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A3dnesday, :arch 22nd:


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.


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

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.


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. 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


These bills wore not discriminated against
gland if t3 y bore one good aiglish ne.mey

i c k o cft


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.


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


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.

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


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 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

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

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

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

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


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,




.: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 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.
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.
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


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.


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.


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

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

That in point of fact, I retarded the blockade as mite

which was of course teiribly mismanaged, in the end General

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.

Thursd Larch


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


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


regard to sales of German securities through Dutch bankers Wee

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.


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,

a batch of over 21,000,000 sterling which hie bans :. had just


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

Sir relk.: said

the market would ,-.ot discriminate as they knew

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

Bills of their character are sellinz Lt about 5,J


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.


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.



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


Dined at Sir Seymour King's house, t ose present being

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


them at their house when I retIrnea to London on my next trip.


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.


believe that it will laut until the fall of next year.


is an underlying current o hope, however, that Germany may
colltpse sooner than this.

Pridz.y, :.:arch 24th:


Spent the zlorning dictating mail and diary, and



paring a rough outline of memorandum for Lord Cunliffe.


at Ilor7nn, Grenfell :7: Company for mail and received a cable


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.


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

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


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


experience weer-111-1nttat----

disclose( where our understanding might be inadeeuate to

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.

I 9444WARC t7le


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

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

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



with whom I had a very pleasant chat about 614=114=4QC in

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.


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.

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.


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


fixed rule.

Every bill bore twol\obligations one of
One of these may be the obligati -m

Ilust be the accantor.

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.


is simply to avoid the mechanical

trouble of endorsinc bills.

The bank also advances on

certain securities, charging a higher than bank rate.


abwe statement relates to the practices followed in normal

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

: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.


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 Department and were shortly after received.

thich he had brought about the creation of a military school modelled

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,_


lie seemed to think it was wholly unnecessary that

the United States should become sufficiently Pro-Ally as to take


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



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


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.

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


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


found their way close to the heart's blood of the commercial life

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 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

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.


took time to train men up to handle this business and do it

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


necessary ingredient for explosives.

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.


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

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


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
Federal Reserve Bank of St. Louis

to foreign entanglements which might involve them in the
&Er), 4







what 'Vashington cautioned them as being entangling alliances would

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
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 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


being announced could put heart into the other side and stiffen

their determination.

he said that is wh/t Ihikland was hoping

Germany vould do, but they would not consider doing it.


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,


campaign under his orders not and with vhom he had fought over

an important part of a continent, but he said that he never tented
to shako hands with a German foe.




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


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


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


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.


shipbuilding, lumber, woolens, building, and certain of the textile

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



the bills brokers and discount houses, and by them distributed
throughout the market.


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

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.


present; A. J. Balfour, Ca:cr, Br. nd. and Hitchins, all of the
'RouniCA,Table", and a

deisnann, a Hebrew in the goverment


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


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

;ewhat unfounded.


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.


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


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


1.1r. and


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


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

0-4PTOOtt e1 bteihrtiNg a P4AAT
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


with which I had no concern.


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.


has an important position under Lloyd George in the L:unitions

He is a member of the firm of shipping people

'of that name, and I gathered from some remarks that were exchanged


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.


lieturned to the hotelgoing did di:1.-ier with C
reading before and to some
;:Ilekemyer and Mt. Shiverick at Ciros.

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

Repeated my invariable story on the suct of

American public opinion, with which he was polite enough to
agree but subsequent discussion rather


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.


called at flr. Skinner's (U S Consul) office who asked what I

thought about the taking of securities from Dutch boats.


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


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.


called on Sir Edward Holden, ,nd found him quite miserable.
He is full of comllaint about the Government handling of the
loan matter.

He 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
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


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

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.


said one of the chief features of the domestic bill ezehange401

an economic sense is it insures the

of bills by merchants.

prompt payment

The little men here, that is the


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.


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



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.


dinner a number of those present asked if some of the features
of our new banking system were not applicable to the Bank of

Tuesda:, .arch 28th:

Called at Eorgan, Grenfell t Company for mail.
Grenfell for a few minutes.


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.


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:


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.

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

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

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

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

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

One :method of shortening time and saving labor is the

direct interchange of items between branches of the clearing

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

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.


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

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


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

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.,


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.


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.


They agreed.
discussed Senator Root's speech at some length.
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.


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


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

a had a long discussio

of the antagonisms w7lich

were gradually developing as result of the 11.7ressiveness

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,






by the war.

Lord Bryce told me that so far as the plans bei..7


in the newspapers, they were simply directed agaist Ger:lany,

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

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

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;


Tigerent countries-versus, low taxes, low interest rates,
and hiilh labor costs

-.a.1.43 in the United States.


seemed to agree ,ith tide except low 1:.bor costs in England.

I asked Lord Bryce to consider ANether they had resiav studied


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


the Lancashire operatives, returns :, to operate these mills in
Lancashire be in competition with the German, Russian and Polish

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

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

I ex7xessed

view that the process of readjustment,

le444z4 an enduring peace could be established, would be; Pirt,

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.
There was no difference of opinion en-nreesed as to

its being of Alramount importance


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 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



that on the whole I thougl4he most unfortunate situation that
we coal-

occupy would be that of


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



they would rally to support so obvious and hum,fne a peace

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

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.


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,


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.


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





He thought

timidity, etc.

possibly a treaty involving, not the use of force but the
,financial, etc.,
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


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

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

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


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
OVDT immediately upon arrival yet'. it has 92 days to run, and the

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.


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.


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

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.

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.


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.

I learn that from time to time the Bank of England received

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 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

".ednesday, March 29th:

Called at Morran, Grenfell
Jay's latest letter.

Compan:7 and received Mr.

Had a short chat with Grenfell.


there went direct to Ar. Martin-Holland who gave me quite a
collection of data and papers regarding the London Clearing

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 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

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.


Chief Inspector told me that in ordinary times they handled about
one million checks nor day all told.
in London.

This includes bills domiciled

All bills so domiciled are cleared Provided they can

the Clearing House so as to go through for presentation and


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.


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

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

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.

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,

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)


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


account which showed a2parently a large balance which when analysed

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.


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


were in the habit of sendiqijitems to the head office for

=Toy;, however, all of these items come to London in

envelones with mazln slips and the total on the envelope.



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



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' 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 Iks German diplomacy.
one of the most curios men I ever met.


He is

He is the soy of Lqughlin


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 e:nbssies.

He is

lorw Secretary at the London EmbLssy.

He is


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 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

He be loves that president Wilson wiU lose every

shred of Prestige he has if he does not deal vigorously


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
take a copy home to the resident.
I e.,raJged to meet him
at the hotel late Thursday afternoon.


Thursd4..y, 'larch Wth:

Ca11e,.' at Liergan, Gron fell ."- Company for : -mil and saw


-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.


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


oertainly the matter ;:ould be considered.

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.


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.



thought that Norman agreed with this view] but Lord Cunliffe was


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,



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


between hew York and Paris to which the govarnmentir assented
and which would have the effect of making relations between

New York and Paris the one open spigot, so to speak, through

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.

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.


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
there drove o Captain Fall's e-'fice at the

Adairalty and

e went to the Carlton -rot lunch.



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

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
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

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.


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


learned that the St Paul sailing was indefinitely postponed,
although they thought she would get away in a day or two.


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

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.


was quite a relief for Mr. Page to unburden himself, and if I
would come over on Sunday morning we could have another visit

Captain Symington came back to the hotel with

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.


`Tr. nthers

believes that wages will be rather high in E4glandx and in that

respect only differs

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.


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


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.


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 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


.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.


"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 Li.. and _:r s. Page.


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,


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,

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.


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

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


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.


3rd, 1916.

Dictate story told you by Trazer re Howard Taylor's visit
memo re Trench Statistics

gist of conversation 7;ith :onsieur lallain, Robineau and
the Secretaire Generale re bills, met7',od
Holden's re2,arks re Kitchenor, Lloyds, Barings, Lord
Revelstoke, Lord Reading and Cunliffe, rather as
gossip than any particular value.


interesting data re member of President's Cabinet, told
by Norman


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
Also re the potash controversy in Berlin.

C. ,oleo-Lt is arranging set Belgium War Emergency Currency.

H. Harjes is arranging set French Ilmergency Legislation

Bran- Stevens are to forward blance of posters by mail.
Complete set Lutch currency


raves se



s-1 1-st


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











Retyped Copy of Governor Strong's Material
1916 England-France Trip


August 16, 1961



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


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.


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

That if satisfactory arrangements

the purpose of stabilizing exchange, gold s
Federal Reserveinquired whether
Bank of St. Louis


this meant that the money employed here would remain in-
the notes
Federal Reserve Bank of St. Louisof


the Banque de France are printed, and where I was asked to
Federal Reserve explained the
Bank of St. Louis


difficulties with which they were now confronted in developing


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

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


to maturity and obtain an immediate credit there.

The Banque


and, I gathered, were not particularly responsible.

The business of
private banks is somewhat di

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.


has only about twelve member

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

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
laws are not
Federal Reserve Bank of St. Louis


sufficiently rigid to enable prompt prosecution of those who



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



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.


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.


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

That if satisfactory arrangements

the purpose of stabilizing exchange, gold sh




Federal Reserve Bank of St. Louis


and the General Manager of the Bank, M. Paul Boyer.

M. Lewan-





laws of St. not
Federal Reserve Bank are Louis


sufficiently rigid to enable prompt prosecution of those who


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