or over were treated as holdout items. jhen the denositor makes his deposit every day, the checks are divided into two classes- - those that go through the Town iht:Ietropolitan clearings in one class, and those that go through the Country clearings in another. They are entered separately, in a le, fully watched. er---the balances are care- These country collections are deducted from the interest balance and the balance is scrutinized every day to ascertain whether uncollected items are being drawn against. without mentionedg any names, in recent years one prominent bank had been guilty of debauching the business by extending privileges to customers in order to cot business away from other banks. He referrer.. to Holden. He and others have stated to me that the Scotch system was the best. They never ^ave immediate credit except the check is rea-ly discounted, and they always im °se ch_r-:es on country chocks. The ball :e in London, generally, have an arrangement with the Scotch banks for mutual enchenge of ite-is for which charnes nr,,; made either directly or by interest deductions. It would have taken ranch more time than I had at my disnosal just then to work out all the detail of this business. There are innumerable exceptions to general rules but the above jives some picture of how checks '.re handled here. One :method of shortening time and saving labor is the direct interchange of items between branches of the clearing banks. For instance, if Lloyd's London receives from its branch in Huddersfield a check drawn on a branch of the London City s, Midland at Leeds, -- this check nsuld be sent by tamatmdtA) ,iinanthE4I0e.-4re4i/e Head Office tithe London Clearing House and would be received by the London City a Monday. Iii(lland of London say on The London City & Midland bank would send it to Leeds Uouday night, and by Tuesday night or Wednesday morning would receive advice that it was good, or, advice that it was not good. In Thursdays clearings this item would appear in A the settlement, and the settlement would be effected by a transfer chock going through the Bank of Bngland. an the other hand if the check was not good, advice would come back to London to that effect but the item itself would be dealt with directly between the branch in Huddersfield and the branch in Leeds. This of course saves time. They all agreed that the Scotch system was very much better than the lhglish system, and thought methods of crediting and collecting checks and the amount of charges and interest deductions should be made uniform by agreement. Returned directly to the hotel, dressed Lord Bryce's for luncheon. /-id went to Lady Bryce was there, also Lord Islington formerly Governor of :jet; Zealand and now serving on Oa, Wgii_Goverrient Comittee having something to do with the blockader as I understand. it. ability. He lm -Dressed me as being a man of 7luch Also, present, a :Ir. Mitchell whom Lady Bryce Informed mo was a leading member of the bar of Australia and who was here oa some important legal mission. Practically the entire discussio:i at luncheon, emid afterwards, was the war, American politics and 'Laglish feeling in reEre to the United States. I sat between Lord and Lady Bryce and :Jost of my talk was with Lord Bryce. Leaving out matters of little coneeruence Lord Bryce expressed his sympathies with the difficulties of the President during the entire war period, and expressed it as his view that President 7ilson had considered himself bound to his course of action by American public opinion which he felt required to follow. He agreed v;ith me that the President must be conscious of the Imo= tremendous responsibility resting upon him by reason of the fact that in such a situation as this it was only the President who could lead, shape or form public c opinion, and if the country were to become involved is a war with Germany it could only be in response to a public opinion which the President would largely create by his own policy in dealing with Germany. I was again, as always, impressed with the judical and fair attitude displayed by Lord Bryce in discussing these matters. He aaked me very frankly in regard to the question, now very alch discussed over here. whether this Governaent has showed too little energy in placing the cause of the Allies before the American public, particularly in view of the activity of the German propoganda. I told him that, in my opinion, anything in the nature of a propoganda by Englan0 in the United States would be offensive in Jimerica--particularly if it emanated either from the British Embassy or any oTficial source in Alerica., nbizet That the American public was tired of pro4ganda, had voZusad the German Prop#ganda and that that had had a c.Dasiderable influence in its comalete failure. ae said he thought that was so, and asked me how I thought it would be possible to convey to the American people the real import of the war and what it meant to the aorld. I tAd him that I had thought a good deal about it °ince I cu.c over here, and felt that there was only one way to do it so that it would aapeal to the American peoalc in the right way, and that was to take the American newspaper correspondents in this country into their confidence and tell them the facts and let the news originate in its customary way. The American aewq,aaer correspondent was 7roud of establishing relations with men of iraortance from whom reliable news could be had. They would pass the nears through Iv:I./Ids that knew how to deal with it from a journalistic point of view for the American trees. That what American newsplier readers needed was not predigested, material, er as Lord Bryce expressed it "views about news" but they wanted news and would form their o :.n views, ani if the news was accurate and official in its source it would oofle through as greater value. 'nu not as projgclnda and be of much He and the others agreed that the censorship on the news had been too severe in England, and Lord Bryce very heartily agreed with the views I expresse as to the means of conveying facts to the American newspapers. e They agreed. discussed Senator Root's speech at some length. a that it was rather partisan and political arraignment of the administration but very ably done. of the whole idea of conducting the campaign for election of a president on any such issues as the European war, although it was certainly a fact that the most important political. issues in the United States today, were the war and riexico. That the various economic issues heretofore occupying first place in party program6 had been submerged by these tic) jects ana by the agitation of them. lib- Any one I.ho desired a kpublican president,-for instance, might well express the view that a presidential campaign conducte d on these issues g::ve a great advantage to the existing :resident as he c;o111d steal the thunder of the republions, and in a matter of this really rwte public opinion, more than on almost any other issue. I repeated the statement I had fre- :aestly made in regard to the lack of under tLndinL at home of foreign affairs, and how the American pee le did not realize their l=n oliiical rnd financial important° in the worlds affairs today. Nor had they been educated to believe that any responsibility rested upon then in that respect. This wa, of course, not so trae along the Atlantic coast but it was true to a coneiderab e extent in the mid 'le West. Calflornia was affected by the dap question, and the South lest by the 2:exican cuestion, which would likewise ,A.stralot public attention from European affairs. Lord Bryce said that he could see no way b-,7 which the iresidont could now avoid di.::ficalty with Germany since the sizing of the nr1A4W14,", J.-nd particularly the "Sussex% both felt very strongly that tht...t comitted in tA.s whole war. drifted around'to the He nd Lady Bryce was one of the '.orst crimes After lunoheen the discussion ..12.esti:-4 of ,clace, how it could be brought about, and what influence the United states would have. a had a long discussio of the antagonisms w7lich were gradually developing as result of the 11.7ressiveness 1 oft t I:merican press in exploiting the idea that v..e were going to steal the worlds businesf: fron the bftlligerent nations, and the idea that after the war was over measures must be taken to monopolise commerce, t:Ln of over os grou by the war. Lord Bryce told me that so far as the plans bei..7 ieuuesed in the newspapers, they were simply directed agaist Ger:lany, if I expressed the vie.: e avoided trouble with Germany and kept out of the war they wcYad inevitably be directed to some extent against us. :ot altogether inclined to Ile w 7 agree to that--pousibly throui7h politeness, but on the other u. h .nd he said that he thought the whole was amistake and that if it bore fruit we would all pay bitterly for it. He asked me what my on views were on this subject, and I repeated the statement made to Sir Hobert Balfour, at dinner, that While our newspapers and some business men might prevent this matter as a 410* program of expansion at home, the fact was that the business we were now getting at home had come to us :unsolicited, unsought, and war really an inevitable conseeuentLof the war over wIlich no narty exorcised the slightea control. The -4orld hack to be fed nd clothed. The currents of commerce and ba-fiking were being changed and we were bonefitting. When the war was over liec.selves again. matters would rea'ust If we were able to keep some of the business it would stay there. t If not, it would go to the competitor best able to get and keep it. To illustrate the point I described the discussion in regard to the bill market, and also expressed the view that the economic problem was high taxes, high interest rates, and low labor costs; ta Tigerent countries-versus, low taxes, low interest rates, and hiilh labor costs -.a.1.43 in the United States. The7 seemed to agree ,ith tide except low 1:.bor costs in England. I asked Lord Bryce to consider ANether they had resiav studied 1P AL Yrr Take for instance a the domestic situation in regard to 1L.bor. bank like the London City e: Midlmdi, which-is today employing 2800 women t.r: do the work of 1650 male clerks gone to the front If those men were willing to core back and -ork in the bank againkand they were all on full pay)the survivors would be in competition .with the women now employed. shire Cot-,on :Ails. Likewise in the Lanca- If Cormany restored her cotton industry,and Lidastries were restored, would not zad the Lancashire operatives, returns :, to operate these mills in Lancashire be in competition with the German, Russian and Polish 1 operators returning to operate their mills:. Would :lot there be an overproduction of cotton, temporarily at least, and so,,::e idle- nes in Lancashire So, in Cornwall, where mining comparies are pressed to the limit now to produce coal for France. as well as the fleets. reat Britian When the Belgian :i.nd French mtles :ere Aran again (:)ened to the world, and shippingjeleased from tralloport service to carry coal from America, would not the returning laborers, now in the army, find a surplus of labor in Cornwall? He said that he had not thoUI:ht of it in that way --that it might be so, and if it was the economic problem was probably as I had stated. I ex7xessed view that the process of readjustment, le444z4 an enduring peace could be established, would be; Pirt, A financial LIttr2UligA1-4.naacia, the U:lited States to use its surplus credit throughout the world to restore the damage caused by the war; econd, efforts to lower taxes abroad bj reducing armament, and third, but most gradual, the reajastment of prices of goods as a result of the equalization of credit mad. au)iihwo taxes, There was no difference of opinion en-nreesed as to its being of Alramount importance avoid friction between Englaa and the United States it matters of finance Aid conmerce The discussio.L of petlee was along the line of the possible position at role of the United States when the time came to mi.ke peace. Lord Bryce diffidently expressed, not only as his * view but as that entertained by many more, that the position of the United States as a belligerent waJd very much si7Iplify the situation, strengthen England's hand, and enable agreements to be entered into which would make efforts for permalOcy successful. I said that I wLs not sure that it was necessary that Te should be a belligerent although I recognised that the influence on public opinion, brought about by participation.&A the Unitea 10,411. brpoll States ,, t1110 serve to c:lorten the war, would he A considerable, but that on the whole I thougl4he most unfortunate situation that we coal- occupy would be that of mediator. 7:e could not hope to sit on the 4iiirene and dispense justice without being more or less unpopular v:ith everybody, and furthermore it was hard to see how, if we occupied that position, the weight of our infla,- nee could be permanently directed towards 'nearing peace. Personally I would rather see the negotiations conducted in such a way that Engl .nd, France and the United States would be working in partnership. He heartily agreed with that and said that he thought the South American Renublics should be brought in and 41 they would rally to support so obvious and hum,fne a peace action. Just es I was leaving he assure me v end with some emotion, that he did not think any plan for the imposing of peace would be worth a "rap" unless the United States was a party to it, and he clearly desired me to understand that serious :::on here felt that the situation was very -4; much in our hands. No one could have been 7-ore cordial than he, and I loft him with a stronger feeling than ever that he is our best f_ send over here. Ur_ Chandler Anderson called at the hotel about 5:30 and told me that he had comIlletcd the settle' wnt of the meat cases, the only one :ow -.unsettled being in the hands of some - one else, and I inferred that it was the Sulzberger case. Et expected the agreemr:nt to be signed in a few days, just as soon as they could be engrorsod. He was about to keep an appoint- m:nt with Lord Reading who had asked him to call, and he asked me if I could suggest why Lord Reading wanted to see him, I told him that, judging from my experience here, it -as owing to the great interest and even anxiety prevailing over here in regrd to conditions in Americe politically. That they were allowing no o.portunity to pass for sounding Americans as to An rican feeling at home. I asked Anderson if he thought the United States could be brought 1:7to a situation at the conclusion of the -;:ar destined. to insure a permanent peace. Anderson thought it would be very difficult to get a treaty ratified by the Senate if it contained any provision for the Ire of force. In fact, it was difficult to get any treaty ratified by the Senate "4-41-04144 4 Atrfuta He thought timidity, etc. possibly a treaty involving, not the use of force but the enwardtat. t4i;vcelui. financial, ,financial, etc., A.th complete withdrawal of all efts*-Tesae, any government breaking faith with a concert of powers could possibly be put through the Senate, but the difficulty would be to find means of determining what constituted breaking frith, and whether it hat' actually transpired or not. I perso7lelly have felt right along, as I told Lord Bryce, that the United States _ight favor an arrangement, to which all the powers are bound, looking toward the Insurance of peace, if it were t'ken aup on the basis oVleace understanding- spir under the J.uspices of the Hague Tribunal or something of that port. The diffi- culty at present lies in the laeklof the ki!d of leadership in these matters that would crystallize public sontinent so that the Senate would feel the eressuro. Later on, Cain Sy, Ligto:1 and Yr. Shiverick called. Shortly before eight o'clock, Tit. Orenfell called for me to dine :i.tliMenteu Norman, 7f) spent the entire e-ening. until after eleven o'clock, discussing the revision of my memorandum upon relatins with the Bank of England. slirht changes were made by Only Norman, all but one being satisfactory, and this was changed to a satisfactory form. Lord Canliffe being detained oflA of torn b7 the storm, there may be only a short time for farther discussion 7rith him bqt I am assured by both Norman and Grenfell that the matter is very close to his heart, and they feel quite confident of the arrange%lent being put through in an entirely satisfactory form. Our disci ssioa throughout the evenini was ariacipally in regard to the general plan of an arrangement betveen the two institutions, and wilich we all agreed should include the Banque de France in order to make the control of the exchanges com:lete and which without the Banene de Prance would be more difficult, and a clause had been added to the memorandum to cover that point. I explained that while in Paris I had not felt, for various reasons, willing to develop the matter with 7onsieur aallain in quite the detail that had been done here, but it would certainly be necessary to-take it up again, and to probably make another trip for the purpose, They all regard iallain here as being a little difficult to deal with, particularly in the matter of gold. in regard to All bills here, coming from the ast, are drawn at 90 days but there are 3 days grace so that usance is really 93 days. If we cannot buy a bill drawn at 90 days but which is actually paid at 93 da7s, the bills available to us will be much restricted inasauch as the 90 day bill is turned OY atm_ OVDT immediately upon arrival yet'. it has 92 days to run, and the 0441-4 7olune would have largely pc. sed 14to the hands of brokers, and discount houses and never reach our hands. possible methods of dealing with this matter: We discussed four 1....To get a ruling th:-t a bill d=111 at 90 days, plus grace, 7ith the Federal Reserve Act. This looks a little difficult to me. 2...Have the Federal Reserve Act amended, 3....Eave an Act of Parliament passed eliminating grace. This they stated wan possible but would occasion considerable Opr3.sition and derange:::: it of trade custom, 4....Hcve the B811- of Englnd In, and carry the bills for the two d_ys and then turn them over to us. Oa the whole, the best pan will probably be to get the Federal Reseve Act amended. If the publicity entailed by this course makes it impassible, the fourth plan would probably have to be employed, although there are :Tame very awkward features connecter" 7:ith that 'Tar. These two geAtleen attach great importance to the conclusion of -,n the memorandum. arrengeri as outlined in T he:: feel that it will enabe the three groat ba1::s to Perform a service long needed and never possible until the Federal aeserve System cwie into existence. They J,re -zits willing to deal with us without any very definite underrt nding of how the plan will work, and to rely upon experience to smooth oat difficulties. There will be.soe dificulty experienced in the exchange of infrmation, not only due to custom and to the conservatism of the Bank of angland, but because of the extremely severe libel Iose heavy penalties where infermatio:1 of this laws which i2 O. olv;racter results in injury to 40 tird party, but they thiqk it can be dealt withstECI;o4=ZIPMEte4y. Much' can be accomplished by personal visits. 1111 The necessity for making no a nouncemont of tentative understanding to be put into operation ,after the war has ended, is thoroughly understood by everyone. They fear that there will be come newspaper speculations about m: trip after I leave. So discussiot took pine° in regard to the cuestion of gold prices. That is simply a question of matlikitics which can be worked out by experts. In conection with the handling of gold it will be necessary to make a little study of the ttestion of quality. 6,0 I learn that from time to time the Bank of England received r++.0 gold, in some cases Scandinavia and occasionally from Gel-,a.:1;:, y;lich is termed "brittle". In other words, it does not cork properly in the minting. I have explaine that I on under the impression that the United States ;.tint has a regular system of charges for treating gold vii.ch varies from our otnndard in ,..uality, and. which would affect the net value realized for coin treated with on a bu lion basis. It may be necessary in dealing with t' is subject to have an arfangernent to hanile bars as far as possible in the adjustment between the two institutions. ".ednesday, March 29th: Called at Morran, Grenfell Jay's latest letter. Compan:7 and received Mr. Had a short chat with Grenfell. from there went direct to Ar. Martin-Holland who gave me quite a collection of data and papers regarding the London Clearing House. then went to the Clearing House and met the Chief Inspector who took me through the building while the clearings were in operation. Again it is necessary to sliclitly modify the statements made by others who apparently were not informed in detail of the operation. Town clearings go through just as formerly described. Metropolitan clearings go through when presented prior to four o'clock, being settled promptly at five. Mere checks presented to the Clearing House are in too great volume for a Metropolitan branch to examine before settling hours, they nevertheless make settlement "under protest" in which case they, in effect, give notice that items so received .21d settled under protest may be returned the next day. Country clearings close at 10:30, the effect of that being that only checks received by the banks in the early morning mail z.re cleared the sea 2s day. These country checks are distributed in the Country Check Department to the various banks or branches on which they are drawn. They are then sent by the bank to which they are presented, to the various branches in the country. If the checks t:re received on a 1=onday, the return from the country will be received, of course, not later than :Tednosday, and on -;:ednesday's settlement ad the debit 41:D.-credit represented by those checks is included in the total on the settlement sheet of the bank clearing these items and forms a part of the total which is settled by transfer chock drawn on -or,..4aftzt5la:,.41.4F the Bank of England. The Bank of England only clears items which it receives on deposit, and sends to the Clearing Eoaseatems drawn on the Bank of England do not c;o through the Clearing House but are deposited directly with the Bank of England by the baakwhich receivefthem on derosit, as they are. all, of course, 1g accounts with the Bank of England. The Chief Inspector told me that in ordinary times they handled about one million checks nor day all told. in London. reac This includes bills domiciled All bills so domiciled are cleared Provided they can the Clearing House so as to go through for presentation and protest. If they cannot be cleared in time for protest, they are presented direct. Bills domiciled in the country ckp not go through the Clearing House as opportunity to protest would be loot. The operations of the Clearing House, they told me, would not be possible without the use of american adding machines. One very nec- essary arrangement is invariably followed;--ovory chock book issued by banks located within the town district bears the letter -T" on *took acct.., the left hand end to indicate that they go through town clearings. Similarly banks and branches of banks located in the iletropolitan rdievrir district -have the le _ter "riu in the :Margin and all other checks in the country districts, that is Engllnd and .a7es, have ',he letter "C". A good deal of di-ficulty is expelienced yi times by importer routing of items, due to consolidations of banks and transfers of branches from one bank to another. They have a special method of treating these ;Thich is not of enough im7lortance to describe but which relieves the Clearing House of working out the detail of adjustments. 41, I was impressed first by the lack of order in the Clearing House, and secondly by the tremendous volume of business which seemed to go through without friction Inasmuch as the town and metropolitan clearings or delay, etal continuous for the better part of the day, it means that a continuous stream of items are coming in and bei_ig distributed, and the clerks of the various baaks become very skillfUl in sorting the items among the various banks and branches for wTich Instead of a bank having but one desk, or possibly they act. two, at the Clearing House, the better part of a room will be given 117) A/desks for the clerks from one bank. I inouired in rcgard to immediate credit. The Chief Inspector said that he though the practice of giving immediate ere it was growing among the London banks, but not so much so in He said that some of the banks used to be im osed the country. upon and spoke of one instance where customer hae" z Izzgz an account which showed a2parently a large balance which when analysed -4a disclosed that this customer never bog really had a balance for r:me years, but had been living, so to sneak, on uncollected checks. The system now followed by most of the banks X= eliminates this as the ledaer account shows separate credits for country items and for the town and metropolitan items. C They now have under considera- tion a plan 14101t requiret all banks to adopt a number and hi=ve the number printed on the check. This app and is designed to facilitate the sorting process 7ahich is very laboriously done. Some years ago branches of the Clearing banks I unsorted were in the habit of sendiqijitems to the head office for clearing. =Toy;, however, all of these items come to London in tmeA4,;./2, envelones with mazln slips and the total on the envelope. The 44.644,tt7e envelopos are GIS/rwrilcod to the paying bank unopened, and only the total listed on the presenting banks list. The naying bank ma::es a separate margin slip of all the items in the envelope, this being check on the total Shown by the presenting bank. Differences are of constant occurrence. The Clearing House toes not settle if the cifference exceeds £1,000, and sometimes banks are kept until mite late to 19cate such a difference. * if AVALUAz k Diasmaaeet 41/list m aount$Ase posted on a big shoot indicating A tirliswttio A Pf how :nuch Vtey-kipte.e. over or short on the in or out side as they des- cribe it. From these lists the clerks in the different banks are generally a le to run down the differences and adjust them beteen themselves. There is no system of fines. I arranged that our men z.i7ht correspond with the Chief Inspbctor through r. Liartin Holland, if that were t'rloup.ht to be desirable later on, in rec:ard to Clearing House methods. From the Clearing House I returned to the hotel and teTt, t* met Captain Symington\land 71r. Loughlin at the NavOtc Military Club for lunch. Laughlin tole me some most interesting stories of his experiences A.th Iks German diplomacy. one of the most curios men I ever met. afti He is He is the soy of Lqughlin millio4 of Jones Lbughlin Of' kittsburgh--surposed to be worth ten or over. He is 7orkin7 his heart out at his job in London and - apparently has been doing the same thing for the past ten years at the vario.as e:nbssies. He is lorw Secretary at the London EmbLssy. He is nervous excitable little fellow with a great fund of common sense but He says that if we do not take a crack at Germany no humour. nretly soon, in fact right away there will be no nation in Enroee that will have the slightest respect for our Goverr-ent or its representatives abroad. I asked him particularly about the fEte of a treaty in the Senate such as Lord Bryce and I discussed. He was emphatic that, if properly handled)' by the Administration, it could be put through. From there I went to the Princes Club and played squash A.th Captain Svmington. At six o'clock Chandler Anderson called at the hotel and we had a' quiet chat about the Alerican position. He has c3acludod his ,neat settle-aent, and apparently with great success. He be loves that president Wilson wiU lose every shred of Prestige he has if he does not deal vigorously ith Germany, also that the country will be in great peril of isolation, coameroially and otherwise, after the war. Dined with Captain Symington, :Ir. Shiverick and Lietten- ant Quekmpurr at the Savoy. Late in the wining on return to the hotel, ;/.. Cameron Forbes called to say that he had PreTared a statement of our interview with Lord Kitchener, which ho wanted me to read and correct where his memory was inaccurate, Sere .9 9it and take a copy home to the resident. I e.,raJged to meet him at the hotel late Thursday afternoon. -L Thursd4..y, 'larch Wth: Ca11e,.' at Liergan, Gron fell ."- Company for : -mil and saw Grenfell1 -Smith and Stettinius,who also Iretartsa returns on the "St.Paul". Said good bye to Grenfell rnd glr.luawSiaith, both of whom expressed satisfaction with the way things had turned out in connection with my trip. there I steeped in to Sir good bye. Fro? Fell', Schuster's office to say The spoke of the Dutch exchange matter, wit :1 %--ich he seemed to Ivire some familiarity, statif: that iAercented wireless messages etc., had kept them -osted, and he aced me how I felt about it. I told. him, as I said to Lord Bryce. that American bani:ers and citiv-ns were going to pay their debts to citizens of other neutral countries and that igland certainly could not :lrevent it and neither should she try. If they had the right (ither by military Terve or ,Jg agreement with Holland to intercept shipments, that waOr a different matter so long as it did not interfere with our rights as a neutral nation, but that it was gaite a mistake to attemnt to prevent the adjustment of exchanges. with what I said. He seemed to agree He was ouite anxious if anythi:z arose whereby his bank could be of serv,ce to us, that we should let him know. He t gal-it they could arrange to buy bills for us and I told him that it was a little too early to have any program definitely possible for the joint stock banks. him that I appreciated the value of he services which his institution could perform for us, and that AQ44a4;114=114 Told oertainly the matter ;:ould be considered. see Then called to Gow of the Lo don Joint Stock Bark, and found L. i.r. Gow also o.lered the services of his Brandt there. bark saying that they were very conservative, but after all Then stepped over to them of value to us. we would. Bron, Shipley 1 Company to say good bye. From there called at the Bank of England and had a long talk wth Lord Cunliffe, Mt. Cokayne,the Deputy Governor. and Mr. M-ntagu Norman, going over the second draft of the memorandum of conversations very carefully. Lord Cunliffe agreed to everything, including two changes I had made, tith the exception of the paragraph about the BzTalque de Prance. from a tri He had just returned recently to 2aris wrich he had nade without anybody knowing it, and was in a frame of laind to criticize anything apd everything the Bantue de Prance did. He says that they are ii-trustful, do not cooperate, and as he expressed it-Uinstead of looking upon us as a son, which the Bank of England would be inclined to do, they were more inclined to look upon us as a grandson. The dispute betwr:en the two institutions is in regard to mit the use of gold the Bancue de Prance. I told them briefly of my discussions with them, and that in some ways I sympathised with them and with the attitude of the Bancue de France w7iich really carried a greater load of responsibility in sore ays than the Bank of England, and particularly Vtert- the :French people worshi-lied their gold as a sort of fetish. 04,0 I thought that Norman agreed with this view] but Lord Cunliffe was t too irritated by their attitude to agree with Tie. all very strongly in favor of some arrangement being effected between the New York and Paris institutions, kr A that any effort made by the Bank of England to bring that about would do harm. I told him I would like to see the agreement set out their views on that matter, and le thought it was imrortant that it should do so. Montagu Norman wanted a very positive statemnt that efforts would be made to bring the Ban ue de France into the elan. Finally language was agreed I told Lord upon and is ne;; embodied in the 13emorLndum. Cunliffe that I understood the situation in Prance to be materially different from that in England or the United States---that the Banrue de France did not have to pay gold, it could pay silver, and the character of payment they made was really directly controlled by the Government, consequently tt put the Banoue de France on the same footing with the Bank of England and ourselves would require an es: Ara-legal agreenant 9fthiot. - between hew York and Paris to which the govarnmentir assented A and which would have the effect of making relations between New York and Paris the one open spigot, so to speak, through orttux(m. which gold 7Aght flowA highly desirable. They agreed that this was so and Lord Cunliffe expressed the ho'e that I would come over here again before the =plan was put into operation, and make a determined effort to persuade Pallain to go as far as the Bank of Englund had gone. They regard Pallain as ttlid, stupid and obstinate, but think that fsglitkiesbt I was very much amused to Sergent is a man of ability. find that Monsieur Pallain had presented Lord Cimliffe with the same medals he had presented me. Lord Cunliffe was inclined to treat them ii ti,. some disresroct. I was greatly amused at his humougus but expressive remarks about "the old bank". He admitted. that the Ba:ik of England was a museum, but that after all they coy ld change' when necessity required, whereas the Banque de France was much more a museum than the Bank of England and apparently did not have the Norman surPrised me by saying capacity or courage to change. that in his opinion, if I hrd. proposed definite guarantees ink, the Banque de Prance, they would have jumped at it. I had thought that over and talk.-'d it over with Herman Harjes but believe it would have been impolitic and would probably have aroused suspicion. later. The matter can be better dealt with Lord Cunliffe told Norman that if he felt that way he would nominate him hereafter to deal with them--that he (Warman) was welcome to the job. ',7e all agreed that the memorandum just completed was a matter of greatest possible import'mce but that it would not be fully effective until e broke through the reserve of the Banque de Prnce, and for that they relied tenon us. Lord Cunliffe wants me to came over again before the thing is settled, and I told him I would try and do so. We shook hands, exchanged expressions of good will, and I left with the understanding that three copies of the memorandum would be sent to the hotel. AP where they arrived later on in the afternoon. there drove o Captain Fall's e-'fice at the Adairalty and e went to the Carlton -rot lunch. He old me some very interesting stories in regard to the fighting in Prance, and said they had "P-ot" many ,ore submarines this ',onth.lkilhat nobody in En171,nd was able to explain this sudden outburst of horribleness on the -part of Germany --it was so inconsistent inex-lic:,ble. their own interests that it was totally I told him about seeing the periscope of a submarine when crossing the channel on the "Sussex ", and asked Suhranqfk him, what he made of it. He said there would be no EngliSh submarines there and that it undo-Abteilly was a German craft. He surmises that as it was a very rough day, the meeting was unexpected to the submarine as -7ell as to us and that there fAzt, was a very good chance that if they had the time to manotwer into position that she would have thrown a torpedo into us, although the fact that it was before the first of Larch may have eLnlained their not (7oing so. He 01d me confidentially that he had sent a man over on the boat with Colonel House,and offered to send this same 7,an over with me. I told him that his judgment was much better then mine, thnt I would think it over and let him know. He ad:aitted that cure was necessary, but co isidered there was no possilility of anything being undertaken as long as I was in England. Prom there I sto:-ned at the steamship office, and 4 learned that the St Paul sailing was indefinitely postponed, although they thought she would get away in a day or two. It was too late to make arrangements to shift to the "Ryndam" which would have necessitated leaving yesterday afternoon, 'Ind the chances are that the "St Paul" will get away by Sunday or Monday. Dressed and -dent to the Pages for afternoon tea, and agreed to go there tonight for dinner and Sunday morning for breakfast if I was still in London. M was quite a relief for Mr. Page to unburden himself, and if I would come over on Sunday morning we could have another visit together. Captain Symington came back to the hotel with 2 Cameron Forbes came in, also Mr. Stright and 1.r. Perkins. Forbes had prepared a brief memorandum of our conversation with Lord Kitchener which he proposed to hand to Ambassador Page, and asked me if I would read it over and agree to its accuracy. I found it rhthor incona7lete and we arranged to amplify it and go over it onoe more. I suggested the inadvisability of using it in any way except to confidentially hand it to Ambassador -:age for such use as met with his discretion, and with the statement, of course, that it was confidential. Had dinner with Hartley Withers at his house, his 'iother and a Henry Ford (an artist) being present. After diner we discussed at great length the econo is mxiktam Position of England and Mrs Militia Status wit Germany. --briktergiggrarPLaft- `Tr. nthers AMA believes that wages will be rather high in E4glandx and in that glick. respect only differs Bryce. the state=t which I made to Lord He thinks that production ti.roughout the world will be at a r-te never before known and that there will of prosperity, new enterl)rise etc. absolutely wrong. be a great wave Personally I think he is He is one of the most ardent advocates of tits restriction pr, the use of luxuries in England, and ks that only by that method can the country carry the burden of taxation after the war. In discussing German finance, I I've eurrised to find how little information he had. He thi ks they ,2re very much stro,.iger financially than they are credited with being. That they have not inflated their currency As en through the issue of pollen Kaezien Schein, issues to the eztent that the world supposes. and similar He w s inclined to agree that their great problem would be the purchase of r w materials but he thought that tie c..'edits for this purpose could be negotiated with rich Germans abroad, eilk which would give them a great fuLd to use in rebuileing their industries. I told him I thought that most of the ria4 Germane were German Jews wbn woula not be inclined to make extensive lone unless they were assured of gold payment .22(1 that Germa_ly's difficulty would be to maintain gold payment, and she would nrobably ctruEgle with it for many yearb. Withers im reseed me as being a text-book man who expounded theoretical formula not based upon business experience. On the T-..her hand, he is certainly much sounder than Paish, whom I regard as an extreme opt mist who is constantly struggling to support his oAlemism with a lot of theoretical arguments that won't hold water. He spoke very .-"forcefully of the traditions of ftiticonntry beinF upon a higher pL.ne than that of any European nation; that our treatment of China, Spainit the Panama Canal matter, Cuba and Mexico all indicated that we had been educated to deal with these international questions on a very elevated standard of international That ethics. .e now had an opportunity to say to the world that the rights of all neutrals were imperilled by Germriny's procedure, and that we had determined to thro7; the weight of our influence in with the Allies to stop it, not only selfich&K in our own behL'.lf but in behalf of s4m4Iar neutral states that were today absolutely without protection. Friclay, "arch 31st: Capaeron Forbes c':_mo in 4-ev breakfast and to discuss further the Lord Kitchenn memorandum. 7e agreed as to ho7 it should be re-drafted and handled. Mere was no doubt in our minds but that Lord Kitchener's tslt tom. was for the pnr7ose of having it used, .Tid I see no objectim to turning it over to Ambassad.)r :age. 7'r day, Larch 31st: Dined in the evening at Ambassador Page's house -ith Captain. SI'raington, and found one of Artiltr Fowler's youna7 sisters there, her brother having been at the Embassy and who is now enlisted -.:ith the British Flying Corp. Continued a discussion with 1.Ir. Page,who told me sole very interesting things which transpired at a visit he had that day with Sir Edward Grey and with whom he spent an hour. A. most interesting and important thing is Sir Edward Grey's state:lent that while commercial hostilities would not be ;-racticable after the war, nevertheless there would be some thins that could be done, and would have to be :one to satisfy public opinion here and in Prance. Saturday, nor*k 1st, After picking up clubs and golf clothes from Captain Symington called at the Embassy for Ambassador Page and we went to the Comb Hill Club for golf, where I glove him a good trouncing. He has too - much on his mind to bervery successful at the game just now, but his enjoyment of the day via really pathetic. He told me some interest- ing stories of conversations he had had with Lrs. Le -with, and par- ticularly again referring to the question of commercial develorment after the war. After having tea with hr. and :Iris. Page alone, I met AJlard Straight for a few minutes at the Ritz, then Captain Symington came in and we went to dinner and to the theatre. Sunday, April 2nd: Took breakfast ith 1.:r. and Mrs. Page. Sunday, April 2nd: Took breakfast A.th Li.. and _:r s. Page. 2.a-. Page is quite urgent that I see President Alson on my return and explain the situation over here. It seems he has written PrOsident :noon suggesting that he thinks it would be a good plan. Prom there returned to the Hotel :itz, Spent the rest of the day in the hotel, and late in the afternoon stopped at ::±s. Astor's for tea. From there called on :Ir. and Llrs. Laaghlin. In the evening Captain Symington, Captain Sayles, 1,1±. S:ith who is in the Aagligh Aviation Service, 1.1t.Donovan of the J:ockefeller Foundation, Shiver ick and I had dinner in Princes -- Captain Symington leaving for the fleet that evening. Lionday, April. 3rd: Caueron Forbes came in for breakfast and we went over the revised memorandum of our conversation with Lord 7atchenor making various corrections which he is to have embodied, sending me two corrected copies. for lunch. Later 7. E. -:;ilkinson called in After lunch I took him back to the city and stopped in at Grenfelle and :pissed him. From there wont to tho Bank of England and had a short talk with the Governor who was exceedingly cordial. Said that he was hopefUl, now that we had our prelim- inaries pretty well thrashed out, that we would in due course get the business started. He attaches great importance to it. Afterwards I had a little visit with Norman who showed me an 11 interesting wireless message. He thinks the situation in Holland is serious but intimated that he irnew no more about Undoubtedly pressure is being exerted it than anybody else. from some quarter. Norman says that Lord Cunliffe is much pleased at our general understanding, and after going over the memoranftam once more very carefully he is convinced that the extension of the arrangement with the Banque de France is most essential but that we must do it. The Bank of Enp1L,Lnd would cioil it by entering in negotiations. Called at the Embassy and missed Ambassador Page who had cone to the Doctors. Also called at Arundel House to see Hr. Hirst, and founa that his newspaper had moved. At any rate, it was not in Arundel rouse just off the Strand. emorandum 3rd, 1916. Dictate story told you by Trazer re Howard Taylor's visit memo re Trench Statistics TT gist of conversation 7;ith :onsieur lallain, Robineau and the Secretaire Generale re bills, met7',od finance. Holden's re2,arks re Kitchenor, Lloyds, Barings, Lord Revelstoke, Lord Reading and Cunliffe, rather as gossip than any particular value. TT interesting data re member of President's Cabinet, told by Norman TT story told you by Laughlin re his conversation viith B Von Helwig in Berlin at the unveiling of statue presented the Emperor by U.S..L. Also his relations with Gel7aan Ambassador in Serbia when located there. Also re the potash controversy in Berlin. C. ,oleo-Lt is arranging set Belgium War Emergency Currency. te/17 H. Harjes is arranging set French Ilmergency Legislation Bran- Stevens are to forward blance of posters by mail. Complete set Lutch currency 1)20_!-TLY .FTER ARRIVAL: or raves se r 4---2,--Eratrz-tt 4 s-1 1-st e-drcrrr-cm-'64r11.6.--- e 1 Lir. Harris, a director in Lloyds Ban New York within the net tw rely from Russel of maid's family. You !.:_re expecting , WNW I 1,.....16 0 1 r Retyped Copy of Governor Strong's Material 1916 England-France Trip DIARY August 16, 1961 2 The Secretaire Gdnerale and head of the Dis the interview, conducted through an interpr length the memorandum submitted, which was who went over the programme, paragraph by p phasized on the part of M. Pallain that our and confidential -- subject to such disposi directors of the Banque de France. The ent H his approval and that of his associates. to whether we would desire discounts, which Federal Bank being a reserve institution ho and unless under unusual conditions such as would not contemplate endorsing bills. The elaborated, and it was explained that the e subject to the approval of directors and of Reserve Board upon my return to New York--p circumstances made it necessary, it was hig ments could be completed and put into opera of the war. To this they all assented, but Pallain emphasized his view that the sooner could be brought about the more advantageou both countries. He explained that whatever regard to banks and banking conditions, or bility to the Banque de France, nor would t (or in any other way) responsible for such I stated it was quite improbable that simil where than in London and Paris, at the outs was impossible at the present time to state develop. That if satisfactory arrangements the purpose of stabilizing exchange, gold s http://fraser.stlouisfed.org/ Federal Reserveinquired whether Bank of St. Louis 3 this meant that the money employed here would remain in- http://fraser.stlouisfed.org/ the notes Federal Reserve Bank of St. Louisof 4 the Banque de France are printed, and where I was asked to http://fraser.stlouisfed.org/ Federal Reserve explained the Bank of St. Louis 5 difficulties with which they were now confronted in developing 6 Lewandowski and the General Manager of the Bank, M. Paul Boyer. M. Lewan- dowski called in the head of his Portfolio Department, together with the attorney who conducted the American correspondence, and the clerk in charge of the settlements at the Clearing House. They explained fully and very clearly the operation of the Discount Department, the collection of checks and the operation of the Clearing House, of which the following are the main points: - Credit and Discount Department. Very limited discretion is given to the managers of branches within the City of Paris. They are given cer- tain fixed lines of discount which they may not exceed without authority from the head office. The supervision of their authority is very close. Somewhat greater discretion is given to managers of the branches in the Provinces. However, the supervision is very close, and maximum lines of credit are fixed. Most of the bills which they now discount are domestic -- largely those drawn by manufacturers, jobbers, and commission houses. To some extent also bills of jobbers drawn on retailers and even retailers on their private customers. Prior to the outbreak of the war, it was not uncommon for the Bank to handle 750,000 bills in a month. their Portfolio Department alone 450 clerks. They have in These bills come to the Head Office from all the branches, with certain exceptions, and are collected by the Head Office. The exceptions, of course, being agencies in the Provinces. Except in time of a great crisis, such as the war period, the Comptoir never melts its portfolio, but instead of collecting many of the bills itself through its own agencies or by messnegers throughout the city it finds it much cheaper to turn them over to the Banque de F rance, three, four or five days prior 7 to maturity and obtain an immediate credit there. The Banque 8 and, I gathered, were not particularly responsible. The business of private banks is somewhat di "pension." That is to say, three or six months -- again the borrower being in each i general understanding that th The large private bankers, kn buyers of bills. Clearing House. T has only about twelve member banks. Checks are so little war broke out, the operations doned and will not be resumed daily, and the average turnov tions as the Comptoir and Cie francs per month -- only a tr American Clearing House opera the Clearing House, much as w Banque de France, which is de of the institutions that are House. They have only admitt arisen where some of the weak France which have not been ho which have been found to be N similar to the New York pract http://fraser.stlouisfed.org/ laws are not Federal Reserve Bank of St. Louis 9 sufficiently rigid to enable prompt prosecution of those who DIARY Retyped Copy of Governor Strong's Material III1916 England-France Trip Friday, February 25th: 10:30 A. M. called on Monsieur Ribot, who was particularly interested in learning of conditions in America, and anxious to discuss, in general terms, the financial situation there, and the possibility of French credits. Left him at 11:10, called on Mr. Harjes and had quite a long visit with him, lunched with him at the Hotel Crillon. had a short visit with Mr. Stillman. From there returned to the hotel and At 3 o'clock went to the American Embassy with Captain Symington and spent about half an hour with Mr. Sharp who gave me some interesting information in regard to the American international situation. He asked me to reserve one night for dinner at his house next week. Went direct from the Embassy to Mr. Aldred Heidenbach's house, 19, Avenue d'Iena, and arranged to lunch at his house next Tuesday. From there drove to Mr. Harjes' office and went with him to Edouard de Rothschild's house and had tea with Baron and Baroness de Rothschild. Baron Rothschild was much interested in our new banking system, and I arranged to lunch with him and with Mr. Harjes some day next week. Returned to the hotel to say goodbye to Mr. Stillman and then took dinner with Mr. Phillips and Mr. Graves and went to the show. Saturday, February 26th After conversation with M. Pallain, it developed that it would prove inadvisable to proceed very far with interviews with other bankers until after the Banque de France had considered the plans we have in mind. Remained in the hotel with Captain Symington this morning, and immediately after lunch kept an appointment with M. Pallain at two o'clock at the Banque de France. The Secrdtaire Gdndrale and head of the Disc 2 4k the interview, conducted through an interpre length the memorandum submitted, which was t who went over the programme, paragraph by pa phasized on the part of 1[. Pallain that our and confidential -- subject to such disposit directors of the Banque de France. The enti his approval and that of his associates. He to whether we would desire discounts, which Federal Bank being a reserve institution hol and unless under unusual conditions such as would not contemplate endorsing bills. The elaborated, and it was explained that the en subject to the approval of directors and off Reserve Board upon my return to New York--pa circumstances made it necessary, it was high ments could be completed and put into operat of the war. To this they all assented, but Pallain emphasized his view that the sooner could be brought about the more advantageous both countries. He explained that whatever regard to banks and banking conditions, or b bility to the Banque de France, nor would th (or in any other way) responsible for such i I stated it was quite improbable that simila where than in London and Paris, at the outse was impossible at the present time to state develop. That if satisfactory arrangements the purpose of stabilizing exchange, gold sh 5 http://fraser.stlouisfed.org/ Lewandowski Federal Reserve Bank of St. Louis 6 and the General Manager of the Bank, M. Paul Boyer. M. Lewan- 1 7 8 http://fraser.stlouisfed.org/ laws of St. not Federal Reserve Bank are Louis 9 sufficiently rigid to enable prompt prosecution of those who