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A History Of The Federal Reserve Bank Of Atlanta Sixth District By Franklin M. Garrett  -PREFACEThis account of the founding, development and progress of the Federal Reserve Bank of Atlanta and its Branches was undertaken in 1962 at the request of its late President, Malcolm H. Bryan, and of his successor, then First Vice President, now recently retired President, Harold T. Patterson. Superimposed upon full-time employment its preparation took much longer than concentration upon it alone would ordinarily have required. Since, however, a variety of activities are essential to the well being of man, it often proved to be a welcome and by no means unpleasant diversion. It is hoped that the history will prove useful to the Bank and to anyone having occasion to examine the background of what is, indeed, one of Atlanta's most significant business, financial and economic institutions.  Atlanta, Georgia December 31, 1968  Franklin M. Garrett  CONTENTS SECTION I.  Page Background and Organization  1  Chapter 1. Events Leading to the Concept of a Federal Reserve Banking System  1  Chapter 2. Organization of the Federal Reserve System.  8  Chapter 3. Organization of the Atlanta Bank, 1914  19  SECTION II  The World War I Period  69  Chapter 4. 1915  69  Chapter 5. 1916  95  Chapter 6. 1917  104  Chapter 7. 1918  120  Chapter 8. 1919  138  SECTION III  The Prosperous Twenties  158  Chapter 9.  1920  158  Chapter 10.  1921  180  Chapter 11.  1922  197  Chapter 12.  1923  214  Chapter 13.  1924  239  Chapter 14.  1925  258  Chapter 15.  1926  279  Chapter 16.  1927  313  Chapter 17.  1928  340  Chapter 18.  1929  357  SECTION IV  The Troubled Thirties  381  Chapter 19.  1930  381  Chapter 20.  1931  397  Chapter 21.  1932  409  Chapter 22.  1933  425  Chapter 23.  1934  448  Chapter 24.  1935  463  Chapter 25.  1936  497  Chapter 26.  1937  534  Chapter 27.  1938  547  Chapter 28.  1939  567  The Forties, War and the Aftermath of War  586  Chapter 29.  1940  586  Chapter 30.  1941  624  Chapter 31.  1942  650  Chapter 32.  1943  694  Chapter 33.  1944  727  Chapter 34.  1945  752  Chapter 35.  1946  779  Chapter 36.  1947  810  Chapter 37.  1948  841  Chapter 38.  1949  864  SECTION V  SECTION VI  Mid-Century  886  Chapter 39.  1950  886  Chapter 40.  1951  907  Chapter 41.  1952  928  Chapter 42.  1953  953  Chapter 43.  1954  1010  Chapter 44.  1955  1027  Chapter 45.  1956  1042  Chapter 46.  1957  1065  Chapter 47.  1958  1097  Chapter 48.  1959  1116  SECTION VII  The Bank Turns Fifty in New Quarters  1136  Chapter 49.  1960  1136  Chapter 50.  1961  1154  Chapter 51.  1962  1178  Chapter 52.  1963  1251  Chapter 53.  1964  1267  Chapter 54.  Epilogue, 1965-1968  1283  SECTION I Background and Organization  Chapter 1 Events Leading to the Concept of a Federal Reserve Banking System  Abraham Lincoln’s first political speech, delivered at New Salem, Illinois in 1832, was admirable for its brevity. He said: “Friends and Fellow-Citizens: I am plain Abe Lincoln. I have consented to become a candidate for the legislature. My political principles are like the old woman’s dance - -short and sweet. I believe in a United States Bank; I believe in a protective tariff; I believe in a system of internal improvements, and I am against human slavery. If on that platform you can give me your suffrages, I shall be much obliged. If not, no harm done, and I remain respectfully yours, Abe Lincoln.”1/  Candidate Lincoln’s belief in a United States Bank was not concurrently shared by the man in the White House. Indeed, President Andrew Jackson was soon to be instrumental in the demise of the Second Bank of the United States. Of the four planks in Lincoln’s simply stated platform, the first was the last to become a permanent reality and that long after the future president had served his day and generation. Of the founding fathers, Alexander Hamilton realized more keenly than the  1  others the necessity of a strong central bank to restore American credit following the Revolution. Such a bank was needed to provide commerce and industry with working capital, to direct banking policy, to lend to the governments and to serve as a fiscal agent to the Federal government. The First Bank of the United States was intended as both a commercial and a central bank. When it began operations in Philadelphia in 1791, under a Federal charter good for 20 years, there was less than half a dozen banks in the United States--all located in Boston, New York, and Philadelphia. From the start the Bank was feared and criticized as undemocratic. Since the Constitution gave Congress no specific authority to found a bank, the action of Congress in doing so was regarded as loose interpretation of the founding document to benefit special interests. Hamilton himself was known for his distrust of the masses and association with men of wealth. The Bank, with its eight branches, was a corporation and in an era when a company worth $200,000 was looked upon as big business, the $70,003,000 Bank seemed overpoweringly large. It held a third to half of all the specie in the country and was assured a favored position in dealing with the government. It soon began to dominate the rapidly growing state banks. This was perhaps its greatest service to the natia1 and, ironically, the cause of its downfall.2/ As fiscal agent, the Bank was custodian of import duties and other tax funds. It accumulated state bank notes, regularly presented them for redemption, and refused to accept notes of non-specie-paying banks. This policy, inevitably, lessened the state banks’ opportunities for profit, for they had to limit loans commensurate with the retention of a safe supply of specie. The Bank thus kept them from over lending and  2  inflating the currency. All merits aside, however, and the fact that the Bank was a complete financial success, availed not. Congress, by the slight margin of one vote in each house, refused to renew its charter and the Bank ceased to exist in 1811.3/ Congress soon had cause to regret its action. The Bank was sadly missed during the War of 1812. The war stimulated currency inflation. When the British captured Washington in 1814, all but the New England banks suspended specie payments. By 1816, the country was ready for a Second Bank of the United States. The new Bank, chartered that year for 20 years, was modeled after the First Bank, but with a capital of $35, 000, 000 and 20 branches.4/ The Second Bank, through its Southern and Western branches over loaned and helped to precipitate the Panic of 1819. Its vigorous collecting policy ruined both individuals and state banks and created some implacable enemies. During the 1820’s, the Bank kept state banks from over lending and was criticized as a great monopoly. During the presidency of Andrew Jackson, some of his political associates claimed that the Bank discriminated against them in its lending policy.5/ The President was no friend of the Bank. Nicholas Biddle, its head, knew this and feared Jackson could not be trusted to renew the Bank’s charter. Biddle, therefore, agreed with Henry Clay to make this question a major issue in the presidential campaign of 1832. Clay lost and the Bank was doomed. So also did young Abraham Lincoln, running for the Illinois legislature that year, though his loss had no direct bearing upon the future of the Bank.6/ After 1833, the Treasury deposited its tax moneys in favored state banks that came to be known as “pet banks.” From then on the regulatory powers of the Second  3  Bank were practically nil. Indeed, the Banks, which had meanwhile taken out a Pennsylvania charter, failed during the Panic of 1837. Congress did not renew its charter.7/ From 1837 to 1862 the country got along with state banks, some of which were good and some not. The state banks broke down during the Civil War and in 1863 Congress, largely at the urging of Treasury Secretary Salmon P. Chase, passed a National Currency Act, which provided for a national banking system. Under this arrangement local banks took national charters, issued notes secured by national bonds, and carried on business under Federal supervision. 8/ This system, however, had four major defects. First, the supply of bank notes was not elastic and was not susceptible to increase or decrease with the needs of business. Bank notes had to be backed almost 100 percent by government bonds and thus the supply of notes was keyed to the supply and price of bonds. Second, national banks could lend little to farmers because the chief collateral of farmers was real estate. Third, the method of collecting checks drawn on distant banks was costly and time consuming. 9/ Fourth, and most serious, in time of panic or depression, banks in distress had no recourse for help. Practically no bank, large or small, could pay off all its depositers when faced with “a run.” Small banks kept some of their reserves in large banks so as to draw interest. The latter, especially those in New York, loaned some of these “on call” finds to stockbrokers, taking securities as collateral. Consequently, when  4  a financial crisis developed, and all too many did, small banks demanded their reserves, large banks called their loans, call money rates rose sharply, speculators were forced to dump their securities and panic followed.10/ After panics of varying severity in 1873, 1884, 1893, and 1907 had closed hundred of banks and ruined countless individuals, Congress passed the AldrichVreeland Act of May 30, 1908, by which a National Monetary Commission was set up to study foreign banking systems, American banking history, and to recommend necessary bank reforms. A Federal Reserve Banking System was not many years away.11/  NOTES  5  Chapter 1 1/  Quoted, Paul M. Warburg, The Federal Reserve System. Its Origin and Growth. (2 Vols. New York, 1930) II, 160-16 1. Hereafter cited as Warburg, Federal Reserve System.  2/  John S. Bassett, A Short History of the United States 1492-1920, (New York, 1923), 858; Collier’s Encyclopedia, (20 vols., New York, 1257), 3, p. 76.  3/  Bassett, A Short History of the United States, 858; Collier’s Encyclopedia, 3, pp. 76-77.  4/  Ibid, Bassett and Colliers.  5/  Ibid.  6/  Ibid.  7/  Ibid.  8/  Ibid.  9/  Ibid.  10/  Ibid.  11/  Ibid.  6  7  Chapter 2 Organization of the Federal Reserve System  From the studies conducted by the National Monetary Commission came, in 1911, the Republican-sponsored Aldrich 1/ plan, recommending the creation of a central reserve bank by national charter with fifteen branches in as many districts. The stock of the bank was to be owned by the banks themselves, and direction was left in the hands of the directors chosen by the corporation.2/ The plan was not acceptable to the people at large. As Paul M. Warburg, the noted banker, expressed it: “The view was generally held that centralization of banking would inevitably result in one of two alternatives: either complete government control, which meant politics in banking, or control by ‘Wall Street’, which meant banking in politics. Abhorrence of both extremes had led to an almost fanatic conviction that the only hope of keeping the country’s credit system independent was to be sought in complete decentralization of banking.”3/ While the Aldrich bill failed to become law, it would nevertheless be a great injustice to deny its author credit for the invaluable service he rendered by boldly cutting loose from the antiquated principles on which American banking legislation had until then been resting and in proposing a plan which was recognized as constituting so great an advance that even its defeat made it inevitable that any substitute plan would have to adopt many of its principles and essential features.4/ The Monetary Commission amended its plan in 1912 but its main features remained the same. The amended plan was rejected by public opinion because it was believed to be as monopolistic as the old central bank. But the work of the Commission  8  was important; for it showed the people what the problem was that confronted them.5/ Then came the presidential election of 1912. Both Republican candidate Taft and Democratic candidate Wilson promised to reform the currency. Wilson won the election and took office with definite ideas on the currency question. In fact, the committee on banking and currency had made much progress in formulating a plan. As soon as the Underwood tariff bill was out of the way, the House turned to this subject.6/ On June 23, 1913, President Wilson addressed the two houses of Congress on currency reform and declared that there must be an adequate and elastic currency under government control. He had previously had many conferences with Senator Robert L. Owen 7/ and Representative Carter Glass, 8/ chairmen, respectively, of the Senate and House Committees on Banking and Currency. A bill had been prepared, known as the Owen-Glass Bill. It was introduced in each house on June 26.9/ The currency debate proved longer than the contest over the Underwood tariff, but in the end the administration obtained most of what it asked for. It was in the Senate that strongest objection was made. Debate produced two groups of opinion. One represented those who distrusted large capitalists and wished to limit the power of the banks to control the proposed reserve bank. The other was composed of men who felt that the banks alone knew what kind of banking facilities the country should have. This group wished to limit the power of the government in the matter. President Wilson stood between these extremes.10/ The bill was carried through the House without material change but struck stormy weather in the Senate. Indeed, it was not passed by that body until it was made a subject of action by the democratic caucus, thus becoming a strictly party matter. It was  9  finally signed by the President on December 23, 1913, after the Congress had passed into the regular session. On the final vote it received the support of 34 Republicans and 11 Progressives in the House and three Republicans and one Progressive in the Senate, thus showing that it had lost something of its partisan character.11/ Shortly after signing the Federal Reserve Act on the afternoon of December 23, President Wilson said: “We have slowly been coming to this time which has now, happily, arrived when there is a common recognition of the things that it is undesirable should be done in business, and the things it is desirable should be done.” He added that the time had come to cease struggling over the limitations under which business was conducted and adopt measures that would be just in themselves and establish what he called “the constitution of peace” in industry.12/ On the same day, David F. Houston, 13/ Secretary of Agriculture, recorded in his diary: “The impossible has happened. Today, Tuesday, December 23d, the currency measure became a law. The President approved it a few minutes after six o’clock in the afternoon. It was passed by a Congress dominated by the Democrats, two-thirds of whom had been unsound on currency questions and a majority of whom can scarcely be said to have understood what the measure meant and would accomplish. The majority of the Republicans had also had an unenviable record on the currency. Bryan 14/  and several other members of the Cabinet had supported free silver, as had Vice  President Marshall, the Speaker, Champ Clark, and many Democratic senators. The measure itself was the result of the labors of many men, extending over a long period, but its passage at this time in its present form was due to Woodrow Wilson, ably supported by McAdoo 15/ Glass, and a few others.”16/  10  In commenting on the Houston diary entry just quoted, Banker Paul M. Warburg wrote: “This refreshingly unbiased account by a loyal Democrat gives us a just description of the origin of the Federal Reserve Act: it was, in truth, ‘the result of the labors of many men, extending over a long period.’ Individuals and associations in all parts of the country, businessmen and economists, stirred up by the disaster of 1907, had struggled with the problem and, step by step, had worked their way towards a better understanding of the great principles that would have to underlie monetary reform. Had it not been for this pioneer work, the Democrats, when they came into power, would never have been able to bring about the banking legislation which some of them now claim as the exclusive achievement of their party…”17/ Certainly the text and substance of the Aldrich Bill was of invaluable aid to the “framers” of the Federal Reserve Act. The Federal Reserve System did not replace the National Banking System, it was superimposed on it and sought to correct the older system’s chief faults. All national banks had to join the Federal Reserve System; state banks might join if they conformed to Federal Reserve requirements, though few joined at first. Member banks provided the capital for the twelve Federal Reserve Banks by buying stock equal to 3 percent of their capital and surplus. The Federal Reserve Banks were thus privately owned, although control and supervision at the top rested in government hands. The whole system was headed by a Federal Reserve Board of seven, appointed by the President.18/ Prior to the opening of the Federal Reserve Banks on November 16, 1914, the  11  “Organization Committee, “ provided for in the Federal Reserve Act, underwent a period of much travail and soul searching before completing its work. The “Committee”, composed of the Secretary of the Treasury, the Secretary of Agriculture, aid the Comptroller of the Currency had, among other responsibilities, the controversial chore of determining the number of Federal Reserve District s (the Act specified 8 to 12), their geographical extent and the site of the home banks in each district.19/ Some of the basic problems confronting the Committee with respect to geography and location were set forth by Paul M. Warburg in “Testimony before the Reserve Bank Organization Committee in January, 1914.20/ “In trying to divide the United States into eight Federal Reserve Districts, we were meeting a peculiar problem. The little corner on the map embracing New York, New England, and Pennsylvania would contain $800, 000,000 of national bank capital and surplus, as compared to a total of the United States of $1, 700, 000, and if we draw a line from north to south, ending in Kansas City, and a line from there to St. Louis to the east, we find that this sector, which is less than a sixth of the area of the whole United States, would contain $1,250,000, OOC as against the total of $1, 700,000. “This shows clearly the difficulty we meet in organizing the remaining territory outside of this sector, for in order to cover five-sixths of the entire territory of the United States, there are left only $450, 000, 000 of national banking power. Of these, $80, 000, 000 would belong to California and about $30,000, 000 to Washington and Oregon, so that for the whole remaining territory, namely twenty-six of the geographically largest states, there remains only a national banking power of $340,000,000. “Six percent of these $340, 000, 000 would produce $20, 000, 000 of Federal  12  Reserve capital, if fully paid, and these $20, 000, 000, out of $102, 000, 000 would have to cover the two Virginias, the two Carolinas, Kentucky, Tennessee, Alabama, Georgia, Florida, Mississippi, Louisiana, Arkansas, Oklahoma, part of Kansas, Texas, New Mexico, Arizona, Colorado, Utah, Nevada, Idaho, Montana, Wyoming, Nebraska, and North and South Dakota. “This admits of several conclusions: First, that the financial preponderance of the northeastern angle of the United States is such that no matter how the country will be divided, it will have to rely for its financing largely upon the banking power of this section of the country. “Second, this being so, that the fluidity of credit which will follow the development of discount markets and which this law is destined to bring about, must depend upon the strength and efficient organization of this section, and that, consequently, any attempt artificially to reduce this strength would of necessity weaken the entire structure. “Third, that in constructing the Federal Reserve Banks, care should be taken that the centers of each district are situated towards the eastern border of the western districts, and rather toward the northern border of the southern districts, because financially and commercially the direction must of necessity be towards the financial center; and from an administrative point of view, it is important that these branches be within the nearest possible reach of Washington. The distance to be covered by each head of a Federal Reserve Bank or by the members of the Federal Reserve Board should be reduced to a minimum as far as feasible, whereas members of the branches lying further to the west or south would have to carry the burden of traveling a little further east or north to the meetings of the Federal Reserve Banks. For clearings and  13  transfers it will be equally important that the letter travel in the right direction which, in the majority of cases, will be to the east and north.” Faced with these general questions and the even more urgent appeals of numerous specific cities to be chosen as headquarters for a bank, the Organization Committee had no easy time. In due course, however, the Committee divided the country into twelve Federal Reserve District and designated in each a Federal Reserve city. Boston was designated as the Federal Reserve city for district No. 1; New York for district No. 2; Philadelphia for district No. 3; Cleveland for district No. 4; Richmond for district No. 5; Atlanta for district No. 6; Chicago for district No. 7; St. Louis for district No. 8; Minneapolis for district No. 9; Kansas City for district No. 10; Dallas for district No. 11; San Francisco for district No. 12.21/ A Federal Reserve Bank was duly organized at each of these cities. On May 1820, 1914, all filed their certificates of organization and thereby became bodies corporate with the rights and powers enumerated in section 4 of the Act. Their organization was officially announced by the Secretary of the Treasury and on November 14, 1914, they were authorized by the Comptroller of the Currency to commence business. Two days later all did so.22/ The Act creating the Federal Reserve System provided that the System should be headed by a Federal Reserve Board of seven, of whom the Secretary of the Treasury and Comptroller of the Currency should be ex officio members. The other members were subject to appointment by the President, with the approval of the Senate.  14  President Woodrow Wilson gave much thought to the composition of this Board. Several individuals approached by him declined, for various reasons, to serve. Finally, however, the first Reserve Board was constituted as follows: William G. McAdoo, Secretary of the Treasury, Chairman, ex officio. John Skelton Williams. Comptroller of the Currency, ex officio. Charles S. Hamlin,23/ Governor (2 years). Frederick A. Delano,24/ Vice Governor (6 years). Paul. M. Warburg 25/  (4 years).  W.P.G. Harding 26/  (8 years).  A.C. Miller 27/  (10 years).  And so the Federal Reserve System, one of the great accomplishments of the Wilson administration, was launched. It gave the country the liquidity it needed— perhaps in retrospect too much liquidity- -and was a vast improvement over the ad hoc credit pools of the senior J. P. Morgan and others of the New York banking fraternity. It is notable, however, that private bankers played a large role in the Fed’s formation. First proposed in embryo by Paul M. Warburg of Kohn Loeb, it received powerful support from Morgan’s partner, Henry P. Davison, as well as Frank A. Vanderlip of Stillman’s National City Bank. And Morgan himself, who died just nine months before the creation of the new structure, would have hardly contested its desirability.28/ He would have applauded the way in which it met the extraordinary demands so soon to be made upon it by the cataclysm of Works War I.  15  NOTES Chapter 2 1/  Named for Senator Nelson W. Aldrich (1841-19 15) of Rhode Island, appointed by President Theodore Roosevelt in 1908 to the chairmanship of the National Monetary Commission.  2/  Bassett, Short History of the United States, 859.  3/  Warburg, Federal Reserve System, I, 12.  4/  Ibid.,79-80  5/  Bassett, Short History of the United States, 859.  6/Ibid. 7/  Robert Lathem Owen (1856-1947) U.S. Senator from Oklahoma, 1907-1925.  8/  Carter Glass (1858-1946). Representative from Virginia, 1902-1918; Secretary of the Treasury under President Woodrow Wilson, 1918- 1920; Senator from Virginia, 1920-1946. It is interesting to note that both Owen and Glass were born in Lynchburg, Virginia and that both lived to an advanced age, 89 and 88, respectively.  9/  Bassett, Short History of the United States, 859.  10/  Ibid.,860.  11/  Ibid.  12/  Ibid., 860-61.  13/  David F. Houston (1866-1940). Served as President Wilson’s Agriculture Secretary, 19 13-20; Treasury Secretary, 1920-21, and subsequently as chairman of both the Federal Reserve and Farm Loan Boards.  14/  Win. J. Bryan (1860-1925), perenniel “free silver” candidate for president and Wilson’s Secretary of ~7të, 19 13-1915.  15/  Win. Gibbs McAdoo (1863-1941), Secretary of the Treasury and President Wilson’s soon to be son-in-law.  16  16/  Quoted, Warburg, Federal Reserve System, I, 129.  17/  Federal Reserve System, I, 130.  18/  Collier’s Encyclopedia, 3, p. 78.  19 /  Warburg, Federal Reserve System, I, 781.  20/  Quoted, Ibid., 759-60  21/  Warburg, Federal Reserve System, I, 783-84.  22/  Ibid., 784. The capital, deposits, and total resources of the 12 banks, after one year of business, on November 12, 1915, stood as follows:  Federal Reserve Bank of Capital Boston $ 5, 171,000 New York 11,059,000 Philadelphia 5,273,000 Cleveland 5,945,000 Richmond 3,352,000 Atlanta 2,417,000 Chicago 6,635,000 St. Louis 2,778,000 Minneapolis 2,495,000 Kansas City 3,027,000 Dallas 2,753,000 San Francisco 3,941,000 Total $54,846,000  Deposits Resources $22,218,000 $28,615,000 181,710,000 196,544,000 19,933,000 25,206,000 18,556,000 24,501,000 *13,160,000 21,669,000 *11,268,000 16,629,000 49,993,000 56,628,000 11,204,000 13,982,000 10,425,000 12,920,000 9,826,000 14,080,000 *11,992,000 18,671,000 14,032,000 17,973,000 $374,317,000 $446,192,000  *Includes government deposit of $5, 000, 000. 23/  Charles Summer Hamlin (186 1-1938). Born in Boston, Massachusetts; practiced law in Boston, 1886-1893 and 1898- 1913; Assistant Secretary of the Treasury, U.S., 1893-97 and 1913-14; Governor Federal Reserve Board, Washington, 19 14-1936; Special Counsel to Board of Governors 1936-1938.  24/  Frederick A. Delano (1863-1953). Born in Hong Kong of Massachusetts parentage. Railway official, 1885-1914; Vice President C.B. & Q; President Wheeling and Lake Erie; Wabash and Monon. Member Federal Reserve Board for 6-year term and designated as Vice-Governor far 2 years. Resigned 1918 to enter Army Transportation Corps.  25/  Paul M. Warburg (1868- 1932); banker; born in Hamburg, Germany. member  17  Kohn Loeb & Co. Member Federal Reserve Board, 1914-19 18. 26/  William P. Gould Harding (1864- 1930); banker, born Greene County, Alabama. Graduated University of Alabama in 1880 at age 16--youngest full graduate in the history of the University. Served as president First National Bank of Birmingham, Alabama, 1902-19 14; member of Federal Reserve Board, Washington, D.C., 19 14-1922 and Governor Aug. 10, 1916. Governor Federal Reserve Bank of Boston, beginning January 1, 1923.  27/  Adolph Caspar Miller (1866-1953), economist; born San Francisco, California. College professor and author of papers on finance, banking, etc. Assistant to the Secretary of the Interior, Washington, 19 13-14; member Federal Reserve Board, Washington, 19 14-1936.  28/  John Chamberlain, “A History of American Business,” Part IX -“The Rise of the Money Power,” Fortune Magazine, Jan. 1962, p. 122.  18  Chapter 3 Organization of the Atlanta Bank, 1914  Atlanta did not, merely as a matter of course, achieve the distinction of headquarters city for the Sixth Federal Reserve District. That honor was secured after a vigorous and effective effort by the Atlanta Chamber of Commerce, local bankers and newspapers and representatives in Washington, notably Senator Hoke Smith. The Federal Commission, as a matter of fact, rather leaned to a plan which would have located all the banks north of the Ohio and Potomac Rivers. Indeed, with Commissioner John Skelton Williams1/ opposed, such a recommendation was made to President Wilson. Largely through the intervention of Senators Smith, of Georgia, and Culberson, of Texas, the recommendation did not prevail. Even so, Atlanta faced a hard fight. The fight was launched in the city of Washington on the night of June 23, 1913. That was the day President Wilson delivered to Congress his address on the currency question. James R. Gray, editor of The Atlanta Journal, John K. Ottley, Vice President of the Fourth National Bank of Atlanta, and Senator Hoke Smith were parties to a conference which was held at the Senator ~s home on the night of the day the President delivered his message. At this conference a campaign was outlined, and before the night was over steps had been taken to boost Atlanta’s chances for a regional bank. The campaign was based on the belief of Senator Smith, Mr. Gray, and Mr.  19  Ottley that the southeastern section of the United States should constitute a Federal Reserve district and that Atlanta, as the center of this section, should be selected as headquarters far the Reserve Bank. No departure was ever made from this basic idea, and throughout the struggle it furnished the ground work for all arguments that were advanced in Atlanta’s interest. Messrs. Gray and Ottley went to Washington on the morning of June 23. They occupied seats in the gallery of the House of Representatives when the President delivered his memorable address on the currency question. As the two Atlantans left the gallery of the ball, with Woodrow Wilson’s concluding remarks ringing in their ears, they felt assured that currency legislation would be enacted by Congress before the snow flew. “We must have a regional bank in Atlanta, “ remarked Mr. Ottley. The sentiment was indorsed by Mr. Gray. That night the editor and banker called at the home of Senator Hoke Smith for a conference. They learned to their great satisfaction that the Senator was in entire sympathy with the President’s desire for currency legislation, and that he felt as keenly as they did about locating a regional bank in Atlanta. As a result of the conference at the Senator’s home, Mr. Gray wired Major John S. Cohen, Managing Editor of the Journal, and suggested the wisdom of favorable action by the Atlanta bankers with reference to the President’s currency program. This was the second move. The next morning, June 24, a meeting of the Clearing House Association of Atlanta was held, and the members of the Association were informed of the conclusions  20  reached by Mr. Gray, Mr. Ottley, and Senator Smith. Two hours later a telegram came to Mr. Gray in Washington informing him that the Clearing House bankers of Atlanta had adopted resolutions commending the President’s message and his demand for currency legislation. This was the first affirmative action taken by a bankers’ association in America. The telegram and resolutions were presented to President Wilson by Mr. Gray, and the President was so much pleased that he asked to keep the telegram.2/ Later in the summer of 1913, things began to hum in Atlanta. In early August, Chamber of Commerce President Wilmer L. Moore3/ wrote to each of the banks and trust companies of the city calling attention to the fact that when the new currency bill was enacted by Congress several cities would compete for regional banks and urged the importance of prompt action. Early in September, Mr. Moore received a call from Dr. W. J. Blalock, President of the Fulton National Bank, who agreed with him as to the importance of early efforts upon behalf of Atlanta. Mr. Moore called Dr. Blalock’s attention to the fact that Senator Smith and Congressman William Schley Howard were then in the city and suggested the advisability of a meeting of the Clearing House with these gentlemen present. Dr. Blalock at once took the matter up with the officers of the Clearing House and a meeting was arranged. Senator Smith explained the status of the currency bill and gave his idea as to what would be necessary to secure one of the banks for Atlanta. As a result of this conference, it was decided to appoint a joint committee, consisting of three from the Clearing House and three from the Chamber of Commerce,  21  to take charge of the work. The committee, not formally organized until Christmas week, was composed of J. K. Orr,4/ Chairman; W. G. Cooper, Secretary; R. F. Maddox,5/ J. K. Ottley, W. J. Blalock, John W. Grant6/ and Joseph A. McCord.7/ Meanwhile, a great deal of statistical work was done by the Chamber of Commerce and considerable information was collected by J. K. Ottley and Dr. Blalock. The secretary of the Chamber of Commerce, W. G. Cooper, prepared in the fall an elaborate brief, including a statistical statement worked out by the American Audit Company, showing the population, cotton production, and the banking power of the territory within 300 miles of Atlanta and New Orleans. This, and other information was transmitted to Senator Smith, who presented it to the members of the organization committee in December, which gave Atlanta the first presentation.8/ The pot was kept boiling. More facts were compiled. They showed that Atlanta’s population increased from 89, 832 to 154, 839 in the decade from 1900 to 1910; that 152 passenger trains arrived and departed the city daily; and that more than half the merchants in the southeastern states traded in Atlanta.9/ In early December, 1931, Atlanta banker Robert F. Maddox was sent to Washington to look over the situation. While there he talked to Georgia Senator Hoke Smith and Augustus Octavius Bacon.10/ He was assured that Treasury Secretary W. G. McAdoo, a native Georgian,11/ favored establishing a Reserve Bank at Atlanta, but he was also warned that the selection of the site would be made on the basis of merit and that the bank would be located where it would be most convenient to the area it served.12/ Mr. Maddox revealed these facts publicly when interviewed by a reporter in New  22  York. During the interview, Mr. Maddox stressed many of the paints in Atlanta’s bid for the bank. He set out that Atlanta bank clearings had increased 400 percent in the previous ten years and called attention to Atlanta’s favorable geographic situation with respect to the proposed Reserve Bank region.13/ While Mr. Maddox was in New York, William Randolph Hearst’s Atlanta Georgian 14/ joined the fight for a bank in Atlanta with an editorial on December 4. Said The Georgian: “Atlanta, reliable reports from Washington say, stands an excellent chance of being made the site for one of the regional banks which will be created under the new currency system. “Robert F. Maddox says that if there are twelve central banks, there is no doubt that Atlanta will have one of them, and if the Senate decides to cut the number to eight, still he is confident. “The regional banks, crudely described, will be the great reservoirs of credit. The banker in Augusta or Jacksonville who has supplied the solid merchants and factory owners of the city with the funds they need to carry on business and can bring the notes these gentlemen sign to Atlanta and sell them at the regional bank. The funds he gets in this way, he can lend, of course, to more merchants and manufacturers--and the very limited amount of currency circulating in the nation by this means will be sufficiently elastic to supply all the needs of business, it is hoped. “The cities which possess the regional banks will become the financial centers of their entire sections. It is history that when a city holds the purse strings, soon it dominates in all other lines. One of the things which has built New York is the fact that  23  New York always has held all the money- -and one of the principal objects of the currency bill is to take some of this power away from New York. “There is no doubt, then, that the regional bank will be a good thing for Atlanta, and there should be no doubt that Atlanta deserves it. “From Virginia south to the extreme tip of Florida, from the Atlantic coast west to the Mississippi River, Atlanta’s influence is felt. Already it is the trade center of this rich area, and in large degree that financial center, though New York always has and always will dominate money until the currency bill operates. “Geographically and economically, Atlanta deserves the bank. “There is another reason. “Joseph A. McCord and Robert F. Maddox are among the most able students of the currency question. Mr. McCord long has been a member of the currency commission. Mr. Maddox participated in the famous conference of bankers at Chicago and was the Southern member chosen to present the bankers’ views to the Senate. “The Senate was so keenly interested that the two hours’ time it allotted to hear the bankers’ case was extended to several days. “Whatever improvement is seen in the bill as compared to its original draft will be due more to Mr. McCord and Mr. Maddox than to any other men in the South. “Having assisted so materially in formulating the plan which is to revolutionize the nation’s banking system, Atlanta should have all possible benefits from it.”15/ Later in the month, on December 26, The Atlanta Georgian reported that Senator Hake Smith proposed to the Secretary of the Treasury that Atlanta should be the regional reserve bank in the South. The recommendation was placed on file for  24  further consideration. “Atlanta’s claim as a reserve city,” said Senator Smith, “should meet with instant approval. It dominates the entire country along the eastern seaboard up to North Carolina; west into Tennessee; and along the gulf to the West Alabama boundary line. Its growing ocean trade with New England and with the South American countries makes it a desirable locality for a regional reserve city.”16/ The following day, December 27, the Organization Committee announced that hearings relative to the designation of Federal Reserve cities and districts would be conducted during the period between January 10 and March 1, 1914, and that a hearing would be held in Atlanta. Also came word that New Orleans was an important rival in the battle for the Reserve Bank of the South. Whereupon the local Joint Committee of the Chamber of Commerce and Clearing House Association stepped up its campaign to get the bank for Atlanta.17/ Valuable aid was forthcoming from Haynes McFadden, Secretary of the Georgia Bankers Association, who did yeoman service in securing from several hundred banks in the Southeast an endorsement of Atlanta’s application. Publisher William Randolph Hearst again rose to the occasion. The following editorial, e~itit1ed “The Metropolis of the South Should Be A Federal Bank Center, “ appeared in all of the Hearst newspapers from coast to coast: “The struggle of the cities for selection as sites for the new regional banks grows strenuous. New York, Chicago and San Francisco, being obviously and necessarily assured that they will be made regional centers, can look judicially upon the hot rivalry of cities which most earnestly compete for recognition.  25  “As the entire country is to be divided into not less than eight, nor more than twelve, financial districts, with one Federal Reserve Bank in each district, Atlanta can hardly fail of recognition among the first eight cities chosen. It is not only the metropolis of the rapidly growing South, but in banking and industrial importance, it has no rival between the Potomac River and the Gulf. It is the political and commercial capital of a state which raises more cotton than any state east of Texas, only the prodigious area of the latter state giving it first place. It is the commercial center of that part of the South lying east of the Mississippi and north to the Ohio and Potomac Rivers. The population tributary to it, the population which a regional bank located there must serve, may reasonably be estimated at more than 14, 000, 000. It includes all the people of Georgia, Florida, Alabama, North and South Carolina, and a great number of the communities of Kentucky, Tennessee, and Mississippi. “The city and the section which it serves are alike advancing rapidly in material conditions, commercial and industrial prosperity. In 10 years the population of Atlanta increased from 89, 832 to 154,839, the figure fixed by the national census of 1910. Its present population is estimated 200, 000. “The region tributary to Atlanta has increased in population no less rapidly than the city. The census gives the percentage of increase for the decade in Georgia as 42. 4--a greater ratio of increase than shown by any Southern area, unless Oklahoma may be regarded as being Southern, “The bank clearings of Atlanta, which in 1893 were $60, 753, 911, rose, in 1913 to $725, 604, 192. Over the year 1912, they showed a gain of $33,662, 937, “There is no better index to the state of a city’s business than its records of bank  26  clearings. It measures with exactitude and furnishes an accurate index to the volume of the city’s business. “According to the census of 1910, the four cities immediately preceding Atlanta in population were Toledo, Columbus, Portland, and Denver.. The Atlanta bank clearings last year were almost three times those of Toledo, marc, than twice those of Columbus, and exceeded those of Portland by $720,000, 000, and of Denver by $250, 000, 000. “Figures of that sort express to the mind accustomed to reading the significance of bank clearings the real reason for the preeminence of Atlanta as a regional bank city. “Georgraphically; Atlanta occupies a commanding position in the center of a rich agricultural and industrial region, with no city of equal size or character to contest its primacy. Commercially, it is pushing and progressive. Its people used to call it the ‘Chicago of the South’, but abandoned the comparison as quite inadequate. That showed the Atlanta spirit of self-confidence and self-assertion, two very essential qualities in city building. “No other Southern city is so largely an agency headquarters for great manufacturing firms of the North. That fact, in itself, justifies Atlanta’s claim to be given the banking facilities offered under the new law. “We have no doubt that the Atlantans themselves will press their cause vigorously before the officials having the settlement of the matter in charge. The Hearst newspapers can add nothing to the array of facts and figures they will have to present, though they give them a degree of publicity worthy of them. But there can be no argument to gainsay them.  27  “The whole plan of the regional banks presupposes that one should be placed in the territory of which Atlanta is the center. There is no other city in that region even remotely qualified to compete with Atlanta for the distinction or be able to offer anything like similar advantages as a financial center. “For these reasons, Atlanta is entitled to a regional bank and doubtless will get one.”18/ The prophecy was destined to be fulfilled! On January 19, 1914, which Atlanta observed as the 107th anniversary of the birth of General Robert E. Lee, more. than 450 Georgia bankers gathered at the Capital City Club as guests of the Atlanta Clearing House Association. They met to let it be known that the bankers of the Empire State of the South stood united in their resolve to secure the regional Reserve bank for Atlanta. Meanwhile, the Organization Committee was holding meetings and hearings around the country. On February 13, it held its Atlanta meeting and set up for hearings in the Circuit Court room of the then new, and still handsome, Post Office and Federal Building at Forsyth and Walton Streets. Treasury Secretary William G. McAdoo called the meeting to order, stated the objectives of the meeting, and invited hearings.19/ J. K. Orr, President of the Red Seal Shoe Company, Chairman of the Joint Committee, representing the Clearing House Association and the Chamber of Commerce, conducted Atlanta’s case at the hearing.20/ Reported the Atlanta Journal after the hearing: “J. K. Ottley, Vice President of the Fourth National Bank,21/ spoke on the trend of banking, following Chairman Orr’s introduction. Robert F. Maddox, Vice President of the  28  American National Bank, 22/ came next, discussing banking in the Southeast. Joseph A. McCord, Vice President of the Third National Bank,23/ hammered further argument home under his subject - ‘The Financing of the Crops’. “Wilmer L. Moore submitted a brief by the Chamber of Commerce, compiled under the direction of Secretary Walter 0. Cooper, that was one of the most comprehensive documents of its character that had ever been drawn up about Atlanta. “Other briefs on distinct phases of the subject in hand were prepared and filed by A. P. Coles, Vice President of the Central Bank and Trust Corporation,24/ whose subject was foreign exchange; Mell R. Wilkinson, President of the Chamber of Commerce, on cotton seed products and commercial fertilizer; Clyde L. King, President of the Atlanta Agricultural Works, on the manufacture of agricultural implements; Oscar Elsas, Vice President of the Fulton Bag and Cotton Mills, on the manufacture of cotton goods; R. S. Wessels, Manager of the Pittsburgh Plate Glass Company, on the manufacturers’ agents located in Atlanta; Milton Dargan, Manager of the Southern Department of the Royal Insurance Company, on fire insurance; Major R. J. Guinn, general agent of the New England Life Insurance Company, on life insurance; and Jacob W. Patterson, President of the Patterson Commission Company, on livestock. “These are the men whose formal arguments in behalf of Atlanta constituted the major portion of this city’s case. But there was much work to be done after they had finished. “Senator Hoke Smith began it by addressing the Organization Committee at the very end of its hearing, Saturday afternoon, February 14. Columbia, Savannah, Chattanooga, and Birmingham- -all claimants for the same distinction Atlanta sought- -  29  had been heard. The hearing was over--except for Senator Smith’s summary. “Those who heard the Senator that afternoon, or who read his speech afterward, remember the argument as one of the most powerful presentations of any subject they ever gave attention to. All of the Senator’s training as a lawyer, as a debater, as a thinker upon broad governmental questions was brought into play in that address.” The meeting ended about four o’clock, after which a banquet was held at the Capital City Club in honor of the members of the Organization Committee. That evening the Committee left the city for Washington. Then came a period of several weeks anxious waiting.25/ The decision of the Organization Committee finally came on April 3, 1914. It brought jubilation to some cities; disappointment to others. Wrote Ralph Smith in the Atlanta Journal that afternoon: “The decision of the Federal Reserve Organization Committee selecting Atlanta and eleven other cities as banking centers of Federal Reserve districts as announced last night seems to have met with general satisfaction. Secretary McAdoo and the other members of the committee were flooded today with telegrams from all sections of the country commending their work. The only outcroppings of soreness and disappointment came from the cities of Washington, Baltimore, Cincinnati, and New Orleans. The first two of those were common rivals against Richmond and the Washington papers today in their news stories profess surprise that the capital of the nation must in future transact its banking business through the former capital of the Confederacy. “Cincinnati, Louisville, and Pittsburgh were the common rivals of Cleveland, which was named as the center of the fourth district. New Orleans was the rival of both  30  Atlanta and Dallas, but the committee felt that the facts did not justify the establishment of a bank in the Crescent City. Atlanta made a much stronger case, as did also Dallas … “The official announcement by the Organization Committee describes the Atlanta district as follows: ‘District No. 6 - - The states of Alabama, Georgia and Florida, and all that part of Tennessee located east of the western boundary of the following counties: Stewart, Houston, Wayne, Hurnphreys and Perry; all that part of Mississippi located south of the northern boundary of the following counties: Isaguena, Sharkey, Yazoo, Kemper, Madison, Leake and Neshoba; and all of the southeastern part of Louisiana located east of the western boundary of the following counties: Pointe Coupe, Iberville, Assumption and Terrebonne, with the city of Atlanta, Georgia, as the location of the Federal Reserve Bank. “The district contains thirty-seven national banks which have accepted the provisions of the Federal Reserve Act. The capital stock of the Federal Reserve Bank of Atlanta, on the basis of 6 percent of the total capital stock and surplus of the assenting national banks in the district, will amount to $4, 641, 415; and if there be added 6 percent of the capital stock and surplus of the state banks and trusts companies which have applied for membership up to April 1, 1914, the total capital stock will be $4, 702, 780. The area in square miles of the 6th district is 233, 860; the population 6, 695,541....” Under the heading, “A Victory for Georgia and the Southeast,” The Atlanta Journal editorialized on April 3:  31  “The selection of Atlanta as the location for a regional bank in the Southeast is a matter of supreme significance to the city, the state and the section. “It means that this part of the Union will receive the best possible service under the new banking and currency system, that its agricultural and business interests will no longer be dependent on remote quarters of finance but will have at their very center, accessible at all times, the monetary resources they require. “It means that Georgia will, attain financial importance equal to that she already enjoys in industry and farm production, and that opportunities for enterprise and development throughout the commonwealth will be greater than ever before. “It means, moreover, that Atlanta is recognized by the national government as the business center of the Southeast and the point from which all parts of the region can be most conveniently reached. The prestige and influence that naturally accompany such recognition are immeasurable. Atlanta looms out as one of twelve cities, chosen after months of expert investigation, to administer the country’s currency and banking affairs. In this important sphere of the nation’s economic life, it takes rank with Boston, New York, and Philadelphia in the east, with Chicago, St. Louis, Kansas City, Cleveland, and Minneapolis in the west, with San Francisco on the Pacific coast; and it extends peculiarly cordial greeting to Richmond and Dallas in the South. “If it be true that trade follows the flag, it is certainly true that interest and confidence will follow the paths marked out by the Government selection of regional banks. The fact that Atlanta has been chosen as one of these centers will appeal to investors and homeseekers the country over, and will tell incalculably for the city’s growth and development through years to come.  32  “Atlanta has won on the broad merits of its case, has won because it is the commercial and financial center of a great territory which is plainly entitled to a Federal Reserve district, it was presumed from the outset that this city would be selected as the site of a regional bank. But so eager was the contest throughout the Union that the most persistent and skillful efforts on the part of Atlanta’s and Georgia’s friends were necessary. “Our sister cities in Georgia and neighboring states who supported us in this great cause--the common cause of the Southeast--are due hearty thanks. The Atlanta Clearing House Association, the Atlanta Chamber of Commerce, and the Georgia Chamber of Commerce are likewise to be congratulated for the excellent work they did. The local committee that presented Atlanta’s claims is due particular praise. But, .there is one influence, one man to whom the city and the state are, peculiarly indebted- Senator Hoke Smith. “From the day the currency bill was introduced to the final stages to the organization committee’s work, Senator Smith has striven unceasingly in behalf of the State. It was his resolution, introduced in the Democratic caucus of the Senate, that fixed the number of regional banks at a maximum of twelve instead of the smaller number originally proposed; the establishment of a bank in the Southeast was thus made possible. It was his speech before the committee at its meeting in Atlanta and his brief submitted subsequently at Washington that swept away such difficulties and doubts as endangered Atlanta’s chance. Senator Smith has stood by the state on this vital question issue, loyally and ably. For the splendid service he has rendered, he merits and, we are sure, is accorded the cordial appreciation of every Georgian.”  33  The contemporary reaction and comment of a number of prominent Atlanta businessmen and bankers is interesting. “I think it is one of the grandest victories ever won for Atlanta, and one of the most important events in the history of the Southeast,” said Colonel Robert J. Lowry, President of the Lowry National Bank and of the Clearing House Association. “It is a great thing- -a great thing.”26/ Said W. J. Blalock, President of the Fulton National: “This bank will enable us of the southeast’ to finance our own needs. We can make ourselves independent of New York for the first time in history. It is the biggest thing for this section that has happened in a long time.27/ “It is the first thing in fifty years that gives the banks the assurance they can do business on an even keel and not be brought into jeopardy at certain times of the year-especially at those times when money is needed for the crop movement. It makes Atlanta the financial center of the southeast,” said Joseph A. McCord, Vice President of the Third National Bank. 28/ “The wisdom of the Organization Committee in selecting Atlanta will be justified by the promptness with which this city can serve the territory allotted to it,” said Robert F. Maddox, Vice President of the American National Bank. “It is another evidence of Atlanta’s growth and prosperity and rapid advancement among the important commercial cities of the United States. None has advanced more in the past 20 years than Atlanta. I believe the Reserve System will work out to the great satisfaction of the people all over the country and to the great credit of Mr. Wilson’s administration.29/ “I’m mighty glad we won it,” said Captain J. W. English, President of the Fourth  34  National Bank. “And, I am ready to acknowledge our debt to Senator Smith. He was the man behind the guns. All we could do was furnish him a little ammunition and let him use it. He was on the job. This victory is worth a great deal to Atlanta. It will fix our position as the financial center of this territory. Atlanta wanted it. Atlanta got it. 30/ “The designation of Atlanta is a matter of which all our citizens and friends should feel proud indeed, “ said J. K. Ottley, Vice President of the Fourth National Bank. “That puts us among the twelve financial centers of the United States from this time on, and distinguishes us beyond further question as the commercial center of the southeast ...”32/ “I think it is the greatest in Atlanta’s whole list of successes,” said Charles E. Currier, President of the Atlanta National Bank. “It establishes our position among the financial centers of the nation. The announcement will have an immediate effect. It will increase our fame for one thing. General conditions are improving, irresistibly, even without the regional bank. With it, they will grow better even more rapidly. It’s a great thing for the country and for us.” “We are to be congratulated not only on winning the regional bank but that we have in this region a man as big as Hoke Smith to take care of our big interests as he has taken care of them in this fight,” said Asa G. Candler, president of the Central Bank & Trust Corporation and of The Coca-Cola Company. “We may expect this good fortune to have a wonderful and early effect on our business affairs. This will come as soon as the reserve board is named ... we work together, here in Atlanta. As long as we do that we need not be surprised at any big thing that comes our way. For us to stand at the head of such a city as New Orleans, which is a city of 2 tremendous commercial interests is to occupy a position in which we should take much pride.”33/  35  Forrest Adair, of Forrest & George Adair (real estate), said that the winning of the regional bank was a great thing for real estate and everything else. “The biggest advertisement the city could have,” said Mr. Adair. “Two things got it for us -- our own commanding advantages, and the intelligent cooperation of Senator Smith. When you consider that Atlanta won over so many other cities larger than it, you realize what a wonderful advantage of location and enterprise this city has.”34/ “Like Captain English said in his interview this morning, I consider the regional bank the very best thing that Atlanta has ever gotten,” said M. Rich, of M. Rich & Bros. Company, “The benefits will be unlimited. It gives us the prominence we sought and deserved and I hope it will bring us nearer a new post office building, which we need. I have lived in Atlanta 49 years and I am very proud that we should have forged ahead, during that time, of the oldest cities surrounding us…”35/ Beaumont Davison, of Davison-Paxon-Stokes Company said: “I consider the regional bank the most valuable thing that Atlanta could have possibly secured. It establishes us as the financial and business center of the southeast, and one of the big centers of the entire country…”36/ Each of the twelve Federal Reserve Banks was organized as a corporation operated for public service. They differ essentially from privately managed banks in that profits are not the object of their operations and in that their shareholders, the member banks of the Federal Reserve System, do not have the proprietorship rights, powers, and privileges that customarily belong to stockholders of privately managed corporations.37/ Each Federal Reserve Bank has nine directors. Three of them are known as Class A directors, three as Class B directors, and three as Class C directors. Class A  36  and Class B directors are elected by member banks, one director of each class being elected by small banks, one of each class by banks of medium size, and one of each class by large banks.38/ The three Class A directors may be bankers. The three Class B directors must be actively engaged in the district in commerce, agriculture, or some other industrial pursuit, and must not be officers, directors or employees of any bank. The three Class C directors are designated by the Board of Governors of the Federal Reserve System. They must not be officers, directors, or employees or stockholders of any banks. One of them is designated by the Board of Governors as Chairman of the Reserve Bank’s board of directors and one as Deputy Chairman. The Chairman, by statute, also serves as Federal Reserve Agent.39/ Under this arrangement businessmen and others who are not bankers constitute a majority of the directors of each Federal Reserve Bank. The directors are responsible for the conduct of the affairs of the Reserve Bank in the public interest, subject to the supervision of the Board of Governors. 40/ During the summer of 1914 the member banks of the embryonic Federal Reserve Bank of Atlanta elected the original Class A and Class B directors of the institution. In the Class A category were Llewellyn P. Hillyer, of Macon, Georgia; Francis W. Foote, of Hattiesburg, Mississippi. and Warren H. Toole. of Winder, Georgia. Those named as Class B directors were Dr. P. H. Saunders, of New Orleans; J. A. McCrary, of Decatur, Georgia, and W. H. Hartford, of Nashville, Tennessee.41/ These six men represented a varied business experience. Mr. Hillyer was vice-president of the American National Bank at Macon, which he and associates had organized in 1891. He was born near Rome, Georgia, during the Civil War, son of a noted Baptist minister, S. C. Hullyer. He was active as an officer of both the State and American Bankers Associations and was a director of the Central of Georgia Power  37  Company and Southern States Life Insurance Company. Francis W. Foote, a life-long small-town banker, was born in Macon, Mississippi, in 1875 and began his career as a runner for the Merchants and Farmers Bank of that place. In 1895 he moved to Hattiesburg and for the past 18 years had been executive officer of the First National Bank of Commerce. Warren H. Toole began his career as bookkeeper for a Macon, Georgia, bank in the city of his birth. In 1896, the year William McKinley was elected President on a “gold standard and protective tariff” platform, Toole went to Winder, Georgia, as cashier of the Bank of Winder. Much later he became President of The North Georgia Trust Company at Winder. He also had substantial mercantile and real estate interests there.42/ Dr. P. H. Saunders originated in Hernando, Mississippi, graduated from the State University near Oxford and became professor of Greek at his alma mater -hence his title “Doctor”, which clung to him through life. -Dr. Saunders remained on the faculty until age 32 at which time he entered commercial life as President of the Commercial Bank and Trust Company in Laurel, Mississippi. While retaining this office he went to New Orleans about 1911 to head the Mortgage Securities Company. He was also vice president of the Louisiana Abstract and Title Company and a director of the New Orleans Casualty Company. Director J. A. McCrary organized the First National Bank of Barnesville, Georgia, in 1902 and for 12 years acted as cashier and vicepresident. He was also interested in farming and stock raising. At the time of his election to the Federal Reserve Board he was treasurer and bond manager of the J. B. McCrary Company, and engineering and construction firm specializing in municipal public utilities construction.43/ William H. Hartford, representing Tennessee on the Board, was born in Noble County, Ohio, in 1860 and worked on his father’s farm until he was 20. Moving to Tennessee he was appointed postmaster of Estill Springs by President Cleveland. Later  38  his varied career included the general sales managership of the Tennessee Milling Company; warden at the new State Prison and Prison Commissioner for two years. Still later he went to Chattanooga to take charge of several mining properties-. About 1909 he organized the Hartford Hosiery Mills. He was a director of the Tennessee Bank and Trust Company of Nashville, and of the Farmer’s National Bank of Winchester.44/ During August 1914, as the lights of Europe went out for four years of war, the Federal Reserve Board in Washington addressed itself to the appointment of Class C directors for the 12 Reserve Banks. For Atlanta the Board chose Maximilian B. Weltborn, president of the First National. Bank of Anniston, Alabama; Edward T. Brown, a noted Atlanta barrister, and W. H. Kettig, banker and industrialist, of Birmingham, Alabama.45/ It was largely due to the efforts of W. P. C. Harding of the Federal Reserve Board and formerly president of the First National Bank of Birmingham, that his friend Max Wellborn was induced to cast his lot with the Federal Reserve Bank of Atlanta -- an institution which, for 15 years, benefited greatly from his sound financial mind and energetic services. Wellborn was then 52 46/ and had already made a distinguished record in finance and industry in his adopted state of Alabama. In May 1914, the Anniston Chamber of Commerce gave a luncheon at the Alabama Hotel honoring Mr. Harding and Fairfax Harrison, president of the Southern Railway System. Max Wellborn was a guest upon this occasion and was down for a speech. It was a good one -- the best he had ever made, according to his friends.47/ A mutual friend, John LaGarde, took the two bankers, Wellborn and Harding, home that evening. He dropped Wellborn at his home and took Harding home to spend the night with him. Next day, after his guest had left, he called on Wellborn.  39  “Look here,” he said excitedly, “Harding wants you to succeed him at his bank. He asked me to sound you out.” Wellborn thought it over, and said he wasn’t interested. LaGarde was surprised. “Don’t want to head the First National of Birmingham? The salary is $18,000 a year!” But Wellborn was sure he didn’t want it. He knew all the people in Anniston and Calhoun County, and about the credits and standing of the people. If he went to Birmingham he’d have to start over.48/ In August Wellborn got a cryptic telegram from a friend in Washington, saying, “Come to Washington at once.” It was awfully hot. He wired back, “What for?” A long letter then arrived, explaining that W. P. C. Harding wanted him to head the new Federal Reserve Bank in Atlanta as chairman of the board and Federal Reserve Agent. “It was like a clap of thunder out of a clear sky,” said Mr. Wellborn. “I was stunned. I had never dreamed of such a thing; but this non-political offer, coming without any solicitation from myself or any of my friends, was too flattering to set aside.”49/ Thus began M. B. Wellborn’s association with the Federal Reserve Bank of Atlanta. The other two original Class C directors were widely known in their respective fields. Edward Thomas Brown, also first counsel for the bank, was born at Gainesville, Georgia, in 1859. After attending Davidson College he studied law under Judge H. R. McCay of the Georgia Supreme Court. He was admitted to the bar in 1878 and practiced in Athens until the turn of the century. During this period he served Solicitor General of the Western Judicial Circuit and Mayor of Athens. After moving to Atlanta his practice was for the most part corporate and included such clients as the  40  Western & Atlantic Railroad50/ and American Telephone & Telegraph Company. As of 1914 Mr. Brown was senior member of the firm of Brown, Randolph, Parker & Scott.51/ William H. Kettig (1863-1939) was born in Louisville, Kentucky, and started his business career as office boy for a mill supply house there. In 1886 he went to Birmingham, Alabama, where he and Major Willis Milner organized the mill supply house of Miller and Kettig. The firm was successful and in 1906, was purchased by Chicago’s Crane Company. Mr. Kettig served as manager of the Birmingham Branch of Crane for the next 15 years. He was active also in civic and military matters, serving as a member of the Birmingham Board of Aldermen, president of the Birmingham Chamber of Commerce, and of the Southern Club. During World War I he was active in Liberty Loan campaigns. For four years Mr. Kettig served as Colonel of Engineers on the staff of Governor B. B. Corner. Camp William H. Kettig was named in his honor.52/ The brand new Board of Directors of the Federal Reserve Bank of Atlanta held its first official meeting on Monday, October 19, 1914. And since the group had no home as yet, it assembled in the office of Colonel Edward T. Brown in the BrownRandolph Building, 56 Marietta Street.53/ Directors present were the Messrs. Wellborn, Brown, Kettig, Saunders, Hartford, McCrary, Hillyer, Toole and Foote. Being first, the minutes of the meeting, as recorded by Temporary Secretary Warren H. Toole, are herewith quoted in full: “Chairman Wellborn called the meeting to order. “Upon motion, W. H. Toole was elected Temporary Secretary. “Motion made that the Governor’s salary be fixed at the sum of $9,000 per annum. “Upon motion,. Mr. J. A. McCord was elected Governor of the Bank. “Upon motion, Mr. Charles A. Lyerly54/ was elected a member of the  41  Advisory Council for one year. “Upon motion, Messrs. Toole, Kettig, and Saunders were appointed a committee to wait on Mr. McCord and see if he would accept the appointment of Governor of the Bank at the salary specified. The committee reports Mr. McCord did accept. “Motion made and carried that the Board give Mr. McCord a reasonable time to dispose of his holdings in the several banks with which he is connected. “Motion made and carried that Captain Lyerly be notified by wire of his election as a member of the Advisory Council. “The Federal Reserve Board at Washington were wired that Directors Brown, Hartford, Saunders, McCrary, Foote, Wellborn, Toole and Governor McCord would attend the Conference of Directors in Washington. “Motion made and carried that the Chairman of the Board and the Governor of the Bank be authorized to go over the applications now in the hands of the Directors, and determine the number of people that we will probably need, and to recommend to the Board such applications as they believe meritorious for our further consideration. “Motion made and carried that the Chairman appoint a Director to represent Mr. Foote in selecting term of office of Class A Directors. The Chairman appointed Dr. Saunders to represent Mr. Foote. “The following are the terms of office of Directors of Class A, B, and C respectively: “A”  “B”  W. H. Toole  3 years  F. W. Foote  2 years  L. P. Hi].lyer  1 year  P. H. Saunders  3 years  W. H. Hartford  2 years  42  “C”  J. A. McCrary  1 year  M. B. Wellborn  3 years  W. H. Kettig  2 years  E. T. Brown  1 year  “Motion made and carried that Colonel E. T. Brown be elected Counsel for the Bank, compensation to be determined later. “Upon motion the Board adjourned to look at the several locations offered to the Bank.” W. H. Toole, Secretary.  N. B. Wellborn, Chairman  The newly elected Governor of the Bank, Joseph Alexander McCord, was qualified by long banking experience and a varied business career for high position. Yet, like so many men, born in the South during the years just before the Civil War his early life was marked by poverty and limited opportunity. But young McCord made the most of what was available. After jobs as a tin shop tinker and butcher’s understudy at $5 per month, he began clerking in various retail stores in Conyers. Next followed a stint as deputy clerk of the Rockdale County Superior Court. At 26 he moved to Carrollton, Georgia, and from 1883 to 1889 operated a general merchandise and farmer’s supply business. Two years of corporate experience followed as chief claim and voucher clerk in the traffic manager’s office of the N. C. & St. L. Railroad in Atlanta. Then, just prior to the hard financial times known as the “Panic of 1893” Mr. McCord entered the business in which he was to gain lasting distinction -- banking. This began by his election, in November 1892, to the position of assistant cashier, Atlanta Trust & Banking Company.55/ The following year he advanced to cashier. 56/ In January 1896 Joseph A. McCord helped to organize and became first cashier of a new Atlanta bank, the Third National.57/ Since 1907 he had been vice-president of this institution. His activity in Connection with getting the Sixth District Federal Reserve  43  Bank for Atlanta has been touched upon. In addition he had long been a leader in bankers’ association affairs. In 1905 he was appointed by the president of the American Bankers Association to the Federal Legislative Committee of the Association. From the Committee evolved the Currency Commission of the American Bankers Association. Mr. McCord was a member until his election as Governor of the Federal Reserve Bank of Atlanta. He was also a member of the Executive Council of ABA until his election as Governor.58/ During the interval of nearly a month between the first meeting on October 19 and the opening of the Atlanta Bank on November 16, the newly constituted Board of Directors held three meetings, one in Washington, D. C., and two in Colonel E. T. Brown’s office. Business transacted was fundamental to the organization of the Bank.59/ At the Washington meeting Chairman Wellborn and Governor McCord were appointed a committee to secure information as to quarters and to report to the Directors on October 30. On the occasion of the latter meeting and before consideration of the quarters question, the Board approved what was probably the first “expense account” item in the Bank’s history: “Motion made and carried that the Bank reimburse Mr. Brown for the two luncheons which he tendered the Board, and which were so much enjoyed and appreciated.”60/ The Board, having made two trips to inspect quarters offered in various buildings, then began its deliberation upon that subject. A proposition from John W. Grant for the third or fourth floor of the Third National Bank Building, at $400.00 per month, was turned down.61/ Next to be eliminated from consideration was an offer of space in the Temple Court Building62/ which included three month’s free rent in lieu of the Bank fixing up the office. Space in the brand new Healey Building was offered but the fact that no vault was available disqualified it. Two other buildings were under consideration, the recently opened Hurt Building and the somewhat older Atlanta  44  National Bank Building.63/ The following motions concerning these buildings are quoted directly from the Minutes:64/ “Motion made by Mr. McCrary that we offer for the Hurt Quarters $6,500.00 for the first year, with option for the second year at $8,000.00 per annum, and the third year at $9,000.00 per annum. “Motion was amended by Mr. Brown that we offer for the Atlanta National Bank Building $4,000.00 for the first year, with the privilege of two additional years at $5,000.00 per annum. The vote was taken upon the amendment and same was lost. Vote was taken upon original motion which prevailed. “Motion made by W. H. Toole that we rent the space in the Hurt Building, as indicated to us by Mr. Hurt, for one year at $6,500.00 per annum, said rental to be paid monthly. Motion prevailed. “Motion made and carried that the motion of W. H. Toole be made unanimous. Two weeks later the Bank opened, with properly restrained fanfare, on the ground floor of the Hurt Building. Meanwhile other organizational matters demanded attention. The Board meeting of October 31, held in Colonel E. T. Brown’s office, was largely devoted to personnel and by-laws. A cormnittee appointed to suggest a staff of officers and employees submitted the following report, which was adopted: “The offices of Chairman of the Board of Directors and Vice-Chairman, are filled by appointment by the Federal Reserve Board, and their compensation is so fixed. “We suggest the following officers and other employees, and compensation: Governor,  Office previously filled. 45  Deputy Governor,  Honorary, to be paid only when on duty, then the same salary as is paid the Governor; no allowance for expenses.  Secretary-Cashier,  $3,000.00 to $4,000.00  Asst. Secretary-Treasurer,  Previously filled.65/  Auditor,  $2,000.00 to $2,400.00  Credit Man,  $2,000.00  Chief Clerk,  Do not fill.  Discount Clerk,  $1,800.00  Tellers,  Do not fill.  One General Bookkeeper,  Not to exceed $1,800.00  One Ordinary Bookkeeper  “  “  “  $1,200.00  One Statement Clerk  “ “  “  $1,200.00  General Utility Man,  Do not fill.  Secretary to Governor, and Chairman of the Board,  Not to exceed $1,800.00  One Stenographer,  Not to exceed $1,000.00  One Messenger,  “ “  “  $600.00  One Porter,  “ “  “  $600.00  One Mail Clerk,  Do not fill.  “Chief Clerk: We recommend leaving the place open for the present, as we think for a while the Auditor or some officer can direct this work. “Tellers: We think for a while the Asst. Secretary-Treasurer, who will be custodian of the cash and securities, can act as paying teller, and some other employee  46  can do the work of receiving teller, if the custodian of the cash cannot, so act. “General Utility Man: Such a person will be needed in time, but the expense can be deferred for the present, we think. “Mail Clerk: Such an employee will be necessary in time, but we think for the present this work can be done by other officers or employees. Respectfully submitted, F. W. Foote M. B. Wellborn Jos. A. McCord.”66/ Having ascertained the approximate need, personnelwise, of the new Bank, the Board then got down to specifics on certain positions. The Chairman was authorized to negotiate with Giles L. Wilson, of Jacksonville, Florida, relative to his acceptance of the Deputy Governorship as an honorary position. The employment of Frank S. Patton, of Jonesboro, Tennessee, was. authorized as General Bookkeeper at $1,800.00 per year, others authorized for employment were R. H. Hiemphill, of Hattiesburg, Mississippi, as Credit Man, at $2,000.00; P. II. Kitties, of Sylvania, Georgia, as Auditor, at $2,400.00; W. S, Graves, of Rome, as Discount Clerk at $1,800.00, and Joseph M. Slattery, of Washington, D. C., Deputy Secretary, at $1,800.00. The Chairman and Governor were authorized to employ a stenographer at not exceeding $1,000.00; the officers a messenger at not exceeding $600.00 and such other small help as may be needed. Following which Dr. Saunders moved “that the Governor notify those elected to fill positions in the Bank, that they are elected with the understanding that their services must be satisfactory, and in case their services are not satisfactory, or we feel that we do not need their services, that they can be disposed of without notice.” A personnel policy, less cavalier in nature, was to develop later.67/  47  A precedent, however, which could easily have gotten out of hand, was stopped short before the meeting was ‘over. A Mr. Carter, who was an applicant for a position in the Bank, was permitted by the Board to come before it and make a statement regarding his qualifications. A motion by Dr. Saunders was quickly passed that no more applicants be permitted to appear in person before the Board.68/ Other matters basic to proper organization were taken up at the same meeting. Compensation of Directors was placed at $25.00 per day for attendance at meetings and $10.00 per day while in transit to and from meetings. Directors W. H. Toole and Dr. Saunders were elected members of the Executive Committee for three months; temporary bonds were authorized for officers and employees, and use of the American Bankers’ Association Telegraph Code was decided upon until the Federal Reserve Board should furnish one to be used by all the Banks. The Governor was authorized to arrange with the Third National Bank69/ for temporary vaults for the reception of money now being paid in on the capital stock of the Bank and the reserve that would come in later. A set of by-laws was adopted and the meeting closed after a motion by Mr. Kettig “that we extend Mr. Brown our thanks for the use of his office, and the pleasant entertainment he has furnished us throughout our session.” Motion was carried by unanimous rising vote.70/ At 9 o’clock a.m. on Wednesday, November 16, 1914, the Board of Directors assembled officially for the first time in the Bank’s new quarters in the Hurt Building. Prior to the opening ceremonies, the Board, all of whom were present, transacted some necessary business. W. H. Toole was elected Secretary of the Bank with the sole duty of keeping the minutes of the Board; Cites L. Wilson was elected Deputy Governor and was personllay presented to the Board, and J. B. Pike, of New Orleans, was appointed Cashier at $3,600.00 per year. It was voted that the entire force of the Bank be bonded  48  by the United States Fidelity & Guaranty Company of Baltimore; Directors Toole and McCrary were appointed to receive the combination in the vault, and Mr. McCord was authorized to employ a man for two or three weeks to assist Mr. Bell in the “counting and handling of money until the present rush is over.”71/ It was moved by Director Foote that telegrams be sent, announcing the opening of the Bank, to the Federal Reserve Board, the other eleven Reserve Banks, to the President of the United States, to the Secretary of the Treasury and to the Comptroller of the Currency. Director Foote and Governor McCord were thereupon asked to retire from the meeting and formulate proper telegrams.72/ The telegrams, all signed by “Joseph A. McCord, Governor,” reflected a happy and auspicious occasion. To the Reserve Banks in Boston, New York, Philadelphia, Cleveland, Richmond, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco, which opened simultaneously went the following brief message: “Federal Reserve Bank Atlanta extends its greetings.” To the Federal Reserve Board, Charles S. Hamlin, Governor: “Federal Reserve Bank Atlanta opened auspiciously and places itself at the services of your Honorable Body.”73/ To President Woodrow Wilson at the White House went the following: “The Atlanta Federal Reserve Bank opened this morning for business. The Board and officers of this your former home, especially desire you to know that they are in sympathetic accord with the purposes of the new Currency Act, and will do everything within their power to make it a success. The Country is to be congratulated upon having a President who had the courage and foresight to give the people this wonderful financial reform.”74/ To Treasury Secretary William C. McAdoo: “Acting upon your authority the Federal Reserve Bank of Atlanta opened for business at 9 a.m. today with great promise. Governor, Chairman of Board  49  and Directors of Bank desire to express hearty appreciation of your diligence and the unusual ability which has marked your course in bringing this great reserve system into a satisfactory form of existence. All pledge their loyal support and await your further commands.”75/ To John Skelton Williams, Comptroller of the Currency: “Federal Reserve Bank of Atlanta opened for business with confidence. Officers and Directors earnestly look to you for guidance and help. Place themselves at your command.” And to Honorable W.F.G. Harding, member Federal Reserve Board and warm friend of Chairman 14. B. Wellborn, the following: “Federal Reserve Bank Atlanta opened for business. Officers and Directors present their compliments and congratulations to you, our neighbor,76/ friend and associate, and wish you continued benedictions of success and public confidence.”77/ Secretary McAdoo responded with two messages. First, as a matter of business, the following, addressed to the Bank: “The Comptroller of the Currency at the close of business of November fourteenth having executed the certificate authorizing the Federal Reserve Bank of Atlanta to commence business, I have this morning signed the announcement to be mailed to all member banks of the establishment of your Bank, and this will be your authority to place in the mail copies of the announcement sent you for this purpose. Then, in less formal vein and addressed to Governor McCord: “Please accept my cordial congratulations upon the opening of the Federal Reserve Bank of your District and my sincere commendation upon the effective work you have done in preparing the Bank for business in the short time allowed for the opening. I am sure that the Federal Reserve Bank will serve a great and beneficent  50  purpose in the future of our Country, and I am sure that this Department and the Federal Reserve Board may count upon your loyal cooperation in the important work and duties which have been confided to you.. My hearty good wishes for your success.”78/ Other messages of good cheer were received from John Shelton Williams, C. S. Hamlin, W.P.G. Harding and the Governors of all the other Reserve Banks.79/ In reporting the opening of the new bank the Atlanta Journal said:80/ “The Federal Reserve Bank of Atlanta opened its doors for regular business at 9 o’clock Monday morning in its quarters in the Hurt Building. A telegram from Secretary of the Treasury McAdoo authorized the opening ... “The bank began operations with $4,000,000 in gold, representing the first installment of the reduction of the reserves of the member banks, 318 in all, of the six states in the Sixth District. “The Third National Bank of Atlanta was the first bank of the system to make its reserve. Other reserve deposits were received all during the morning. “No paper was rediscounted Monday morning, although the bank was ready for this work. “At 2 o’clock the directors were guests of the Atlanta Clearing House Association at a luncheon at the Capital City Club, and on Tuesday evening at 6:30 o’clock they will be guests of the Atlanta Credit Men’s Association at the Chamber of Commerce Café… “The Atlanta banks alone released $2,200,000.00 of reserves, which, through the new system, will be used in rediscounting commercial, industrial and agricultural paper. “The capital of $780,000.00 in gold and gold certificates was transferred Monday from the vault of the Third National Bank to the vault of the Federal Reserve  51  Bank in the Hurt Building …... “The official and working force of the bank when it began business was as follows: “Governor, Joseph A. McCord, of Atlanta. “Assistant Cashier, Milton W. Bell, of New Orleans. “Discount Clerk, W. S. Graves, of Rome, Georgia. “Auditor, P. R. Kittle, of Sylvania. “Manager of credit bureau, R. H. Hemphill, of Hattiesburg, Miss. “General bookkeeper, H. E. Dunlap, of Gadsden, Ala. “Bookkeeper, .J. B. Tutwiler, of Atlanta. “Secretary to Chairman N. B. Wellborn, Joseph N. Flattery, of Anniston, Ala. “Stenographer, Mill L. V. Davidson, of Atlanta. “It is expected that other bookkeepers and clerks will be elected as soon as they are needed. “Many telegrams of congratulation were sent to and from the bank Monday morning…” A contemporary article described the Bank’s quarters in glowing style:81/ “The room was originally equipped for the Continental Trust Company, organized by Joel Hurt and associates. Owing, however, to the adaptability of the room to the needs of the Reserve Bank, the officers of Continental Trust patriotically agreed to relinquish their home and seek quarters elsewhere. “The quarters were designed by Thomas Bruce Boyd, bank specialist, of New York, who also designed the new homes of Banker’s Trust Company, Guaranty Trust Company and J. P. Morgan & Company, of that city. “The architecture is based on the Italian style, modified to conform to present day requirements of utility and to harmonize in beauty with the rest of the Hurt  52  Building. The columns, pilasters, counter screen, balustrade and wainscoting of the banking room are of the finest Tavemelle Claire mable, a product imported from Italy and noted for its restful color, beauty and great durability. “The main banking room is 25 feet high, panelled off by well-designed and chastely decorated beams, and then sub-divided into smaller panels with very slight projections ... Three sides of the room are perforated with large decorative windows and in this respect it became one of the best lighted and ventilated banking rooms in the country. “The vaults, which are among the best constructed in the United States, form another desirable feature of the regional bank’s home. They are large and conveniently arranged and were installed by C. W. Freeman, Southern Manager of the Mosler Safe Company. “M. B. Wellborn, Chairman of the Board of Directors of the Atlanta Federal Reserve Bank, gave out an interview while in Atlanta recently in which he stated that the quarters of the Atlanta bank are the handsomest of any of the twelve banks in the system.” Just prior to the official opening of the Bank, on November 16, a matter of vital importance to the conduct of its business was given attention. Chairman Wellborn discussed with Governor McCord the matter of a discount rate, and wired the Federal Reserve Board at Washington, naming a rate of 5%. This was based on the idea that the Atlant~a Bank would receive a deposit from the Secretary of the Treasury of $75,000,000.00 in gold. The Board at Washington named a rate of 6% for paper maturing in 30 days and less, and 6½% for maturities beyond 30 days.82/ This rate did not attract much business to the new Bank. Indeed, in early December 1914 Senator Hoke Smith, a prime mover in securing the Bank for Atlanta, wrote a letter in which he expressed disappointment at the rate and the amount of  53  business done by the Bank. Whereupon, after appropriate Board action Chairman N. B. Wellborn wired the Federal Reserve Board in Washington: “I am requested to send you this message: “Board of Directors after conferring with a number of member banks and after full discussion, has fixed discount rate four and one-half for thirty days and five per cent other maturities. We request that you confirm same and advise by wire. Good banks this district offered money New York at less than five per cent and we have practically no demand for funds at present rates. Practically no thirty day paper offered and in our judgment four and one-half rate would be little used. Imperative in our judgment that we be placed in position to do some business. No danger could befall reasonable action of this kind as district has abundant resources and rate can be raised if necessary to protect reserves. Member banks want to do business here and we think it important that they commence. They need the training badly to prepare them for proper future relations with this bank and their customers.”83/ Business headed upward and the Executive Committee, which held its first meeting on November 17, 1914, soon found itself busy passing upon notes offered for discount.84/ Cotton mill paper was recognized early as an important factor in the Sixth Federal Reserve District. Washington Board member W.P.G. Harding wrote desiring an expression from the Atlanta Bank relative to this class of paper. The matter was discussed by the Board at some length, and while no definite action was taken, it was the concensus of opinion that these papers should be handled on their merits when presented to the Executive Committee.85/ Another matter of import calling for action was the adoption of a schedule of allowances for collecting checks. In that connection the following Board resolution was adopted on December 11.  54  “Resolved that the Directors of the Federal Reserve Bank of Atlanta, believing that the cost to the interior banks of remittances for checks drawn on them, is considerable, recommend that to cover this cost, there be paid to member banks in all towns of five thousand inhabitants and under, the sum of one dollar and twenty five cents per thousand for remittances, and that there be paid to member banks in all towns and cities of more than five thousand and not more than thirty thousand inhabitants, the sum of one dollar per thousand for remittances, and that these charges for collection be paid by the bank or banks forwarding the checks for credit and collection. The Directors likewise recommend that member banks in cities above thirty thousand inhabitants, remit for checks drawn on them at par.”86/ Other matters involving procedure were resolved in late 1914. An “order of business” for Board meetings was set up as follows: Reading of minutes of previous meeting. Report of the Governor. Report of the Executive Committee. Reports of other committees. Unfinished business. New business. Adjournment.87/ At the same meeting, on December 11, it was decided that the Governor would furnish the Directors, at each monthly meeting, a classified statement of the expenses of the Bank. Also that a weekly statement of the condition of the Bank ~e sent each one of the Directors weekly.88/ Coincidentally Colonel E. T. Brown explained to the Directors that while he  55  was in Washington awhile back, the question of attorneyship and directorship was discussed with him by the Federal Reserve Board. It was decided that there might be some conflict in the dual service to the Bank. Therefore Colonel Brown; desiring to relieve the situation, resigned as attorney. The resignation was accepted and, on motion of Dr. Saunders, seconded by Mr. Toole, Mollins N. Randolph was elected Attorney for the Bank.89/ Before the year was out several security measures were adopted by the Bank. A one million dollar burglary policy was taken out with the Fidelity & Deposit Company of Maryland; and A.D.T. alarm system was installed; a night watchman was employed, and the placement of revolvers in teller’s cages was authorized.90/ An invitation to join the Atlanta Clearing House was accepted on November 17, and overtures from the national banks in New Orleans and the Chamber of Commerce of Birmingham for branch banks in those two cities were discussed at some length on December 11.91/ It was more by coincidence than design that the Atlanta Federal Reserve Bank had its inception in an interesting and significant year in the city’s history. The population was approaching 200,000. James G. Woodward, a political landmark in Atlanta for a generation, occupied the Mayor’s office in the City Hall, which then stood on the present site of the Fulton National Bank Building at Marietta and Forsyth Streets. Nathaniel E. Harris of Macon, the last Confederate veteran to hold the job, was elected Governor of Georgia. Asa G. Candler, founder of The Coca-Cola Company, gave an initial gift of one million dollars, which enabled Emory College of Oxford, Georgia, to become Emory University in Atlanta. The Druid Hills Baptist Church, one of Atlanta’s largest, was organized. The present Fulton County Court House on Pryor Street was opened and the Y.M.C.A. Building on Luckie Street was erected. The Ford Motor Company built an assembly  56  plant on Ponce de Leon Avenue; Walker and Nelson Streets, two of Atlanta’s oldest residential avenues were rapidly giving over to business, and Paces Ferry Road was becoming a byword for elegant homes. On the “cloak-and-dagger” front, the Leo Frank case was at midpoint between the murder of Mary Phagan and the lynching of Leo M. Frank. And the Nelms sisters of a prominent West End family disappeared in the direction of the West Coast and were never seen in Atlanta again. Atlanta gained stature as a convention city during the year by playing host to a National Shriner’s Convention, one of the most colorful events in the city’s history.92/ When the Federal Reserve opened in Atlanta, the city was already the financial capital of the Southeast. And while branch banking was years in the future, Atlantans had a choice of seventeen banks, some large, some small, with which to do business.93/ As Sixth District Federal Reserve headquarters the financial status of “The Gate City of the South” was substantially enhanced.  NOTES  57  Chapter 3 1.  John Skelton Williams (1865 - 1926), born in Powhatan County, Virginia. An organizer and president Seaboard Air Line Ry. System, 1899 - 1904; organizer and officer of various banlcs, trust companies and industrial institutions. Became first assistant Secretary of the Treasury, March, 1913; Comptroller of the Currency, 1914.  2.  Ralph Smith, “Fight Launched Last June in Washington”, Atlanta Journal, April 3, 1914, p. 10.  3.  Also President Southern States Life Insurance Co.  4.  President J. K. Orr Shoe Co.  5.  Vice-President American National Bank.  6.  Vice-President Third National Bank.  7.  Vice-President Third National Bank.  8.  Atlanta Journal, Apr. 3, 1914, p. 8.  9.  Dianna Goforth, “How the Fed Came to be in Atlanta”. The 6-F Messenger, March, 1962.  10.  Who died Feb. 14, 1914 before final victory for Atlanta was assured.  11.  Born in Cobb County near Marietta.  12.  Goforth, “How the Fed Came to be in Atlanta.!’  13.  Ibid.  14.  Discontinued in 1939.  15.  Quoted, Goforth, “How the Fed Came to be in Atlanta.”  16.  Quoted, Ibid.  17.  Goforth, “How the Fed Came to be in Atlanta.”  18.  Atlanta Georgian, Jan. 14, 1914. Quoted, Goforth, “How the Fed Came to be in  58  Atlanta.” 19.  Goforth, “How the Fed Dame to be in Atlanta.”  20.  Atlanta Journal, Apr. 3, 1914  21.  Since 1929, a component of the First National Bank of Atlanta.  22.  Merged with Atlanta National Bank, 1916.  23.  Consolidated with Citizens and Southern, 1919.  24.  Merged with Citizens and Southern, 1922.  25.  Goforth, “How the Fed Came to be in Atlanta.”  26.  Atlanta Journal, Apr. 3, 1914.  27.  Ibid.  28.  Ibid.  29.  Ibid.  30.  Ibid.  31.  Ibid.  32.  Ibid.  33.  Ibid.  34.  Ibid.  35.  Ibid.  36.  Ibid.  37.  The Federal Reserve System. Purposes and Functions,  38.  Ibid.  39.  Ibid., 70; The office of Chairman and Federal Reserve Agent was specifically  stated in the  69.  original Federal Reserve Act. The title “Governor” was not  mentioned in the law. The framers of the Federal Reserve Act apparently intended that the Chairmen appointed by the Federal Reserve Board would be the principal executive officer as well as the official representative of the Federal Reserve Board. The directors  59  appointed the Governor who, in practice, became the active head of the Bank. 40.  The Federal Reserve System. Purposes and Functions, 70.  41.  Southern Banker, Sept. 1914, p. 11.  42.  Ibid., 24 — 32.  43.  Ibid.  44.  Ibid.  45.  Ibid., Oct. 1914, pp. 22, 23.  46.  Born in Lewisville, Ark., Jan. 22, 1962, son of Maximilian and Ema Julia Dent Wellborn.  47.  Linton C. Hopkins, Biography of Maximilian Bethune Wellborn, Atlanta, 1960, p. 73.  48.  Ibid.  49.  Ibid., 74.  50.  Owned by the State of Georgia and now operated by the L.&N.R.R.  51.  Composed of Mr. Brown, Rollins N. Randolph, a direct descendent of Thomas Jefferson and now buried in the Jefferson family cemetery at Monticello; Robert S. Parker, subsequently General Counsel and President of the Bank and Hugh M. Scott.  52.  Biographical Records of the Bank.  53.  Present site of Western Union Building, erected in 1919 and originally called Transportation Building.  54.  Charles A. Lyerly (1847 - 1925), member Federal Advisory Council, Federal Reserve Bank of Atlanta, 1914 - 1919, was born at Enterprise, Miss. His early business career was devoted to general merchandising and wholesale dry goods. Later, during the. 188O’s he organized the First National Bank of Jackson (Miss.) and the Chattanooga National Bank. Served as president  60  of the latter for many years both before and after the bank was absorbed by the First National Bank of Chattanooga. Was a director of numerous companies and owner of one of the largest peach orchards in the area. 55.  Then located at 34 East Alabama Street. W. A. Remphill, president; Hugh J. Inman, vice-president; Alonzo Richardson, cashier.  56.  Southern Banker, Nov. 1914, p. 33; Biographical records of the Bank.  57.  Consolidated with the Citizens & Southern in 1919.  58.  Biographical records of the Bank.  59.  Minutes. Board of Directors, No. 1, pp. 2 - 9. Hereafter cited as Minutes. Directors.  60.  Ibid., 3.  61.  Then one of Atlanta’s newest and finest buildings. Erected 1911 and now known as Atlanta Federal Savings and Loan Building.  62.  Now the site of the Jefferson Hotel, ‘southwest corner Alabama and Pryor Streets. The Temple Court, one of Atlanta’s older office buildings, was erected in 1883 and was long a focal point for law offices. During its first decade the building housed the ill-fated Gate City National Bank.  63.  The Atlanta National, originally Century Building, at Whitehall and Alabama streets, was built in 1903.  64.  Minutes. Directors, Oct. 30, 1914.  65.  Filled at same meeting by election of M. W. Bell, of New Orleans, at $2500.00 per annum.  66. 67.  Minutes. Directors, 1, p. 7. Minutes, Directors, 1, pp. 6, 8, 9.  68.  Ibid., 4.  69.  The Third National Bank was then located at 26 Marietta Street, present site of  61  the Atlanta Federal Savings and Loan Association. 70.  Minutes. Directors, 1, pp. 6, 7, 9. The original By-Laws of the Bank follow as a matter of historical record: “ARTICLE I - DIRECTORS. SECTION 1, Quorum - A majority of the Directors shall constitute a quorum for the transaction of business, but less than a quorum may adjourn from time to time until a quorum is in attendance. SECTION 2, Vacancies - As soon as practicable after the occurrence of any vacancy in the membership of the Board, the Chairman of the Board shall take such steps as may be necessary to cause such vacancy to be filled in the manner provided by law.  SECTION 3, Meetings — There shall be a regular meeting of the Board every 2nd Thursday at one o’clock P.M., or if that day be a holiday, on the first preceding business clay. The Chairman of the Board may call a special meeting of any time, and shall do so upon the written request of any three directors or of the Governor. Notice of regular and special meetings my be given by mail or telegraph. If given by mail, such notice shall be mailed at least three days before the date of the meeting. If given by telegraph, such notice shall be dispatched at least one day before the date of the meeting. Notice of any meeting may be dispensed with, if each of the Directors shall in writing waive such notice.  SECTION 4, Powers - The business of this Bank shall be conducted under the supervision and control of its Board of Directors, subject to the supervision vested by law in the Federal Reserve Board. The Board of Directors shall appoint the officers and fix their compensation.  62  The Board may appoint legal counsel for the Bank, define his duties and fix his compensation. SECTION 5, Special Committees - Special business of the Bank may be referred from time to time to special committees, which shall exercise such powers as the Board may delegate to them. SECTION 6, Order of Business - The Board may from time to time make such regulations as to order of business as may seem to it desirable. ARTICLE II. - !~ECUTIVE CCMMITTEE. SECTION I, How Constituted. - There shall be an executive committee of the Governor, the Federal Reserve Agent, and one or more Directors chosen from Classes A, B or C; the member or members of the committee chosen by the Board shall serve during the pleasure of the Board, or for terms fixed by it. Not less than three members of the committee shall constitute a quorum for the transaction of business, and action by the committee shall be upon the vote of a majority of those present at any meeting of the committee. The committee shall have the power to fix the time and place of holding regular or special meetings and the method of giving notice thereof. The Executive Committee shall be four in number and the term of service for Executive Committee members shall be three months with rotation. Minutes of all meetings of the Executive Committee shall be kept by the Secretary, and such minutes or digests thereof shall be submitted to the members of the Board of Directors at its next succeeding meeting. Such minutes shall be read t& the meeting if required by any member of the Board. SECTION 2, Powers. - Subject to the supervision of the Board of Directors, as set forth  63  in Article I, Section 4, the Executive Committee shall have the following powers:  (a)  To pass upon all commercial paper submitted for discount.  (b)  To initiate and conduct open market transactions.  (c)  To recommend to the Board of Directors from time to time changes in the discount rate.  (d)  To buy and sell securities.  (e)  To apply for and provide for the security of such Federal Reserve notes as may, in the judgment of the Committee or of the Board be necessary for the general requirements of the Bank.  (f)  To employ or to delegate to officers of the Bank authority to employ clerks and other subordinates and to define their duties and fix their compensations.  (g)  To approve bonds furnished by the officers and employees of the bank and to provide for their custody.  (h)  In general, to conduct the business of the Bank, subject to the supervision and control of the Board of Directors. ARTICLE III. - OFFICERS.  SECTION I. - The Board of Directors shall appoint a Governor, a Deputy Governor, a Secretary, and a Cashier, and shall have power to appoint such other officers as the Board may from time to time determine to be necessary and appropriate for the conduct of the business of the Bank. The offices of Deputy Governor, Secretary and Cashier, or any two of them, may be held by one person, in the discretion of the Board. The officers chosen by the Board shall hold office during the pleasure of the Board. SECTION 2. — Federal Reserve Agent. The Federal Reserve Agent, as Chairman of  64  the Board, shall preside at meetings thereof. Copies of all reports and statements made to the Federal Reserve Board, shall be filed with the Federal Reserve Agent. SECTION 3. - Deputy Federal Reserve Agent. In the absence or disability of the Federal Reserve Agent, his powers shall be exercised and his duties performed by the Deputy Federal Reserve Agent, who may perform such other services as shall be prescribed by the Board of Directors not inconsistent with his duties as provided by law. SECTION 4. .‘ The Governor. Subject to the supervision of the Board of Directors, the Governor shall have general charge and control of the business and affairs of the Bank, and he shall be the Chairman of the Executive Committee. He shall have power to make any and all transfers of securities or other property of the Bank which may be authorized to be sold or transferred by the Executive Committee or by the Board. The Governor shall have power to prescribe the duties of all subordinate officers and agents of the Bank, where such duties are not specifically prescribed by law or by the Board of Directors or by the By-Laws. The Governor may suspend or remove any employee of the Bank. SECTION 5. - The Deputy Governor. - In case of the absence or disability of the Governor, his powers shall be exercised and his duties discharged by the Deputy Governor, and in case of the absence or disability~ of the Deputy Governor, the Board shall appoint one of the other Directors Governor pro tern. The duties of the Deputy Governor shall otherwise be such as may be prescribed by the Board of Directors or by the Governor. In case the Board shall deem that the business of the Bank requires the appointment of one or more Assistant Deputy Governors, it shall have authority to appoint such Assistant Deputy Governor or Governors and shall prescribe and define his or their duties. SECTION 6. The Secretary.- The Secretary shall keep the minutes of all meetings of the Board and of all committees thereof. He shall have custody of the seal of the Bank,  65  with power to affix same to certificates of stock of the Bank, and by authority of the Board or the Executive Committee to such other instruments as may from time to time be required. The Board of Directors may, in. the absence or disability of the Secretary, or upon other occasion where in the discretion of the Board greater convenience can be attained, appoint a Secretary pro tern or empower one or more officers to affix the seal of the Dank to certificates of stock or other instruments. The Secretary shall perform such other duties as may from time to time be prescribed by the Board of Directors, the Executive Couunittee or the Governor. SECTION 7. The Cashier. - The Cashier and at least one other officer designated by the Board of Directors, ahall have the joint custody of all moneys, investments, and securities of the Bank, subject to such rules as the Board may adopt for their safety. He shall perform such other duties as may be assigned to him from time to time by the Executive Committee, the Board of Directors, or the Governor. ARTICLE IV. - CERTIPICATE OF STOCK. SECTION 1, Signature. - All certificates of stock, or of payment of or on account of stock subscriptions, shall be signed by the Governor or a Deputy Governor and the Secretary or Cashier, or such other officers as may be prescribed by the Board, and such certificates shall bear the corporate seal. ARTICLE V. SECTION 1, Business Hours - The Bank shall open for business from nine o’clock to two o’clock on each day except Sundays or days or parts of days established as legal holidays. ARTICLE VI. - Amendments. These By-Laws may be amended at any regular meeting of the Board by a majority vote  66  of the entire Board: Provided, That a copy of such amendment shall have been delivered to each member at least ten days prior to such meeting.  71.  Minutes. Directors, 1, pp. 10 — 14.  72.  Ibid., 10.  73.  Ibid.  74.  Ibid.  75.  Ibid.  76.  Until lately President, The First National Bank of Birmingham.  77.  Minutes., Directors, 1, p. 11.  78.  Ibid , 11.  79.  Ibid., 11 — 13.  80.  Nov. 16, 1914.  81.  Southern Banker, Nov. 1914, pp. 35 — 36.  82.  Minutes. Directors, 1, p. 16.  83.  Ibid., 17.  84.  Executive Committee Minutes, Nov. 17, 1914, et. seg. Hereafter cited as Ex. Coin. Mm.  85.  Minutes., Directors, 1, p. 17.  86.  Ibid., 19.  87.  Ibid.., 18.  88.  Ibid.  89.  Ibid.., 19. Rollins N. Randolph (1872 - 1938), a law partner of Ccl. Brown, was born in Albemerle County, Virginia, a direct descendent of Thomas Jefferson. Re was admitted to the Georgia bar in 1896 and throughout his career enjoyed an extensive corporate practice. Rendered much civic and public service. Served as President for life of  67  the Stone Mountain Memorial Association and was author of the Congressional act directing five million Stone Mountain ‘memorial coins. Received Distinguished Service certificate from Atlanta Chamber of Commerce for services rendered City of Atlanta. Is buried in Jefferson family cemetery at Monticello.. 90.  Ex. Corn. Mm., Dec. 19, 29, 1914.  91.  Minutes. Directors, 1, pp. 15, 19.  92.  Franklin M. Garrett, Atlanta and Environs, 3 vole., New York, 1954, II, 631 — 655.  93.  According to the Atlanta City Directory for 1915, issued Dec. 15,1914, the seventeen.banks were: American National Bank, W. L. Peel, President. Atlanta Banking & Savings Co., George Winship, President. Atlanta National Bank, Charles E. Currier, President. Atlanta State Saving Bank (Negro), J. 0. Ross, President. Atlanta Trust Co., W. J. Morrison, President. Central Bank & Trust Corp., Asa G. Candler, President. Colonial Trust Co., 3. S. Slicer, President. East Atlanta Bank, E. A. Minor, P;esident. Farmers & Traders Bank, W. D. Manley, President. Fourth National Bank, James W. English, President. Pulton National Bank, W. 3. Blalock, President. Germania Savings Bank, 3. G. St. Aznatid, President. Lowry National Bank, Robert 3. Lowry, President. Merchants & Mechanics Banking & Loan Co., B. M. Grant, President. Security State Bank, 3. S. Slicer, President. Third National Bank, Frank Hawkins,)President. Trust Company of Georgia, Ernest Woodruff, President. West End Bank, 3. S. Sewell, President.  68  SECTION II THE WORLD WAR I PERIOD Chapter 4 1915  The first full year of operations for the Federal Reserve Bank of Atlanta coincided with the first full year of World War I and with all of the business and economic dislocations occasioned by the latter. Chairman N. B. Wellborn pointed out many of these problems and traced the progress of the bank to the end of 1915 in his “First Annual Report to the Federal Reserve Board.” As a contemporary document of historical significance it is herewith quoted in full: “OFFICE OF FEDERAL RESERVE AGENT. “As Chairman of the Board of Directors and Federal Reserve Agent since the opening of the bank, on November 16, 1914, my entire time has been devoted to the duties of my office. I have been assisted in the general routine work of the office by Mr. Joe M. Slattery, Assistant to the Federal Reserve Agent. “In addition to receiving collateral incident to the issuance of Federal Reserve notes, work is occasioned by deposits of gold to reduce liability for outstanding circulation; and on account of the large amount of agricultural paper handled, with cotton receipts attached, there is a daily transaction in substitution of collateral, necessitated by the sales of cotton and withdrawal of cotton receipts pledged. “The total note issue of our bank up to this date, December 31, 1915, amounts to $18,950,000.00, and by comparison with the issue of other Federal Reserve Banks, it is second in amount, and stands first in amount, taking into consideration the proportion of our capital stock to that of other Federal Reserve Banks. This proportionately large issue of our bank is due to the fact that a great deal of currency is 69  required for use in moving the. cotton crop, which currency prior to the establishment of the Federal Reserve Bank was obtained by the member banks from reserve cities. Our bank being within a short distance of each member bank, the difference in the cost of shipping, either by mail or express, constitutes quite a saving in expense and also a great convenience, since the banks are able to get the currency in much less time. “Against the issue of Federal Reserve notes I am holding $4,751,245.69 in collateral, being commercial paper rediscounted by the member banks with the Federal Reserve Bank of Atlanta. In addition to this collateral the Federal Reserve Board holds to the credit of the Federal Reserve Agent at Atlanta $14,200,000.00 in gold transferred from the Gold Settlement fund. “EARLY ORGANIZATION OF THE BANK. “At the organization of the bank, owing to the depression throughout the United States due to the European War, business within the Sixth Federal Reserve District was almost paralyzed; the cotton crop was in process of marketing,1/ and Europe, no longer a purchaser, had previously absorbed more than one-half of this product. The banks and merchants were, of course, unable to make their usual collections, and business was in a chaotic state. The decision of the Federal Reserve Board to have the Federal Reserve Banks open for business on November 16, 1914, greatly restored confidence, so that by the time the Federal Reserve Bank of Atlanta opened, the member banks did not find it necessary to offer us rediscounts to any great extent. In addition thereto, the member banks in our district had obtained AldrichVreeland emergency currency to the extent of $22,000,000.00, and had taken advantage of the lower rates offered by the banks in the large financial centers, as the result of the establishment of the Federal Reserve System. “The physical organization of the Federal Reserve Bank was similar to that 70  of any other pioneer movement, and consisted simply in working out the details as they presented themselves. The $22,000,000.00 of Aldrich-Vreeland currency obtained by the member banks of this district had served to tide over the credit necessities of the district for several months prior to the opening of our bank. The difficulties experienced in the early operation of the Federal Reserve Bank were due largely to lack of a thorough knowledge of the intent and meaning of the Federal Reserve Act and of the class of paper eligible for rediscount. The solution of these problems involved much correspondence with the member banks. Another question involved was the difficulty in obtaining uniform warehouse receipts and insurance sufficiently specific to identify the product pledged. This problem has been practically solved. “At points of concentration where the movement of cotton is too rapid to permit of the deposit of receipts with this bank, custodians have been appointed, under adequate bond, to hold and exchange the securities supporting paper rediscounted with this bank. The prevailing system of loans to cotton merchants on demand paper gave rise to the necessity of rebating on paper withdrawn before maturity, in order to allow the unhampered sale of the commodity previously pledged. “The effect of the work of the Federal Reserve Bank has been to reduce the rates of rediscount; to give the member banks the assurance of a place of rediscount at reasonable rates, and the knowledge that they could obtain currency when needed. It has stabilized the value of the commodities of the district; the quality of loans by member banks is much improved; bankers are requiring better paper -- paper that will be liquidated at maturity -- with a view to eligibility at the Federal Reserve Bank. “Of the member banks in the district 49 are borrowing from their correspondents and have not applied for rediscount with this bank. To those banks I addressed the following letter: ‘In analyzing the credit needs and condition of member banks in  71  this district we notice from your last report of condition to the Comptroller that you are using outside funds. ‘Inasmuch as you have never availed yourselves of the rediscount facilities of the Federal Reserve Bank of Atlanta, we are anxious to ascertain if there be any specific reason for your not allowing this institution to serve you in this capacity. ‘We are desirous of having the thorough cooperation of the member banks, and would be glad to have a frank expression from you along this line.’ “With one exception, nearly all of the banks to whom the above letter was addressed express no dissatisfaction with the Federal Reserve Bank. Some state they prefer to borrow money in New York, as heretofore, believing it involves less trouble, while others say they can obtain a lower rate in New York than they can with us, the one exception stating that the Federal Reserve Bank should, in their opinion, accept paper of any character when offered by a member bank. “INTERNAL ORGANIZATION OF THE BANK “A complete set of by-laws was adopted by our Board of Directors at its first meeting.2/ By referring to the powers and duties of the Executive Committee, it will be noted that the management or administration of the bank is largely left with this committee. The said committee is composed of the Governor, who is chairman of the committee, the Federal Reserve Agent, and one director. The directors serve in monthly rotation, being selected by the Board of directors at its regular monthly meetings. Thus the Governor of the bank and the Federal Reserve Agent are in continuous service on this committee. This plan works admirably, and the whole committee is in thorough touch with the workings of the bank. The Executive Committee meets daily for the consideration of all discounts offered by member banks. When the director serving on the committee lives some distance out of town and is unable to attend the daily meetings of the Executive Committee, he usually selects a director who lives in Atlanta, or very close by, to act in his stead. “The official staff of the bank is composed of the following: Salary Governor Secretary (acts only at Board meetings)  $9,000 25 per month 72  Deputy secretary  Receives a salary of $2,400 per annum as Assistant to the Federal Reserve Agent.  Cashier  3,600  Assistant cashier  2,500  Manager credit bureau  2,400  Auditor  2,400  Discount clerk  1,800  “The discount clerk has a staff of clerks with salaries ranging from $480 to $1,200 per annum. “Including this staff of clerks and officers, the total number of employees is 27. Our bank having to handle so large a number of rediscounts, the force is constantly at work, frequently into the night, during the autumn and winter seasons. “DEPUTY FEDERAL RESERVE AGENT “When it is necessary for the Federal Reserve Agent in Atlanta to be absent from the city a week or more, he so advises the deputy Federal Reserve Agent, in writing, requesting him to serve in the interim as Federal Reserve Agent. For such service he is allowed the same compensation, per diem, as that received by the Federal Reserve Agent. “Other than this, the deputy Federal Reserve Agent in Atlanta has no specific duties, and receives no compensation, except the duties and compensation of a regular director, serving as a member of the Board of Directors and as a member of the Executive Committee. “DEPUTY GOVERNOR  73  “At the time of the organization of this bank a deputy governor was elected to serve without compensation, but in view of the ruling of the Federal Reserve Board as to the ineligibility of member bank officials serving as deputy governor of this bank, our Board of Directors, at their meeting on June 11, 1915, in accepting the resignation of the deputy governor (Cues L. Wilson), voted not to select a deputy governor (an active deputy governor being unnecessary); and further voted that the director serving on the Executive Committee, each month, be designated governor pro ternpore and to act as governor during the absence of the governor of the bank. For such services, as governor, he receives the same compensation allowed the governor. “BOARD OF DIRECTORS “The Board of Directors meet once a month, and during the first year of the board’s existence it was found necessary to remain In session two consecutive days at each meeting; but beginning with the second year a session of one day’s duration has been found sufficient. While the Class A and Class B directors are in closer touch with the viewpoint and affairs of the member banks, the Class C directors are no less attentive to the welfare of the banking interests of the district,’ and, their positions being appointive, probably act with a little more independence than the other directors. “EXECUTIVE COMMITTEE LOANS AND DISCOUNTS “In the early days of the operation of our bank it was feared that some difficulty would be experienced in handling the rediscounts offered by member banks -- a fear relieved by experience. The Executive Committee, in handling the offerings 74  of constantly borrowing banks, are as considerate of them as is consistent with safety and prudence; but notes are frequently returned for various reasons, the most prominent of which are: I.  Ineligibility.  II.  A too distant maturity.  III. Continued renewal. IV.  Poor mercantile ratings, or other unfavorable information.  V.  A too liberal line of credit extended to customer.  “The Federal Reserve Bank of Atlanta has, since its opening, discounted 22,252 pieces of paper amounting to $35,013,287.67.. This large volume of discounts necessarily requires close and steady work, as our Executive Committee examines carefully each day the condition of the borrowing banks, and each piece of paper offered for rediscount; also the volume of the member bank’s transactions with the Federal Reserve Bank of Atlanta, including the average balance maintained, date of the first offering, maximum accommodation extended, date of liquidation, if any, maximum accommodation subsequently extended, amount outstanding, proportion of paper secured by collateral, and pending maturities. “This bank has not deemed it wise, except at its New Orleans Branch, to engage in open market operations to any great extent, as we have had, at all times, a fairly full line of discounts, this being, in our opinion, the primary object of the law - - to first accommodate the member banks in extending to them rediscounting privileges. It is our intention, however, to go into the open market for business whenever our loanable funds are idle, in order to take care of current expenses and make our own rates effective when it becomes necessary. “DIVISION OF WORK -- GOVERNOR AND FEDERAL  75  RESERVE AGENT “The division of work in this bank between the Governor and the Federal Reserve Agent is rather evenly balanced, both giving their entire time to the business of the institution. While it is generally understood that the operation of the bank is under the management of the Governor, still, in practice, this is not exclusively true. The bylaws of the bank provide, under article 2, section 2, paragraph H, that to the Executive Committee is delegated the power ‘in general to conduct the business of the bank, subject to supervision and control of the board of directors.’ As chairman of the board of directors, I am necessarily a regular member of the executive committee and am, therefore, called upon to participate in the joint management of the bank. These duties, in addition to the correspondence with the Federal Reserve Board, and having custody of the Federal Reserve notes and collateral deposited with me to secure the issuance thereof, add largely to the contemplated duties of the Federal Reserve Agent. The duties of the Federal Reserve Agent at Atlanta have been further increased by the establishment of the branch in New Orleans. Relations existing between the Governor and Federal Reserve Agent are most pleasant and agreeable. “POWERS OF TRUSTEE, EXECUTOR, ADMINISTRATOR, AND REGISTRAR OF STOCKS AND BONDS “In recommending that permission be granted to applying member banks to act as trustee, executor, administrator, and registrar of stocks and bonds, we have adopted the plan of presenting such applications to the Board of Directors at its regular monthly meetings. As Chairman of the Board of Directors, I obtain as a preliminary all the information available from the chief bank examiner for the district and other sources and present same t& the Board of Directors with the application. If acted upon favorably, the application is forwarded to your Board, accompanied by such information as we  76  have obtained with the recommendation that it be granted.3/ “CLEARING SYSTEM “Our bank has earnestly endeavored to cooperate with the Federal Reserve Board in putting into effect the voluntary clearing system proposed by your Board, but the result has not been satisfactory. “The system was inaugurated on April 10, 1915, membership was voluntary, and items were received only from those banks which agreed to permit their accounts to be charged with checks on themselves, subject to final payment. The system began operation with 67 members, 15 joining later, and 9 withdrawing, leaving a present membership of 73, of which 21 are located in reserve cities. “The number of items handled daily has averaged 440, of which 207 have been on banks in the district outside of Atlanta, 204 on banks in Atlanta, and 29 on banks in other Federal Reserve districts. The principal objections raised by the member banks are: (1) They cannot anticipate the drawings, hence the difficulty of maintaining their reserves when checks are charged to their accounts; (2) They object to giving up exchange charges, which it has been their custom to make; (3) Owing to the limited number of points covered, none being outside the district other than Federal Reserve cities, the volume of items they send in for credit must, of necessity, be small; (4) Since the Federal Reserve Banks will not accept their checks on nonmember banks, which are in the majority in this district, balances must be maintained with reserve correspondents, in order to have such items collected. “The effect of the system has not been to reduce exchange charges, either by the banks themselves or by the two country clearing houses in the district, Atlanta and Nashville. The charges in this district run from $1.50 to $2.00 per $1,000, the average being $1.63 per $1,000 for the entire district.  77  “The Federal Reserve Bank of Atlanta receives from its members, at par, subject to deferred credit, exchange on points outside of the district. It also makes transfers, by mail, outside of the district without cost, and pays checks on itself coming from other districts, without charge, provided the volume of exchange deposited by any member bank during the current month equals the amount of the transfers made for that bank and incoming checks from other Federal Reserve Banks. The charge on the difference, if any, is based on the cost of shipping currency to the gold fund to cover, provided such shipments have to be made. We have not endeavored to make a profit on our exchange transactions, believing we should give this service to our members without cost, provided we can do so without loss to ourselves. “ATTITUDE OF STATE BANKS “A canvass of the attitude of the State bankers toward the Federal Reserve System develops the fact that while every thoughtful State banker fully realizes that the system to which he has in no way contributed has been indirectly of great benefit to his institution, he is hesitant about joining a system of which his ideas are more or less vague. He is familiar with the limitations of the State laws under which he operates, but unfamiliar with the National bank and Federal Reserve Acts and in many cases exagerates the extent of their requirements. The State banks are accustomed to transact business at fixed rates of interest and are not in sympathy with any movement which may tend to decrease their profits through changes in interest rates, and, further, it will no doubt be difficult to engage the attention of the majority of State bankers so long as the period of easy money continues. “BUSINESS CONDITIONS OF THE SIXTH FEDERAL RESERVE DISTRICT “At the time of the inauguration of the Federal Reserve System the general  78  business conditions of the district were undergoing a most demoralizing depression, and especially was this true in agricultural lines. The South had produced the largest cotton crop in its history and a correspondingly small grain crop, the cotton exchanges were closed, exports cut off, causing a depreciation in value until the market price was below the cost of production and trade in our main staple almost at a standstill. “The establishment of the Federal Reserve Bank and its public announcement that it intended to lend all the assistance within its power to aid the producers was the strongest factor in dispelling the gloom and doubt. In this work the Federal Reserve Bank had the hearty cooperation of the member banks of the district. “The unusual conditions caused a holding back of the 1914 crop and the marketing of it in the late winter and spring of 1914-15, thereby necessitating the most rigid economy, especially among the agricultural element of our population. Such conditions brought most forcefully to the mind of the Southern farmer the imperative need of crop diversification, with the result that the 1915 crops showed an increase of approximately 70,000,000 bushels in corn, wheat and oats, with an increase in the rice crop of approximately 5,000,000 bushels, with more cattle and hogs than any previous season, and for the first time the cotton crop of the South may be classed to some extent as a ‘surplus-money crop.’ The decrease of approximately 5,000,000 bales in the 1915 crop and the establishment of a 3 per cent commodity rate to member banks for money loaned to the farmers at 6 per cent were the strong elements in causing and maintaining the favorable prices of cotton, and the commodity rate has been especially, effective in the holding and marketing of the crop. “The tobacco growers of both Tennessee and Florida were compelled to carry over a greater proportion of their 1914 crop on account of difficulty in delivery and high ocean rates, and to the producers of this commodity the Federal Reserve Bank has rendered valuable aid in assisting them to hold their crop for a more favorable market.  79  “The iron industry has received a strong impetus within the past few months and the movement in this and kindred industries is stronger than for several years past. Activity is general throughout the district, covering a multiplicity of lines, and business conditions appear exceedingly bright. “ESTABLISHMENT OF A BRANCH OF THE FEDERAL RESERVE BANK OF ATLANTA AT NEW ORLEANS, LA. The policy of the board of directors of this bank was not favorable to the establisment of branch banks until we had thoroughly developed the business of the parent bank. In view of the commercial importance of New Orleans and its distance from Atlanta (approximately 500 miles) the board of directors decided to recommend to the Federal Reserve Board the establishment of a branch at New Orleans, to be known as the New Orleans Branch of the Federal Reserve Bank of Atlanta. “The branch bank was opened for business on September 10, 1915. Its territory comprises that part of the Sixth District in the states of Louisiana and Mississippi, and the banks in the Counties of Mobile and Baldwin, Alabama. The expenses of the branch bank at New Orleans for the first year’s operation are guaranteed by the member banks in the City of New Orleans. “A duplicate of the accounting system of the Atlanta bank is used in the New Orleans branch, and the auditor of the Federal Reserve Bank of Atlanta and the examiners for the Federal Reserve Board make periodical examinations of its accounts. Daily reports are made to the Federal Reserve Bank of Atlanta, with copies to the Federal Reserve Board. On Friday of each week the statements of the branch are telegraphed to Atlanta and incorporated in the weekly statement of the Federal Reserve Bank of Atlanta. “As Federal Reserve Agent, I appointed a ‘representative of the Federal Reserve Agent at New Orleans,’ to represent me in transactions involving the issuance  80  of Federal Reserve notes, which action was approved by the Board of Directors of the New Orleans branch and the Federal Reserve Board. “Upon my request to the Board, the Comptroller of the Currency deposits Federal Reserve notes with the Assistant United States Treasurer at New Orleans, subject to the order of the Comptroller of the Currency. Upon notice from my representative at New Orleans that collateral has been deposited, an order for Federal Reserve notes is forwarded to the Federal Reserve Board and transmitted to the Assistant United States Treasurer at New Orleans, who delivers the Federal Reserve notes to the manager of the New Orleans branch. My representative handles only the collateral and records incident to the transactions.4/ “CREDIT NEEDS OF THE DISTRICT “The ability of the Federal Reserve Bank and of the southern banking organizations to move the cotton crop and to properly finance the preparation of cattle for the market has demonstrated that the long anticipated relief from seasonal financial pressure has been realized. The great progress in diversification of crops for the past two seasons clearly indicates the willing response to broadening effort, this response being limited only by the great need of an adequate supply of capital to prepare for and finance the improvements necessary to profitably grow and market crops which have heretofore been grown to a limited extent only. “Iron and steel industries have no lack of funds for current needs, including the movement of their products and to finance reasonable extensions and improvements. The navel-stores industry has suffered severely for the whole season for lack of necessary funds. This is a peculiar industry in that the greater part of operating capital is expended in labor; therefore, while the result can be accurately forecast, this expenditure is not represented by tangible assets which can be made the basis for  81  financial negotiations. The industry is’ sadly in need of some kind of coalition and organization that would tend to stabilize prices and promote confidence in financial circles. The rapidly diminishing area adaptable to the production of these articles and the increasing foreign and domestic normal demand indicate that this industry should be conserved if this country is to receive the returns to which it is entitled from what has been and is still a natural and valuable asset. “The lumber industry is in better financial position, and for the immediate future appears to be in a fair condition so far as the sale of the product is concerned, but has suffered severely for a period running back to the depression of 1907, during which time billions of feet of valuable timber have been manufactured and sold without profit. Any comprehensive plan of conserving the wealth of our national resources should by all means include some feasible plan of finance which would enable manufacturers to keep their timber supply inactive during periods of slack demand and low prices, rather than to follow the present system of exhausting this valuable asset to cover carrying charges. The prominent distinction between such industries and agriculture and mining is that agricultural products are produced seasonally, and new mineral deposits are constantly discovered, adding to the already tremendous known quanity of that known source of wealth, with the fair assurance that yet undiscovered mines will place the probability of exhaustion far remote; while on the other hand the timber area is known, the amount fairly accurately determined, and the end of an important industry forseen.5/ All of which clearly points to the necessity of careful study of the wasting of this resource through press of necessity occasioned by lack of capital and credit. “The immediate and crying need of the district is financial encouragement for new enterprises. Money is plentiful for established demand, but any attempt to promote new activity or even to re-establish lines of effort which have been idle through the past depressions meets with little or no encouragement. Although everywhere are  82  seen the essentials of prosperity, there appears to be a strong undercurrent of uneasiness and disbelief in its solidity or permanency. Under these conditions substantial progress, is, of course, impossible. What stimulus is necessary to a resumption of normal and progressive enterprise is not apparent unless it be the allaying of uncertainty regarding the outcome of the European war and of an unanalyzed yet ever present fear of the remote possibility that our own Nation may become involved therein. “EARNINGS OF NATIONAL BANKS OF SIXTH DISTRICT. “A resume of the earnings of the national banks of this district presents a most interesting subject which the general public has had little opportunity to examine and about which an almost universal mistaken idea exists. That the net earnings of the banks of the district fall short of the returns accruing to other lines employing a similar capital and energy has of course, been well known to those whose life work has been along this line of activity. But in the mind of the general public there exists an impression so greatly of variance with the facts that a wide publicity and a clearer understanding of the comparatively meager profits realized would no doubt do much to create a closer and more sympathetic relation between the banks of the district and their customers. Moreover, in view of the fundamental and sweeping changes in our financial structure contemplated and effected by the Federal Reserve Act, a clearer and more appreciative general understanding of the difficulties attendant upon the operations of the banking business is highly desirable, if not almost essential, to the purpose of securing the full measure of cooperation necessary to effect the broad and salutary reforms for which this system was designed. “The following tabulated analysis of earnings is arranged in groups according to invested capital (i.e., capital, surplus and undivided profits): Invested Capital Net Earnings  83  Less, than $50,000  per cent  6.13  $50,000 to $100,000  “  7.6  $100,000 to $200,000  “  8.5  $200,000 to $300,000  “  7.9  $300,000 to $500,000  “  6.3  $500,000 to$1,000,000  “  6.36  Over $1,000,000  “  7.63  “I might add, in conclusion, that the policy of the bank has been to issue as many Federal Reserve notes as possible - and to put up gold with the Federal Reserve Agent to reduce outstanding liability. In this manner the Federal Reserve Bank has been able to accumulate gold, which the officers of the bank believe is the correct policy to pursue. It is thought highly desirable that ultimately our bank have on hand only gold and gold certificates and put Federal Reserve notes out for circulation into the channels of commerce. Respectfully submitted, M. B. WELLBORN, Chairman of the Board and Federal Reserve Agent. Atlanta, Ga Dec ember 31, 1915.” A number of matters came up during the Banks first full year of business not specifically touched upon by Chairman Wellborn in his formal report. Some illustrate the growing pains of a new organization; others the birth and development of policy. The expense accounts of directors, most of whom lived at a distance from Atlanta became, almost immediately, a bone of some contention with the Federal Reserve Board in Washington. On January 15, 1915 the Atlanta Board adopted the  84  following schedule:  “3¢ per mile for railroad fare $1.00 for each meal, $2.50 hotel room per day, Actual Pullman car fare, $2.00 each day for incidental expenses”6/ This conservative schedule apparently inspired some criticism from Washington, for on April 29 it was amended to include, in addition to regular directors’ fees, actual expenses only, viz: “Railroad fare, Pullman car fare, ‘Hotel bills, Actual expenses only.”7/ The following day the Board, on motion of Director Ketting, passed the following rather caustic motion on the subject: “That the Chairman of the Board reply to the criticism of the Federal Reserve Board regarding the expense of the director; and that in his reply he should include a copy of the resolution passed by the directors at our meeting in January, which provided a schedule of expense in detail, which schedule has been used by the directors since the passage of the. resolution. The Chairman is also requested to furnish the Federal Reserve Board with a schedule of the various directors and their residences It is further desired that the Chairman make it very plain to the Federal Reserve Board that it is the purpose of our directors to have their approval of our charges, and we are anxious that the same be consistent and satisfactory, and if these expense charges are not satisfactory to the Federal Reserve Board, that they  85  advise us and we will make them in accordance with their wishes.8/ A couple of weeks later, on May 14, a final appeal on the subject was made: “To the Honorable Federal Reserve Board, Washington, D. C. Sirs: WHEREAS: The Board of Directors of this Bank desire to conform their expenses to the judgment and pleasure of your honorable body; and, WHEREAS: It is our feeling that you will approve charges that do not exceed the actual outlay of Directors in attending meetings; and WHEREAS: The Directors know by experience that their expenses average one dollar per meal or more, and that their incidentals in various ways are at least two dollars per day, and hotel room two dollars and fifty cents per day; the Directors necessarily by virtue of their positions and the exposure in connection therewith being at more than mere ordinary expense; and, WHEREAS: The Board desires to avoid, if possible, the inconvenience and difficulty of keeping itemized expense accounts; THEREFORE: Be it Resolved, that we respectfully request your honorable body to approve the following schedule of expenses: Actual railroad fare paid. Actual Pullman fare paid. Hotel room when necessary, $2.50 per day. Meals $1.00 each. Incidentals $2.00 per day. RESOLVED: Further, that we respectfully request you to take into consideration the fact that the several Directors occupy more than ordinary positions in their communities, and that by virtue of their relations with member banks, that they are more or less in the continuous service  86  of the System to a substantial degree; thereby having some consequent continuing expense in connection therewith, all of which makes it a matter of moment that the expenses of attending board meetings be at least paid in full.”9/ The logic and reasonableness of this appeal was not lost upon the Board in Washington. It was approved by letter dated June 1.10/ During its first year the Atlanta Federal Reserve was faced with various problems concerning member banks. In February, the First National Bank and Clarksville National Bank of Clarksville, Tennessee and the Peoples National Bank and Springfield National Bank of Springfield, Tennessee, filed a petition with the Federal Reserve Board at Washington seeking to be removed from the Sixth District to the Eighth District at St. Louis. Governor McCord and Director Hartford were authorized to go to Nashville and to meet with officials of the banks concerned in an effort to adjust any differences or objections the Tennessee banks had to remaining in the Sixth District, The diplomatic efforts of the Atlanta officials were successful and the petition to transfer was withdrawn.11/ During the summer of 1915 the Atlanta Federal Reserve Bank experienced the first bank failure in its district when the Third National Bank of Fitzgerald (Ga.) became insolvent, was liquidated and reorganized. The Federal Reserve Bank agreed to discount the paper of the re-organized bank to the extent of $50,000 to $55;000, in addition to the paper already discounted and held by the Reserve Bank. It was understood and agreed that as these capital loans were paid in, the demand for discounts in the Atlanta Reserve Bank should be correspondingly decreased.12/ As Chairman Wellborn pointed out in his first annual report to Washington, State banks continued to be very slow in joining the Federal Reserve System. In a  87  gesture of encouragement to these banks, the Directors of the Atlanta Bank passed the following resolution on September 10, 1915: “WHEREAS: The time now seems to be opportune for a large number of state banks in this District to join the Federal Reserve System; and, “WHEREAS: Many inquiries are being received through the mails, and many of the officers of state banks are from time to time calling at this Bank, and asking various questions regarding the System and their entering the same; “THEREFORE BE IT RESOLVED: That the Chairman of this Board appoint a Director, or Directors, to visit state banks in this District where such visitation may have been requested by said banks, that they might be informed fully in regard to being admitted into the System, and the operations and functions of this Bank; and, “BE IT FURTHER RESOLVED: That the Chairman be authorized to appoint some one to draft a suitable letter to send selected state banks in the District, which would in effect state that this Bank would be glad to send some representative to meet with such Bank’s boards of directors by special invitation and appointment; it being the purpose of this letter to convey all necessary information to the state banks of our willingness to inform them, yet at the same time preserving the dignity of this institution.”13/ But, as the Chairman pointed out, “it remained difficult to engage the attention of the majority of state bankers so long as the period of easy money continues.”  During July 1915 certain banking interests in Atlanta, spearheaded by John K. Ottley14/ and A. P. Coles15/ proposed to organize a district clearing house independent of the Federal Reserve Bank. The directors of the latter rebutted the proposal in the following policy  88  defining language: “...We think it would be unwise for this Bank to lend itself to outside undertakings, and if we embark in the proposition with them, we fear it would not only displease many of the shareholders of this institution, but might also injure the bank otherwise. “We therefore suggest the following reply to (Messrs. Ottley and Coles): “The Directors of the Federal Reserve Bank after carefully considering the proposed plan, have decided that it would be injudicious for this institution to lend itself to same. It is doubtful if the law allows sufficient latitude for such an undertaking on the part of this institution, and we also doubt the wisdom of associating ourselves with it on account of the great division of sentiment existing among the member banks on the question of clearing. Clearing is a function provided for in the Federal Reserve Act, and in our opinion; if the best interests of the System at any time demands clearing, the Federal Reserve Board will take action to that end, and provide all needed facilities of that character within the system itself. “0ur Board appreciates the interest you gentlemen have manifested in this subject, and we are glad to have had the privilege of talking the matter over with you; and we will appreciate your approaches at any time on all subjects looking to the betterment of banking conditions in this District. “We suggest further that the Chairman of this Board send a copy of his communication to Hon. W. P. G. Harding, Member of the Federal Reserve Board, in view of the fact that this subject has been discussed with him, and in view of the further fact that Messrs Ottley and Coles brought the-matter to our attention through the suggestion of Mr. Harding. (Signed)  W. H. Toole J. A. McCrary F. W. Foote.”16/  89  As the 1915 harvest season approached the Secretary of the Treasury had the Treasurer of the United States deposit five million dollars in gold in the Atlanta Reserve Bank to aid in financing the crops. At the same time a commodity rate of three percent was approved. It was based on staple agricultural products, properly warehoused and insured, with an interest rate to borrowers not to exceed six percent, including interest, discount and commissions.17/ The subject of “discounts” formed the inspiration for the following Board action on October 15, 1915: “WHEREAS:- It is the sense of this Board, that in order to have conservative banking within our District, we deem it necessary that each member bank ‘clean-up’ with this Bank occasionally, and to this end it is; RESOLVED: -That it is the desire of this Board that the member banks be requested to pay off their discounts at least once a year. This requirement, however, is not intended to apply to rediscounts known as ‘Commodity Paper, or ‘Trade The resolution was passed with the understanding that the giving of such notice to member banks, to “clean-up,” should be left to the discretion of the Governor and Chairman.18/ On August 13, 1915 the Georgia Legislature passed “An Act to provide for the prompt payment of the public school teachers of the State by authorizing the issuance of the Governor’s warrants and sale of the same; and for other purposes.” Bank Governor Joseph A. McCord reported to his Board on October 14, that the day before he and Colonel E. T. Brown visited Governor Nathaniel E. Harris at the Capitol and discussed the probability of the Reserve Bank purchasing such warrants up to $1,000,000 at the rate of 3% per annum. The Chairman and Deputy Chairman of the Board of Directors acquiesced in the proposal with the understanding that the Federal Reserve Bank of Atlanta. could only invest to the amount of 5% of the amount of  90  deposits of its member banks, the balance to be placed with other Federal Reserve Banks, through the Federal Reserve Bank of Atlanta.19/ Shades of Jesse James! In mid-July 1915 a Louisville & Nashville train was held up between Montgomery and New Orleans on which occasion the Sixth District Federal Reserve Bank suffered a loss of $25,000. An insurance wrangle followed. When the Bank first opened, the mail insurance of currency was sought by nearly all of the agents in Atlanta. Haas & McIntyre, representing the St. Paul Fire &Marine Insurance Company submitted the lowest rates in a general way, though on some points other companies offered a lower rate. On the voluntary suggestion of Leopold Haas, of Haas & McIntyre, the Bank agreed to give that firm the coverage because its general policy was lower and Mr. Haas’ agreement to give the Bank the benefit of lower rates it might have from other sources. The agreement worked satisfactorily until the train robbery. The insurance carrier paid the loss promptly but immediately submitted a new rate schedule, which, in some instances represented an increase to the Bank of over 100%. St. Paul Fire & Marine claimed that it had an annual contract with the bank. The bank protested and brought forth what it regarded as a very insulting letter to Assistant Cashier H. W. Bell from the president of the insurance company. In early November a conference was held in the Bank between Mr. Moore, of the insurance company and Governor McCord and Messrs. Pike and Bell of the Bank. The language used by Mr. Moore on that occasion was derogatory to the character of the Governor and his associates to such an extent that all relations between the Bank and St. Paul Fire & Marine were broken off. The insurance was subsequently placed with Lloyds of London.20/ During February 1915 P. R. Kitties, original Auditor of the Bank, resigned. W. S. Graves was elected to the position. At the same time Ward Albertson was elected  91  Discount Clerk on a temporary basis.21/ Born in 1872, Mr. Albertson was destined to spend the remainder of his life with the Bank. At his death, on May 16, 1933, he held the position of Assistant Federal Reserve Agent.22/ On April 30, a policy relative to salary increases was established by the following motion, which prevailed: “That no salaries be increased of any of the employees of this Bank, by the officers, without first submitting the proposed increase to the directors for their approval; such submissal to be made by the Governor of the Bank.”23/ Even before its first year of business had passed into history the Bank began to feel the pinch of inadequate space. The matter was discussed in March 1915 but during the following month was deferred.24/ However, in July, the Governor reported that additional safes and lock boxes, owned by the Mosler Safe Company and formerly in the Third National Bank, had been purchased.25/ At its meeting on December 9, 1915, the Board of Directors was addressed by Captain Charles A. Lyerly, a member of the Bank’s Advisory extended his congratulations, expressed pleasure relative to the present condition and management of the Bank, and stated, that in his judgment, “it was about all that could be desired or expected.”26/ The statement of the Bank’s operations, including the New Orleans branch, issued by Governor Joseph A. McCord on January 3, 1916, supported Captain Lyerly’s optimism. It revealed that to December 31, 1915, the Bank earned $236,460.37; had expenses of $153,927.98, and produced a net profit of $82,532.39.27/ NOTES Chapter 4. 1.  For an account of .measures taken locally to ease the cotton situation see Garrett,  92  Atlanta and Evirons, II, 638-641. 2.  See footnote 70, Chapter 3.  3.  At its meeting on April 29, 1915, the Board of the Atlanta bank passed the following motion by Mr. Kettig: “That we cooperate with the national banks in this district in removing any restrictions regarding national banks acting as trustee, administrator, registrar, etc.”  4.  The City of New Orleans, it will be recalled, had been a serious contender for the Sixth District bank itself and almost as soon as Atlanta was designated as the Site, began agitating for a branch. At its first 1915 meeting, Jan. 14, the Atlanta Board passed the following resolution: “That for the purpose of facilitating and developing the export and import business of this District, that this Board recommend to the Federal Reserve Board the establishment of a Branch of this Bank in the city of New Orleans, La., at the earliest time practicable, accepting the New Orleans Bankers’ offer of the expense of the Branch for a period of twelve months.” On March 12 a suggested outline for a New Orleans Branch was spread upon the Minutes of the Atlanta Bank. On July 9 Messrs. Sol Wexler and J. H. Fulton, of New Orleans were elected Class “A” Directors and W. J. Davis, of Jackson, Miss., as a Class “B” Director of the branch bank to be opened in New Orleans. On Aug. 16 Marcus Walker was elected Class “B” Director of the New Orleans Branch and was designated Manager, at a salary of $400 per month. The Branch was opened on Sept. 10 and a month later, reporting to the Atlanta Board on Oct. 14, Director F. N. Foote, after a visit to New Orleans, reported: “that the quarters are very much improved and now present a very good appearance; that the officers and force seem to be well organized and to have the business of the Branch Bank well in hand.”  5.  Modern methods of forrestry conservation had yet to be developed.  93  6.  Minutes, Directors, 1, p. 2  7.  Ibid., 34  8.  Ibid., 36  9.  Ibid., 40  10. Ibid., 45 11. Ibid., 25, 28. 12. Ibid., 46 13. Ibid., 56-57. 14. Vice-President Fourth National Bank. 15. Vice-President Central Bank & Trust Corpn. 16. Minutes, Directors, 1, p. 49. 17.  Ibid., 54  18.  Ibid., 61  19.  Ibid., 59  20.  Ibid., 63-64  21.  Ibid., 26  22.  Biographical records of the Bank.  23.  Minutes, Directors, 1, p. 26.  24.  Ibid., 32, 34  25.  Ibid., 49  26.  Ibid., 67  27. First Annual Report, Federal Reserve Bank of Atlanta, 1915.  94  Chapter 5. 1916  President Woodrow Wilson, champion of the Federal Reserve System, stood for re-election in 1916 against Charles Evans Hughes and won by a slim margin. The popular vote stood 9,128,837 to 8,536,380 and the electoral vote 277 to 254. During the year, on the national financial front Congress passed the Anti-Trust Interlocking Directorates Act, a Federal Farm Loan Act and a New Revenue Act which doubled the normal rate of income tax for both individuals and corporations. On September 25 the New York Stock Exchange set a record with sales of shares representing $2,192,300. A-month later the commodity market soared with wheat at $1.68 3/4 against $1.03 1/8 the previous year; corn, $ .82¼ against $ .58 and cotton in New York at $ .17 a pound.1 In Atlanta, on November 2, the Atlanta National Bank, the city’s oldest, became also its largest. This was brought about by a merger of the Atlanta National and the American National Bank, the latter a successor to the old Maddox-Rucker Banking Company. Total deposits of the merged bank, which retained the Atlanta National title, came to $15,000,000. In commenting on the merger Colonel William L. Peel, president of the American National, said: “…The new financial conditions which have developed in the United States during the past few years have demonstrated the importance of handling business on a large scale…”2 The Atlanta Federal Reserve Bank was out for business too in 1916. On March 9 Director McCrary offered a resolution which authorized the Executive. Committee “to designate any official (of the Bank) to Visit different sections of the District, with a view to increasing the business and efficiency of the Bank, at such times  95  as they may deem advisable.”3 As the Bank’s personnel gained experience certain procedures were simplified so as to make for a smoother operation. In January the attention of the Executive Committee was called to the amount of work necessitated by the crediting of rebates on loans. It appeared that from 15 to 20 entries were necessary to put the rebates on the books. After some discussion a resolution was adopted making the minimum rebate on loans up to $200., 50¢ on each transaction, were payment was made before maturity. If the amount of interest to be returned was less than 50~, no rebate shall be given. On loans over $200, the minimum amount of rebate shall be $1.00. If the interest due does not amount to $1.00, no rebate shall be made.4 Another situation which required a clear-cut policy in early 1916 was that of paying earnings to withdrawing banks. The matter was settled by the following motion put by Director Foote on February 10: “That member banks withdrawing from the System be paid the value of their stock, as shown by the books of this bank, less the unearned discount, and less such losses as the Executive Committee may estimate the bank has sustained at such time of withdrawl.”5 During the summer of 1916 a crisis arose in Jacksonville, Florida in connection with the Heard National Bank. Chairman M. B. Wellborn was called to Washington in July to confer with Comptroller Williams, the chief examiner of the Sixth District; W. P. C. Harding, of the Federal Reserve Board; President Heard, of the bank, and several of his directors. The upshot of the matter was that the Heard National Bank was in a very deplorable condition,” with losses on bad loans alone amounting to $700,000 or $800,000. A change in management was recommended. To this end Mr. Heard was  96  retained as President on a temporary basis and J. B. Pike, cashier of the Atlanta Federal, was placed in charge as Vice—President. The conditional resignation of Mr. Pike was accepted by the Board. He went to Jacksonville and Assistant Cashier M. W. Bell was named cashier until January 1, 1917.6 Later in the year the Directors of the Atlanta Federal received a light slap on the wrist from the astute W. P. C. Harding. He called their attention to certain transactions with the Central Bank and Trust Corporation7 involving the purchase of trade acceptances and banker’s acceptances carrying with them certain liens or bills of sale or chattel mortgages on certain cotton oil mills, products, etc., which latter class of paper, Governor Harding stated, did not come within the ruling of the Board. Governor McCord assured Governor Harding that this class of paper would not be bought from the Central Bank in the future.8 The first of the Sixth District’s branch banks, New Orleans, was) by the spring of 1916, after seven months of operation, doing well. Director F W. Foote had reported in October 1915 that “the business of the Bank is well in hand.” Director Saunders, following on inspection in April 1916, made a cheerful prophecy, “The outlook for the New Orleans Branch,” said Dr. Saunders, “is much brighter than at any prior time.”9 A couple of deaths in the official family at New Orleans occurred in the summer of 1916 in the persons of Director W. J. Davis and Cashier Dunn. The latter position was filled in July by the election of Sterling Armstrong. The directorship was left vacant until August, at which time H. B. Lightcap, of Jackson, Mississippi, was elected as a Class “B” Director.10 Earlier in the year Director Sol Wexler, of the New Orleans Branch resigned and had been replaced by J. E. Bouden, Jr.11 A number of matters concerning personnel, some of which set precident, were acted upon in 1916. In January a motion was adopted that salary increases would  97  henceforth be considered only at the January meeting. Governor Joseph A. McCord was re-elected at $9,000 per year and effective October 1, Chairman Wellborn’ s salary was increased from $7,500 to $9,000 by the Federal Reserve Board in Washington.12 Effective July 1 Auditor W. S. Graves was made Assistant Cashier and Manager Transit Department; Ward Albertson was moved up from Discount Clerk to Auditor, and W. Patterson was made Discount Clerk. No salary increases were involved.13 Credit Bureau Manager Robert H. Hemphill resigned in November. J. A. Cranberry was named to the post in January 1917.14 While the United States did not become a fighting participant in World War I until April 1917, trouble was afoot south of the border in Mexico. Reserves were ordered into service in 1916. In August the case of former employee Leon Savell, then in the U. S. Army, came before the Board. After some discussion it was decided to grant Savell a leave of absence on account of military duties and that his salary be continued until January 1, 1917 less the $16 per month he received as a soldier.15 In March Watchman David Davidson registered a request with the Executive Committee that his hours be rearranged so as to allow him to attend church on Sunday. He complained that his present hours precluded either morning or evening attendance. The Committee agreed that if Mr. Davidson would ring in at 10:30 on Sunday mornings he could then have until 2 PM to attend services. Even so, the Committee thought the action unwise as it would, in the Committee’s words, “give six hours time without any watchman in the bank, and if this became known to yeggmen, they would so arrange to work in the six hours.”16 Throughout its second full year of operations the business of the Federal Reserve Bank of Atlanta remained good and earnings satisfactory. On December 30 a dividend of $70,941.30 was declared.17 A commendable Christmas spirit prevailed that month also, when, on the  98  l4th the Board of Directors adopted a motion that “we give each of the employees $10.00 as additional compensation except the Governor, the Chairman, the Attorney, and the Secretary, subject to the approval of the Federal Reserve Board, to be paid on Christmas eve.”18 Nineteen sixteen was especially significant in the history of the Federal Reserve Bank of Atlanta in that a choice site for a permanent home was secured. Almost from the day the Bank opened in the Hurt Building, space became a problem and, while the Bank’s lease was extended in October 1916 for one year after November 1, 1917,19 steps had already been taken to purchase a building lot. In April a committee of two, composed of Directors Hillyer and McCrary was appointed for the purpose of investigating locations.20 Fortunately the Bank’s need coincided in point of time with the availability. of a prime location. The First Presbyterian Church of Atlanta had occupied a site on the northwest side of Marietta Street near Spring and almost opposite Cone Street since 1852. The original frame sanctuary had been replaced in 1878 by a much more imposing Gothic brick structure. It, in turn, was outgrown by 1915, in which year construction of the present house of worship at Peachtree and Sixteenth Streets was begun. The building and lot on Marietta Street were for sale. As of 1916 the property was flanked on the South by the old Austell Mansion, originally built by Reuben Cone and still occupied by the widow of General Alfred Austell. To the North was the realatively tall building, still standing and then occupied by John Silvey & Company, wholesale dry goods.21 Director J. A. McCrary, one of the two committeemen appointed earlier to find a building site, was authorized to negotiate for the purchase of the church property. His correspondence with Judge William T. Newman,22 Chairman of the church committee and with Paul S. Vose, a member of that committee, sums up the  99  negotiations. October 13, 1916 “Mr. Paul S. Vose, City Dear Sir:  I am authorized by the Federal Reserve Bank Board of Directors, to offer  through you $100,000 when you deliver an approved deed to the Church and lot located on the South side of Marietta St., known as the First Presbyterian Church. Yours very truly (Signed) J. A. McCrary, Committeeman” “Mr. J. A. McCrary, Federal Reserve Bank Atlanta, Ga. Dear Sir: I am authorized by the Board of Trustees of the First Presbyterian Church to state to you, in response to your offer above, that we will sell the property named for one hundred and two thousand five hundred dollars ($102,500.00) cash, and will give you 24 hours within which to notify us of your acceptance or rejection of this offer. Very truly yours (Signed) Win. T. Newman, Chairman” Since the Bank was actually willing to go as high as $110,000, Judge Newman got a quick reply. Oct. 14, 1916, 11:25 A.M. “Judge Win. T. Newman, Chairman, Board of Trustees, First Presbyterian Church, Atlanta, Ga. Dear Sir: The written offer of the Board of Trustees of the First Presbyterian Church of Atlanta, Ga., submitted through you, as Chairman of the Board of Trustees, to Messrs. J. A. Mccrary and L. P. Hillyer, directors of the Federal Reserve Bank of Atlanta, being a committee appointed to negotiate with your Board of Trustees; to sell the property on Marietta Street -known as the First Presbyterian Church property - for the sum of one hundred and two thousand and five hundred dollars ($102,500); is  100  hereby accepted, subject to our approval of the title to the property, and we hereby pay you as Chairman of said Board of Trustees, the sum Of one hundred ($100.00) dollars to bind this sale. Respect fully (L. P. Hillyer, by J. A. McCrary, (Director Federal Reserve Bank of Atlanta (Signed)  Committee  (J. A. McCrary  (Director Federal Reserve Bank of Atlanta. Approved: M. B. Wellborn, Chairman -Board of Directors Jos. A. McCord, Governor and Chairman Executive Committee E. T. Brown Member Executive Committee Received One hundred ($100.00) dollars in part payment in acceptance of the within sale. (Signed)  Win. T. Newman, Chairman - Board of Trustees; First Presbyterian Church of Atlanta  Attest: Paul L. Fleming, Secy.”23 The Federal Reserve Bank of Atlanta had a building site.  101  NOTES Chapter 5. 1.  Helen Rex Keller, The Dictionary of Dates, 2 vols., New York, 1934, II, 292-294.  2.  Garrett, Atlanta and Evirons, II, 686.  3.  Minutes, Directors, I, 74.  4.  Minutes, Executive Committee, Jan. 25, 1916.  5.  Minutes, Directors, I, 71.  6.  Ibid., 89-90.  7.  The Candler bank.  8.  Minutes, Directors, I, 97.  9.  Ibid., 78  10.  Ibid., 87, 91.  11.  Ibid, 69.  12.  Ibid., 69, 93.  13.  Ibid., 85.  14.  Ibid., 97, 102.  15.  Ibid., 90.  16.  Minutes, Executive Committee, March 31, 1916.  17.  Ibid., Dec. 30, 1916. The Second Annual Report, covering the year 1916, is missing from the Bank’s files.  18.  Minutes, Directors, I, 100  19.  Ibid., 96.  20.  Ibid, 78.  102  21.  Garrett, Atlanta and Evirons, I, 347, 948; II, 759.  22.  Judge Win. T. Newman, was a colorful and useful Atlanta citizen. He was born in Knoxville, Tennessee, lost his right arm as a Confederate soldier at the Battle of Jonesboro in 1864 and settled in Atlanta in 1866. After a practicing law for 20 years he was appointed by President Cleveland in 1886, United States Judge for the Northern District of Georgia and served the office for 34 years. He died in 1920.  23.  Minutes, Executive Committee, Oct. 14, 1916.  103  CHAPTER 6 1917  Nineteen seventeen was one of those crucial years in history, the events of which profoundly and permanently affected the lives of individuals and the operations of business and government. On April 6 the United States became a fighting participant in World War I by declaration of war against Germany. On the 24th Congress passed the Liberty Bonds Act which authorized issuance of bonds for national defense - $5 billion at 3½%. and an issue of short term notes of $2 billion, of which $3 billion were to be invested in bonds for the Allies. The first loan under this Act was made the following day - $200,000,000 to Great Britain. It was followed during the remainder of the year by substantial loans to Italy, France, Russia, and Serbia.1 In May the Chicago Board of Trade suspended trading in May wheat, that commodity having reached an all-time high of $3.25 per bushel. Other exchanges followed Suit. During the same month Secretary of the Treasury. McAdoo announced the First Liberty Loan of $2 billion in 3½% convertible gold bonds.2 Mid June saw cotton reach 27 cents per pound on the New York Cotton Exchange, highest since 1871. At the same time Congress passed the War Appropriatior Act which carried $3,281,904,541.60 for Army and Navy war expenses. A week later, on June 21, the Federal Reserve Act was amended, establishement of branches authorized and regulations set up for admissions of state banks and trust companies, accounts, etc.3 In late September the Second Liberty Loan Act authorized the Secretary of the Treasury to borrow by certificates of indebtedness from $2 billion to $4 billion, and War Saving Certificates were authorized under this Act, on October 1, the second  104  Liberty Loan was offered, $3 billion at 4% to run for 25 years. Two days later Congress passed a New War Revenue Act which provided for an increased income tax individual incomes, graduated excess on sale December 3, and on the 31st U. S. railroads were placed under government control.4 On the local front the wealthy founder of the Coca-Cola Company, Asa G. Candler, took office as Mayor. On May 21, clear and windy, Atlanta experienced its greatest conflagration since General Sherman left the city on his “march to the sea.” Two thousand homes and buildings were destroyed in the northeast section along Jackson Street and North Boulevard. Fortunately there were no casualties. The Peachtree Arcade was erected and production of the “Hanson Six” Atlanta’s only “native” automobile was begun. Following the declaration of war on April 6, local army, navy and marine recruiting offides were jammed with eager applicants anxious to get into uniforms. Ft. McPherson began to take on new life, and September 5 Camp Gordon out Peachtree Road of Chamblee opened its gates to the first of thousands of citizen soldiers.5 The Federal Reserve Bank of Atlanta began the year on January 11, by reelecting the following slate of executive officers: Joseph A. McCord, Governor M. W. Bell, Cahier W. S. Graves, Assistant Cashier W. H. Toole, Secretary J. M. Slattery, Deputy, Secretary. Hollins N. Randolph continued as General Counsel and M. W. Wellborn as Board Chairman and Federal Reserve Agent. A general schedule of salary increases was put into effect and, subject to approval of the Federal Reserve Board, that of the Governor was increased to $10,000.6 Captain Charles A. Lyerly was unanimously elected as member of the 105  Advisory Council of the Bank for 1917, and the following Directors were named for the New Orleans Branch: J. E. Bouden, Jr., Class “A” Director H.  B. Lightcap,  Frank Roberts , Marcus Walker,  “B” “A” “B”  Mr. Walker was designated as Manager at a salary of $450 per month.7 As the year progressed number of key personnel changes took place and several actions affecting personnel were taken by the Board. Assistant Cashier W. S. Graves resigned in April as did Director Dr. P. H. Saunders. Mr. Graves left to accept a position with the Pioneer Bank at West Palm Beach, Florida. His position was not filled pending the return of James B. Pike, who, it will be remembered, had been “loaned” to assist in the reorganization of the Heard National Bank in Jacksonville, Florida. Dr. Saunders’ resignation as director of the Atlanta Bank was accepted with regret. He continued to serve the New Orleans Branch as a director for another month.8 At the June Board meeting Chairman Wellborn reported the election of Edgar B. Stern to fill Director Saunders unexpired term.9 Mr. Stern, a prominent young New Orleans business man, was born in that city in 1886. He had served as president of the New Orleans Association of Commerce during 1915. At the time of his election to the Atlanta Federal Reserve Board he was Treasurer, Lehman, Stern and Company, Ltd., of New Orleans.10 In Mid-September, at the suggestion of Chairman Wellborn, G. A. Hagan, of Anniston, Alabama, was employed as Assistant Auditor. October brought several changes. Warren H. Toole, an origiual Class “A” Director, who served also as Secretary  106  to the Board, resigned both positions on the 11th. Joseph M. Slattery, since August, Assistant Federal Reserve Agent assumed the additional responsibility of Secretary to the Board. manager of the Transit Department and the employment of an assistant manager for the New Orleans Branch, at $3,600 per annum, was authorized.11 The Board vacancy created by Mr. Toole’s resignation was filled, on December 14, by the election of Peter R. Kitties, of Sylvania, Georgia. Mr. Kitties was born in 1879, attendedScreven County schools, Orangeburg Collegiate Institute and Mercer University. He had a varied business career as auditor, merchant and banker and was President of the National Bank of Sylvania at the time of his election to the Atlanta Federal Reserve Board. He had previously served the Bank as Auditor from Nov. 16, 1914 to February 12, 1915. Mr. Kitties continued to serve as a Class “A” Director until his death on January 18, 1926.12 In addition to personnel changes, the subject of salaries and compensation continued throughout 1917 to be a live topic of Board discussion and action. Certainly Chairman Wellborn must have been gratified by receipt of a letter dated March 12 from W. P. G. Harding informing him that the Federal Reserve Board had increased his salary to $10,000 per annum.13 The increase, however, still left the Chairman shy the $8,000 more he could have been making had he accepted the presidency of the First National Bank of Birmingham rather than the Federal Reserve appointment in 1914.14 In December the salary or retainer of General Counsel H. N. Randolph was increased from $600 to $900 per year.15 Meanwhile the salary situation as it affected employees earning less than $100 per month was receiving attention. At the July meeting it was voted to recommend to the Federal Reserve Board that salaries of all employees receiving less than $100  107  per month be given a 10 percent increase as a bonus and not a permanent increase, to be effective July 1, 1917. A total of 39 employees, earning from $35 to $90 per month were affected.16 It was felt, however,that a better defined salary policy for the Salaries, was appointed, composed of Directors Hillyer, Hartford and Foote.17 The Committee’s report, dated December 14, 1917, forms and interesting commentary on the Bank’s early compensation policy and is herewith quoted in full: December 14, 1817 “Board of Directors of the Federal Reserve Bank of Atlanta: “Your Committee, appointed to investigate and make recommendations relative to the salaries of employees of this bank, (not officers) beg leave to report as follows: “We talked with some of the officers, heads of departments and employees o f the bank, and after this investigation and a full discussion of the matter, your committee find it impossible to make satisfactory detailed recommendations. “We find some instances where some clerks deserve more consideration than other clerks doing the same class of work. We find that some are indifferent, and the opinion is expressed that it is immaterial whether they remain with the bank or not. Some have been with the institution a greater length of time than others and deserve a difference in consideration for loyalty and tenure of employment. “The force is large, numbering 132, and there are many conflicting elements in fixing salaries. “The work is divided in divisions, and in our judgment the conforming of salaries of one division to another should be left to the officers of the bank. One tantalizing question encountered is that of the bonus being paid to certain employees. It appears that the bank is operating under a rule whereby certain  108  employees are paid a 10 percent additional compensation, increase seems to be merited, whereas in other cases no increase in compensation is warrented. The rule is applied without reference to merit or tenure of employment. it has caused considerable agitation and some dissatisfaction in the institution and it seems to us that this bonus system is wholly undesirable and should be abolished as of January 1, 1918. “We think it is thoroughly in line for the bank to pay its employees a bonus, based upon equitable division, when the prosperity of the bank justifies it, but only under such conditions. “Our recommendation, therefore, regarding the paying of a bonus would be that if a bonus is warrented, the officers of the bank make recommendations to the Board of Directors at the December meeting of each year; and that the Board take such action as the earnings of the institution shall justify. The bank should not obligate itself to pay any employee a bonus. “Our recommendations regarding the establishment and adjustment of salaries, is as follows: “We think it too cumbersome and unscientific to refer such matters to the Board of Directors. We further think it would be detrimental to the welfare of the institution for these matters to be handled in such a manner. We think the force should at all times be employed according to merit, and that employees should be impressed with the fact that their compensation will be based on the character of their services, and that the heads of their division and the officers of the bank are the proper judges of services rendered. We feel that any other system would prove prejudicial to that enterprise, initiative and courtesy which is necessary for the well being of the institution and the development of employees. “Your Committee, therefore, begs to recommend that salaries of employees for the present and in the future be left to the Executive Committee for final adjustment.  109  (Signed)  Respectfully submitted” L. P. Hillyer, Chairman F. W. Foote W. H. Hartford.18  At the same meeting, and following the submission of the above report the Board voted to present each employee of the Federal Reserve Bank of Atlanta at Christmas with the sum of $10, as an honorarium. The Bank’s construction project went forward during 1917 and on the site of Atlanta’s first store20 a classic building began to rise. It started with a resolution by Colonel E. T. Brown at the January Board meeting, “that we erect a building on the lotpurchased by the Bank on Marietta Street, Atlanta, at a total cost not to exceed $200,000, upon and with the approval of the Federal Reserve Board.”21 Approval came, almost by return mail, though a ceiling of $175,000 was placed on cost. Reserve Board Governor W. P. G. Harding’s interesting letter on the subject follows:22 FEDERAL RESERVE BANK OF ATLANTA FOOT-NOTE TO MINUTES OF DIRECTORS’ MEETING FEBRUARY 8, 1917; being copy of letter from the FEDERAL RESERVE BOARD, WASHINGTON, dated January 22, 1917 “Mr. M. B. Wellborn, Chairman of the Boards Federal Reserve Bank, Atlanta, Ga. Dear Sir: Your Deputy Chairman, Colonel E. T. Brown, called on the members of the Board a few days ago and presented plans for your proposed building and vault, and stated that the directors of the Federal Reserve Bank of Atlanta would appreciate a prompt ratification of the action taken and proposed to be taken by your Board. 110  The subject was referred to the Board’s committee on operation of the Federal Reserve Bank of Atlanta and at the meeting of the Board this morning the report of the committee was adopted. I accordingly wired you as follows, which I now confirm: Board will interpose no objection to expenditure not exceeding one hundred seventy-five thousand dollars for bank building, vault and equipment, provided five percent of cost of improvements be charged off as amortization annually for ten years. Letter follows. It is proper to state that, while the Board probably would not have favored the purchase of the lot if it has been consulted in advance, it is willing, in view of the fact that the lot has been purchased, to take the position that it will interpose no objection to the expenditure of a certain sum by the Federal Reserve Bank of Atlanta for a bank building and vault substantially along the lines indicated from which we understand the improvements, including the vault, would cost: with glazed terra cotta face  ..$155,000  with Indiana Linestone face.........$l65,000 with marble face.………………..$l80,000 The Board believes that this cost might be reduced without modifying the lines of the building by cutting out florid decorations, while fully maintaining the dignity, proportions and general style of the building, and suggested that it might be well for your architect to inspect the quarters recently fitted up for the Federal Reserve Bank of New York in the Equitable Building, in which space has been economized to a marked degree. The lobby as proposed in your plans is larger than that of the New York Bank and it seems to the Board that it is really larger than need be and valuable space wasted thereby. The sound-proof features of the typewriting rooms in the New York 111  bank are well worth considering, as they seem to add to the comfort and efficiency of those employed therein. Therefore, after a careful consideration of the plans submitted, the committee on operations has recommended to the Board, and the Board has agreed, that no objection be made to the expenditure by the Federal Reserve Bank of Atlanta of not more than $175,000. for building, vault and equipment complete, with the understanding that the Federal Reserve Bank of Atlanta shall amortize at least 5% per annum for a period of ten years of the total cost of the improvements. It will be apparent to the officers and directors of the Federal Reserve Bank of Atlanta that the interest on the cost of the building, taxes and the amortization charge as suggested, will amount to more than the rent hitherto paid. The committee has therefore suggested, and the Board agrees, that every effort should be made before final contracts are let, to secure the applications for member. ship of some of your more important state banks. In the brief presented by Atlanta before the organization committee it was argued that many of the large state banks in Georgia would at once come into the system, but so far not one of them has. The argument has been made more recently that if the Federal Reserve Bank of Atlanta occupied its own dignified bank building, state banks would thereby be attracted and apply for membership. The Board is of the opinion that now is the time, be fore it is made known publicly that the directors and officers of the Federal Reserve Bank of Atlanta have committed themselves to this large expenditure, to put every pressure upon prominent state banks to apply for membership rather than to take chances of their making such application after it becomes definitely known that the building is to be erected.  Yours very truly, (Signed) W.P.G. HARDING, 112  Governor.” On March 8, the Building Committee was authorized to employ an architect, a local man, if possible, to prepare plans for the bank building, vaults and equipment and, that the architect “be instructed to furnish plan of building to cost not to exceed $170,000 on basis of material and labor in normal times, preceeding war.”23 At its July meeting the Board authorized Chairman Wellborn to employ Atlanta Architect A. Ten Eych Brown24 as supervising architect in connection with construction of the bank vault on a basis of 5 percent commission on total cost - 3 percent to be paid on beginning of work and the balance on completion and acceptance.25 It will be remembered that in April and September, 1917, the First and Second Liberty Loan Acts were passe by Congress in order to meet expenditure for national defense. At its May meeting the Directors of the Federal Reserve Bank of Atlanta took note in the form of a resolution: “Resolved that the Executive Committee of the Federal Reserve Bank of Atlanta and the New Orleans Branch . . . in their respective territories be authorized in conformity and in compliance with the regulations of the Secretary of the Treasury, to arrange for deposits of public moneys arising from the sale of bonds, in such banks as are authorized by law; and to receive as security for said deposits the same class of securities as those received by the Treasury Department for the security of deposit of public moneys.”26 A month later the Directors voted that the Bank purchase $25,000 Liberty Loan Bonds for purpose of resale to employees and others, such resales to be subject to the approval of the Executive Committee.27 Further action on the subject was taken in August when a Liberty Loan 113  Committee was set up composed of Mr. Wellborn as Chairman and Directors McCord and Toole as members. This committee was charged with full responsibility for the Liberty Loan bond department.28 During its early years of operation it was necessary for the Bank to take a firm stand on certain matters and thus establish policy. One such matter was that of deficient reserves on the part of certain member banks. After a report on the subject by Governor McCord at the April meeting, Director McCrary moved that “we refund all penalties charged up to March 1st, and that the Governor be authorized to make it plain to the offending banks that these amounts were rebated because it was the first offense, but that it would in no wise be observed in the future.”29 The organization of the Bank was streamlined in December by the organization of a Fiscal Agent Department embracing the Bond Issue Division, the Securities Division, the Conversion Division and the War Savings and Thrift Stamp Division. Assistant Cashier M. W. Bell was named Manager of the new Department.30 The By-Laws were changed in some respects during 1917. A November amendment provided for changing the title of the office of “Governor” to that of “President” and that of “Deputy-Governor” to “Vice President.”31 At the same time Section 3, of Article 3, relative to the duties of the Assistant Federal Reserve Agent, was amended to provide that he should function in the absence of the Federal Reserve Agent and perform such other duties as may be prescribed by the Board of Directors.32 The other 1917 By-Law change was made in December and changed that part of Section .3 pertaining to “Meetings,” to read: “There shall be a regular meeting of the Board every second Friday of each month, at 1 P.M., or if that day be a holiday, on the first preceding full business day.33 As the Board of Directors finished its routine business on December 14, 114  1917, Governor W. P. G. Harding, of the Federal Reserve Board in Washington appeared and joined in a discussion concerning a report by Federal Reserve Board Examiners. “He called especial attention to the necessity of a thorough and competent organization, and stated that while he appreciated the fact that the Federal Reserve Bank of Atlanta, in its early stages, on account of smaller revenues, had practiced very rigid economy, he now felt that this feature could be figured secondarily, and that service to our member banks, and not economy should be the current slogan. “He called the Board’s attention to the new By-Laws governing branch banks,34 and the advantages to be had by their adoption . “Governor Harding also impressed upon the Board the necessity of adopting some remedy to reduce the ‘float’ of the Federal Reserve Bank of Atlanta, and stated that it might be well to extend the deferred credit to three or more days. He also called the attention of the Board to the report of the examiners, wherein it stated that the Credit Department was not in a satisfactory condition . . . Governor Harding said the law was plain, especially in regard to securing proper credit statements from member banks, and that the regulations must be enforced, and that the Federal Reserve Bank of Atlanta should not endeavor to popularize the institution by waiving the rules or regulations in this or other respects.”35 Governor McCord’s narrative report covering 1917 operations of the Bank qualifies as an interesting chapter of its early history. “Atlanta, Ga., January 10th, 1918 To the Board of Directors and Member Banks, Sixth Federal Reserve Bank Dear Sirs:  115  We herewith submit to you the Third Annual Report of the Federal Reserve Bank of Atlanta, covering the operations of the Bank from January 1, 1917 to December 31, .1917 . . “'On June 30, 1917, we paid a dividend for six months due to the shareholders from July 1, 1916 to December 31, 1916. On December 31, 1917, we paid a dividend for twelve months on all stock in this bank up to and inclusive of that date, thus paying to our shareholders or member banks, the dividends due them up to date. The profits arising in the bank during its operation for the year justified the payment of these cumulative dividends. In addition thereto we wrote off the depreciation of furniture and fixtures, paid all the expenses of operations, cost of printing and issuing Federal Reserve notes, and set aside a reserve for depreciation in addition thereto of $24,909.00. After paying these dividends and setting aside these funds, there remained $80,000 of net profits for the year’s operations, and under the law under which we operate one-half of this is set aside to our surplus account, being $40,000, and the other half is paid into the Treasury of the United States as franchise tax to the United States Government. “'We are glad to be able to make this statement, considering the fact that our government has been at war with the Imperial Government of Germany since April of last year. During this time there has been floated two issues of government bonds, and this bank, both at the home office in Atlanta and the branch at New Orleans are highly pleased with the results obtained in this district in the way of subscriptions to said loans; and believe that the prosperous conditions that surround us at the present time and the immediate outlook for the future will justify a larger subscription to the anticipated loan that is near at hand. “During the present year we have been of service to nearly all classes of banks. We have handled the farmer’s loans, loans of the stock raiser, we have taken  116  care of the agricultural interests and the manufacturers’ interests, and then as these .crops float to the center, it has been our pleasure to take care of the commercial interests coming to us from the larger banks in the centers. We have also been of service of currency to handle the needs of the trade for the marketing of the crops and the handling of business conditions. “The reserve position of the bank has been kept sufficiently strong to meet any reasonable emergency, and in addition thereto we have issued sufficient Reserve notes and possibly one of the largest issues of any of the twelve Federal Reserve Banks. These notes are largely secured by gold; in fact three-fourths of the issue is covered by actual gold in the hands of the Government, and the sale of the products from this section of the country brings to us exchange which is converted into gold reserve in the financial centers, relieving us of the outstanding liability on reserve notes, and creates a bulwark of strength in case there should come an immediate demand for credit in this district. “We desire to express to our member banks our appreciation of their cooperation, and extend our best wishes for the coming year. Respectfully submitted, JOS. A. MC CORD, Governor” The Federal Reserve Bank of Atlanta thus entered the second year of American involvement in World War I in a prosperous condition and with bright hopes for the future.  NOTES Chapter 6. 117  1.  Keller, The Dictionary of Dates, II, 294-302.  2.  Ibid.  3. Ibid. 4. Ibid. 5. Garrett, Atlanta and Environs, II, 697-720. 6. Minutes, Directors, I, 101-102. 7. Ibid., 102 8. Minutes. Directors, I, 109, 114; biographical records of the Bank. 9. Minutes. Directors, I, 113. 10. Who’s Who in America, Vol. 31, 1960-61 11. Minutes, Directors, I, 122, 124, 128, 129, 140. 12. Ibid., 140; biographical records of the Bank. 13. Minutes, Directors, I, 109. 14. Hopkins, M. B. Wellborn, 73. 15. Minutes, Directors, I, 140. 16. Ibid., 118. 17. Ibid., 133. 18. Ibid., 138-139. 19. Ibid., 140. 20. The small general store of Johnson & Thrasher, opened in 1839 to serve the railroad builders. 21. Minutes, Directors, I, 103. 22. Copy in Minutes Directors, I, between pages 104 and 105. 23. Minutes, Directors, I, 107. 24. Anthony Ten Eyck Brown, noted Atlanta architect, was born in Albany, N.Y., in 1878. Came to Atlanta in 1905. Designed many notable local buildings including the Fulton County Court House, Peachtree Arcade, the old Criterion Theater, and the new Post Office at Forsyth, Hunter and. Spring Streets. 25. Minutes. Directors, I, 114. 26. Ibid., 112. 27. Ibid., 115. 28. Ibid., 122. 29. Ibid., 109. 30. Ibid., 137. 31. Ibid., 135. Apparently this amendment did not take effect since the titles Governor and Deputy Governor prevailed until 1935. 32. Minutes, Directors, I, 135. 33. Ibid., 138 34. Referring to June 21, 1917 amendment to Federal Reserve Act. 35. Minutes, Directors, I, 140-141.  118  Chapter 7 1918 As World War I reached its crescendo and then its end in 1918, the Country shifted to a spartan economy. With tight restrictions on food and fuel there were “meatless days” and “lightless days.” Sugar was rationed. Auto riding east of the Mississippi River, except for necessity, was discontinued and embargoes were placed upon rail freight shipments.1 In late March the Secretary of the Treasury announced the Third Liberty Loan, $3 billion at 47.. The Fourth Liberty Loan was announced in July, and the Fifth in September. Meanwhile, in April, Congress created the War Finance Corporation, with capital stock of $500,000,000 and power to issue $3 billion in bonds, authorized to lend to banks to cover loans made to assist war industries, and to persons and corporations engaged in business necessary to prosecution of war. W. P. G. Harding, of the Federal Reserve Board, was nominated manager of the newly created corporation.2 During the spring and early summer of 1918 airplane mail service between Washington and New York and between New York, Boston and Montreal, was commenced. The Director-General of the railroads authorized 182 lines to expend $938,000,000 during the rest of the year for repairs, equipment and improvements.3 On November 9 Herbert Hoover was directed by President Wilson to go to Europe and represent the United States in food relief organization. Two days later the Armistice was signed ending the war. Two million American soldiers were then in France. In early December Carter Glass, of Virginia, was appointed Secretary of the Treasury.4 Here at home, in mid-February, the banks comprising the Atlanta Clearing House Association instituted a service charge of 50~ per month for handling checking  120  accounts of persons and firms with average monthly balances of less than $50. The street cars skip-stopped in order to conserve power; horses ceased to be a factor in the fire department and a Georgia State Department of Archives and History was created.5 Building operations went forward with the completion of the Transportation (Western Union) Building, the Cecil (Atlantan) Hotel, and Southern Railway’s Peachtree Station. In May Navy Secretary Josephus Daniels, introduced by Governor Hugh M. Dorsey, delivered a patriotic address, while in the Fall a severe epidemic of Spanish influenza caused many premature deaths, particularly among soldiers at Camp Gordon near the city. The signing of the Armistice on November 11 was greeted with unrestrained joy and the victory parade next day was one of Atlanta’s most colorful.6 General business and banking conditions during 1918, as seen by Bank Governor Joseph A. McCord, were described in his Annual Report for the year in the following language: “Except for the construction of a number of large shipbuilding plants, the year did not record any new industrial enterprises, although there has been a vast enlargement of operations in old industries, especially in the iron, steel and coal fields. The most marked activity has been in the Birmingham manufactoring district and in the shipbuilding plants at New Orleans, Mobile, Jacksonville, Savannah, Brunswick, and practically every seaport town. In plants at these places there appears to be no lessening of activity since the signing of the armistice. War demands enlivened the lumber market, and with the opening of the sea traffic this trade as well as that in naval stores, has been taken on new life. “Owing to the great yields and high prices for nearly all crops the producer finds himself in a strong financial condition. The cotton yields were larger than in 1917, and during the early picking season the prevalence of satisfactory prices enabled the disposal of such an amount of the crop as sufficed to liquidate pressing obligations, the  121  producers, however, depending on their better financial condition and improved food situation to enable them to carry their surplus crop for better prices. The end of the year finds prices lower than in the early season and the cotton holding movement largely in force. Cotton buyers are experiencing some difficulty in purchasing the staple at the prevailing prices, which are deemed to be too close to the cost of production. The banks have shown a general willingness to assist the farmer in carrying his cotton, though the producer has not found it necessary to borrow in great volume. “Generally speaking, almost every line of business was handicapped during the year by a shortage of labor. The wages paid and the rules practiced with reference to compensation and overtime have somewhat demoralized labor for normal conditions. With the increase in progress in army demobilization there will be some relief, but with little or no immigration expected for some years, labor conditions are viewed as extremely uncertain. “Little or no engineering or construction work was carried on after the United States into the war, even minor repairs and additions being largely restricted to essentials. “There has been great diversification of farming operations, and practically all industrial plants show increased capacity and output and are in better position to supply the foreign trade. Shipping has begun to open up and there will be a gradual movement of raw materials, especially cotton, with larger demand and better prices. “Collections were reported unusually good during almost the entire year, with monthly increases in bank clearings, railroad and post-office receipts. “Interest rates for loans prevailing in financial centers in this district have increased somewhat. Rates for several years past have ranged from 5 to 6 per cent, but during the latter half of 1918 were advanced to 6½ and 7 per cent. These rates have advanced notwithstanding the increase in bank deposits...”  122  On January 25, 1918 the following officers of the Federal Reserve Bank of Atlanta were elected for the year: Joseph A. McCord,  Governor  J. B. Pike,  Cashier  M. W. Bell,  Assistant Cashier  W. B. Roper,  Assistant Cashier  W. R. Patterson,  Assistant Cashier  Ward Albertson,  Auditor  G. A. Hagan,  Assistant Auditor.7  At the same time a letter was read to the Board from H. Parker Willis, Secretary, Federal Reserve Board, informing M. B. Wellborn that he was elected a Director of the Atlanta Bank for three years from January 1, 1918 and redesignated Chairman and Federal Reserve Agent for one year from same date.8 Captain Charles A. Lyerly, of Chattanooga was re-elected a member of the Advisory Board to represent the Sixth Federal Reserve District.9 Other changes affecting officers and Board members of the Atlanta Bank took place during the year. In August Director Edgar B. Stern resigned to accept an appointment as a Captin in the Ordnance Department of the United States Army.10 Mr. Stern’s seat was not officially filled until December 13, 1918, at which time the Messrs. John K. Ottley of Atlanta and James E. Zunts, of New Orleans, were elected. At the same time J. A. McCrary, of Decatur, was re-elected a Class B Director.” The Board meeting of December 13, 1918 was also the last attended by L. P. Hillyer as a Class A Director, his term having expired. Director W. H. Kettig rose to the occasion. In an eloquent and fitting speech, and upon behalf of the entire Board, he  123  presented Mr. Hillyer with a beautiful loving cup. among the many compliments paid Mr. Hillyer by the speaker was praise for constant attendance. Since his election as an original director at the time the Bank was organized he had never missed a Board meeting. Both Governor McCord and Chairman Wellborn paid feeling tribute to their retiring associate.12 The two new Directors, J. K. Ottley and J. E. Zunts, were noted in the fields of banking, business and the law. Mr. Ottley, vice-president, but soon to be elected president (1919) of Atlanta’s Fourth National Bank, was born at Columbus, Mississippi in 1868. Following youthful banking experience in St. Louis and Greenwood, Mississippi, he came to Atlanta in 1890 as assistant cashier of the American Trust & Banking Company, a Fourth National predecessor. By 1896 he had become cashier of the Fourth and ten years later one of its two vice-presidents. Mr. Zunts was also a native Mississippian, having been born at Canton in 1860. He was a Yale and Tulane Law School graduate; had practiced his profession in both New Orleans and Birmingham and was an officer and director of several insurance and industrial companies.13 At the September Board meeting the chairman read a letter from Paul M. Warbury of New York, who recently resigned as a member of the Federal Reserve Board. Long a key figure in the movement leading to the establishment of the Federal Reserve System, Mr. Warbury had written to express to members of the local Board his feeling of appreciation for their friendship and loyal spirit during his tenure.14 In November J. B. Pike was elected Deputy Governor of the Atlanta Bank at a salary of $7500. There was some opposition to his election by Board members, some of whom thought the postion should go to a Group-2 or Group-3 banker. Indeed a tie vote was had. Chairman Wellborn broke the tie in favor of Mr. Pike.15 December produced a number of official changes. In addition to the election  124  of Messrs. Ottley and Zunts to the Board, previously noted, Milton W. Bell was promoted from Assistant Cashier to Cashier. Warren H. Toole, a former Director, was designated as Manager, Fiscal Agent Department. Then, only two months after his election as Deputy Governor, J. B. Pike resigned, effective December 31, to accept a position with the National City Bank of New York.16 The general situation as to personnel was somewhat chaotic during 1918. The war called 23 employees to the colors. With numerous Army camps in the 6th district and a large volume of Government work under way, many employees were lured away by higher pay, thus handicapping the Bank’s operations .seriously. After the Armistice was signed on November 11, however, a number of old clerks returned to their positions and clerical service began to improve rapidly.17 The war year of 1918 saw much activity insofar as branch banks were concerned. Two were put into operation, one was authorized, others were considered, and the already established New Orleans branch had a busy year. In January the following were elected Directors of the New Orleans Branch: Frank Roberts,  Lake Charles, La.  J. E. Bouden, Jr.,  New Orleans, La.  H. B. Lightcap,  Jackson, Miss.  John J. Gannon,  New Orleans, La.  Marcus Walker was re-elected Manager for the year. At the same time the Federal Reserve Board authorized the employment of an Assistant Manager for New Orleans at $3600 per year. After some discussion among Board members and by a vote of three to two, Joseph L. Campbell, Cashier of the Tennessee Hermitage National Bank of Nashville, was elected to the position. In May William H. Black was appointed cashier at New Orleans, while in September the salary of Manager Walker was upped to $7500. In November Assistant Manager J. L. Campbell resigned and was made  125  Assistant Cashier in Atlanta in charge of the Discount and Credit Departments. William H. Black succeeded to the New Orleans Assistant Managership and was succeeded as Cashier by Lewis Buckner.18 Serious discussions relative to the advantages of establishing branch banks at Birmingham, Nashville and Jacksonville got under way at the March 1918 Board meeting. Delegations of bankers from both Birmingham and Nashville appeared with Oscar Wells as the spokesman for Birmingham and T. D. Webb for Nashville. Jacksonville’s application was in the form of a telegram signed by seven of that city’s banks. At the April meeting a strong delegation from Jacksonville appeared by invitation and, through Spokesman Cues Wilson, made a strong case for their city.19 Action taken during 1918 relative to branch banks is set forth in the Annual Report for that year in the following language:20 “In addition to the branch already in operation at New Orleans, a branch of the Federal Reserve Bank of Atlanta was established at Birmingham, Ala., on August 1, 1918. Mr. A. E. Walker, formerly State bank superintendent of Alabama, was elected manager, and Mr. J. B. Cobbs was appointed assistant Federal Reserve agent. The entire clerical force consists of 15 employees, including the officers. The following members compose the board of directors of the branch: Messrs. W. H. Kettig, chairman; Oscar Wells, T. 0. smith; W. W. Crawford and John H. Frye, all of Birmingham. “As of the same date a branch was established at Jacksonville, Florida. Mr. Ceo. R. DeSaussure, prominent for many years in banking circles in that city, was elected manager, and Ceo. R. Martin was appointed assistant Federal Reserve Agent. The entire clerical force consists of 16 employees, including officers. The branch board of directors is composed of Messrs. John C. Cooper, chairman; Edward W. Lane, B. H. Barnett, Giles L. Wilson, Fulton Saussy, all of Jacksonville. “These branches are operated under the limited form of by-laws in force at  126  Pittsburgh and Cincinnati, providing for a daily settlement plan for the parent bank. All accounts with member banks in the zone covered by the branches are kept by the parent bank, the branches reporting to it by private wire daily both their immediate and deferred entries and the parent bank carrying the ‘float.’ The plan in operation has proven generally satisfactory to both the member banks in the branch zone and to the parent bank.” Quarters for the Birmingham branch were leased in the Jefferson County Bank Building21 at $4800 per annum. The Jacksonville branch found sanctuary in leased space in the Atlantic National Bank Building.22 Early branch office operations are epitomized in the following recollections of Henry Fraser, a pioneer employee of the Birmingham branch: Functions of the Branch “...At the time the writer was first employed, the Branch’s services were limited to the handling of currency and coin, clearings, check collections and noncash collections. There were no provisions for safekeeping or special custody of securities for member banks, nor was a stock of unissued U. S. Government securities maintained. “Member bank reserve accounts and all accounting functions were kept at the Head Office, with entries being wired in during the day. A transcript of the day’s work was mailed to the Head Office each night. Vaults and Equipment “Since the currency vault was small, frequently unassorted one dollar bills were simply stacked on the floor, just inside the door of that vault. “There was no coin vault per Be. The safe deposit box vault was used for this purpose and coin was stacked on the floor around the inside perimeter of the vault. If the begs were not stacked properly, or if they were stacked too high, they would sometime topple over, thus commingling bags of various denominations. “Shipments of unfit currency to the Treasury were cancelled one strap at a  127  time. The cancelling was done by placing the one strap of currency in a rectangular pan with a- long handle that had part of the bottom removed to allow the punching and cutting blades to go through the strap and pan. The power switch to the machine would be turned on, then the pan would be inserted and a trip lever would be pressed which caused the punches and blade to descend at the same time. On the ascent the pan would be withdrawn and the operation repeated with another strap. This meant that on a shipment of say $196,000 in ones the pan had to be inserted in the machine 1960 times. “As there was no armored car service at that time, incoming and outgoing currency and coin shipments were transported the distance of seven blocks to the Post Office in a two-door Ford sedan owned by the assistant teller; he was paid a monthly rental for the use of his car. Security Measures “Security measures for the protection of money and securities as we know them today were almost non-existent. Only two persons served as guards, and one of them was the night guard. “During the day when currency shipments were received from or dispatched at the post office, the day guard always accompanied the assistant teller on those trips. During these periods and the time when the day guard was at lunch, there was no guard on the premises. The door opening into the aisle behind the cages was always unlocked and so was the cage door at the entrance to , the money department. “Except for upper and lower combinations on the vault doors, dual controls on currency and coin were not in effect then. When an order for currency was received, the teller typed the shipping advice, withdrew the money from the vault, and placed it in a large cage shared by the assistant teller and two assorters. The assistant teller alone packaged the money for shipment. Also he opened the incoming shipments with no one else present, and had sole custody of the coin vault, where he verified incoming coin 128  shipments when not engaged in other duties. The feasibility of an agency of the Federal Reserve Bank of Savannah was brought forcefully to the Board’s attention at its November meeting by Mills B. Lane,23 representing the Savannah Clearing House Association. He emphasized the sizeable export business at Georgia’s leading seaport and the large and sudden demands for money at certain seasons of the year. Mr. Lane stated that they would be satisfied with moderate quarters and that local banks would furnish vault space for the two or three million dollars of Federal Reserve notes he suggested be kept in Savannah. The Board resolved that an Agency be established at Savannah, provided that satisfactory facilities be obtained and that operating expenses not exceed $5000 per year. 24 The Agency was not actually established until 1919. War engendered matters received their full share of attention on the part of the Atlanta Bank during 1918. Indeed, in mid-1917 at a dinner of the Presidents’ Club at the Piedmont Hotel, plans were laid to make Atlanta a $10,000,000 stockholder of the government through Liberty Bond subscriptions. The job of selling bonds throughout the six-state Atlanta Federal Reserve District was placed under the direction of Board Chairman Wellborn and a Liberty Loan central committee consisting of William C. Wardlaw, Chairman; Mell R. Wilkinson, J. Epps Brown, Frederick J. Paxon, Ivan Allen, St. Elmo Massengale and W. H. Toole, of Winder, Georgia.25 Apparently the Messrs. Wardlaw and Massengale devoted most of their time to the effort, for on June 14, 1918 the Atlanta Reserve Board adopted the following resolution: “WHEREAS, the flotation of the first, second and third Liberty loans, it has been necessary to appeal to certain citizens in the Sixth Federal Reserve District to devote their time and talents to this great patriotic work, and WHEREAS, Mr. W. C. Wardlaw and Mr. St. Elmo Massengale accepted the  129  appointment conferred upon them by Mr. M. B. Wellborn, Chairman of the Liberty Loan Coimnittee for the Sixth Federal Reserve District, and have devoted almost their entire time to this work; BE IT RESOLVED, that the Board of Directors of the Federal Reserve Bank of Atlanta express their hearty approval and sincere appreciation of their unselfish and patriotic service rendered this institution in conducting The Liberty Loan campaigns, BE IT FURTHER RESOLVED, that a copy of these resolutions be forwarded to those gentlemen, who have so earnestly and faithfully served us.”26 Governor McCord, in reporting on the Bank’s activities in connection with Liberty Loans, War-Savings Certificates and the War Finance Corporation during 1918, wrote: “The flotation of the Liberty loans met with large success in this district. Many of the best and most conservative bankers felt fearful of the result of the second loan, but when the time arrived to offer it a largely increased number of subscribers was found. The third Liberty loan was taken by a number of purchasers, probably 200 per cent larger than the second loan, and the fourth loan showed a corresponding increase... “The sale of war-savings and thrift stamps has been the occasion of a campaign of education. In the future stamps will probably be purchased as a mode of general saving. A total of $13,390,829.69 in stamps were sold in the sixth district during 1918... “Necessary machinery was provided for the handling of business incident to the War Finance Corporation, and a considerable amount of correspondence and literature found its way from the Federal Reserve Bank to the banks of the district. The need for such loans was not, however, as great in the sixth district as anticipated, and only one loan was made to a bank during the year. This was promptly liquidated at  130  maturity.”27 Chairman M. B. Wellborn felt very strongly on the Liberty Bond question. Indeed, The Atlanta Journal quoted him as telling the Atlanta Rotary Club that “the citizen who fails to purchase bonds, according to his means, is as much a slacker as the young man who shirks his military duty.”28 Another matter about which Chairman Wellborn had strong feelings at this time was the failure of state banks to come into Reserve System in substantial numbers. Starting with only one state bank as a member in 1914, the Atlanta district listed two in 1915, four in 1916, 18 in 1917, 54 in 1918 and 64 in 1919. This apathy disturbed the Chairman, who believed that the state banks would virtually defeat the purpose of the Federal Reserve, destroying its power to act as a cushion in times of panic, unless they joined in great numbers. His speeches and statements during the 1917 - 1920 period are especially significant when viewed in the light of subsequent events like the depression of 1920 --21, which he foresaw and the failure of a Georgia chain of state banks in 1926 which he did not foresee.29 In June 1918 Chairman Wellborn discussed at length a proposed drive for state bank membership. He told his fellow Board members that the drive would commence about July 1. While results were modest, gain over previous years was significant.30 In summing up the state bank situation at the end of the year Governor McCord wrote: “The 54 state banks now members of the Federal Reserve System in this district have had an opportunity to test the practical value of membership and are distinctly satisfied with the result. “In proportion to their number they have as liberally availed themselves &f the privileges of membership as have the national banks. This is evidenced by the  131  volume of discounts offered by them... “By materially reducing their reserves they have increased their loaning power and are able better and more satisfactorily to serve the business interests of their respective communities. This means more business and more earning power for them and their stockholders and they have not been slow to avail themselves of the full advantage of doing more business and doing it with perfect safety.”31 On September 26, 1918 Congress amended the Federal Reserve Act by giving the Board discretion in grouping of member banks; changed the manner of the election of directors, and authorized issue of Federal reserve notes in denominations of $500, $1000, $5,000 and $10,000, the largest heretofore having been $100.32 As to the Atlanta Bank’s activity during 1918 in connection with Federal Reserve notes and Federal Reserve bank notes, Governor McCord reported: “The issue of Federal Reserve notes has been an important feature of the year~5 operations, due in large measure to the increased pay rolls and high cost of commodities. The statement of December 31, 1918 shows $196,240,000 ‘Federal Reserve notes received from the Comptroller of the Currency,~ with ‘Federal Reserve notes outstanding’ in amount, $123,620,285, as compared with $66,867,420 ‘Federal Reserve notes outstanding,’ on December 31, 1917, or an increase of $56,752,865. “The power of issuing bond-secured currency is conferred upon the Federal Reserve Banks by the act as originally drawn, but it was not found necessary or desirable to resort to any large exercise of this power until this year. Accordingly, Federal Reserve bank notes were, not issued by the majority of the Federal Reserve Banks until June. On the 10th day of that month the first bank notes of the Atlanta bank were issued.”33 Throughout the first nine months of 1918 work went forward on the bank’s new home on Marietta Street. In March the Board approved installation of a Lamson  132  Pneumatic Tube System at a cost not to exceed $6500.34 That autumn, as the leaves began to turn and the Senate rejected the Woman Suffrage Amendment to the Federal Constitution, the Federal Reserve Bank of Atlanta forsook the second floor of the Hurt Building in favor of 104 Marietta Street and the new edifice a building for more than a year under the supervision of Architect A. Ten Eyck Brown. In citing the event Governor McCord wrote: “On October 1 the Federal Reserve Bank of Atlanta moved into its permanent home on Marietta Street. The building is a two-story structure, with commodious basement, being of reinforced concrete, with granite exterior, fireproof, and of thoroughly modern construction. While the new quarters are adequate for the bank proper at present, additional space will have to be provided in the near future, as the business of the institution is rapidly increasing and it is now necessary to operate the fiscal agent department in a nearby building.35 Plans for the new building were drawn and excavation began in the late spring of 1917, and the growth of the institution has been more rapid than was anticipated. The building cost approximately $150,000 and the vaults $33,000.36 A few details remained. On November 8 the Secretary of the Board called the members attention to the fact that there was need of the employment of a maid to be in charge of the ladies room. He also stated that a number of the employees brought their lunch and offered the suggestion that the Bank purchase a large percolator and furnish coffee, sugar and milk in order that the employees might have hot coffee with their lunch. This idea struck the Board members favorably and they voted to instruct the Secretary “to proceed to make such arrangements and purchase such equipment as would be necessary to equip such a lunch room and rest room for the employees. The  133  maid referred to, to have charge of the lunch room as well as the ladies’ room.”37 At the same meeting Chairman Wellborn called the Board’s attention to the need of enlarging the garage and building a porte-cochere over the right side entrance to the Bank. Action on this matter was postponed to the following year.38 Rapid growth of a relatively new banking operation in a wartime economy naturally resulted in some loose routine and less than perfect situations as epitomized in the following paragraph from the Board Meeting Minutes of Dec. 13, 1918: “Upon invitation of the Chairman, Mr. John A. Will, Chief of the Federal Reserve Bank examiners, now conducting an examination of this institution, appeared before the Board. Mr. Will stated that he was very much disappointed at the conditions prevailing in certain departments of the Bank, especially the Discount and Credit Departments, and certain matters in the Fiscal Agent’s Department. He stated he wished to assure the Board that his remarks were in the way of ‘constructive criticism’ for the good of the bank and the service. He stated further that the bank had never had a thorough systematic organization. Mr. McCord was present at the meeting and stated that the bank had experienced a great many difficulties through the loss of men going to war, and again on account of the influenza epidemic, and a continual change of employees. The Board thanked Mr. Will for his report and assured him that the matters referred to would be promptly corrected. He was requested to confer with the secretary; they to work out a more systematic plan of organization for operation of the Bank.39 Systematic operation or not, 1918 earnings of the Federal Reserve Bank were fine. For the six-month period ending June 30 they stood at 34 7/10 per cent, or $511,250.40 Net earnings for the Atlanta Bank and Branches for the full year came to $1,652,787.98 as compared with $315,104.00 for 1917.41 A full six per cent dividend was declared upon the capital stock of the Federal Reserve Bank of Atlanta as of December 31, 1918, while a year-end bonus of 134  10 per cent was voted to each employee.42 All in all. It was a good year. Governor McCord, in summing up, said: “The year 1918 has been the most momentous in the financial history of this district. Sudden demands occasioned by war conditions brought about rapid changes in financial and commercial activities. The financing of Government requirements and the war-savings campaigns brought the Federal Reserve Bank of Atlanta to the front in such a way that even that portion of the general public not actively engaged in business now fully realizes the worth of the Federal Reserve System.43  NOTE S  135  Chapter 7 1.  Keller, Dictionary of Dates, 303 - 310.  2.  Ibid.  3.  Ibid.  4.  Ibid.  5.  Garrett, Atlanta and Environs, II, 727 - 749.  6.  Ibid.  7.  Minutes, Directors, I, 142.  8.  Ibid.  9.  Ibid.  10. 11. 12.  Ibid., 188. Ibid., 189. Biographical Records of the Bank; Atlanta City Directories, 1890 - 1919.  13. 14.  Minutes, Directors, I, 173. Ibid., 183 - 184.  15.  Ibid., 185; The 6-F Journal, Dec. 1921, p. 6.  16. 17.  Annual Report, 1918, p. 19. Minutes, Directors, I, 142, 143, 156, 175, 179, 183.  18. 19.  Ibid., .148, .153. Page18.  20. 21.  Now known as the Corner Building. Minutes, Directors, I, 166, 168.  22.  Father of Mills B. Lane, Jr., present (1964) President of the Citizens & Southern  23.  National Bank. Minutes, Directors, I, 181.  24.  Garrett, Atlanta and Environs, II, 716 - 717. As of 1918, Mr. Wardlaw was secretary-treasurer Robinson-Humphrey-Wardlaw Co.; Mr. Wilkinson, president, Ashcraft-Wilkinson Co.; Mr. Brown, first vice-president, Sou. Bell Tel. & Tel. Co.; 136  Mr. Paxon, secretarytreas. Davison-Paxon-Stokes Co.; Mr. Allen, sec. & treas. Fielder & Allen Co.; and Mr. Massengale, president, Massengale Advertising Agency. 25.  Minutes. Directors, I, 159 — 160.  26.  Annual Report, 1918, pp. 14 - 15.  27.  Hopkins, M. B. Wellborn, 79.  28.  Ibid.  29.  Minutes, Directors, I, 160.  30.  Annual Report, 1918, p. 12.  31. 32.  Keller, Dictionary of Dates, II, 310. Annual Report, 1918, p. 16.  33.  Minutes, Directors, I, 149.  34.  Third floor, Rhodes Bldg., 78 Marietta St.  35.  Annual Report, 1918, pp. 20 — 21.  36.  Minutes. Directors, I, 183.  37.  Ibid.  38. 39.  Ibid., 185. Ibid., 166.  40.  Annual Report, 1918 ,p. 25.  41. 42.  Minutes. Directors, I, 187, 188. Annual Report, 1918, p. 5.  137  Chapter 8 1919 The war to end all wars and make the world safe for democracy had ended. President Woodrow Wilson began his losing fight for a League of Nations and suffered the stroke from which he never fully recovered. In early January Herbert Hoover was appointed head of an international relief organization to minister to liberated and enemy countries. Three days later former president Theodore Roosevelt died at home in Oyster Bay, N. Y. The Grand Canyon National Park in Arizona was created in February and in mid-March the American Legion was informally organized in Paris, France. During April the Fifth (victory) Loan was announced by the Secretary of the Treasury and Frank W. Woolworth, originator of the five and ten cent store died. July 1 saw the public debt at an all time high of $25,482,034,418. On the glorious fourth Jack Dempsey won the heavyweight boxing crown from Jess Willard at Toledo, and on the last day of the month the telephone and telegraph systems were returned to private ownership. On the same day a committee was appointed by the Cabinet to investigate the high cost of living, which incidentally, had advanced more than 80% since 1914. It was to rise another 5.87. between July and December 1919. The year saw the death of two builders of the country’s steel industry-Andrew Carnegie in August and Henry Clay Frick in December. High society was enlivened in November by a visit to this country of the then young and very eligible Prince of Wales.1 During the last four months of 1919 the Federal Reserve Act was amended three times. On September 17 to allow banks to invest in stock of corporations engaged in financing exports; on October 2 to provide that national banks might lend to the extent of 25% of their capital and surplus instead of 107. on shipping documents, warehouse  138  receipts, etc., based on cotton and livestock under certain specified conditions; and, on December 24, to allow organization of corporations to extend credit in Europe to stimulate export trade.2 On the local front James L. Key began his first term as mayor of Atlanta. A consumate politician, he was destined to serve several intermittent terms ably, including most of the depression years of the 30’s. The Victory Loan exceeded its Local quota of $11,000,000 by $350,000 under the leadership of Forrest Adair and the untiring efforts of the Atlanta Chamber of Commerce.3 While national suffrage for women did not come to pass until 1920, Atlanta women received the franchise locally in 1919. On April 6 the new sanctuary of the First Presbyterian Church of Peachtree and Sixteenth streets was dedicated. Its historic and longtime Marietta Street, location had become the site of the Federal Reserve Bank of Atlanta. In the early fall one of the largest commercial transactions in Atlanta’s history and one of the largest in the entire South, before or since, was consummated when the Coca-Cola Company was purchased from the Candler interests on September 12. The sale, representing a consideration of $25,000,000 was spearheaded by the Trust Company of Georgia. The Company was reorganized under a Delaware charter and its stock was made available to the general public at an initial price of $40 per share.4 That the Federal Reserve Bank of Atlanta had a lively post-war year during 1919 is indicated by the opening paragraphs of the Chairman’s Fifth Annual Report: “In many respects the year 1919 has been more remarkable than any preceding year. The operations of the Federal Reserve Bank of Atlanta during the period of readjustment since the Armistice and for the year 1919 have been more active than during the war period of 1918. The expansion in all lines has made heavy demands on the banking interests, which, in part, have been met by the increased deposits of banks,  139  while it has been left for the Federal Reserve Bank of Atlanta to make up the deficiency, resulting in increased loans to and rediscounts for member banks over the amounts held during the latter months of 1918 and the early months of 1919. “The increase in government secured obligations ~s due partially to the flotation of the Victory Loan and partially to a general demand for commercial, industrial and agricultural purposes, the banks using their Government collateral for these purposes in order to secure the lower rate of discount. The demand from the member banks for other classes of discounts is attributed to business expansion and higher prices rather than to a speculative demand, which so far has been observed, is negligible throughout the district. “During the month of December there was considerable liquidation by the members of this district, resulting in increased reserves for the Federal Reserve Bank of Atlanta, and placing it in a position to rediscount for other Federal Reserve Banks. “The increase of nearly every item on the balance sheet for 1919 is an indication of the increasing use by member banks of the facilities offered by the Federal Reserve Bank of Atlanta...”5 During the Directors’ meeting of January 10, 1919, M. B. Wellborn was redesignated as Chairman and Federal Reserve Agent, J. M. S]Lattery as Assistant Federal Reserve Agent and Joseph A. McCord as Governor. At the same time 14. W. Bell was elected Cashier and W. B. Roper, J. L. Campbell, W. R. Patterson, R. A. Sims and Creed Taylor, Assistant Cashiers. Ward Albertson continued as General Auditor and Captain Charles A. Lyerly began his last year as a member of the Advisory Council for the Sixth Federal Reserve District.6 The year was soon to see some significant changes in the directorate and official family of the bank. From the time the Bank opened in 1914, the official relationship between  140  Chairman Wellborn and Governor McCord had not been altogether smooth. It was characterized, in fact, by considerable maneuvering for position. The office of Chairman and Federal Reserve Agent was specifically stated in the original Federal Reserve Act. The title “Governor” was not mentioned in the law. The framers of the Federal Reserve Act apparently intended that the Chairman, appointed by the Federal Reserve Board would be the principal executive officer as well as the official representative of the Federal Reserve Board. The directors appointed the Governor who, in practice, became the active head of the Bank. The Chairman, under the original system, was (a) Federal Reserve Agent, and (b) Representative of the Federal Reserve Board. In order to carry out these duties, he had jurisdiction over the following departments: Note Issues, Reports, Member Bank Relations, Bank Examination and Auditing. He was also responsible for presenting a monthly report to the Federal Reserve Board on general business conditions in the District.7 The Governor, according to the Bank’s By-Laws, had general charge and control of the business and affairs of the Bank, in addition to being Chairman of the Board’s Executive Committee. He prescribed duties for all subordinate officers and could suspend or fire employees. The Governor’s salary at 10 of the 12 Reserve Banks was higher than the Chairman’s. At Richmond and Kansas City they were equal. In Atlanta, in 1915, the Governor got $9000 and the Chairman $7500.8 M. B. Wellborn had served the Bank as Chairman since its opening. In addition to being an experienced and able banker he was ambitious and a man of strong character. As the years passed he realized that the chief office was going to be Governor rather than Chairman. In this realization he was influenced by Governor Benjamin Stron~ of the Federal Reserve Bank of New York. Paul N. Warbury  141  characterized Governor Strong as “the prototype of splendid men who, with utter disregard of self, give their lives and souls to the task of making our Federal Reserve System an efficiently and harmoniously functioning organization...”9 As a matter of fact the circumstances under which Mr. Wellborn agreed to come with the Bank in 1914 were such as to lead him to the conclusion that he was slated for the key post. It is not surprising, therefore, that he and Governor McCord were often sparring for position. There was no open enmity. Mr. McCorcl was a few years older and, having started life in a humble station and risen to high business position his ambition was not a fire. He was a mellow, friendly man and soft-hearted to the extend of being easily moved to tears. In addition to his close friendship with the influential W. P. G. Harding of the Federal Reserve Board, Mr. Wellborn had more friends and allies on the Atlanta Board and thus more influence with the group.10 The upshot of the matter was that effective March 1, 1919 the Messrs. McCord and Wellborn swapped jobs. The machinery was set in motion at the Directors’ Meeting of February 14 at which time Mr. McCord tendered his resignation as Governor and Mr. Wellborn his as Chairman and Federal Reserve Agent. They were immediately designated Chairman and Governor respectively, effective March 1.” W. P. G. Harding was present at the meeting and remarked, to quote the Minutes, “that he wished to emphatically state that the Governor is the recognized head of the Federal Reserve banks; for the reason that the Federal Reserve Board did not wish to assume any of the responsibilities of the operation and management of any Federal Reserve Bank, through their Federal Reserve Agent.”12 Following Mr. Harding’s remarks short talks were made by all of the Directors pledging their most loyal and hearty support of the incoming Governor and expressing their pleasure at Governor Harding’s presence.13  142  At the same meeting Louis C. Adelson was appointed Deputy. Governor of the Bank at $7500 per annum. The appointment was strongly recommended by Mr. Wellborn. J. M. Slattery was elected secretary of the “ Bank at $5000 per annum and was continued as secretary to the Board of Directors.14 The new Deputy Governor, Mr. Adelson, was born in New York City in 1888 and moved shortly afterward to Birmingham, Alabama, where he resided until August 1914. He was connected with the First National Bank of Birmingham from 1905 to 1914, at which time he went to Washington as Secretary to W. P. G. Harding, an original Federal Reserve Board member. He remained with Mr. Harding until July, 1915 when he was appointed Federal Reserve Examiner. This was followed in November, 1917 by an appointment as Assistant Director of the Division of Foreign Exchange of the Federal Reserve Board. In May, 1918 he was appointed Assistant Secretary and Assistant Chief of Division of Examination, Federal Reserve Board, in which capacity he served until elected Deputy-Governor, Atlanta.15 As the year progressed other official changes were made in the Atlanta Bank. H. P. Coniff, Assistant Auditor, was elected Assistant Cashier and assigned to the Fiscal Agency Department. At the same time, March 14, Creed Taylor was made General Auditor, at $4000 per annum, and Ward Albertson, Assistant Federal Reserve Agent at the same salary.16 Director John K. Ottley was designated Governor pro tempin April, to serve in the absence of both the Governor and the Deputy Governor. James E. Zunts resigned from the New Orleans branch board in June and from the Atlanta board in November. He was succeeded by Leon C. Simon of New Orleans.17 Mr. Simon, a wholesale hat merchant, was born in 1876. He served as President of the New Orleans Progressive Union .and as first President of the New Orleans Association of Commerce which succeeded it. He was the organizer of a  143  movement to create a College of Commerce and Business Administration as part of Tulane University and director of the first board of guarantors of this college. As Director for the Gulf states, he served the Chamber of Commerce of the United States until 1917. The Birmingham Branch Directorate for 1919. was comprised of T. 0. Smith, W. W. Crawford, John H. Frye, W. H. Kettig and Oscar Wells. A. E. Walker was reelected Manager.18 The Jacksonville Board comprised Edward W. Lane, Brian H. Barnett, Giles L. Wilson, John C. Cooper and Fulton Saussey. George R. DeSaussure was re-elected Manager.19 New Orleans began the year with Frank Roberts, of Lake Charles, La.; J. E. Bowden, Jr., New Orleans; H. B.Lightcap, Jackson, Mississippi; James P. Butler, Jr., vice J. J. Grannon, resigned; James E. Zunts, New Orleans; A. P. Bush, Mobile, and P. H. Saunders, New Orleans. Marcus Walker was re-elected Manager.20 During the year some changes took place on this Board. James E. Zunts, as previously noted, tendered his resignation in June. Mr. Butler resigned in August. They were succeeded by L. 14. Pool and R. S. Hecht, the latter, President of the Hibernia National Bank.21 The scope of operation of the Federal Reserve Bank of Atlanta was considerably enhanced during 1919 by the establishment of an Agency22 at Savannah, Georgia, and a Branch in Nashville, Tennessee. The Savannah Agency, opened on February 5, was in large measure, a tribute to the importance of that city as a port for the export and import of goods. During January Chairman Wellborn, Governor McCord and Directors Kittles and McCrary: as a committee, made a trip to Savannah to consult with local bankers. The Savannah banks agreed to furnish offices in the Merchants National Bank Building rent free and to absorb any expense over $5000 per annum in connection with the Agency. The latter  144  agreement was waived by action of the Atlanta Board in December.23 R. J. Taylor, formerly connected with banks at Savannah and afterwards cashier of a bank in nearby Guyton, Georgia, was appointed manager of the new Agency, and R. N. Groover, also formerly of Savannah banks, was named assistant manager. As originally established the functions of the Agency were limited to the furnishing of currency to Savannah member banks, receipt of currency and deposit from Savannah member banks, and the holding of collateral pledged as security to bills offered to and under rediscount with the parent bank.24 The opening of a Branch in the City of Nashville was a result of much study by the Atlanta Bank Board and long-standing pressure on the part of member banks in Nashville. The new facility opened on October 21 in the Fourth &First Bank Building under the direction of Bradley Curry,25 manager, Joseph B. McNamara, Cashier, and W. T. Tyler, Assistant Federal Reserve Agent.26 The original Board of Directors for Nashville was comprised of W. H. Hartford, Chairman; Paul 14.. Davis, James E. Caldwell and E. A. Lindsey, all of Nashville, and T. A. Embry, of Winchester, Tennessee. By the end of the year the Branch had 23 employees in addition to the officers. Its assigned territory comprised that part of the State of Tennessee located in the Sixth FederAl .Reserve District, with the exception of the City of Chattanooga. The plan of operation was identical to that of the Birmingham and Jacksonville Branches, the accounts of all member banks in its zone being carried on the books of the parent bank, and all entries relating to transactions consummated being handled promptly over private telegraph wires.27 Incidentally there had been much discussion during the Fall of 1919 relative to the opening of an Agency in Chattanooga. The matter was urged largely by the Clearing House of that city. It was decided, however, not advisable to establish such an agency since the close proximity of Chattanooga to Atlanta made service from the  145  parent bank entirely feasible.28 A number of matters concerning policy and other important aspects of branch operations were resolved during the year. In February permanent quarters were secured for the Jacksonville Branch under a ten-year lease in the Heard National Bank Building.29 In June the New Orleans Branch purchased the Commercial National Bank Building in the square bounded by Carondelet, Common, Baronne and Canal Streets for ~236,25O. The building was then leased to the Commercial National Bank for a period ending July 1, 1920 at a rental of 5% of the purchase price per annum. Meanwhile the Branch was authorized to move from the Hibernia Bank Building to the building occupied by the United States Trust and Savings Bank.30 Though the above transaction in New Orleans had the full approval of the Atlanta Bank Board, a contrary policy was adopted in December in connection with the Jacksonville Branch. The Directors of that Branch appointed a committee to investigate the purchase of a lot upon which to erect a building. This action inspired the following resolution, introducted by Colonel Edward T. Brown: “RESOLVED, That the Directors of the Jacksonville Branch Bank be notified that it is not the policy of the Parent Bank to approve the purchase of lots or the erection of buildings for any of the Branch Banks or Agencies, and “BE IT FURTHER RESOLVED, That the said Directors of the Jacksonville Branch Bank be requested not to consider the purchase of any lot or building, but to consider only the renting of proper quarters for said Branch Bank, and BE IT FURTHER RESOLVED, That a copy of these resolutions be sent to all Branch Banks and Agencies.”31 The Directors themselves became the subject of several of their own actions during the year. In January an organization chart for operations of the Atlanta Bank was  146  adopted and copies sent to proper officers. In February the By-Laws were amended so as to provide for regular Board meetings the second Friday of each month at 10 o’clock, a.m. An expense account schedule for Directors was voted in April providing for hotel bill, $3.50; meals, $3.75, and incidentals, $2.00 per day. At the same meeting the Atlanta Board members heartily approved a communication from Governor Harding, the gist of which was “that no Director of a Federal Reserve Bank or Branch shall permit a reference to his connection with the Bank to be used for the purpose of aiding or promoting his private business connections.”32 Employee amenities were not overlooked in 1919. In March former Director W. H. Toole appeared before the Board as representative of the Federal Reserve Bank Club of Atlanta. He stated the aims and hopes of the organization and asked that the Board vote the Club $1,000 and allow all protest fees and money from the sale of waste paper to go into the Club fund. The Board, upon motion of Mr. Ottley, voted to donate the cash requested but declined to allocate protest fees or funds from sale of waste paper. It was the opinion of the Board that all money so accruing should be a part of the Bank funds.33 In November the Board approved an expenditure of $250 per month by the Club for the publication of a magazine, the same to be of an educational nature and for distribution to Club members and member banks.34 The matter of overtime work was settled by an enunciation of policy at the June meeting of the Board. In connection with proposed overtime of the Jacksonville Branch, the Board said: “The Federal Reserve Bank of Atlanta is opposed to the being preferable to employ a sufficient force to do the work within reasonable hours.”35 As the year closed, however, the Board took cognizance of a steady increase in the cost of living during 1919 and voted a general salary increase for officers and employees of both the Atlanta Bank and all Branches.36 147  As already noted, the Bank had no sooner occupied its new home on Marriette Street in 1918 than growing pains were felt. The ambitious building plans of 1917 had proven less than adequate for even two years of growth. Indeed, before 1918 was out discussions were had relative to the building of a porte cochere at the side entrance and enlargement of the garage. The matter was postponed to 1919 and came up at the January 10 Board meeting. It was decided that it would probably be only a short time before present quarters would be crowded and that a broader plan--an extension of the building would be feasible. A committee consisting of Directors McCrary, Ottley and Foote was appointed with instructions to study the matter and report at the next meeting.37 It was not until June that the committee was able to make a comprehensive report. Plans, as drawn by Architect A. Ten Eych Brown, provided for an additional story on the present building, containing new directors’ room, committee rooms, space for auditors, files, etc. Also a three-story and basement building in the rear with space for currency, transit, fiscal and discount departments, files, rest room, cafe, etc. Construction called for reinforced concrete frame and floors with fireproof windows. A new elevator and garage were provided. Cost, including Mr. Brown’s fee came to slightly over $2OO,OOO. A contract was let on June 27, 1919, though the “annex,” as it was called, was not completed 38 until the summer of 1920.38 The operation of the Bank and its Branches during 1919 produced a splendid earnings record. Total resources at the close of business, December 31, 1919 stood at $76,447,455.27, a 37% increase compared with 1918. Practically all items on the statement of condition showed an increase.39 Gross earnings from the principal sources of revenue for 1919 were up 92%, or $2,122,942.71 over 1918, while total expenses increased only 52%, or $331,946. After deducting all expenses, dividend payments and amounts authorized by the  148  Federal Reserve Board to be reserved, $3,185,000 was carried to surplus fund--an increase of $1,715,000, or 116% over the previous year.40 Membership in the Federal Reserve Bank of Atlanta fluctuated somewhat during 1919. As the year began National bank membership was 372. During the year 13 new National banks came in and 22 withdrew by liquidation, resulting in a net loss of nine. Of the 13 additions, eight were new banks and five were state banks converted into National banks. The decrease of 22 National bank members was accounted for by one liquidation, one absorbed by another National bank, eight absorbed by State banks and 12 succeeded by State banks.41 During the year a special effort was made to increase state bank membership. Cashier N. W. Bell devoted considerable time making personal calls for that purpose throughout the District. Results were modest. Mr. Bell report cited two primary reasons why state banks did not come in with more alacrity--loss of interest on balances and on account of exchange.42 Even so, the year produced a net gain in state bank membership. As 1918 ended there were. 54 State banks and Trust company members. During 1919 there were 16 additions to membership and six withdrawals for a net increase of 10. Fifteen of the State bank admissions were new members and one was the result of two State bank members consolidating. Besides the two banks reported as a consolidation, one was absorbed by a National bank and three withdrew from membership. Chairman McCord, reporting further on the subject of membership said: “Practically all of the largest State banks and Trust companies in the District are now members, there being only one bank in the District with a capital and surplus of $1,000,000 or more that is not a member. There seems to be an increasing disposition on the part of other banks to apply, and it is expected that the membership will be considerably increased during the ensuing year. There were no failures among the  149  membership of the Federal Reserve Bank of Atlanta during l919.43 It was noted early in this chapter that the Federal Reserve Act was amended on October 2 so as to permit national banks more leeway in making loans- -from 10% to 25%. of their capital and surplus--under certain conditions. The Atlanta Bank went on record in favor of this legislation by resolution dated June 13: “Whereas National Banks frequently complain that the present statute fixing 10 per cent of capital and surplus as the maximum amount that can be loaned to one individual, firm or corporation causes them great inconvenience, and seriously militates against their best interests, and the: best interests of their communities, in the matter of handling the cotton crops, and Whereas, it has been shown that State banks with which they are in competition enjoy much larger privileges in this regard, being permitted to loan 25 per cent of capital and surplus on cotton, and Whereas, this question involves the public welfare, and Whereas, the large increase in the value of agricultural products accentuates the importance of this question; Therefore, Be it Resolved that we call attention of the Federal Reserve Board to these facts and conditions, and suggest that they in their discretion take steps to cause suitable legislation to be enacted that will enlarge the powers of National Banks to make loans on readily marketable staple .“44 The various functions of the Bank moved along briskly during 1919. Discount operations were very active, with more than 200 out of 427 member banks in the District having paper under discount at all times. Trade Acceptances were generally used throughout the District, their use becoming broader as business interest recognized the advantage of securing acceptances in settlement of shipments, instead of opening bank  150  accounts and giving future dating.45 The close of the-year found the Bank’s reserve position strong, enabling it to comfortably care for the essential needs of its own member banks, as well as to give aid to other sections of the country, if necessary.46 Fiscal Agency operations of the Bank, though reduced in total volume as compared with 1918, due primarily to the partial cessation of government financing by the flotation of bonds, coincident with. the demobilization of the army and navy and conversion to peace were, nevertheless, large in total volume. They showed unmistakenly that the banks and the people of the Sixth Federal Reserve District stood squarely behind the government in supporting its program for raising funds necessary to meet the obligations incurred in the prosecution of the war.47 The average circulation of Federal Reserve Notes during 1919 had been greatly in excess of any previous year, due primarily to business expansion, high prices, high wages, and larger a3notmts of till and pocket money.48 The subject of “par clearing” came up for warm discussion during the December 11 Board meeting. While the Federal Reserve Act provided for “par clearing and most Federal Reserve Banks had made rapid strides toward putting their districts upon a par basis, the Atlanta Bank had not kept pace. Some of the local Directors declared themselves in favor of par clearing, others not. Since, however, sentiment in favor had been strongly urged at a recent conference of Federal Reserve Agents and Governors, the following resolution was unanimously passed: “BE IT RESOLVED: That the Board of Directors of the Federal Reserve Bank of Atlanta does hereby instruct the officers of the Bank to adopt such plans and incur any necessary expense in order to effectively arrange for the par clearance of checks and drafts drawn upon present non-par remitting banks payable upon presentation, received upon deposit by the Federal Reserve Bank of Atlanta.”49  151  As the year ended Chairman McCord, in commenting generally on business and banking conditions, said: “The month of December brings to a close a year of remarkable commercial &activity and expansion in the District. The transition from a war footing to a peace basis, while it has been marked, has taken place with comparatively little disturbance. There was some uncertainty in the early months of the year occasioned by the cancellation of Government contracts and orders, but the attention of business was at once turned to the general trade, and for several months now manufacturing plants and jobbers have experienced difficulty in filling orders as rapidly as received... “While peace has not been officially declared, there has been a good foreign demand for our raw and manufactured products, as well as foodstuffs, until more recently when the decline in foreign exchange has had the effect of somewhat curtailing this demand. Nevertheless, it has had the effect of reducing our supplies and correspondingly increased prices with the result that very few articles have escaped the general rise in prices... “Bank clearings at the principal cities of the District have consistently shown increases from month to month over those for the same periods of 1918, and collection conditions have been reported as good throughout the year... “It is undoubtedly true that the average individual has had more money this year than ever before, arid while savings deposits have increased, the individual has spent money unrestrainedly, and for more expensive things, than ever before. The business in automobiles, jewelry, fine furs and expensive clothing exceeds that of any previous year... “There has been a continuous and strong demand for money, both for investment and regular pursuits, with a slight easing off the latter part of the year. In some instances those banks in the District which have had a surplus of funds have kept  152  them employed by the purchase of open market paper. There has apparently been no tendency to increase rates of discount throughout the District, but, if anything, there is more of a disposition to reduce rates. As a whole, however, throughout the year they have remained practically normal.”50 In lighter vein are the recollectiOn of retired Vice President V. K. Bowman, who, writing in 1963, remembered 1919 as a young clerk in. the Bank: “At the close of World War I clerical help was nearly impossible to obtain or retain. As a consequence we started work at 8:30 a.m., and rushed to finish the day’s work in. time to catch the last street car of the evening. P. L. T. Beavers was in charge of the Discount Department at that time and it was my responsibility to see that the rediscounts were properly typed on the ‘flimzies’ and on the large sheets making, up the permanent discount records. Normally the notes were not delivered to the typing unit until around 4 p.m., and it was rush, rush, rush to get the work completed, checked, balanced and filed. “You had a wonderful feeling all during 1919 when you could pause, grab your hat and run down the street to a ‘hash joint,’ located on the original site of the Pulton National Bank building51 to get a big lunch for 25 or 30 cents around 4 p.m. A sandwich or apple around 8 or 9 o’clock was your last meal for the day. “Reminded again and again by the bank management of the statement of Federal Reserve Board member, Col. James,52 of the state of the economy, particularly in the South, as more money was leaving the State of Arkansas each year for the purchase of automobiles than the total value of its cotton and rice crops...” As the World War I decade ended the role played by the Federal Reserve System during the period can be briefly summarized. When the Reserve banks opened their doors in 1914, in make-shift quarters, war had begun in Europe but had not yet become the World War with the United States  153  as a participant. During the intervening period, before the United States declared war, organization problems were dominant and the necessity for determination of national credit or monetary policies did not seem to be pressing. The reduction of statutory bank requirements had eased the credit situation. But with this Government’s declaration of war in 1917 came the first great problem of Treasury financing confronted by the System. It was met by liberal discounting for member banks and preferential treatment of Government securities. Coercial banks were enabled not only to make substantial loans on Government securities, but also to accumulate large investments of their own. Senator Carter Glass expressed the opinion “that the World War could not have been financed but for the Federal Reserve Act.”53 On the other hand, the resulting creation of a greatly increased supply of money together with consumer demands brought about inflationary developments. Credit expansion was rapid, prices doubled, and gold reserves decreased. Government expenditures did not decline immediately. The Treasury needed to float additional securities, and it was opposed for the time being to credit restraints by the Federal Reserve System. In 1919 the System warned member banks against the consequences of such developments and, in accordance with traditional central banking practice, discount rates were raised to exercise some restraint upon the increasing demands for credit which, however, continued until mid-1920 when prices collapsed, particularly for agricultural products. An investigation was launched by Congress, and the Commission created for this purpose decided as one of its conclusions that the Federal Reserve Board and the Reserve banks were not responsible for the deflation.54  154  NOTES Chapter 8  1.  Keller, Dictionary of Dates, II, 310 - 318.  2.  Ibid., 317 .— 318.  3.  Garrett, Atlanta and Environs, II, 755 - 774.  4.  Ibid.  5.  Fifth Annual Report of the Federal Reserve Bank of Atlanta, 8. Hereafter cited as Annual Report, 1919.  6.  Ibid., 21; Minutes. Directors, I, 191, 194.  7.  Circulated also to member banks, it was the seed that evolved into the present (Monthly Review).  8.  Memorandum, May 21, 1963, Basil A Wapensky to Harold T. Patterson, defining duties, etc. of Chairman and Governor.  9.  Warbur, The Federal Reserve System, I, viii.  10.  Statement of a retired officer of the Bank to Franklin M. Garrett, March 31, 1964.  11.  Minutes. Directors, I, 200.  12.  Ibid.  13.  Ibid.  14.  Ibid., 201.  15.  The 6-F Journal, March 1923, p. 6.  16.  Minutes. Directors, I, 203, 205.  17.  Ibid., 208, 220, 244; Annual Report, 1919, p. 21.  18.  Minutes. Directors, 192.  19.  Ibid.  20.  Ibid.  155  21.  Ibid., 198, 222, 227.  22.  An Agency differs from a Branch in that it has no Board of Directors and is under  the Immediate control of a manager and assistant manager. 23. Annual Report, 1919, p. 20; Minutes.Directors, I, 192, 252. 24.  Annual Report, 1919, p. 20.  25.  Mr. Curry, prior to army service in World War I, had been an officer of the Fourth  26.  and First National Bank of Nashville. Annual Report, 1919, pp. 20 - 21; Minutes. Directors, I, 199, 210, 219, 237, 239.  27.  Annual Report, 1919, p. 21.  28. 29. 30. 31. 32.  Minutes. Directors, I, 233, 236, 240, 242j, 247. Ibid., 196. Ibid., 206, 213, 217, 222, 234. Ibid., 247. 1., 191, 198, 208, 210.  33. 35.  Ibid., 204. 34. 244 Vol., of The 6-F Journal, bears date of Dec. 1921 Ibid., 220.  36.  249, 252.  37.  Ibid., 191.  38.  Ibid., 191, 202, 207, 216; The 6-F Journal, Dec. 1921, p. 7.  39.  Annual Report, 1919, p. 9.  40.  Ibid., 10.  41. 42.  Ibid., 13. Minutes. Directors, I, 205, 208, 214, 217.  43.  Annual Report, 1919, p. 13.  44.  Minutes. Directors, I, 219.  156  45. 46. 47. 48. 49.  Annual Report, 1919, pp. 10 - 11. Ibid., 12. Ibid., 13. Ibid., 17 — 18. Minutes. Directors, I, 245.  50.  Annual Report, 1919, pp. 24 — 26.  51.  In 1919 there were three restaurants, including a Chulds’ on the south side of Marietta Street between Peachtree and Broad and between the then Fourth National and Third National Bank Buildings.  52.  Referring to George Roosa James, merchant-and manufacturer of Memphis,  Tenn. 53. “The Fed’s First Half Century,” Banking, Dec. 1963, pp. 43 — 44. 54. Ibid., , 44.  157  SECTION III The Prosperous Twenties Chapter 9 1920 The decade in American history usually associated with unbridled high finance, a volatile stock market, bootlegging and gangsterism began with a total U.S. population of 105,710,620. In 1920 New York, Chicago, Philadelphia, Detroit and Cleveland ranked in that order as the country’s five largest cities. During January return of the American Expeditionary Forces from Europe was completed to the plaintive sound of “Nobody Knows How Dry I am,” the Volstead, or Prohibition Act, having bec9me law on the sixteenth. In March the railroads were returned to private ownership, while the first transcontinental air mail flight, New York to San Francisco, took from July 29 to August 8. Later in August the Woman’s Suffrage amendment to the Constitution of the United States was adopted. On September 16, at the noon hour, a bomb exploded in Wall Street opposite the offices of J.P. Morgan and Company, killing 35 and injuring 130 persons. On November 2 Warren G. Harding and Calvin Coolidge were elected President and Vice President, defeating James M. Cox and Franklin. D. Roosevelt by 404 to 127, electoral votes. Later that month a significant change in the living habits of Americans was presaged when the Westinghouse Electric Company broadcast the first regular evening radio program.1 In Washington Congress amended the Federal Reserve Act as to discount rates on April 13 and on May 26 amended the Farm Loan Act as to bonds.2 Atlanta began the decade with an official population of 200,616. James L. Key was re-elected mayor over two opponents. A City Planning Commission, long needed, was set up in October, 1920, and the site of the old Henry Banks home, just 158  north of the Grand Theater was adorned with the handsome Howard Theater, the city’s most palatial motion picture house.3 The second post-war year was indeed a time of trial and tribulation for the nation and its Federal Reserve banking system. Sixth District Chairman Joseph A. McCord, prefatory to his Annual Report for 1920, explained some of the factors which made it so. He wrote: “Probably never in the history of this country has its financial structure been so severely tried as during 1920, certainly the Federal Reserve System has received a most severe test, and successfully performed the functions for which it was inaugurated. “During the early months of the year prices continued high and there was a growing disposition on the part of the buying public to purchase more conservatively. This together with the increasing production brought about a restraining influence on the advancing prices, with the result that prices began to show evidence of declining in the early summer, and at the end of the year there was a considerably lower level. “It must be remembered that during 1919 the demobilization of those in the country’s service was taking place, but the larger number were still consumers, and it was not until the early part of 1920 that a large majority became producers. With production increased and the export demand limited, the price of farm products declined rapidly. This was particularly noticeable in cotton, with a prevailing price of approximately 39-1/4 cents on the New York market December 31, 1919, as compared with 14-3/4 cents on December 31, 1920. “Ordinarily the cotton crop throughout the district is largely marketed in the fall months. During the 1920 season only a small part of the cotton had been marketed up to the close of the year on a declining and very inactive market. One of the causes of the decline in the price of cotton was the carrying over of about four million bales of low grade cotton which could not be manufactured in this country. The early part of the year,  159  textile manufacturers were running on two and three shifts, and in this the seeming consumption of cotton was continuous and regular. However, when the price began to decline, commission merchants with large stocks of cotton goods began to throw them on the market; this, in turn, absorbed the orders that otherwise would naturally have been received by the mills. This condition of affairs placed the mills in the position of not having their quota of orders and forced a slowing up of production, hence, they were not in the market for the present crop of cotton. Stocks of cotton goods are now fast disappearing and the mills are opening up, and raw cotton is coming more in demand. “This same condition was reflected to a more or less extent in commodities and products other than cotton.4 In describing the panic of 1920 and the events leading up to it Governor M. B. Wellborn was more succinct: “During the war, a ban was placed on all business enterprises which were not involved, directly or indirectly, in the prosecution of the war. The public was admonished and to invest in Liberty Bonds . . A short while after the armistice the public which had denied itself many luxuries during the war, turned around; and, as the reaction always exceeds extended effort in any direction, there commenced a period marked by the exercise of an imprudent and unusual extravagance. Money was easily made, and was therefore easily spent. Those who had prospered on war contracts felt no restraint, and bought to the fullest extent. A situation was thus brought about in which an abnormal demand ran ahead of the supply; and naturally prices rose to unprecedented figures.”5 Indeed the Governor was unusually articulate upon the subject of personal extravagance and directed heavy fire against what he called the “pleasure automobile.” On May 19 he declared that the resources of the bank should not be used to finance the purchase of strictly pleasure automobiles. He thus aroused the ire of auto dealers in all  160  parts of the country. The New Orleans Item quoted city in May, 1920: “When it comes to pleasure automobile heads the list.” him as saying in a speech in that non-essentials, I consider the list.” The paper reacted with a two-column “answer” from one of the New Orleans auto men, who said: to take your family out for a recreation, take cars do not run to the scenery you would like Tell Mr. Wellborn where it is and he will ride and come back and tell you all about it.”6 How the Bank itself fared during the crisis of 1920 will be described later in this chapter. Meanwhile, as in every year, changes in the official family of the Bank occurred during 1920. At the Directors’ Meeting of December 12, 1919, Frank W. Foote, an original Board member declined to stand for re-election. The Board members, through Colonel Edward T. Brown, expressed regret at Mr. Foote’s retirement and presented him with a beautiful loving cup to commemorate his service.7 Mr. Foote’s successor as a Class A, Group 2 Director for a three-year term was Oscar Newton, then serving as president of the Jackson (Mississippi) State National Bank. The new Director and future Governor of the Bank was born at Crystal Springs, Mississippi in 1877 and, after attendance at Southwestern Presbyterian University at Clarksville, Tennessee, entered the banking business as clerk and assistant cashier of the Mutual Bank, Crystal Springs in 1895. Before moving to Jackson in 1910, he saw long service as cashier of the Brookhaven (Mississippi) Bank  & Trust Company. As a public spirited citizen of Jackson he functioned as Chairman of Liberty Loan campaigns during World War I; served as Chairman of the Jackson Board  161  of Education and President of the Chamber of Commerce.8 Captain Charles A. Lylerly, of Chattanooga, Tennessee, had served the Bank since its founding as a member of its Advisory Council. He retired at the end of 1919 and was succeeded by Oscar Wells, President of the First National Bank of Birmingham, Alabama.9 The following were elected as officers of the parent Bank and Branches for 1920: Atlanta M. B. Wellborn, Governor L. C. Adelson, Deputy Governor J. M. Slattery, Secretary M. W. Bell, Cashier R. A. Sims, Assistant Cashier W. R. Patterson, Assistant Cashier W. B. Roper, Assistant Cashier J. L. Campbell, Assistant Cashier H. F. Conniff, Assistant Cashier Creed Taylor, General Auditor Rollins H. Randolph, General Counsel Joseph A. McCord continued as Chairman and Federal Reserve Agent New Orleans W. H. Black, Assistant Manager M. F. Harlan, Cashier Jacksonville G. R. DeSaussure, Manager W. G. Wilson, Cashier Birmingham A. E. Walker, Manager W. C. Sterrett, Cashier Nashville Bradley Currey, Manager J. B. McNamara, Cashier  162  Savannah Agency R. J. Taylor, Manager R. N. Groover, Assistant Manager10 On January 6, 1920, Marcus Walker was re-elected Manager and a Director of the New Orleans Branch. Other Directors for the branch banks, elected at the same time, were: P. H. Saunders, A. P. Bush and F. W. Foote for New Orleans; W.  H.  Kettig and Oscar Wells for Birmingham; John C. Cooper and Fulton Saussy for Jacksonville, and W. H. Hartford and Paul M. Davis for Nashville.11 At mid-year Bradley Currey resigned as Manager, Nashville Branch to accept a position with a New York bank. On July 9 J.B. McNamara was elected to the Nashville post and Joel S. Fort was elevated to cashier.12 During the latter half of the year the Board of Directors authorized the Governor to appoint three officers as a Managing Committee, to be responsible for the planning and general conduct of the interior operation of the bank. Messrs. Creed Taylor, L. C. Adelson andJ. M. Slattery were named as members of this committee. At the December meeting of the Board the office of a second Deputy Governor was created, and resulted in the election of J. L. Campbell. J. B. Tutwiler was elected Assistant Cashier to succeed Mr. Campbell.13 A number of developments took place within the Bank during 1920 which affected directors, officers and employees. The Executive Committee became the subject of an Amendment to Section 1, Article 2 of the By-Laws by which it was provided that the Committee should consist of the Governor, Deputy-Governor, Federal Reserve Agent and two directors, to be elected at the monthly meeting of the Board of Directors and to 163  serve until the following meeting of the Board. It was also provided that not less than three members should constitute a quorum and that a majority vote of those present should prevail.14 A new schedule of allowable expenses for Directors and committee members traveling on Bank business was adopted in June and provided for: Hotel Bill $5.00 per day Meals 2.00 per meal Incidentals 3.00 per Actual railroad and Pullman fare15 At the same time an “added compensation” or “bonus” committee of the Board reported favorably on the payment of a bonus on June 30. Divided into three “classes,” the bonus was based on annual earnings: Annual salary $1500 or less, 25 percent; $1500 and not over $3000, 20 percent; and $3000 and not over $6000, 15 percent.16 Earlier in the year the salary of Joseph A. McCord, Chairman and Federal Reserve Agent, was increased from $10,000 to $12,000 annually.17 During the summer of 1920 construction of the annex, for which a contract had been let in June 1919, was completed. The new space more than doubled the original floor area. Since the amount of business handled by the Bank increased markedly during the. year it was found necessary to increase the number of employees from 386 to 446.18 The matters of fire insurance and retention of records occupied the stage briefly during 1920. Governor Wellborn expressed himself on the former subject on July 9:  “On several ocassions the officers of the Bank have had up for discussion the question of fire insurance on the building, furniture and fixtures, and also the matter of liability insurance on account of machinery used by certain departments, and to cover  164  the elevator recently installed. The rate of fire insurance is 18 cents per hundred, which I understand is the lowest rate made in the city of Atlanta, with the exception of the Hurt Building, which was formerly occupied by us. In connection with the elevator, this will be used by the public as well as the employees. While I do not believe there is very great danger of the employees being seriously hurt in connection with the cutting and cancelling machine, I would like for the Board to take up for determination the matter of fire insurance and liability insurance in connection with the elevator.”19 In any growing business records get out of hand if not selectively destroyed at intervals. The Bank, confronted with the problem, in September 1920, sounded out the Federal Reserve Board and received the following from Governor W. P. G. Harding: “The Board has considered your letter of the 11th, instant, asking what records of your bank might be destroyed and for what period they should be held. It is the Board’s view that all records should be preserved, even if it is necessary to provide additional space for their safekeeping for an indefinite length of time, except the carbons of remittance letters, to and from banks, statements to which have been reconciled. The Board sees no occasion for holding records of this kind and believes you could safely adopt the policy of destroying such documents after you have held them three months, provided there is no question that the statements have been reconciled.”20 As Chairman McCord wrote, the country’s financial structure was indeed sorely tried during the post-war financial panic of 1920. The Federal Reserve System weathered the storm and insofar as the Atlanta Bank was concerned its resources were strained to the utmost. In mid-May, on the threshold of the worst of the storm, the Board issued a press statement. It read: “The Board did not authorize any increase in rates at this meeting, and its  165  deliberations were principally devoted to discussing plans for the future. “There is a great deal of financial strain throughout the country. Fortunately, however, the public is beginning to recognize this fact, which is encouraging. It would be an error and an injustice to the public to fail to admit the seriousness of the situation. The condition is due to inflation, high prices, lack of production, extravagance and congestion of traffic. “We are, not alone in our problems. This is a world condition, and it is therefore more serious as other nations are not in a position to invest in this country’. The remedy is deflation, personal economy, larger production and a public opinion sufficiently strong to relieve the crippled traffié conditions. “The numerous strikes that have afflicted the country and tied up ports and railroads have contributed immensely to making present conditions. Deflation cannot be accomplished except through liquidation, and liquidation cannot be effected unless transportation facilities are adequate. Personal economy will hurry liquidation and it would provide much needed capital. “The power of economy is shown by the fact that an average of 10 cents each day for one year saved by every citizen, and deposited in the banks, would increase our liquid capital $4,000,000,000, which would liquidate all the rediscounts in the Federal Reserve System, and provide $1,OOO,OOO,OOO for financing Europe. Personal economy would revive our lost thriftfulness and increase production. Diligence of effort, almost a lost art, must return to life. “We cannot point out too strongly the utter failure of the individual to assume personal responsibility. If every citizen would put his own house in order, good business will continue and the people would remain prosperous. Complete individual reform would achieve all things needed.”21 The situation was destined to deteriorate before it improved. Cotton dropped  166  from 40 cents a pound to nine cents in 60 days in the late summer of 1920.22 “It was plain, psychological panic,” said J.R. Morgan. Cashier of the bank of Union Springs, Alabama, when the panic struck. “All we country bankers could do was endorse notes and send them to the Federal Reserve. Governor Wellborn met every ligitimate demand. He had taken the position before the panic hit that the banks were over-extended, but when it did strike he said the shock would have to be cushioned, and he let the banks have the money necessary to see them through. For two years he had been warning the country, but when the crash came he didn’t even stop to holler ‘I told you so;’ he just jumped in and put the fire out. It was his coverage and foresight that stopped that terrible panic. For its duration it was the worst we ever, had, though it only lasted six to eight months. Governor Wellborn broke it by throwing the whole resources of the Federal Reserve behind the banks of the south.”23 The Atlanta banks did indeed throw everything into the fight. Governor Wellborn not only tried to save the banks and the bankers, but the depositors. He knew how a bank failure could wreck a country town. Almost every member bank in the district was driven to the precipice, but not one went over. Figures tell part of the story: early in 1920 the Atlanta bank’s loans to its members aggregated $88,052,000; by November 1, these loans had reached $182,258,000, and all this was from a Federal Reserve Bank with a paid-in capital and surplus of only $11,000,000.24 Governor Wellborn put it across by demanding and getting the full support of other Federal Reserve banks, often over the protests of these banks and even of the Reserve Board itself. He called his bank a financial hospital, and he believed in helping the cripples.25 The situation as a whole and particularly as it related to interbank rediscounting gave rise to a spirited and informative exchange of letters between Governor Harding, of the Reserve Board and Governor Wellborn of the Atlanta Bank  167  from December 3 to December 23, 1920.26 Harding to Wellborn, December 3, 1920: “The Board, in reviewing the interbank rediscount situation, notices the increased restlessness of the Cleveland Federal Reserve Bank, to whom the bulk of your rediscounts are due. The Board agrees with the Cleveland bank that it ought not to be required to lend an amount over $35,000,000 to a Federal Reserve Bank having a paid-in capital and surplus of only $11,000,000. . . Wellborn to Harding, at Washington, December 9: “I… note that your board has reviewed the interbank rediscount situation, and has noted the increased restlessness of the Cleveland Bank…I also note that. the Board probably will not view with favor the continued borrowing of this Atlanta bank. “I wish to advise that the Atlanta Bank is not a borrowing bank by choice, but from a necessity which has been created by almost unprecedented conditions in this section. In the winter and spring of 1920, the labor, supplies, fertilizer, farm implements, and every other element entering into agriculture and manufacture were at the highest peak; and every effort was made by Government propaganda to encourage and stimulate the largest production in every line; these repeated urgings by the government officials were followed by the farmers and manufacturers of our District. They may have not produced wisely, but perhaps too well. ’Through circumstances over which this section had no control, the money crops were produced at unprecedented high cost, and upon a basis which contemplated the making of prices commensurate with the cost of production. At the very time the crop began to move, the most disastrious and radical slump began; within 90 days the great money crop of this District dropped 65 percent, and other staple commodities declined in the same or greater proportion. No section or country could stand the full unmitigated shock of such a disaster without ruin. This Bank has conceived its plain  168  purpose and duty to stand between the country and financial disaster to the full extent of business prudence and ligitimate banking. This section is fundamentally strong and sound enough to react from the present situation if temporarily aided financially, in order that the full force of the shock may be mitigated. “I submit, if this bank had failed to stand as a buffer between the business of this section and disaster, it would not only have failed in its duty, but it would have permitted a situation to develop which would have seriously affected all other sections of the country and every other reserve bank. To carry the load under these emergency conditions, which may continue a short time longer, of course meant borrowing and rediscount. “The commerce of all the states is too closely knit together to permit the confining of the results of financial upheaval to any one particular state or group of states. The Cleveland District itself counts thin section one of its principal markets… “In the present crisis, it seems to me it is not a time for individual reserve banks which are rediscounting for other reserve banks, to attempt to impose upon the borrowing bank onerous conditions. If the Cleveland Bank is ‘restless’ on account of the credit which it has in the past, and must almost of necessity in the near future (on account of its high reserve position) extend to Atlanta, the Cleveland Bank simply takes a rather narrow and personal view of the situation. “If called upon to lend to other Federal Reserve Banks, upon occasions of impelling necessity and great emergency, the Federal Reserve Bank of Cleveland should not become restless under such a necessity. The responsibility of such interbank transactions resting upon the Board, the Federal Reserve Bank of Atlanta involves the cooperation of the Board in the efforts of this Bank to preserve and protect the business situation within this District. . . We feel we have protected the situation in the Sixth Federal Reserve District. We confidently believe that disaster will be averted by  169  what we have done. In the carrying out of the purpose of the Federal Reserve Act, we have been forced to draw on the resources of other Federal Reserve Banks, and rediscounts have been, in my opinion, in strict line with the Act . “The Federal Reserve Banks are now like an army on the line of battle, and when the commanding general (The Federal Reserve Board) orders reinforcements from one end of the line to another, there should not be any hesitancy or unwillingness in obeying such orders. “With regard to your statement that your Board has an inclination to allow the Atlanta Bank to show a depreciation, I do not question that your Board has a legal right to do this; but it is a responsibility that rests upon your Board, and in these perilous times I hardly think your Board would care to assume such a fearful risk. The mere publication of our actual reserve .position might possibly have the effect of causing the failure of numerous banks - not only in this District, but in others as well - and bring on a panic of great magnitude. “I have the honor to report that we have had a steady but small liquidation and a decline in our loans since the first of this month, and today our loans and discounts show a decline of over four million since the first of December. Instead of being on the increase, the tendency is the other way, which is very encouraging to us. Harding to Wellborn, December 15: “Receipt is acknowledged of your letter of the 9th instant, in which you give in detail the reasons for the present overloaned condition of the Federal Reserve Bank of Atlanta. In this letter, you do not express any opinion as to when your bank will be able to pay off its rediscounts without falling below its legal minimum reserve, and on the other hand you assume that it will be necessary for other Federal Reserve Banks to extend your bank accomodations for an indefinite period . “This Board is of the opinion that your present experience should convince  170  you that your lending policy has been rather too lenient and that in some cases credit was granted in such large amounts to banks when no emergency existed as to impair your ability to make loans out of your own resources when a real emergency did arise. The Board would suggest that you refrain as a rule from issuing circular letters to be sent to banks generally throughout your district and that you adopt the policy of writing personal letters to those banks whose discount lines with you are too large . . . and that you might indicate the particular loans ‘which you desire to have paid in full or in part . “The Board notes the objections you raise against paying off your rediscounts entirely and operating at the present time on reserves below the legal requirement, and it is disposed, therefore, to use its influence with other Federal reserve banks having a larger reserve to continue to have them assist you in bearing your burdens, provided you will meet their reasonable requirements as to character of paper and security, and will make consistent efforts to improve your own position by inducing extended banks to reduce their lines with you in an orderly way. Wellborn to Harding,, December 23: “…You say we have been too lenient in granting credits. I feel sure if your board was on the ground and saw the daily workings of our bank, that you would not take this view, and I venture to make the statement that not in any other District has any Executive Committee been more careful and discriminating in the individual paper that has been accepted for rediscount. We have, since the early part of this year, firm control of credits, but in doing so we have not lost sight of the necessary demands that we had to take care of…” “Your Board, it seems to me, is laboring under an error in thinking that it is our policy ‘to carry loans indefinitely for member banks until cotton reaches a price that is satisfactory to the producers.” You must remember that only about 60 days have elapsed since the bulk of the notes fell due, and our policy is merely to give them  171  reasonable time to find a market in these disturbed times, in order to keep them from ‘dumping’ their products on the market at one time. To do otherwise at this critical time would force a disaster upon our agricultural and business interests that might perhaps have the effect of bringing on a state of panic and bankruptcy.” And so Governor Wellborn took his stand. Fortunately conditions gradually eased. By April, 1921, the Atlanta Bank had paid in full all of its borrowings from the Cleveland and other Federal Reserve bank. This was accomplished without undue pressure on member banks, allowing liquidation to be done gradually.27 A view of the cotton crisis from the national standpoint is contained in a statement by Congressman Hatton W. Sumners, of Texas, showing that the effect of Governor Wellborn’ s work and the actions of the Atlanta Federal Reserve Bank were not limited to the south:28 “This situation In the United States in the late fall of 1920 was very different from what it appeared to be on the surface. Outwardly, this country seemed prosperous, but there were already upon the business horizon clouds which were to develop rapidly in the months to come… “It soon became apparent to me that, unless something was done to save the situation, the purchasing power of the south would be absolutely paralyzed. If this happened, it was obvious that the effect would be nationewide. “Congress agreed that the cotton situation had become a national problem, and appointed a Commission of Agricultural Inquiry. I was made chairman of the Committee on Cotton. “My first move was to go to Atlanta; where I called upon Governor M. B. Wellborn of the Federal Reserve Bank, and discussed fully with him the situation. I shall never forget the pleasure I experienced in finding that here was another man who was awake to the peril of conditions, and was prepared to do everything in his power to avert  172  what we both believed would have been the greatest financial panic in the history of the United States. “I want to emphasize here that the public was blissfully unaware of the threatened danger, and that there was a strong disposition to regard the warnings as/calamity howlings of agitators. The importance of having the support and influence of Governor Wellborn in the fight to awaken the national consciousness cannot be overstated. To get back to our conversation on that day, we agreed that the only way to save the situation was the rescue of the cotton farmer of the south. Governor Wellborn agreed with me that it was a time for the most drastic measures, and asserted that the Federal Reserve Bank of Atlanta would stand behind the cotton crop of 1921, that without regard to money already owed the Reserve Bank - paper offered them for rediscount by a member bank which was secured by cotton would be accepted. It was further agreed that member banks ‘which held cotton-secured paper should not only not be pressed to collect this paper, but actually urged to hold it as long as possible. “On returning to Washington, I laid my views before a special meeting which was attended by the governors of the Federal Reserve Banks of New York, Atlanta, Dallas, Richmond, Kansas City and St. Louis, as well as the members of the Federal Reserve Beard and director of the War Finance Corporation . “There were two opinions represented at this meeting, one to the effect that the time and conditions called for the exercise of conservatism, the other - of which I was the spokesman - maintaining that the situation was desperate and demanding that the doors be thrown wide open to the cotton producers in the way of the most liberal credits possible. Governor Wellborn backed up my position whole-heartedly, and stated in substance that he was willing to pledge the support of the Federal Reserve Bank of Atlanta to save the situation in the south. The Atlanta bank agreed to accept all cotton paper offered for rediscount without charging such loans against the ordinary credit  173  lines of member banks, and to join with the other Reserve Banks in making an appeal to the people to tell them that cotton was a good buy, and that for the cotton crop to be deliberately sacrificed at forced sales would be a monstrous thing for the nation to allow . . . After a long discussion, the conference agreed with these views and sanctioned the attitude of the Atlanta bank. This was the final act which reversed the psychological attitude of the world in regard to cotton. “I regard Governor ,Wellborn’s attitude at this trying time as of tremendous importance in swaying the sense of the meeting toward the proper position. If the conference had come to any other conclusion, it is my sincere belief that no power on earth could have saved the United States from the greatest financial crash in its history.” The branches, particularly New Orleans, Jacksonville and the Savannah Agency likewise had a relatively hectic year in 1920. “At the July Board meeting, on motion of Director J. K. Ottley, it was voted that it was the consensus of opinion of the Atlanta Directors “that it is very important that the managers of the various branches be kept in close touch with the policy of the parent bank, especially the New Orleans Branch, and that it is deemed advisable that the Governor of the Bank invite the Managers of the Branches to attend the meetings of the Executive Committee as often as he deems proper.” Also that they be available for Board meetings in the event matters concerning their particular branches are discussed.29 The New Orleans Branch, only one delegated with the same powers as the Atlanta Bank, except for capital stock and open market transactions, was called upon to function to a higher degree than ever before. Indeed, Governor Wellborn, in a discussion at the May Board meeting, laid particular emphasis on the fact that the New Orleans Branch had used up more than the reserves of the entire district. He went on to say that while the New Orleans loans were confined largely to commodities, the lines  174  should be reduced in a way not to bring detriment to the section. He suggested that a way to do this was to cut out everything pertaining to non-essentials, and referred to the speech he had made the previous day relative to banks discouraging the financing of pleasure automobiles.30 Director Saunders, of that branch, pointed out that the burden had largely been on New Orleans because of the fact that it was a port; that other points shipped commodities there to be exported, which necessarily forced their financing at New Orleans.31 During the year the total of rediscounts made for and advances made to member banks located within the New Orleans zone was approximately $709,400,000.32 “It was also during this busy year that steps were taken to improve and enlarge the physical quarters at New Orleans. In mid-summer an architect was engaged to submit plans and estimates on proposed changes, including larger vaults, in the bank building recently purchased for use of the branch.33 The problem at Jacksonville was faulty management and came to light as the result of a report by the General Auditor. The Manager plead lack of sufficient help, but was assured that he could employ such help as ‘was necessary. He was allowed a two months vacation beginning June 10 and Assistant Cashier W. B. Roper, of Atlanta was put in temporary charge. Apparently the weak point was in the cashier’s office. W. G. Wilson resigned the office and was replaced by F. M. Sheffield, Assistant Auditor of the Atlanta Bank on October 1. The  at Savannah made an insistent plea for a reduction in  the margin on cotton from 20 percent to 10 percent. The plea was denied by the Executive Committee, which voted that the Bank would continue to require 20 percent, but that insofar as Savannah banks were concerned 5 percent of the amount could be  175  covered by paper eligible for rediscounts.35 In addition to large amounts of cotton paper, the Reserve Banks, in 1920 carried an abnormal amount of meat packers’ paper. In commenting on that situation Governor Harding stated that “Federal Reserve Banks were carrying approximately $32,000,000 of this class of paper and that the Federal Reserve Bank of Atlanta was carrying about the limit of its share.” He said further “that the large borrowings of the packing concerns was probably due to the fact that they were making large sales abroad and that in view of the depreciation of foreign exchange, they were unable to convert their balances until a more. favorable time.”36 While the Rural Electrification Administration was 15 years in the future and, in 1920, less than 200,000 farms were connected with electric power lines, the need for farm electric service was not lost upon Governor Wellborn. In a report to the Board on July 9, 1920, he wrote: “High wages and better living conditions are attracting many farmers to the cities until the point has been reached that the situation is alarming to those who wish to see increased farm production. In view of this situation and in order to encourage better and more attractive living conditions on the farm, I have recently obtained a favorable ruling from the Federal Reserve Board with regard to the eligibility of paper given for Farm Electric Lighting Systems.37 The short lived post-war panic by no means dulled the earning capacity of the Sixth District Federal Reserve Bank. True, total resources showed a decrease of approximately $5,000,000 from 1919, due almost entirely to the decrease in reserve deposits of member banks. But net earnings almost doubled from $3,443,784.62 to $6,090,990.23. National bank membership increased from 363 to 375 and State Bank and Trust Company members increased from 64 to 87 over 1919.38 Before leaving the first year of the so-called “roaring twenties” it might be  176  interesting to relate an incident, which while not looming large in the overall history of the Bank, did cause temporary consternation in the summer heat of late July. On the 29th $5000 turned up missing. That day the automobile truck assigned to the collection of balances from local member banks made its rounds in charge of department,  , a clerk in the currency  , a watchman and a Negro driver, hell were provided with side-  arms. The sum of $50,000 was collected from the and $10,000 from the  , all in currency. The money was put into an  unlocked pouch and, upon return to the Federal Reserve Bank building, was delivered to Teller  . He, in turn, delivered it to  , a clerk in the money  sorting room. Up to this point no one had verified the contents of the pouch. Neither did just then. He closed his cage and went to lunch. After lunch, upon checking, did not immediately report it, thinking  discovered a shortage of $5000. He had been in error in stating the amount  to be $60,000. Later, however, he did report the matter to Mr. Sims, who in turn reported it to Cashier M. W. Bell. Thereupon matters began to hum. All currency in the money division was reverified and inquiry was made at the  banks. All to no avail. The  bond company was notified; a Pinkerton detective questioned employees who might have had access to the funds.  were demoted to  non-money handling jobs.  Governor Harding, of the Federal Reserve Board commented rather acidly that he was not particularly surprised when he read of the system used to collect clearing house balances. Indeed he couldn’t understand why the Atlanta Bank should have to send around to collect money from member banks. The Governor was assured  177  by Director J. K. Ottley that the Executive Committee had met to consider that very point and that a subcommittee had been appointed to confer with the clearing house to the end that collection would not be necessary.39 The matter rocked along. Then, on October 8, Governor Wellborn reported to the Board: ‘With reference to the $5000 loss reported to your Board sometime ago, I am glad to report that the Bonding Company has fixed the shortage as a theft by driving our truck that day. It appears that through careless handling, the package containing $5000 dropped in the truck and after the bags had been removed,  found and retained the package.”40  Notes Chapter 9 1.  Keller, Dictionary of Dates, II, 318-322  2.  Ibid., 323 .  178  3.  Garrett, Atlanta and Environs, II, 775, 777-778  4.  Annual Report4.i.920, 7-8  5.Hopkins, M. B. -.Wellborn, 84-85 6.  Ibid., 87  7.Minutes Directors, I, 253 8.  Ibid., 251; Who Was Who in America, I, 895  9.Ibid., 255; Who Was Who in America, III, 903 10. 11. 12.  Minutes. flirectors, I, 250-251 Ibid., 256-257 Ibid., 291  13.  Annual Report, .1920, p. 23  14. 15. 16. 17.  Minutes. Directors, I, 266 Ibid., 283 Ibid. Ibid., 256  18. 19. 20. 21. 22. 23.  Ibid., 283; Annual Report, 1920, p. .24.; The G -F Journal, Dc. 192i ,p .7 Minutes. Directors, I, 287 Ibid., 311 Ibid., 279 Hopkins, M. B. Wellborn, 87 Quoted, Ibid., 88  24.  Hopkins, M. B. Wellborn, 88  179  CHAPTER 10 1921  Nineteen twenty one has not been recorded in the annals of American economic history as. prosperous. However, before the horns and bells sounded on New Years eve, heralding the advent of 1922, the acute but relatively short lived post World War I depression had about it run its course. Chairman Joseph A. McCord summed up the situation briefly when he wrote: “A review of the activities of the Federal Reserve Bank of Atlanta for 1921 emphasizes more fully the stabilizing effect the Federal Reserve System has had on business conditions generally.. The severe strain. sustained by the financial. structure of the country during 1920 was continued to a considerable extent until the latter months of 1921, when credit conditions became somewhat easier. “When the year was ushered in, there prevailed a feeling of anxiety and uncertainty as to what it would bring forth. Many economic adjustment necessary to normalcy were effected, and the year closed under more favorable conditions, with business generally in a stronger financial position. Stocks had been reduced, prices had declined, liqudations had been effected, and bank holdings of discounts reduced, particularly in commercial centers, although not so marked in agricultural districts. Profits were small and determined losses charged off, so that final figures for the year represented more nearly their true value. “United States securities had advanced in price, and there was a tone of strength to stocks and other bonds. Many hard and tedious transition processes took place during the year, which contributed to the economic readjustment of the country.1 The readjustment process did indeed have its trials and tribulations. During  180  the first half of 1921 wage cuts were announced by American Woolen, Bethlehem Steel, United States Steel, the Standard Oil Company and the meat packers. Labor strikes were numerous. President Wilson vetoed a Resolution of Congress. to revive the War Finance Corporation, but a joint Resolution, overrode the veto and revived the Corporation for the relief of depression in agricultural sections. At midyear a Budget Act provided for a national budget and an independent audit of government accounts. A Budget Bureau was established in the Treasury Department, with Charles Gates Dawes as first Director. Later in the year the Veteran’s Bureau was created and a Revenue Act abolished war taxes on many items.2 Warren G. Harding and Calvin Coolidge were inaugurated President and Vice President. on March 4. Among cabinet members soon thereafter named were Charles Evans Hughes, Secretary of State; Andrew W. Mellon, Treasury, and Herbert Hoover, Commerce. Later in the year William Howard Taft was appointed Chief Justice, and General John J. Pershing, Chief of Staff. In early August the incomparable Italian tenor Enrico Caruso died in Naples and, on November 11, third anniversary of the signing of the Armistice, ending World War I, occurred the burial of the unknown soldier at Arlington National Cemetery in Virginia.3 Atlanta received visits during the year from both the Harding’s and the Coolidge’s. Vice President Elect Coolidge and his brunette wife were guests of the city at the Georgian Terrace Hotel in late January, while President and Mrs. Harding came in late October in response to an invitation exctended by a committee headed by Chamber of Commerce President Lee Ashcraft. The most successful municipal achievement of 1921 in Atlanta was the passage of a bond issue in the amount of $8,850,000. During the next few years the proceeds were spent for new public schools, sewer improvements and extensions, additions to the waterworks and the erection of the Spring Street Viaduct. The bond  181  issue necessitated an increase in the tax rate from $1.25 to $1.50 per $100. But the citizens got their money’s worth.4 Changes in the official family of the Bank were not numerous during 1921. H. F. Conniff, Assistant Cashier in the Fiscal Agent Department, resigned on September 26 to accept the vice-presidency of the First National Bank of Sparta, Georgia. On September 1, W. C. McLarin, Jr., of the parent bank and later to loom large in its affairs, was elected Cashier of the Jacksonville Branch to succeed F. M. Sheffield, resigned.. Indeed, the affairs of the Jacksonville Branch had not been in the best of order for sometime due to loose supervision. Manager C. R. DeSaussure was granted a leave of absence from July to September to visit the grave of his son in France - a war casualty. J. M. Slattery, Secretary of the parent bank filled the Jacksonville managership during this interim.5 Colonel Edward T. Brown, formerly of Atlanta, then of Washington, announced his resignation as a Class C Director, to become effective January 1, 1922. Colonel Brown, a noted lawyer, was one of the original directors of the Bank and had rendered valuable and useful service. He was succeeded as a Class C Director for a three year term by Lindsey Hopkins,6 a prominent Atlanta financier. J. K. Ottley and J. A. McCrary, Class A and B DirectOrs respectively, met no opposition and were unanimously re-elected to three year terms, expiring in 1924. Edward W. Lane, President of the Atlantic National Bank, Jacksonville, Florida, served as a member of the Federal Advisory Council during the year.7 Colonel Brown, incidentally, was paid a feeling tribute at his last Board meeting on December 10. Governor Wellborn, on behalf of the Board, presented a handsome loving cup, to which Colonel Brown responded in a short but appropriate speech. The cup was inscribed: “Presented to Colonel Edward T. Brown, By the Board of Directors of the Federal Reserve Bank of Atlanta  182  1914 — 1921 In Recognition of his Faithful and Efficient Service, In the Organization and Development of the Federal Reserve Bank of Atlanta As an Expression of the Affection and Esteem of his Associates, the Members of the Board ofDirectors.”8 During the early part of 1921 an original, though retired Director died. He was Llewellyn P. Hillyer, a noted banker of Macon. Suitable resolutions upon his death and to his memory were adopted by the Board on April 8.9 A couple of other official appointments were made during the year. Joseph L. Campbell, formerly Assistant Manager of the New Orleans Branch and Assistant Cashier of the Atlanta Bank, was named Deputy Governor on January 1. He was a native of Nashville, Tennessee and secured his early banking experience in that city.10 On December 7 Director W. H. Kettig was named Deputy Chairman of the Board, to serve during the ensuing year.11 On February 18, 1921, the first conference of Governors and Chairmen of the Board of the Federal Reserve Banks of Cleveland, Richmond and Atlanta, was held in Atlanta. Those present were Caldwell Hardy and Governor Seay, of Richmond; J. B. Williams and Governor Fancher, of Cleveland, and D. C. Wills of the Federal Reserve Board. A general discussion relative to rates, the inter-district relation thereto and other matters of mutual interest was had.12 Hectic though the economy was in 1921, the business of the Federal Reserve Bank was brisk and earnings, though somewhat less, held firm. The gross for 1921 was $7,406,652 against $7,476,431 for 1920. Expenses for 1921 were approximately $195,000 in excess of those for 1920. Net earnings available for dividends, surplus and franchise tax for 1921 stood at $5,496,218 compared to $6,010,324 for the preceding year. Of this sum $245,862 was paid out as dividends.13 Activity in discount operations for 1921 were fully as marked as during 1920,  183  although liquidation was shown by many member banks. Out of a total of 515 member banks, 444 had paper under rediscount at sometime during the year, with a peak being reached in September and December.14 Rediscounting with other Federal Reserve Banks, a subject of much controversy during 1920, reached a peak in January 1921, in the amount of $29,083,000, as against $48,856,000 in October, 1920. During five months of 1921, no rediscounting was done with other Federal Reserve Banks.15 National bank membership increased in 1921 from 375 to 386, a fraction less than the gain for 1920. State bank and trust company membership, however, broke all previous records - 87 to 129. The total number of member banks at the close of the year stood at 515, representing a net increase in the capital stock during the year of $136,300.16 A matter of considerable import to the Atlanta Federal Reserve Bank was the so-called “par clearance case.” It occupied the attention of management and particularly of General Counsel throughout the year 1921 and both before and after. The case, to which newspapers referred as an “insurrection” against the Federal Reserve Bank, had its inception in January 1920 and centered in Georgia and Alabama. Its gist was a protest against the Federal Reserve’s insistence on ~ collections” of checks — that is, collection without the service fee which some banks customarily charged. A Cordele, Georgia bank went to court to restrain the Federal Reserve from putting its par clearance order into effect. The Federal District Court threw the case out, this action being argued through the Circuit Court of Appeals and finally the United States Supreme Court. In the Supreme Court the banks charged that officials of the Federal Reserve Bank of Atlanta, “acting in concert with reserve banks in other districts,” had joined in a conspiracy to force small banks throughout Georgia to become  184  members of the Federal Reserve System. In May 1921 the Supreme Court sent the case back to the trial judge for retrial on its merits, though the high court did uphold the Federal Reserve’s contention that United States District Courts have jurisdiction but denied the motion to dismiss the plaintiff’s complaint. The district judge’s decision, two years later, was again in favor of the Federal Reserve and again the case went to the Supreme Court. The latter reversed the lower courts and decided against the Federal Reserve. Representing the Federal Reserve in this litigation were Rollins N. Randolph of Atlanta, General Counsel for the Bank, and John W. Davis, of New York, noted corporation lawyer and, in 1924, Democratic candidate for the presidency of the United States. Even the Federal court decisions did not end the thorny case. In June 1923, the Federal Reserve Board took a final step of reprisal when it prohibited all Federal Reserve Banks from handling checks drawn on the banks which refused to cooperate. This action had the desired effect.17 The matter of how far the Federal Reserve should go as a custodian of securities came up for discussion and decision in the autumn of 1921. Governor Wellborn set forth his views at some length. Leaning toward a liberal custodial policy, he summed up: “Inasmuch as the Federal Reserve Banks are quasi-public institutions, and should endeavor to render the best service possible, not only to member banks, but to.the public in general, I believe that it should be done, if it can be accomplished without incurring any unusual expense. It is therefore my belief that the Federal Reserve Bank of Atlanta could accept for safe-keeping, Government obligations offered to it by its member banks, and could also accept from non-member state banks who are on our par list, such securities as we received from our member banks.  185  Upon motion of Director John K. Ottley it was unanimously voted that the Federal Reserve Bank of Atlanta and Branches, issue safe-keeping receipts only to member banks and non-member banks on the par list.18 Branch bank operations continued at a lively clip during 1921. The New Orleans Branch, with a maximum membership in its zone of 54 banks, extended a total amount of accommodation to them of $531,847,403; Birmingham, with 76 member banks, extended $75,421,320; Jacksonville, with 72, extended $110,391,000, and Nashville, with 86, extended $389,947,000.19 The Savannah Agency, though limited in the scope of its operations, continued to function in a manner that facilitiated the transactions between the member banks located in Savannah and the parent bank in Atlanta. Its existence, and the knowledge that it had an ample stock of currency to care for emergency demands, was no doubt a source of relief to member banks when the closing of some small institutions might have been the predicate for serious disturbances.20 The manager of the Savannah Agency since its organization, R. J. Taylor, was granted a leave of absence on November 19, 1921 to enable him to accept a position with the War Finance Corporation. With the exception of Savannah, all of the Branches came up for new quarters’ consideration during 1921, inspired, of course, by continued growth and expansion. In New Orleans, where the branch employed 96 persons, it was decided to raze the building then owned, at Common and Carondelet Streets, and to erect, on the same site, an entirely new four-story and basement building. An offer by the CanalCommercial Trust and Savings Bank was accepted, whereby the latter agreed to remove the present building down to the foundations and to purchase all materials, vaults, fixtures, etc., paying therefor the sum of $37,500.21  186  Branch directors at Jacksonville recommended the purchase of a 60 x 105 foot lot on the north side of Adams Street between Laura and Hogan Streets for $90,000. The recommendation was concurred in by the Atlanta Board but was not approved by the Federal Reserve Board in Washington. Reasons for the disapproval were significant. Governor Harding, in his letter to Chairman McCord, said: “It the Board does not feel certain by any means that all your branches will be continued permanently The Board aleo objected to the $90,000 price for “a bare lot.” While it was pointed out that the land was located in “the business center of Jacksonville,” the Board rebutted by saying, “there is no necessity for locating your Branch in Jacksonville in the center of the best business district . . . a block or two away would answer all practical purposes.”22 Later in the year approval was secured to pay $45,000 for a lot at the southwest corner of Hogan and Church Streets in Jacksonville, measuring 53 x 90 feet. Even so, the Board did not commit itself to the immediate approval of a building on this site.23 Nashville posed less of a problem. Reported Governor Wellborn in July: “The Federal Reserve Board has approved the purchase of the lot and building on Third Avenue, in Nashville, next to the Stahlman Building, known as the Keith’ building for $85,000, providing the vaults as already therein are in good shape and are of such construction as will serve the purposes of the Federal Reserve Bank. In this connection, I had the Mosler Safe Company send one of their representatives to Nashville on June 3Oth to inspect and submit a report as to whether these vaults were in such condition as would suit our needs. He reports that with the strengthening by means of iron beams and making the walls twelve inches thicher with concrete, they could be made entirely serviceable.”24 A proposal for Birmingham, like that in Jacksonville, drew fire from the  187  Federal Reserve Board in Washington. Both the Atlanta and Birmingham Board voted to purchase a lot, 100 x 100 feet at the northwest corner of Eighteenth Street and Fifth Avenue for $69,000. After which Governor Harding wrote to Governor McCord: “…I will state that the Board has not yet approved the purchase of this lot. In view of the favorable lease which the branch bank has on the quarters in the Jefferson County Bank Building, and the long time the lease yet has to run, I doubt very much whether the Board will approve at any time in the future of an expenditure for the purchase of a lot in Birmingham.”25 Meanwhile the original building of 1918 and the annex thereto, completed in 1920, had become inadequate to accommodate the growth of the business and the increasing number of employees in Atlanta. Fortunately space was available immediately to the east. The Austell mansion at 92 Marietta Street, wherein the Atlanta National Bank was organized in 1865, had only been intermittently occupied since the death of Mrs. Alfred Austell in 1917. The land on which it stood, three-fourth of. an acre, was sold by Sidney Root and Edward W. Marshall, of the ante-béllum Atlanta firm of Beach & Root, to General Alfred Austell on March 17, 1864 for $5000.00. On February 28, 1921, the heirs of Alfred Austell sold to the Federal Reserve Bank of Atlanta a part of this property, fronting 90 feet on Marietta Street and running back 202.3 feet to the Seaboard Air Line Railroad for $180,000.00. Soon thereafter, the Bank, at a contract price of $977,417.49, plus excavation and extras, began the construction of a substantial addition. It consisted in the main of a three story and basement building, plus a partial sub-basement on the eastern side and at the rear of the new portion, the latter for dead files and for boiler and coal rooms. The entire addition was carried out on the same floor levels and in the same architectoral style as the original building and annex.26  188  In reporting on the progress of the building program at the year’s end, Chairman McCord wrote: “Work on the new addition has progressed steadily since July 12th, under the direction of Architech A. Ten Eyck Brown, and the Building Committee headed by Director J. A. McCrary.27 After careful consideration of the bids received, Gude and Company were awarded the contract as General Contractor. “The structural part of the building has already been practically completed, but there are many details which must wait until the installation of the vaults, upon which work has just been begun. It is expected that the entire building will be finished easily before the date set in the contract, namely, October 1, 1922. “As the completed building will have frontage of approximately 158 feet, it has been found possible to achieve a dignified elevation, with ample lighting facilities and entrances; furthermore, on account of the fact that the building sets back about 11 feet of the lot line on each side and that there is a street in the rear, the structure is assured of ample permanent light and ventilation throughout. “The construction of the original building and the addition now under way is reinforced concrete throughout,, with enveloping walls of face brick and marble, backed up with hollow tile to give a warm building in winter and a cool building in summer, by means of the air spaces which this type of construction affords. Tile floors are used in the toilets; marble floors in the public lobbies and corridors, and wood floors in working spaces, with a finished cement floor in the sub-basement, garage and boiler room. Most of the doors are of metal, as are such items as balustrades, though some are of marble, having been so constructed with the idea of using durable materials in order to keep down the cost of maintenance. There are practically no painted surfaces, except the walls and ceilings of working spaces and officers quarters. “The exterior of the building is to be handsome and dignified -practically a  189  continuation of the original, with certain changes which in the completed design will make a distinct improvement on the original, at the same time re-using all of the old materials, such as marble columns, cornices, bolts, ashler, etc. “Owing to the fact of the work having been done in sections on the original building, the vault was first located at the rear of the structure in the center, and was enlarged at the time of building the annex, by the insertion of a vault of the same size below the first, and on the basement level, for coin storage. “In laying out the vault system, with a view to the future development of the bank, it was decided to locate the new vault in the center of the entire basement, on the basement level, and with dimensions approximating 30 x 60 feet. This vault is being constructed in accordance with the improved methods demonstrated at recent tests last year at Washington, and this year at Sandy Hook, held by the Consulting Architect of the Federal Reserve Board. The construction of the main door and of the emergency door will involve the application of these improved principles.”28 Matters relating to personnel and the general well-being thereof, had adequate attention during 1921. In reporting on the operation of the “Federal Reserve Bank Club,” Chairman McCord wrote: “The Club had, on the whole, a very satisfactory year. Perhaps e outstanding accomplishment was the launching of a very creditable magazine, which has been called ‘The 6-F Journal.’ The first issue, under the editorship of Mr. Ward Albertson, Assistant Federal Reserve Agent, met with pronounced approval and popularity. “Another noteworthy action was the giving of $250 from the Club treasury, and a like amount from the Birmingham, Jacksonville and Nashville Branch Clubs, toward the support of the Employee’s Benefit Fund at the New Orleans Branch, which is unable on account of legal restrictions to maintain such a fund for itself. Besides this 190  initial gift, each of the other Branches as well as the parent bank is to contribute $25 monthly toward the upkeep of the New Orleans Club. “The Welfare Committee continued its good work throughout the year. “Many social functions were held with something more than the. usual attractiveness and success. There was an elaborate dinner dance for the new officers on March 17th; the annual picnic on June 3rd, and other feature dances at Holloween and Christmas, interspaced with the regular semi-monthly entertaiments.”29 The picnic, incidentally, was held at Marietta and featured a horseshoe pitching contest between Governor Wellborn and Chairman McCord. Wrote John R. Marsh in the Atlanta Georgian:30 “Governor Wellborn was rather nervous when he arrived at Marietta because he was scheduled for a battle with his associate, Joseph A. McCord, for the banker’s championship in horseshoe pitching. The two contenders squared away just before noon with a big crowd at the ringside. Joe Slattery was accused by Mr. McCord’s seconds of using the hypnotic eye on their battler and he was ordered to stand a safe distance away. The first round was even and after several more the decision was still in doubt, both men standing punishment well. They finished the match all square and neither could win in the extra rounds, so they decided to pitch one horseshoe apiece for the championship. Governor Wellborn’s fell a fraction of an inch closer than Mr. McCord’s and he was given the decision.” Additional compensation in the form of a bonus was paid to all employees, on the basis of annual earnings, June 30 and December 20, 1921.31 Employee .morale was further enhanced in October when the Board of Directors voted unaminously to approve a Pension Plan.32 Another boon to the staff was the cafeteria. During 1921 the price of monthly meal tickets was reduced from $6 to $5 per person.33 It was at this stage of the Bank’s history that the advisability of establishing  191  a library was first discussed. Governor Wellborn reported in May that he had received several letters on the subject from Miss Ella May Thornton, Assistant State Librarian. He pointed out that the Bank then had no room for a library but that the matter might be considered in connection with the new addition.34 Economically, 1921 was a transition year between post-World War I depression and the prosperous mid-twenties which lay ahead. The banking situation in the Sixth District, as it existed during the critical period of the transition was described by Governor Wellborn in a report to the Board of the Atlanta Bank on December 10, 1921: “If it were possible for your Board to sit with our Executive Committee each day, witnessing its deliberations and workings in every detail, I venture to say that you would be astounded to learn of the very serious condition of a large number of our member banks. “As you know, the decline in deposits has been general, but possibly as many as twenty five or thirty have shown that they are experiencing the most severe effect of the present depression, their deposits having declined more than fifty percent, and, in extreme cases, sixty to seventy five percent. Their decline in deposits has been in much larger proportion than their collection of bills receivable. This has been due I think almost entirely to the great and rapid fall in prices of agricultural products in this section; and to the added aggravation of the devastation wrought by the boll weevil. Those banks having deposit balances have checked upon them unceasingly, in order to continue carrying some of their two years’ production, and investments made during the era of prosperity; and as a response to the importunities of friends for personal loans of funds which they too, needed to supply them with the necessities of life, while endeavoring to hold on to their visible assets, until the time was reached when their disposal would cause the least sacrifice.  192  “Last year’s cotton and rice crops which were produced at a good deal higher cost than they can bring in the present market, still remain unsold to a large extent. The sugar section is confronted with the competition of very low-priced foreign sugars, and therefore their production cannot be marketed without loss. “The daily problem which our Executive Committee must meet, is that of properly taking care of those of our member banks which are in straightened condition. Many of these banks have been very heavy borrowers through the year; and, while this season of the year would naturally demand that there be curtailment, deposit declines are in larger volume than collections. To preemptorily decline the increased accommodiation, would perhaps so cripple the functioning of the applicant that it would have to close. Some of these extended banks will draw checks or send advices of credit for cash letters, without sufficient balances or provision to cover. Such cases must be very carefully handled, as the declination of checks, or advice to the endorsers of the non-receipt of their remittance for their items would soon percolate back to the community in which the bank is located, and perhaps be attended with serious consequences. The reports of examination of such banks are watched very closely, and the paper they offer for rediscount is scrutinized to the last degree. “We are in almost daily touch with the officers of those institutions, laying particular stress in those cases where the officers and directors, by the concentration of their own lines, are impeding the proper functioning of their own institutions. I feel that it is the duty of our Committee to sustain and back up to the furtherest point possible, our member banks, by accepting their paper for rediscount where it is reasonable to do so, taking into consideration the declaims and demands of other member banks, and the general effect in the particular community, should we decline to go further. “As so many non-member state banks have failed we feel that if a national bank or a state bank which is a member, should fail in an important section, it might  193  bring on very serious results for our agricultural member banks and their communities. The responsibility of our work can well be cornpared to the task of guiding a ship along a tortuous and perilous course, with submerged obstructions continually in the offing. On the one hand, we are confronted with the danger of extending so much aid to a member bank that, if it failed, we should incur a very considerable loss. “On the other hand, if we go to a great length and save a member bank so that it can, in time, work out of its difficulties, I feel that we would be accomplishing what was intended in the establishment of the Federal Reserve System. It is our fundamental duty to take care of extremes and emergencies, and while the responsibilities are exceedingly heavy, still I believe that we should show the proper nerve and fortitude, and go as far as is possible in saving any member bank which is in difficulty.”35 Governor Wellborn pacticed what he preached. Many years later Paul M. Davis, President of the American National Bank of Nashville, in commenting upon this facet of Wellborn’s character, said: “Governor Wellborn did a great job at a time when the Federal Reserve System was new and had no precedent by which to go, and he had the vision and guts to fill the job admirably... To my mind he had a fine understanding of what the Federal Reserve System was really intended to do and did his part. In other words, he read between the lines.”36  194  NOTES CHAPTER 10. 1.  Annual Report, 1921, p.7.  2.  Keller, Dictionary of Dates, II, 323-328.  3.  Ibid.  4.  Garrett, Atlanta and Environs, II, 779-782.  5.  Annual Report, 1921, p.p. 22-23; Minutes, Directors, II, 375, 420, 441.  6.  Lindsey Hopkins, the new Director, was born near Reidsville, N • C., in 1879. He was a pioneer in the sales development of motor cars in the Southeast and was an early flying enthusiast. He settled in Atlanta in 1910 and subsequently became a director of several corporations, including the Coca-Cola Company, American Hide & Leather Company, Sperry Corporation, and North American Aviation. He died in 1937.  7.  Annual Report, 1921, p. 23; Minutes, Directors, II, 455.  8.  Minutes, Directors, II, 461. In March, 1921, Col. Brown presented to the bank a table, long in his office, at which the first meeting and all preliminary meetings of the Board of Directors were held prior to the inauguration of the Federal Reserve System. The Board accepted the gift with thanks and appreciation.  9.  Minutes, Directors, II, 361.  10.  The 6-F Journal, March, 1923, p.7  11.  Minutes. Directors, II, 456.  12.  Ibid., 353  13.  Annual Report, 1921, p.3  14.  Ibid., 10  15.  Ibid.  16.  Ibid., 15-16.  195  17.  Minutes, Directors, II, 376, 386: Hopkins, M. B. Wellborn, 83-84.  18.  Minutes. Directors, II, 440, 442.  19.  Annual Report, 1921, pp. 17-18.  20.  Ibid., 18.  21.  Minutes, Directors, II, 387, 396, 407, 431.  22.  Ibid.~ 385-386, 408.  23.  Ibid., 442, 449.  24.  Ibid., 408.  25.  Ibid., 416-17, 427.  26.  Ibid., 342-43, 352-53, 363, 370, 374-75, 398, 404-5, 414; Correspondence between L. C. Adelson, Acting Governor and A. B. Trowbridge, Consulting Architect, Oct. 24, 1921; “The Romance of Atlanta Realty,” Atlanta Chamber of Commerce, 1921.  27.  Other members of the committee were Directoes J. K. Ottley, W. H. Kettig, Governor Wellborn, and Chairman McCord.  28.  Annual Report, 1921, pp. 21-22  29.  Ibid., 23.  30.  Quoted in Hopkins, M. B. Wellborn, 102-103. Marsh was subsequently married to Margaret Mitchell, author of “Gone with the Winds”  31.  Minutes, Directors, II, 408, 457.’  32.  Ibid., 445.  33.  Ibid., 390.  34.  Ibid., 378.  35.  Ibid., 454-455.  36.  Hopkins, 14. B. Wellborn, 99-100.  196  CHAPTER 11 1922  During 1922 the country reached a degree of financial stabilization it had not known for several years. The last advance of money under the Liberty Loan Acts was made on May 29 - $717,834 to Czechoslovakia. Twenty million dollars were appropriated by Congress for the relief of starvation in Russia, while at the end of the year the public debt stood at just under $23,000,000. Meanwhile, in June, the Federal Reserve Act was amended to provide for agricultural representation on the Federal Reserve Board and the powers of the War Finance Corporation to make loans for agricultural purposes were extended to June 30, 1923.1 A notable bank consolidation took place in Atlanta in September, 1922, when Asa C. Candler’s Central Bank and Trust Company was absorbed by the Citizens and Southern National Bank.2 The radio age, a new era of communication opened locally on March 16 when the Atlanta Journal’s station WSB began operations. The adjoining County of DeKalb celebrated its centennial during the year and the Town of Decatur became officially the City of Decatur. Women came to the fore politically with the election, in September, of Miss Bessie Kempton, of Atlanta, to the State Legislature. Two months later Mrs. Rebecca Latimer Felton was appointed to the United States Senate to fill the unexpired term of Thomas E. Watson, deceased. Both the election of Miss Kempton and the appointment of Mrs. Felton represented firsts for their sex.3 Governor Wellborn’s thoughts on the economic situation at the beginning of 1922 were expressed to the press as the year started: “The business outlook for the coming year is a great deal brighter than it was at this time last year. In my opinion, we have passed through the severest part of a  197  depression, which has been not only section-wide or nation-wide, but which has profoundly affected the entire world. “Business concerns generally have had opportunity to adjust themselves to changed conditions, as manifested chiefly in a lower level of prices. The textile industry, whose condition touches this district more vitally, in all probability, than that of any other industry, shows a considerable improvement. There are many mills now running on full time, whereas, a year ago most of these mills were shut down entirely and still others were being operated on a half time basis. “The farming outlook, so far as the production of cotton is concerned, is in a very uncertain state, on account of the depredation of the boll weevil and the probable extension of that insects activities over a larger area during the next twelve months. It has, however, been demonstrated on many occasions that we receive about as many dollars for a small crop as for a larger one. Consequently, decreased production does not necessarily mean a financial loss for the farmer. “The credit situation in this district is far sounder than it was last December. Commercial and industrial concerns will have little difficulty in securing funds at a reasonable rate of interest with which to finance their operations. “The banking business, generally speaking, is on a sound basis throughout this District; and many banks which have been compelled to rediscount with the Federal Reserve Bank, in order to take care of their local situations, have entirely wiped out their indebtedness to us, and are now in a sufficiently strong position to meet in a satisfactory manner the requirements of their customers for the coming year.”4 Though the economic situation did indeed look better in early 1922, repercussions of the cotton panic of 1920-1921 were still being felt. Governor Wellborn’s work in helping to halt the panic was acclaimed by the banking fraternity. The public, however, began to hear rumors that the Federal Reserve, by. curtailing  198  credits for luxury buying, had brought on the crisis.5 Governor Wellborn rose to the defense of the Federal Reserve System, and, in Washington, Senator Carter Glass was preparing one of the great speeches of his career in behalf of the financial system which he helped create. Yet the muttering continued and an investigation was demanded.6 Defending the operation of the Reserve System Glass cited salaries and other expenses in comparison with expenses of private banks: “The governor of the Federal Reserve Bank of Atlanta gets $18,000,” he said. The president of one member bank at Atlanta gets $20,000; another $17,500. The vice-president of one bank there gets $18,000. The salary account of the Atlanta Federal Reserve Bank averages very much less than the salary account of the individual member banks.”7 In answering another charge, the Seantor went on to say: “…The Federal Reserve Board, it is charged, loaned its own members $18,000,000, which vast sum it is suggested they used to gamble in cotton after deliberately using their official powers to depress the price for their own profit. Perhaps there are cotton pickers on plantations of the South who may be deceived by such trumpery, but surely there is no member of the Senate who does not understand how absolutely preposterous these accusations are. “No Federal Reserve Bank in the system can loan any individual or corporation in the United States a penny... These banks are banks of banks and do business only with banks... “8 The Congressional Committee appointed to study the handling of agricultural credits by the Federal Reserve Banks was composed of three Representatives and two Senators, with Senator E. D. Smith of South Carolina as the Chairman. The Atlanta hearings were held January 26-27, 1922 in the Senate Chamber  199  of the State Capitol. Governor Wellborn was called to appear and was asked many questions about his policy during the panic, all of which he readily answered. The following account is by Robert E. Harvey,9 of Atlanta, who was present at the hearing: “The Governor had finished his statement to the Committee, and, after a great many questions had been asked him by the members, he was excused. Senator Smith left his seat, followed the Governor into the outside corridor of the Senate Chamber, and said: ‘Governor Wellborn, I have listened with great interest to your testimony on the subject of Farm Credits; and, although I have never met you before, I have known you for a long time through your public utterances, and have wished -for this opportunity to meet you personally, and state to you, face to face, that in all of these trying times the country has been through, a clear note of sound common sense has rung through it all from the Governor of the Federal Reserve Bank of Atlanta. You have handled the agricultural situation with a sympathetic and understanding policy, and your direction of the Federal Reserve Bank of the Sixth District has been frequently discussed in Washington in the most favorable manner. If the other banks in the System had pursued your policies, there would have been no occasion for these hearings...”10 The official family of the parent bank and branches, elected in December, 1921 to serve during 1922, was composed as follows:” Atlanta M. B. Wellborn,  Governor  L. C. Adelson,  Deputy Governor  J. L. Campbell,  Deputy Governor  M. W. Bell,  Cashier  J. M. Slattery, Creed Taylor, W. R. Patterson,  Secretary General Auditor Assistant Cashier  200  W. B. Roper,  Assistant Cashier  R. A. Sims,  Assistant Cashier  J. B. Tutwiler,  Assistant Cashier  Savannah Agency R. N. Groover, D. E. Avery,  Acting Manager Acting Assistant Manager  Birmingham A. E. Walker,  Manager  W. C. Sterrett,  Cashier  Jacksonville C. R. DeSaussure,  Manager  W. S. McLarin, Jr.,  Cashier  Nashville J. B. McNamara,  Manager  J. B. Fort, Jr.,  Cashier  New Orleans Marcus Walker,  Manager  W. H. Black, James A. Walker,  Assistant Manager Cashier  F. C. Vasterling,  Assistant Cashier  M. F. Harlan,  Assistant Cashier  Joseph A. McCord continued as Chairman and Federal Reserve Agent and  201  Hollins N. Randolph as General Counsel. Not many changes occurred during the year. Julian B. Tutwiler, Assistant Cashier, in charge of the discount and credit departments of the parent bank, resigned in September to accept the vice-presidency of the Miami National Bank, Miami, Florida. W. B. Roper, Assistant Cashier, was assigned the immediate supervision of Mr. Tutwiler’s two departments, in addition to the accounting department, already under his charge.12 C. R. Tidwell, Assistant Federal Reserve Agent in charge of the department of bank examinations, resigned effective December 31 to become vice-president of the Bank of Orange and Trust Company, Orlando, Florida. W. S. Johns, Assistant Federal Reserve Agent and Auditor of the New Orleans Branch, was transferred to Atlanta to succeed Mr. Tidwell. At the same time, Lawson Brown, Assistant Auditor, Atlanta, was appointed to Mr. John’s position in New Orleans and P. J. Prosser, Jr., was elected Assistant Cashier of that branch.13 Edward W. Lane was re-elected as a member of the Federal Advisory Council for the year.14 In April it was voted to employ Counsel for the New Orleans Branch and in May Ralph J. Schwartz, of the firm of Morris and Schwartz was retained.15 The feasibility of creating the post of Assistant General Counsel of the Atlanta bank and the election of R. S. Parker thereto was discussed in November and December but the matter was postponed to 1923.16 In all probability no individual had a greater influence upon the operations and policies of the Federal Reserve System during its formative and early years than did William P. C. Harding, the Alabama banker who became an original member of the Federal Reserve Board in Washington and its governor in 1916. He frequently attended Directors meetings of the Alabama bank. His last, as a member of the Washington  202  Board, was on May 12, 1922, which meeting was held in Birmingham. On this occasion he was given the privilege of the floor. His remarks, as recorded in the Minutes, follow: “He stated he had always taken not only an official, but a great personal interest in the affairs of the Federal Reserve Bank of Atlanta. He spoke of the possibilities of the Sixth District and paid high tribute to the directors and officers of the Federal Reserve Bank of Atlanta, stating that they had not only shown ability to make large loans, but further ability to get their money back. He stated that we had a smaller percentage of outstanding loans than any other of the Federal Reserve Banks in the agricultural section, and that in the matter of ‘lame duck’ banks in our District, the bank was in better shape than in any agricultural district and further that in two Federal Reserve Districts, over 80% of their loans were to over extended banks. “He also spoke of the demands of member banks that they be paid interest on their reserves, but that this was ill-advised as it might put the Federal Reserve Banks in competition with Member Banks. He stated, however, that he understood Congressman Appleby of New Jersey had prepared a bill looking to a further return to member banks than that now provided by law. He was of the-opinion that there would always be lean years in the Federal Reserve System, and good years, and that there was no cause for undue alarm when earnings were not large. And that while banks might temporarily have too many employees that there should not be any necessity for large reductions of force, but that clerks resigning or dismissed should not be replaced until the necessity demanded.”17 Mr. Harding resigned from the Federal Reserve Board on August 9, 192218 upon which occasion he sent the following telegram to Chairman McCord: “McCord, Atlanta My official connection with the Board terminates tonight. I shall always look  203  back with pride and pleasure upon my association with the System. Greatly appreciate the cordial cooperation I have always received from your officers and directors. Warm regards to all connected with your bank and best wishes for future welfare of the system, the bank and its personnel. President has redesignated Mr. Edmund Platt as Vice-Governor. As such he will act as Governor until a Governor is designated.”19 Chairman McCord, on behalf of the officers and directors of the Atlanta bank replied appropriately to Governor Harding’s message.20 Among problems of the year was that of accommodation to country banks, touched upon by Mr. Harding in his references above to “lame duck” banks. In reporting to the Board in February, Governor Wellborn addressed himself to the same problem: “I fully realize and appreciate the troubles of a great many of our country member banks, particularly those banks located in small towns which are supported mainly by agriculture. They are unable to take up their paper with us, and we find it necessary to continue to rediscount for them, not because they are making many loans at the present time, but because their deposits have materially declined without any consistent liquidation in the matter of their loans. “The whole organization of our government, from the President down, is taking a lively and sympathetic interest in the welfare of the farmer, both in the South and in the West. There is not only a disposition to assist them with the financial machinery at hand, but there is a desire on the part of the President, the Federal Reserve Board, and Congress to afford the farmers, through the Federal Reserve Banks, every reasonable credit facility. The Executive Committee of our bank is fully cognizant of the situation, and we are doing all in our power to help matters in this district. We are extending credit very freely to the farmers and it seems to me that if we have erred at all, it has been rather on the side of liberality than of restriction.”21 Another current problem of 1922 was focused upon by Governor Wellborn  204  in a report to the Board of Directors in May: “We are still confronted with a serious situation in handling a number of member banks which are already over extended, but which from time to time, are pressing us for additional accommodations. Their credit on the outside is evidently impaired, and they are necessarily depending upon our Bank entirely for their support. We scrutinize very carefully every paper offered by these banks and conduct an active correspondence with them. Also, we frequently have officers of these institutions come to confer with us regarding their situation; and we discuss in detail with these officers the lines of indebtedness which are due them, Of course we are averse to extending these banks additional accommodation, for we are well aware that in some cases their capital have been impaired, and that they have sustained other probable losses which have not yet been ascertained. It is a difficult situation, both for the banks and for ourselves, but we are doing our very best to tide them over;. and unless we grant the additional accommodation requested by them, they would be unable to maintain any reserve with us, and, in some cases,. failure might be brought about.”22 A difficult situation indeed. Of the banks described by Governor Wellborn, most were in small and medium sized towns. Five were in Alabama, one in Florida, sixteen in Georgia, and two each in Louisiana and Tennessee.23 It was probably inevitable that financial institutions of lesser magnitude should attempt to capitalize on the Federal Reserve name and connotation of strength. The first such instance to engage the attention of the Atlanta bank was “The Federal Reserve Loan Company,” of Gainesville, Florida. Chairman McCord, after considerable correspondence with this firm, secured just a modification to “Florida Reserve Loan Company” and finally to “Florida Loan Company.”24 On the building construction front 1922 was a busy year for the Sixth District Federal Reserve Bank - in Atlanta, New Orleans, Nashville and Jacksonville new  205  buildings or additions to buildings were the order of the day. Only in Birmingham, where leased quarters in the Jefferson County Bank Building were well suited to needs of the branch, was earth unturned. It was expected that the addition to the Atlanta building, began during 1921. on the site of the former Austell home would be completed by the end of 1922. However delays in receiving shipments of materials due to railroad strikes, with a resultant reduction in the work force of the contractor slowed progress considerably. A January 1923 target date for cornpletion was predicted.25 In New Orleans a contract was let on April 22 to George J. Glover in the amount of $706,393.00 for the erection of a four story and basement building at the corner of Carondelet and Common Streets. Completion was contemplated in 365 days, with a penalty for delay and a premium for completion earlier, both on a per diem basis.26 A banking home for the Nashville Branch was completed on Third Avenue, North, in December 1922. A three-story structure with basement, it had an imposing front and was well suited to the requirements of the business. The branch moved to the new building on December 21 from its old quarters in the Fourth and First National Bank Building, which it had occupied since opening. Total investment in the new building was $21.5,669.6O.27 In December 1.922 a contract was let for the erection of a two-story banking house suited to the requirements of the Jacksonville Branch. Estimated cost to complete the building, located at Hogan and Church Streets, was $191,690.08.28 Extra embellishment for the Atlanta bank, both Directors Room and new building, were provided for during 1922. In April the directors voted to invite Governor Wellborn and Chairman McCord to have suitable portraits of themselves prepared for placement in the Directors’ Room.29 In October Governor Wellborn suggested to the  206  Board that some mural decoration might be in order for the new building. He observed that a painting of the signing of the Federal Reserve Act, showing those in attendance, including former Director E. T. Brown, would be an appropriate subject. Chairman McCord, in somewhat more epic vein, suggested a depiction of the agricultural and industrial activities of the Sixth District.30 After considerable discussion of the latter project Atlanta Artist Wilbur G. Kurtz was commissioned to execute a painting eight feet long and five and a half feet wide for a fee of $2,500. Its title: “President Wilson signing the Federal Reserve Act in December, 1913.”31 Matters concerning personnel came up for consideration during 1922 as they had in preceding years. In January a general salary policy was nailed down. It provided that all salary matters whatsoever, including employments, transfers, resignations and dismissals both for the parent bank and branches, should be handled by the Managing Committee and brought to the attention of the Special Salary Committee, each month, for review and final action and to be reported monthly to the Board of Directors. The policy provided further that salary increases should be held in check so as not to be out of line with similar salaries paid by financial institutions in Atlanta and other parts of the District, keeping in mind that a just salary should be paid for work performed. Conservatism was to be the order of the day in fixing salaries.33 Conservatism, however, did not preclude recognition of merit. The Jacksonville Branch had been a perennial problem, management-wise. In 1.921W. S. McLarin, Jr. was sent from the parent bank on a trial basis to be Cashier at Jacksonville at a salary of $2,400 per year. His salary was increased to $3,000 on January 1, 1922. At the September Board meeting, following, Governor Wellborn, in commenting on McLarin, said: “I am glad to say he has made a success, and I feel that his salary  207  should now be increased commensurate with the duties and importance of his position. I therefore recommend that his salary be fixed at $3,600 dating from July 1, 1922.”34 It was. W. S. McLarin, Jr. was to go far with the bank. A Christmas bonus was paid in 1922, though, like salary matters, it was marked by conservatism. At the December 8 meeting of the Board, upon the recommendation of Governor Wellborn, Directly Ottley offered a motion that the Bank, as a Christmas remembrance, give to each employee receiving a salary of $1,000 or less per annum, the sum of $10.00, and the sum of $5.00 be, given to all. employees receiving a salary of over $1,000, not exceeding $4,000. This gift to apply only to employees and not including officers. Directors Simon and Kettig were in favor of giving all employees $10.00 but the motion as put by Director Ottley prevailed.35 Throughout the year much discussion was had as to the feasibility, and particularly the desirability, of setting up a “Member Banks Relations Department.” In January a committee composed of Directors Newton, McCrary, Ottley, and Kettig was appointed to make a report on the subject. In December it was finally decided that such a department should be created, though the details of its organization were deferred until the following year.36 At the same meeting it was voted to authorize the Branch banks to join the Chambers of Commerce in their respective cities.37 The unsettled business climate which prevailed during the immediate post war period had largely given way to a more stable economy during 1922. Conditions generally were described by Chairman McCord in his Annual Report for the year. He wrote: “Business conditions during 1922 have shown a steady improvement and although foreign trade has been at a low ebb, the close of the year found the Sixth Federal Reserve District in a more stabilized and in many respects, in a more satisfactory position than at any time since the outbreak of the World War. The  208  uneasiness on the part of the public, which commenced in 1920 and continued for the most part through 1921, has given way to a more settled and confident feeling and except for the railroad and a few unimportant strikes in the District, there have been few disturbing influences. “The reserve city banks and those in financial centers have shown a healthy improvement, and a general improvement has been made by the banks located in agricultural sections, although it has not been so marked as in the larger city banks. “There has been a reaction in the downward trend of prices, and the returns for agricultural products have been much more satisfactory than for the preceding year. The advanced price of cotton, with a larger yield than last year (although much below the ten year average) has aided the farmers materially, except in restricted areas where the boll weevil has practically destroyed the crop for three successive years. “In most lines of the wholesale trade there has been a steady upward trend, and the increase is also apparent in comparing the same months’ business with that of the preceding year. Reports indicate that the retail trade generally is buying for immediate needs, and is not inclined to increase stocks. The reports of department stores do not show the same ratio of increase in sales as is shown by the several lines of wholesale trade. This, however, can be attributed to some extent to the late fall and winter, which if anything was milder than last year. “The industrial plants, especially textile, iron and steel, have’ been more active than for many months past, and production has shown a steady increase. “To sum up the situation, it is believed that with conditions at home and abroad still unsettled, recovery in the Sixth Federal Reserve District during 1922 has been on the whole satisfactory, if not remarkable.”38 A more stabilized economy brought with it less activity for the Federal Reserve Bank and reduced earnings. Indeed, 1922 was what Governor Wellborn  209  referred to as a “lean year.” Gross earnings for the year were $2,352,736 which represented only 31.7% of the $7,406,652 earned in 1921. The decrease was a reflection of the rapid decline in earning assets during the early months of the year to the low and fairly even level which prevailed for the remaining months. Expenses for the year were $1,293,053, a reduction of $287,532 from 1921. The principal items showing a decrease were officers’ and clerks’ salaries, printing and stationery, cost of Federal Reserve Currency, and tax on Federal Reserve Bank note circulation. Net earnings far 1922 came to $1,059,683, a decrease of 82% from 1921’s $5,826,069.39 At year’s end membership stood at 543, an increase of 28 during the year. Of the new member banks, ten were National and 18 were State banks.40 On the lighter side the Bank’s magazine, The 6-F Journal, under the heading “Personals,” offered the following comment relative to certain officers and employees: “Whoever Heard Of: Governor Wellborn pulling down the shades in the lunch-room? Mr. McCord smiling at anybody? Mr. Adelson smoking a black pipe? Mr. Campbell War Financeing anything? Mr. Bell saying ‘Doggoneit? Mr. Slattery pulling down his vest? Mr. Roper opening a window to ‘let in a little fresh air?’ Mr. Patterson signing anything? Mr. Sims kidding the giils? Mr. Albertson saying ‘Ah-h-h? Mr. Taylor laughing very loudly at anything? Mr. Tutwiier playing the ‘Song of India’ on the Victrola during lunch? The Registered Mail Shipping Department being able to find Shep  210  when they wanted him? Mr. Camp getting enough heat up to the Auditing Department? John Bach not being too busy to wait on you, when you needed him? Mr. Johns carrying the baby around - just for the exercise? The Editorial Staff getting the Magazine Out on time?”41  NOTES  211  CHAPTER 11. 1.  Keller, Dictionary of Dates, II, 329, 331-332.  2.  Garrett, Atlanta and Environs, II, 495; Minutes. Directors, II, 561.  3.  Garrett, Atlanta and Environs, II, 789-792.  4.  Minutes, Directors, II, 465.  5.  Hopkins, M. B. Wellborn, 103.  6.  Ibid.  7.  Quoted, lbid, 105.  8.  Quoted, Ibid, 107.  9.  At the time Mr. Harvey was Secretary Agricultural Loan Agency of the War Finance Corporation, in Atlanta.  10.  Quoted, Hopkins, M. B. Wellborn, 107-108.  11.  Minutes, Directors, II, 459.  12.  Annual Report, 1922, p. 27.  13.  Ibid., 27-28.  14.  Minutes. Directors, 11,484.  15.  Ibid 500, 506.  16.  Ibid., 569, 585.  17.  Ibid 511-512. The Bank had a relatively lean year in 1922.  18.  He became Governor of the Federal Reserve Bank of Boston on January 1 1923 and died April 7, 1930.  19.  Minutes, Directors, II, 539-540.  20.  Ibid., 540.  21.  Ibid., 480-481.  22.  Ibid., 507.  23.  Ibid.  24.  Ibid 511, 528, 541.  212  25.  Ibid., 565; Annual Report, 1922, p.28.  26.  Minutes, Directors, II, 509-510; Annual Report, 1922, pp. 28-29.  27.  Annual Report, 1922, p.  28.  Ibid., 29  29.  Minutes, Directors, II, 501  30.  Ibid., 560  31.  Ibid., 560, 567, 581  32.  Ibid., 467  33.  Ibid., 479-480  34.  Ibid., 547  35.  Ibid., 584  36.  Ibid., 462, 464, 582  37.  Ibid., 584  38.  Annual Report, 1922, pp.  39.  Ibid., 14  40.  Ibid., 24  41.  The 6-F Journal, March, 1922, p  213  CHAPTER 12 1923 The world became smaller in 1923. In mid-January the first transatlantic radio message was transmitted between New York and London. In March a world aeroplane speed record was set at 236.5 miles per hour. A few months later this was upped to 266.6 simultaneously. Robert A. Millican was awarded the Nobel prize for physics as the man who first isolated and measured the electron.1 An exodus of Negroes from the South to Northern cities was also taking place. From Georgia alone 32,000 departed, representing 13% of its farm labor.2 On March 4 Congress enacted the Agricultural Credits Act which authourized the creation of 12 Intermediate Credit Banks, each with a capital of $5,000,000, subscribed by the Government, and authorized to make loans, not only on land, but on farmers crops, live stock, personal notes and equipment.3 Headline of the year was, of course, the unexpected death of President Warren C. Harding in San Francisco. after an illness of a week. The day following, August 3, Vice President Calvin Coolidge took the oath of office as President, at Plymouth, Vermont.4 During its August meeting, on the 10th, the Board of Directors of the Federal Reserve Bank of Atlanta took note. Chairman McGord called attention to the great loss the country had sustained and stated that -the day had been proclaimed one of sorrow and mourning. Director McCrary moved that a recess of one hour be taken in memory of the departed President, which motion was seconded by Director Simon and unanimously carried.5 As the year was closing in December, President Coolidge delivered his first annual message. He declared- in favor of adherence to Permanent Court, the tax reduction plan of Treasury Secretary Andrew Mellon, coal control, and prohibition  214  endorsement. He opposed a soldier bonus and cancellation of Allied war debts.6 Eleven months before, Governor Wellborn, in his January report to the Board, summing up the economic situation as the year began, wrote: “On the whole it may be said that there is growing confidence on the part of the business public. That conditions are being righted, although in some lines slowly; and the attitude of business men generally at the present time, lacks the element of doubt and uncertainty which was so widely prevalent at this time a year ago. Some apprehension is felt, of course, over unsettled conditions in Europe, particularly over the Allied disagreement on the reparations question and the French invasion of German towns to enforce their demands. But it is hoped that the conservative policy advocated by Premier Bonar Law of Great Britain and Secretary Hughes of the United States will, in the end, prevail. An amicable settlement of the reparations question would undoubtedly be reflected in a quickening of foreign trade and a consequent improvement in business conditions in this country.7 The official family of the Bank remained much the same during 1923 as in 1922. Though, inevitably, some changes took place. The firm of Randolph and Parker, composed of H. N. Randolph and R. S. Parker, was named General Counsel succeeding H. N. Randolph, individually. Compensation was increased from $2,500 to $3,500 per annum.8 Mr. Parker was destined to play an increasingly important role in the affairs of the Bank as the years went by. J. B. Tutwiler was elected Assistant Cashier in December. He was placed in charge of the Failed Bank Division and special visitation to member banks in an extended condition.9 Captain W. H. Hartford, an original director of the Bank was forced to miss his first meeting on November 9, 1923. Illness prevented his attendance.10 Aside from some changes made as the result of the establishment of an agency in Cuba, which will be noted later, the branches came in for few official changes.  215  In January Bion H. Barnett resigned as a Jacksonville Branch Director and was succeeded by Courts P. Kendall, Vice President of the Barnett National Bank. H. B. Lightcap had resigned as a New Orleans director as of the first of the year. On January 12 the following Branch Directors were named: New Orleans, P. H. Saunders, A. P. Bush and F. W. Foote; Jacksonville, John C. Cooper and Fulton Saussy; Birmingham, W. H. Kettig and Oscar Wells; Nashville, W. H. Hartford and Paul M. Davis.11 M. F. Harlan was elected Assistant Cashier at New Orleans in January, and P. J. Prosser resigned as Assistant Cashier at the same branch in June.12 A number of policy matters concerning personnel were considered and acted upon during 1923. In March a letter from the newly organized Atlanta Junior Chamber of Commerce, soliciting ten members from the Bank was replied to in the negative, the “officers of the Bank being not in favor of the expenditure.”13 In June, upon recommendation of Governor Wellborn, the maximum amount of coverage under the Bank’s group insurance policy was increased from $3,000 to $5,000.14 A plan for uniform vacations was adopted in November which provided one month for senior officers - Governor, Deputy Governor and Cashier of parent bank - and three weeks for all other officers. For employees the plan provided “one day (exclusive of Sundays) for each month in the employ of the bank preceding the period designated for vacations; except that no vacation will be allowed until six months’ service has been completed. Vacation periods not to be cumulative for more than twelve days (exclusive of Sundays) and not to be granted prior to April 1 nor later than September 15, without special authority from the Managing Committee.”15 During the same month the Board took up for consideration a recommendation of the Governor regarding an appropriation for educational purposes in connection with the American Instiatute of Banking. It was voted that employees of the  216  Bank be allowed to enroll for courses in the local chapter of the A.I.B., at Bank expense provided that they attended regularly. Otherwise they would be required to refund the amount paid for them.16 Officers and employees who may have looked forward to the usual extra year-end compensation in 1923 were disappointed. On November 28 the following letter was received from the Federal Reserve Board in Washington: “By direction of the Federal Reserve Board, I have to advise you of the following resolution adopted by the Board, and to request that you bring this letter to the attention of your directors and officers of your bank: “BE IT RESOLVED, That all Federal Reserve Banks be notified that no bonus or extra compensation payments of any character will be approved by the Federal Reserve Board, and that the Federal Reserve Board is of the opinion that the proper method of compensating its own employees and the employees of the Federal Reserve Banks is by payment to them at regular intervals - weekly, semi-monthly, or monthly - of the full amount earned by them on the basis of their fixed annual compensation.” Yours very truly, (s)  Walter L. Eddy, Secretary.”17  The feasibility of an agency of the Federal Reserve Bank in Havana, Cuba, had been carefully considered for some time. In 1923 such an agency became a reality. Historically, banking in Cuba had been faced with many problems since the days of Spanish rule. Shortly before Cuba gained its independence in 1898, the Bank of Spain, which had operated in Cuba for years, repudiated its issue of peseta notes. After cuba gained its independence the Banco Nacional de Cuba was organized and issued bank notes whièh were later also repudiated.18  217  As a result of this experience the people of Cuba were apprehensive and had very little faith or confidence in financial institutions. After branches of American banks were established and United States currency was made legal tender, an appreciable degree of confidence was restored. But again in 1920 and 1921 a disastrous depression hit Cuba resulting in the temporary closing of all and the permanent closing of some banks. This situation destroyed almost completely the confidence in banks which had been restored.19 At the time the agencies of the Federal Reserve Banks were established, confidence in banks in Cuba was still at low ebb. It was felt, however, by the Cuban government and Havana banks that announcement of establishment of the Havana agencies with adequate cash reserves to enable the banks to meet emergencies would have a salutary effect on public opinion toward banks. This assumption proved to be correct.20 The first Board action in connection with an agency in Havana took place on June 16, 1921. At that meeting Chairman McCord spoke of the advantages of an agency at Havana. Whereupon the Board voted to adopt the following resolution introduced by Director McCrary: “RESOLVED, That the Governor and Federal Reserve Agent are appointed a Committee to investigate the feasibility and desirability of the establishment of an Agency of this Bank at Havana, Cuba; said Committee to take up the matter with the Federal Reserve Board and make a report at the next meeting.”21 From that point on investigations and studies were made in connection with the issue though the Board Minutes for 1922 indicate little action. In early 1923 Chairman McCord and Governor Wellborn made a trip to Washington in connection with the proposed agency. Then, at the Board meeting of May 8, 1923, Governor Wellborn let loose a bombshell when he reported:  218  “Under date of April 25, I received a letter from Acting Governor Platt of the Federal Reserve Board, advising that the Federal Reserve Bank of Boston had made application for permission to establish an agency in Cuba, and inviting participation of the New York, Philadelphia, and Atlanta Reserve Banks in the hearing scheduled to take place Monday, April 30. Chairman McCord and I attended this conference, and endeavored to place before the Board the attitude of the Atlanta Bank. We called attention to the resolution adopted by your Board in August, 1921, suggesting that, should such an agency be contemplated, the Board give due consideration to the claims and interests of the Atlanta Bank, whose facilities for handling Cuban business were, for geogtaphical reasons, superior to those of any other Reserve Bank. We also drew the attention of the Board to the fact that in 1920, this bank began furnishing, through the Jacksonville Branch, its notes in Cuba, and that the amount of our notes now in circulation there approximate forty million dollars.22 At the same meeting Governor Wellborn elaborated: “Another hearing was called for May 7, at which Deputy Governor Adelson and Director Ottley were present. Also, at our suggestion, several of our leading member bankers attended and urged the claims of the Sixth Federal Reserve District to the proposed agency. Mr. Mills B. Lane, President of the Citizens and Southern Bank, Savannah; Mr. J. S. Reese, President of the Citizens and Peoples National Bank, Pensacola, Florida; Charles A. Faircloth, President of the National City Bank, Tampa, Florida; C. M. Kendall, Vice President of the Barnett National Bank of Jacksonville, Florida; J. T. Howell, Vice President of the American National Bank at Nashville, Tennessee; and C. M. Trarmmell, Comptroller of the same institution, were present with our delegation. President Mitchell of the National City Bank of New York attended and took a position favorable to our Bank. No definite decision was reached.23 At the conclusion of Governor Wellborn’s remarks the Board discussed the  219  proposed Havana Agency thoroughly, all members expressing themselves strongly to the effect that such an agency should by rights be under the supervision of the Federal Reserve Bank of Atlanta. A forceful and detailed resolution, introduced by Director Simon and seconded by Director McCrary, was adopted and forwarded to the Federal Reserve Board in Washington.24 The resolution set forth four principal reasons why the Atlanta Bank should be given the agency. Briefly, they were: (a) Geographically nearer. Jacksonville 602 miles from Havana vs. 1,875 from Boston, thus saving two days in the handling of currency. (b) Congress by special act, recently authorized the Atlanta bank to build a $400,000 building for its Jacksonville Branch in order that adequate facilities might be close at hand to work with a Cuban agency. Otherwise a $250,000 building, as originally planned, would have been adequate. (c) That from any logical standpoint an agency in Cuba ought to be established by and through the Federal Reserve Bank of Atlanta’ rather than by and through any other of the Federal Reserve Banks. (d) That the organization committee in establishing boundaries for Federal Reserve Bank territories must have taken into account the proximity of Atlanta to Cuba and that to deny the ‘Atlanta Bank the right to the Cuban agency would upset normal territorial boundaries and inject an undesirable element of competition into the Federal Reserve System.25 Meanwhile the press jumped into the fray. Wrote Linton C. Hopkins in his Biography of M. B. Wellborn:27 “Newspaper accounts of the contest, which came to a head in the spring of 1923, made it look like a minor Civil War between the southeast and the New England states. The Atlanta bank at that time was already furnishing Cuba with its currency $40,000,000 worth - and its application to establish an agency in Havana had been before the Federal Reserve Board for two years. When the Boston bank stepped into the picture by applying for the agency, loyal southern newspapers, clearing houses and  220  other financial and civic agencies jumped to the aid of the Atlanta bank and asserted that the north was trying to steal the south’s thunder. The Atlanta Constitution developed the theme that ‘certain astute financiers in New York are using Boston as a catspaw to prevent the Atlanta district from obtaining the consideration to which it is properly entitled.’ Jealousy of the south’s growing financial importance was seen as the motive: ‘The growing commercial and industrial importance of Georgia and other states in that Federal Reserve region is such as to cause eastern magnates to fear for their future unquestioned supremacy. “At the hearings before the Federal Reserve Board said the Constitution’s Washington correspondent, ‘Governor Harding26 tried to make it appear that Havana was financially nearer to Boston than to Atlanta.’ “Governor Crissinger, the Ohio man who had been appointed to Governor Harding’s post on the Federal Reserve Board, opposed his predecessor in the Cuban contest. A ‘compromise’ that looked like a victory for Boston was finally reached, for a Constitution dispatch dated June 27 announced: ‘The Federal Reserve Board late today granted the application of the Boston Federal Reserve Bank to establish an agency in Cuba. At the same time the Board allowed the Atlanta Reserve Bank the same privileges in order to compromise differences which had arisen as a result of protests from the Atlanta bank against the Boston application. The Constitution was right. On June 27, 1923 the Federal Reserve Board adopted a resolution authorizing each bank to establish an agency in Cuba and to perform the following primary functions: 1. To buy from, or sell to, the Republic of Cuba or any bank institution doing business in Havana, Cuba, cable transfers of funds to or from any banking institution located in any city in the United States where there is located a Federal Reserve Bank  221  or Branch of a Federal Reserve Bank, charging therefor a commission at the rate of $1.00 per $1,000; 2. To pay out Federal Reserve notes or other currency of the United States in such denominations as may be demanded in payment of cable transfers of funds to Havana, the kinds of currency paid out to be discretionary with the Agency; 3. To accept any and all kinds and denominations of United States currency, including Federal Reserve notes, in payment for cable transfers of funds to the United States. While the two agencies were in operation, number 1 above was applicable exclusively to the Boston Agency and numbers 2 and 3 to the Atlanta Agency.28 Although the agencies were authorized to deal with any banking institution doing business in Havana, transactions were actually confined almost exclusively to the nine clearing house banks which at the opening of business on September 1, 1923, were as follows: The National City Bank of New York The Chase National Bank of New York The First National Bank of Boston The Royal Bank of Canada The Canadian Bank of Commerce The Bank of Nova Scotia Banco del Comercio Banco Commercial de Cuba N. Gelats and Company The National City Bank of New York and the Royal Bank of Canada each had around 30 branches located in Havana and points throughout the island. The other  222  Canadian and American banks each had several branches located within the city limits of Havana. Currency payments and receipts in connection with cable transfers of funds were handled directly with the head office only of the banks having branches. Currency deliveries and receipts for the branch banks were carried Out by the head office of the bank in Havana. The Agency had no direct dealings with any of the branches of the Havana banks.29 Prior to the opening of the agencies the Havana banks had maintained in their vaults unusually heavy cash reserves to be in position to meet emergencies. The establishment of the Federal Reserve Agencies greatly facilitated the transfer of funds to and from Havana, and as a result, during the first few weeks of operation the Havana banks materially reduced their cash reserves by transfer of large sums to the United States.30 For years there had been no means of disposing of unfit or mutilated currency except by shipment to the United States. Therefore, because of the expense involved the banks had refrained from making frequent shipments, and as a result the United States currency in circulation in Cuba was very dirty and in extremely unfit condition. Consequently, during the early months of operation of the Havana Agency currency received in payment of transfers was practically 100% unfit and mutilated. Many counterfeit notes had circulated in Cuba for years without being noticed, but after about a year of operation of the Agency a large number of the counterfeits were detected by the Agency personnel and removed from circulation. Since all payments to banks were made with new or fit Federal Reserve notes and practically all receipts from banks were in unfit or mutilated currency, the improvement of circulated notes was soon very noticeable. The improvement in the notes of circulation was not only beneficial to the banks but to the public at large and was the subject of many favorable comments.31 The Havana Agency of the Federal Reserve Bank of Atlanta was originally  223  housed in the National City Bank of New York Building on Cuba Street. The location was considered ideal as it was within four blocks of all the Havanna banks and directly across the street from the Cuban Treasury Building. Working quarters for the Agency were provided on the second floor and vault space on the ground floor in the main vault of the National City Bank. The Agency operated at this location until May, 1925.32 When the Agency was authorized by the Federal Reserve Board, the Board of Directors of the Atlanta Bank named Deputy Governor Louis C. Adelson and Secretary Joseph M. Slattery of the Atlanta Bank, as Co-Managers of the Agency. Mr. Slattery, as Manager, proceeded to Havana with L. L. Magruder of the Atlanta Money Department and Misses Mittie LaHatte and Stella Hamrick, currency sorters from the Atlanta Bank, to set up the initial operation. In December, 1923, H. C. Frazer, from the Atlanta Money Department was sent to Havana to join the Agency staff as clerk.33 In his Annual Report for 1923 Chairman McCord, in commenting on the new Havana Agency, wrote: “On September 1, 1923 an agency was opened in Havana, Cuba, by authority and under regulations and conditions of the Federal Reserve Board. The United States government, by virtue of the Plott Amendment, has entered into relations with the Cuban government which it does not have with any other country, especially in matters of finance and currency. The currency of the United States having been made legal tender in Cuba, the Federal Reserve Board deemed the establishment of an agency at Havana desirable as means of stabilizing banking conditions and furnishing an adequate supply of clean currency. Authority was therefore granted to the Federal Reserve Bank of Atlanta and the Federal Reserve Bank of Boston for the establishment of agencies in Havana, and the functions of these two agencies were prescribed by the Federal Reserve Board, and do not in any way conflict with each other or perform the  224  same operations.”34 During the four months the Havana Agency was open for business in 1923, receipts and shipments of currency amounted to $32,732,000.35 The Atlanta of 1923, with Lawyer Walter A. Sims in the Mayor’s chair at Marietta and Forsyth Streets, echoed to the sound of saw, hammer, drill and steam shovel. It was a year of unprecedented building operations. Much of this activity centered around the Marietta and Spring Street intersection. The Spring Street viaduct, a long-range effort to ease the problem of cross-town traffic, was completed in December. The Glenn Building, the £01 Marietta Street Building and the Bona Allen Building, all nearby were under way. Further to the north Morningside and Brookwood Hills were being developed, while two blocks south of the Bank, Rich’s new department store was taking shape at Broad and Alabama.36 Meanwhile, the building program of the Atlanta Bank, though behind schedule, moved forward. In January 1923, Governor Wellborn reported: “The new addition to our building is now completed to the extent that our officers are enabled to occupy quarters therein. The old building is being remodeled to conform to the plan of the new, which work will probably be completed within the next two or three months.”37 In May, the following action was taken: “Chairman McCrary, of the Building Committee having reported the Atlanta building would be completely finished by the July meeting of the Board. Upon motion by Director McCrary, it was voted that at the regular July meeting, a formal opening should be had and that the members of the Federal Reserve Board, the Advisory Council, and all Directors of the Branch Banks be invited to attend the opening and the meeting of the Board.”38 During the course of the Board meeting on July 20, Director McCrary,  225  Chairman of the Building Committee, reported the completion of the building, with the exception of some minor details, and the final settlement of accounts. In that connection the Board voted to adopt the following resolution: “WHEREAS, the Bank building of the Federal Reserve Bank of Atlanta was built under the direct supervision of the Building Committee, composed of Mr. J. A. MàCrary, Chairman, Mr. M. B. Wellborn, Governor, Mr. Joseph A McCord, Chairman of the Board, and Messrs, J. K. Ottley and W. H. Kettig, Directors, and WHEREAS, The said building has been completed and was yesterday opened to the general public and to the visiting bankers, and WHEREAS, The building and its equipment have been highly complimented by the public and visiting bankers and members of the Federal Reserve Board, who were present at the opening. BE IT RESOLVED, by the Board of Directors of the Federal Reserve Bank of Atlanta that the magnificent building was erected within the appropriation and at some saving due largely to the efforts and deep interest taken by each and every member of the Building Committee, and the Board of Directors does extend to the Building Committee their heartfelt congratulations upon the completion of the building, and upon the beautiful design and excellent workmanship.”39 In his Annual Report, on the same subject, Chairman McCord wrote: “On July 19 the banking house of the Federal Reserve Bank of Atlanta was opened with impressive ceremonies, on which occasion Messrs. E. B. Cunningham and George R. James, members of the Federal Reserve Board, were present, and a representative number of officers of member banks of the district. The original building was completed in 1918, but increase in volume of business since that time made it necessary to provide additional space, and accordingly, two additions have been made, the last being completed just prior to the opening on July 19. The building is  226  commodious and of substantial design, and will adequately provide for the future growth and development of the bank’s business. The book value of the building, including land, at the close of the year was $1,444,757.16, after the charge off for depreciation, which has been deducted yearly since the original building was completed.”40 Forty years were to elapse before the Atlanta Bank became the subject of another major building program. Space was provided in the new building for certain amenities and conveniences not feasible in more limited quarters. The Chief National Bank Examiner for the District was invited to occupy the building along with his staff41 and, after proper application to Atlanta Postmaster E. K. Large, a contract Post Office was set up on the premises. The latter, authorized on August 4, was a great time-saver in the handling of both ordinary and registered mail. Indeed, it provided for direct handling of mail from trains to the bank building.42 In June portraits of Governor Wellborn and of Chairman McCord were completed, accepted and authorized to be hung in the Directors’ Room. The Wellborn painting was done by Miss Kate Edwards,43 of Atlanta and the McCord portrait by Charles F. Naegele, of Cobb County, both well-known and able artists. At its request, the paintings were paid for by the Federal Reserve Bank Club, composed of employees of the Bank.44 In September the Governor reported modest progress in connection with a library. He wrote: “We have begun to lay the foundation for a library in Our bank for the use of employees and, up to date, we have spent $489.90. This we believe will be very beneficial to our employees, inculcating in them the profitable habit of reading and adding to their store of information. I cannot see the necessity of the bank maintaining the extra expense of employing a librarian, for a person occupying this position would  227  have but very little to do each day. I would therefore recommend that the books be kept in cases under lock and key, and we can designate either officers, chief clerks or secretaries to have charge of the library, and to dispense the books upon receipt from those who desire to take the books home to read and to specially look after our books and keep them in proper shape.45 Atlanta was not the only site for Sixth District building activities during 1923. The banking house of the New Orleans Branch was completed during the summer and was formally opened on October 12, at which time the Board of Directors of the parent bank held its regular monthly meeting in that city. Among others present were George R. James, of the Federal Reserve Board and a number of officers of member banks located in the New Orleans zone. The building was built under the supervision of a Building Committee composed of R. S. Hecht, Chairman, Leon C. Simon and Marcus Walker. It was designed in the office of New Orleans Architect Rathborne DeBuys and was constructed by George J. Glover. It consisted of four stories and basement; was of classic design thoroughly equipped and suited to the needs of the branch and its future growth. Total cost was approximately $1,090,000.0046 The Nashville Branch moved into its new building December 21, 1922, but the building was not formally opened until May 11, 1923. The regular monthly meeting of the Parent Bank Board was held in Nashville that month so that the members might be present at the opening ceremonies. The building was built under the supervision of Captain W. H. Hartford, of the Atlanta Board and Chairman of the Nashville Branch Board. It was a three-story structure of imposing appearance, admirably adapted to the requirements of the branch.47 Construction of a banking house for- Jacksonville was commenced in December, 1922 and continued throughout 1923. Branches at Birmingham, Savannah  228  and Havana continued in leased quarters.48 Shortly before the new Atlanta building was completed, the matter of a fair tax assessment came up. Reported Governor Wellborn on June 7: “The City assessors of Atlanta fixed the assessment on our bank property, that is, building, vaults and land, at one million dollars. I thought this too high, and, together with General Counsel Randolph and Deputy Governor Adelson, had a conference with the assessors on May 22. After considerable discussion and argument, the assessment was reduced to $654,000.00. This amount, I believe, is a fair assessment, in view of the fact that our building is not adapted to mercantile or general office purposes; and, if placed on the market, would not bring an amount at all commensurate with its cost of construction. It is, in short, designed solely to fulfill the function of a Federal Reserve Bank.”49 Two matters concerning operating policy came up for special consideration during 1923. They involved extended country member banks and non-cash collections. On November 7, in a report to the Board on the first subject, Governor Wellborn wrote: “One of the most important problems confronting us at the present time is that of dealing with those of our country member banks which became seriously extended during the depression of 1920-1921, and have spent the time since then in trying to work out of their difficulties back into a normal state. As a rule, such institutions have been borrowing heavily and continuously from us in order to meet their current obligations and continue in business. From our point of view, it is difficult to refuse the additional accommodation to a bank, even though it is already borrowing far in excess of its capital and surplus, when we know that to do so means, in all probability, to force that bank into the hands of a receiver. “1 want particularly to call your attention to the fact that, in dealing with banks that are in bad condition, a Federal Reserve Bank occupies a different position from a  229  commercial bank dealing with debtor institutions, in that the Reserve Banks are not organized for the purpose of making profits. Their earnings up to 6 per cent go to their member banks, and above that amount, to the Government. Therefore, we feel that we are not called upon to press a weak bank too far and force collection as a commercial bank would undoubtedly do. Any losses that we may sustain by assisting these banks are fully provided for by our earnings without any detriment to the Federal Reserve Bank. Our aid has been instrumental in saving many of these banks, which are now in good healthy condition and serving their communities well. I believe that we all recognize that the relations between a Federal Reserve Bank and a member are closer, and that more mutual interests exist than between a city bank and its country customers, in that a Federal Reserve Bank feels a heavier obligation to do all it.can for a member, not alone to protect it, but in a broader sense, to look out for the welfare of the community in which the bank is located. “I am merely making these observations because some might be inclined to think that judged by the standards of ordinary commercial banking, we have been a little too liberal in extending credit in doubtful cases which may result in our sustaining certain losses. If we had been running our bank on a purely commercial basis, I am sure that our management would have cut off some of our member banks instead of going a step further, and trying to preserve them so that they could be useful to their communities. If it were not for the rights and privileges of member banks under the law, we would feel inclined to discount for certain of them only in small amounts, and for some others not at all. But we feel it our duty to care for them so long as hope for them exists. In this matter, we have uniformly shown a sympathetic spirit, and I am sure that  230  the public in the communities where these banks are situated, appreciate our helpfulness to their local banks. “The policies, as outlined above, which the Federal Reserve Bank of Atlanta has been pursuing from the beginning should have the effect of arousing in the public mind a full realization that it is to their interest to discriminate between members and nonmembers, and give preference to a bank that is a member of the Federal Reserve System. 50 On the subject of noncash collections, the Governor, in a report to the Board on December 7, wrote: “Your Board has been on record for the past five or six years as being opposed to our bank’s handling noncash collections. I believe that, in considering this question, we should be careful to bear in mind that the Federal Reserve System should be conducted as intended by its creators, and all unnecessary expenses eliminated. In this connection, I may say that, at the recent conference of Governors and Federal Reserve Agents with the Board at Washington, I took occasion to state my views on this whole subject. These are substantially reiterated in what follows: “There are several reasons why I consider the handling of noncash items for collection through the Federal Reserve Banks undesirable. In the first place, such action puts the Reserve Bank in direct competition with its member banks. Secondly, it deprives member banks of a legitimate source of revenue, and it is a further discrimination against them in that it affects particularly, member banks which are located in Reserve cities and Federal Reserve Branch Bank cities. Thirdly, it involves a heavy expense upon the Federal Reserve Banks to take care of such business. The  231  Committee of Efficiency and Economy of the Federal Reserve Board has submitted figures showing that it now costs the Federal Reserve System annually over a miLI.ion dollars to collect these noncash items; and the Committee further estimates, taking into consideration the rate at which this business is growing, that in a few years it will cost the Federal Reserve System in the neighborhood of eight million dollars annually. “It was never contemplated that a Federal Reserve Bank should enter into relations with the general public, but should confine its activities to its member banks. Our experience has been that the public is inclined to resent the handling of such items by the Federal Reserve Banks, because we are compelled to require certified checks before we deliver the drafts, and this is very annoying to those upon whom the drafts are drawn. In short, I think it would be a very wise move to drop this practice as a function of the Federal Reserve Banks.” 51 The Atlanta Board had previously placed itself on record as opposed to the handling of noncash items and, following Governor Wellborn’s remarks, it voted again to recommend the discontinuance of handling such items.52 As the year 1923 drew to a close, Governor Wellborn, in a report to the Board in December, was quite optimistic. He wrote: “The Bank’s operations, while making a slow start at the beginning of 1923, picked up momentum after mid-summer, and the last of the current year will see an increase, not only in the earning assets, but also in the volume of business handled in the course of our currency and transit operations. Notwithstanding this increase, the total operating expenses have been held down to slightly less than last year.  232  “We feel that we are in closer touch with our member banks than ever before, and hence best able to help them solve the problems with which they come to us. From time to time officers from the parent bank and branches are sent around to the various member banks; and I believe that so far as the promotion of good feeling and the development of a better understanding are concerned we have accomplished all that could be desired. “I believe that we are justified in inferring the general satisfaction of our members with the administration which we have given them from the fact that none of our Directors have been defeated for re-election. In most cases, there has been no opposition whatever; and, in those instances where there has been another candidate, the serving Director has always been returned by a wide margin. Surely, if there had existed any material criticism of our management, it would have been brought out at election time; and I think we may safely conclude that our members generally are satisfied with your Board, and with the officials whom you have selected to administer the affairs of the bank.”53 Throughout 1923, as earlier, much thought and discussion had been devoted to the feasibility of a Member Bank Relations Department. Indeed, by late 1923 the matter had progressed to the point of an offer to Thomas R. Bennett, Superintendent, Banking Department, State of Georgia, to become Manager at $7500 per year. Mr. Bennett was amenable, but the Federal Reserve Board in Washington dragged its feet on approval and the matter carried over to 1924.54 In setting forth earnings, expenses, profit and loss for 1923, as compared with 1922, Chairman McCord wrote:  233  “The gross earnings of $2, 682, 314 for 1923 was an increase of $329, 578 over the gross earnings for the previous year, amounting to $2, 352, 736, while the total current expenses of $1, 294, 232 for 1923 was only $1179 more than the previous year, which amounted to $1, 293, 053. The expenses for 1922, however, did not include any expense for the operation of the Havana Agency, amounting to $11, 264.07 in 1923, and the expenses for 1923 included an Increase in ‘Taxes on Banking House” of $32,574. “The current net earnings .for 1923 were $1, 388, 082 as corn-pared with $1, 059, 683 for 1922. The deductions from current net earnings for furniture and equipment, for depreciation allowance on-bank buildings and reserve for probable losses, etc., were $1, 038, 692, as compared with $391, 366 for the previous year. During the year, the buildings at Atlanta, New Orleans and Nashville were completed and a large part of the deductions for the year were for depreciation on bank buildings to bring the present book value to a replacement cost, also a considerable amount was reserved for probable losses. The net earnings, therefore, for dividends, surplus and franchise tax were $352, 179 for 1923, as compared with $672, 730 for the previous year.”55 The general business picture during the year as it affected the Bank, was painted by Chairman McCord in the following language: “At the beginning of the year 1923, business conditions in the Sixth Federal Reserve District gave promise of continued improvement, which was realized during the early months followed by some recessions during the late spring and summer. In the early part of the year rediscount demand came from agricultural sections, and it was not  234  until the crop moving season that the city banks made demands for rediscount to any great extent. At the close of the year, all classes of banks in the district were rediscounting freely with the Federal Reserve Bank. “Deposits of member banks followed the general trend of business, while the loans and discounts of all member banks showed an increase from the low point at the beginning of the year. “Agricultural prospects were good until the latter part of July and during the month of August, when continued rains greatly damaged all crops, and in some parts of the district the wet weather increased the activities of the boll weevil and army worm to such an extent that the cotton crop was almost totally destroyed. The increased acreage planted in cotton was considerably reduced by abandonment, due to unfavorable weather conditions and shortage of labor as the result of the migration to the North of Negro farm hands. However, the increased price of cotton materially helped conditions that otherwise might have been irreparable. The volume of retail trade was greater than for the previous year, and slightly larger than in 1921, while the volume of wholesale trade was greater than for any year since 1920. According to the United States Bureau of Labor Statistics, wholesale prices fluctuated during the year from 150 to 159, based on 100 for 1913 prices. The peak of prices was in March and April and the lower level was reached in August. “Building throughout the district continued on a large scale. As reported by twenty cities, building operations were greater than any year since 1919, while in volume 1923 exceeded any previous year. “Probably at the close of 1923, conditions could not be regarded as so favorable as at the close of the previous year, yet taken as a whole, the end of the year 235  found the Sixth District on a sound, economic basis.” 56  NOTES Chapter 12. 1. 2. 3.  Keller, Dictionary of Dates, II, 332-336. Ibid Ibid. 236  4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48.  Ibid. Minutes, Directors, III, 676. Keller, Dictionary of Dates, II, 336. Minutes, Directors, II, 592. Ibid., 594. Minutes, Directors, III, 745. Ibid., 716. Minutes, Directors, II, 587-589. Ibid., 595; III, 667. Ibid., III, 619. Ibid., 649, 656. Ibid., 720. Ibid., 725. Ibid., 743. H. C. Frazer, “Brief History of the Havana Agency of the Federal Reserve Bank of Atlanta,” 1963, p. 13. Hereafter cited as Frazer, “History, Havana Agency.” Ibid., Ibid., 14 Minutes, Directors, II, 387. Cf. 396, 422, 424, 428 Ibid., III, 641 Ibid Ibid., 643-645 Ibid., 644-645 W. P. G. Harding of the Boston Bank Pages 111-112 Frazer, “History, Havana Agency,” 10-11 Ibid., 12 Ibid Ibid., 12-13 Ibid., 7 Ibid., 8 Page 20 Page 22 Garrett, Atlanta and Environs, II, 794-798 Minutes, Directors, II, 593 Ibid., III, 643 Ibid., 658 Annual Report, 1923, p 22 Minutes, Directors, II, 592-596 Ibid., III, 678-680. Still living in Atlanta, March, 1964. Minutes, Directors, III, 692 Ibid., 697 Ibid., 684; Annual Report, 1923, pp. 22-23 Minutes, Directors, II, 594-595; Annual Report, 1923, p. 23 Annual Report, 1923, p. 23  237  49. 50. 51. 52. 53. 54. 55. 56.  Minutes, Directors, III, 655 Ibid., 718-719 Ibid., 739 Ibid., 744 Ibid., 739 Ibid., 737; Annual Report, 1923, p. 24 Annual Report, 1923, pp. 10-11 Ibid., 9-10  238  Chapter 13 1924  The year was young when the man who signed the Federal Reserve Act into law in 1913, died on February 3. For the four preceding years Woodrow Wilson had lived broken in health and in semi-seclusion, bitter over the defeat of his beloved concept of a League of Nations. During the same month Congress extended the life and power of the War Finance Corporation for nine months and J. Pierpont Morgan presented the $8, 500, 000 library of his father, together with the building in which it was housed on 36th Street to the City of New York. 1 The presidential election of 1924 pitted Calvin Coolidge and Charles G. Dawes, Republicans, against John W. Davis, of West Virginia and Charles W. Bryan of Nebraska. Coolidge was re-elected. A political precedent was set in November when two states elected female governors, Mrs. Nellie 0. Ross in Wyoming and Mrs. Miriam “Ma” Ferguson in Texas. 2 On the scientific and transportation front the Radio Corporation of America demonstrated the transmission of pictures by wireless telegraph between London and New York and transcontinental air mail service was inaugurated between New York and San Francisco.3 In May the controversial Soldier Bonus Bill was passed and, in September, John J. Pershing, General of the Armies, retired from active service at the statutory age of 64. 4 On the local scene Clifford H. Walker became the first State Governor to  239  occupy the now controversial stone mansion in Ansley Park; John A. White began his long tenure in city council and Fulton County abolished the much abused fee system as a method of compensating certain key officers. Joel Hurt doubled the size of his great office building by extending it back to Ivy Street; the Biltmore, Robert Fulton and Henry Grady Hotels opened; George F. Willis, the patent medicine manufacturer, developed Avondale Estates east of Decatur, and historic old Boyts High School at Courtland and Gilmer Streets was gutted by fire during the freezing cold early morning hours of January 6.5 Turn of the year general business conditions were described by Governor M. B. Wellborn during 1924’s first Board meeting: “The turn of the New Year finds business conditions in the Sixth District on a sound basis. The outlook for the immediate future is probably not quite so bright as it was at this time last year, but it will be remembered that the latter part of 1922 and the early months of 1923 were accompanied by a tendency to a rather rapid increase in business. Along with this increase in general business, there was a corresponding increase in prices, and there was fear in the minds of business men that if these tendencies continued, business would soon reach an unsound level. The pace of the first three or four months of the year was, however, checked, and since that time, business has moved forward on a conservative and sound plane, buying has been done in a cautious way to meet current requirements, but there has been no tendency to speculative purchasing in any line...”6 The directors devoted considerable time at their meeting on December 14, 1923 to official personnel for 1924.  240  Leon C. Simon and P. R. Kitties were elected Class B and Class A directors, respectively. Joseph A. McCord was redesignated Federal Reserve Agent and Chairman; Randolph and Parker were continued as General Counsel, and Oscar Wells succeeded E. W. Lane as a member of the Advisory Council.7 All Branch Bank Directors were re-elected; Creed Taylor was named General Auditor; L. C. Adelson was elected Manager of the Cuban Agency, at a salary of $12, 000 per year, with an allowance for foreign service of $4, 000. M. B. Wellborn was unanimously re-elected Governor by a rising vote.8 Other officers elected for 1924 were: Atlanta J. M. W. W. R. W. H. J.  L. Campbell, Deputy Governor W. Bell, Cashier B. Roper, Assistant Cashier H. Tode, Manager Fiscal Agent Dept. A. Sims, Assistant Cashier R. Patterson, Assistant Cashier F. Conniff, Assistant Cashier W. Honour, Assistant Cashier  New Orleans Marcus Walker, Manager W. H. Black, Assistant Manager J. A. Walker, Cashier F. C., Assistant Cashier  Birmingham A. E. Walker, Manager W. C. Sterrett, Cashier  Savannah  Jacksonville  R. N. Groover, Manager D. E. Avery, Assistant Manager  G. R. DeSaussure, Manager W. S. McLarin, Jr., Cashier  Havana  Nashville  J. M. Slattery, Assistant Manager  J. B. McNamara, Manager J. B. Fort, Jr., Cashier9  As the year progressed a number of changes in the official family took place. In  241  January, with the acceptance by L. C. Adelson, of the Havana manager ship, J. L. Campbell was named Senior Deputy Governor, Creed Taylor, Deputy Governor; W. S. Johns, General Auditor, and J. M. Slattery, Manager, Bank and Public Relations Department.10 L. L. Magruder was named Assistant Manager of the Havana Agency in March to succeed Mr. Slattery.11 At its April meeting the Board appointed the Messrs. Adelson and Magruder joint managers of the Havana operation. 12 In September the Nashville Branch Board recommended the resignation of J. B. McNamara as manager. Mr. McNamara resigned effective November 1 and was succeeded by Joel B. Fort. Ellis C. Huggins, Jr., succeeded Mr. Fort as Cashier of the Branch.13 It was also in September that Walter B. Roper, an Assistant Cashier since 1917, tendered his resignation to accept the position of Vice-President of the Georgia National Bank of Athens, Georgia. The resignation was accepted with resolutions of regret and good wishes.14 At its meeting on November 7, the Atlanta Board was informed by Chairman Joseph A. McCord that he has tendered to the Federal Reserve Board in Washington his resignation as a Class C Director, Chairman, and Federal Reserve Agent, effective December 31, which had been accepted. He expressed. his high regard and friendship for the members of the local Board, and stated that Oscar Newton, of Jackson, Mississippi, had been appointed as his successor. In commending Mr. Newton to the Board, Mr. McCord said that he regarded him as thoroughly capable and well qualified for the duties of the office.15 In December the Board passed suitable resolutions on the retirement of Mr. McCord and.John K. Ottley, who, after six years of yeoman service as a Director retired  242  at year’s end. Both were presented loving cups from the directors, Governor and Federal Advisory Councilman. Mr. Ottley’s successor as a Director was the well-known and colorful native Atlantan, Eugene R. Black. Born at the close of the Reconstruction Era, on January 7, 1873, Mr. Black was educated for the law and celebrated July 4, 1893 by being admitted to practice. In 1897 he was appointed Solicitor of the Criminal Court of Atlanta and, during the same year married Miss Gussie Grady, daughter of the noted editor and orator, Henry W. Grady. Beginning in 1901, Mr. Black functioned for three years as General Agent of the Prudential Insurance Company for the State of Georgia. In 1904 he returned to the law as a member of the firm of McDaniel, Alston and Black, his partners being Sanders McDaniel and Robert C. Alston. In 1921 he became a full-time banker as President of the Atlanta Trust Company.16 Director-elect Black attended his first Board meeting on December 12, 1924 and on that occasion, in a few happy remarks, expressed his pleasure at his new association.17 He was destined, during the next ten years, to play a stellar role in the operation of the Bank. Joseph A. McCord, who retired at 67, was the original Governor of the Atlanta Bank and had played an active part in getting Atlanta chosen as a site. Since 1919 he had held the positions from which heretired at the close of 1924. Following retirement he devoted himself to private interests and served for a time as Chairman of the Mortgage Guarantee Company of America. At his death on December 30, 1943, the Atlanta Journal paid editorial tribute: “Joseph A. McCord, whose death came in his 87th year, yesterday morning,  243  was one of the outstanding examples of Atlantans who, born in smaller Georgia communities, have come to this city in youth and then become leaders in her most vital activities. “Mr. McCord was a native of Newton County, coming to Atlanta in 1890. He entered the banking business in 1892, with the old Atlanta Trust and Banking Company. From that point on his career was a record of advancing service and advancing responsibility. He retired as governor [sic] of the Sixth District Federal Reserve Bank only when advancing age compelled his withdrawal from active business affairs. “It was both as banker and as lay leader in the church that Mr. Mc Cord was best known. He was one of the organizers of St. Mark Methodist Church, he was a member of the Warner Hill Bible class there, a trustee of Salem Camp Ground and trustee and chairman of the executive committee of Young Harris College. “He served his city and state and nation in many other capacities. He was a man whom others instinctively liked and respected. His life contributed a large share of the development of his adopted city. He was a good man, a successful man and, in every respect, a most distinguished Atlantan.” That the Bank was growing during the mid-twenties is attested by its payrolls. As of April 11, 1924 the Atlanta Bank had 256 employees for an annual payroll of $440, 050; the New Orleans Branch, 88 employees for a total of $123, 840; Nashville, 35 for $44, 928; Birmingham, 29 for $44, 380; Jacksonville, 35 for $49, 780, and the Cuban Agency, 10 for $21, 528. 18 Officers salaries, as approved by the Federal Reserve Board on February 14, 1924, were: M. B. Wellborn, Governor  $20,000 244  J. L. Campbell, Deputy Governor Creed Taylor, Deputy Governor M. W. Bell, Cashier W. S. Johns, General Auditor H. F. Conniff, Assistant Cashier J. M. Slattery, Mgr. Bank Relations Dept. J. B. McNamara, Mgr. Nashville Branch J. B> Fort, Cashier, Nashville Branch D. E. Avery, Assistant Mgr. Savannah Agency W. H. Black, Assistant Mgr. New Orleans Branch J. A. Walker, Cashier, New Orleans Branch F. C. Vasterling, Assistant Cashier, New Orleans J. A. McCord, Chairman Ward Albertson, Assistant Federal Reserve Agent  12,000 9,000 7,000 6,000 4,200 6,000 5,400 3,600 2,400 5,700 5,300 3,120 15,000 6,500 19  Several matters pertaining to personnel were resolved during 1924. The Board went on record in March, following a motion by Director Lindsey Hopkins, that it “does not look with favor on the borrowings from commercial banks or loan agencies by officers and employees of the Federal Reserve Bank of Atlanta, and that the Governor be requested to inform the officers and employees.”20 In June the matter of nepotisim came to the fore. It was voted “that, in future, it shall be the policy of the Federal Reserve Bank of Atlanta and its branches not to engage employees that are related to officers and directors, and that it does not look with favor on engaging employees related to other employees.”21 A uniform vacation schedule was adopted in May which provided three weeks for the Governor, Deputy Governors and Branch Managers. All other officers were given two weeks. For employees the matter was more involved, and provided: “One day (exclusive of Sundays) for each month in the employ of the Bank, preceding the period designated for vacations, except that no vacation period will be allowed until six months’ service has been completed. Vacation periods not to be cumulative for more than twelve days (exclusive of Sundays), and not to be granted  245  prior to April 1 and not later than September 15. Except in cases where employees are entitled to more than one week and less than two weeks, all vacations should start at the close of business Saturday, returning the second Monday - in the case of one week vacations - and the third Monday, in the case of two weeks’ vacations.”22 Governor Wellborn was ready to concede the advantages of good reading,. but not ready to accord full departmental status to a Bank library. In April he reported: “The officers of the bank have for sometime been considering the advantages of establishing a library for the benefit of the employees. Quite a number of books have been purchased from time to time with this end in view. It is not contemplated that we go into this matter extensively, i.e., that we establish a separate department, thereby incurring considerable expense, but it is believed that the library can be put in charge of one of the departments of the bank and operated for the benefit of the employees without any additional expense. It is, therefore, suggested that the library be operated in connection with the infirmary under the direct supervision of Mrs. Jones, who now has charge of the infirmary. One of the junior officers can be assigned the duty of supervising the library and infirmary in order that the efficient operation of both may be assured. This will entail no additional expense whatever to the bank, and it is believed that the employees will receive quite a benefit in having access to a library of wellselected books.” 23 Some months later, in November, the Special Salary Committee recommended the combining of the Infirmary and the Library under the supervision of the Matron now in charge of the Infirmary.24 In an effort to streamline and economize, it was voted in October to  246  discontinue, effective January 1, 1925, the position of Federal Reserve Agents at Birmingham, Jacksonville and Nashville. At these branches the Agents acted also in the capacities of resident auditors, secretaries to the loca]. boards and custodians o1 collateral, their salaries being prorated among the several functions. 25The duties were subsequently assumed by assistant cashiers. 26 For some time efforts had been made to get a Bank and Public Relations Department functioning. These efforts bore fruit during the latter half of 1924. The board committee having to do with the function was composed of Joseph A. McCord, Chairman; M. B. Wellborn, J. K. Ottley and J. A. McCrary. J. M. Slattery was named Manager of the department, while Cashier M. W. Bell and Assistant Cashier W. R. Patterson were assigned as part-time field representatives. 27 As the end of the year approached Chairman McCord submitted a report upon behalf of the Bank and Public Relations Committee. Addressed to the Board of Directors and dated December 12, it read: “… As you know, the Department did not start functioning until June of this year. .. Visits have been made to the banks in the district by three representatives selected to do this work, and while the Department has only recently begun to function, I am of the opinion that great good has been attained by the visitations made. “Since the November meeting of the Board of Directors, field representatives of the Department have visited 176 banks; making a total of 788 banks visited up to December 5th. Representatives have called on all the member banks in Mississippi, Alabama and Tennessee, and a great many nonmember banks in these states. Mr. Patterson is at present working in Louisiana. One-half or more of the banks in Georgia  247  have been covered, and beginning shortly after the first of the year, the work in Florida will be started. “The last meeting of our committee was held Wednesday, December 10th, and I give you below excerpt from the minutes of that meeting: ‘Mr. Ottley stated he felt that in the report of this work submitted by the Chairman at the December meeting of the Board, the Committee should give some expression as to the value of the work done and as to the future; and upon motion, the Chairman was requested to draw up the following resolution: WHEREAS, This is the last meeting to be held by the Bank and Public Relations Committee for the year 1924; and WHEREAS, The Committee feels that the work so far has been very beneficial, in that it has brought the Federal Reserve Bank in closer contact with the member banks, and many nonmember banks; that it has given opportunity to explain many benefits of the workings of the System; to answer many criticisms which have been advanced against the System and the Federal Reserve Bank of Atlanta; and WHEREAS, We feel that the amount expended has been justified by the results attained, BE I T FURTHER RESOLVED, That this Committee does commend and recommend the continuance of the work under a similar committee to be appointed by the Chairman of the Board; and, BE I T FURTHER RESOLVED, That it is the opinion of the Committee that after all the banks in the district have been visited one time, future visitation by field representatives might well be confined to member banks, such nonmember banks as are located in the  248  same town, or nonmember banks who are prospects for membership; and, if in the opinion of the Executive Committee certain visitations should be temporarily suspended in the interest of all concerned, it is suggested that a list of all the banks be furnished the Bank and Public Relations Committee for their consideration; and BE I T FURTHER RESOLVED, That we believe this Department, although it has been in operation but a short time, is one of great importance to the bank, and that it should have the thorough cooperation of all the officers and heads of departments, in order that the very best results may be obtained for the bank as a whole. The above resolution was then adopted.  Respectfully submitted, (signed) Jos. A. McCord, Chairman, Bank and Public Relations Committee.”28 In his monthly report to the Board, in February, 1924, Governor Wellborn cited a number of specific instances wherein the Sixth District Federal Reserve Bank, by timely aid to certain banks during the post-war depression, had saved the banks and averted local economic disaster. Three of these instances, described by Wellborn, follow: First National Bank, Athens ,Alabama: “This institution suffered from bad management, and had it been permitted to close in 1920, there is no doubt but that other institutions in its vicinity would have gone under. We extended them accommodation in the neighborhood of $200, 000, and later, when conditions had somewhat settled down, reorganization of the bank, aided by the officers of our bank, was perfected. To accomplish this, we purchased for $25, 000 around $90, 000 of what was considered worthless assets. This amount was considered 249  small as compared to the loss that would have been taken had the bank been permitted to go into the hands of a receiver.” First National Bank, Sparta, Georgia: “This bank also suffered from poor management, but had it been permitted to close in the fall of 1920, it would have meant a complete demoralization of the community and its surrounding territory; it having been the predominant one of the two banks in the county. . At one time in that year, accommodation close to $300, 000 had been extended it. New capital was subsequently infused, and one of our officers was placed with the institution in the effort to work it out. The assets of the bank, however, were honeycombed with too many imprudent loans, and it became necessary to effect a reorganization. This was accomplished by our purchasing, for approximately $100, 000, all of the doubtful assets amounting to about $160, 000. Whatever may be our ultimate loss in this case, the exigencies of the case in 1920 and the saving of the county from a set-back that would have perhaps taken fifteen years to recover from, in my opinion offsets the loss.” Fourth & First National Bank, Nashville, Tennessee: “During 1920, this institution, perhaps more than any other, demanded and received the most careful thought and deliberation. Between the fall of 1919 and the fall of 1920, its deposits decreased $3, 600, 000, and its loans increased $6, 500, 000. In the fall of 19L9, it was carrying war obligations of $20, 000, 000. In the fall of 1920, they had been reduced to only about $11,800,000. Its deposits in 1919 of $19, 300, 000 was a fair indication of the bank’s importance, not only to its immediate community but the State of Tennessee at large; it being the depository for hundreds of country banks.  250  Whether or not its judgment in expending its loans and extremely large investments in war obligations was wise were not the points that we had then to consider; it was the general effect upon the State of Tennessee, and perhaps the entire Sixth District. It was for this bank mainly that our bond repurchase plan was evolved, in order to save it from the large inroads it was suffering in carrying them, to say nothing of the absorption from their undivided profits by reason of price decline. I unhesitatingly say that though our resources were heavily taxed to do it, we saved this institution and the Sixth District from a shock that would have been terrible in its consequences, and perhaps had an echo in surrounding Federal Reserve Districts. During the years that have intervened since 1920, the bank has succeeded in entirely extinguishing its debt, though, of course, on account of its importance, it has from time to time availed of our discount facilities in fairly large sums, which, however, seem negligible as compared to what they were once indebted to us for.”29 Certainly such instances of service indicate that the Federal Reserve System was fulfilling an important concept of its founders. The efficacy of branch operations of the Sixth District Federal Reserve Bank was indicated by a study early in the year. It was accompanied by a statement showing the estimated net saving if all the functions then performed by the branches were transferred to the Atlanta office. As reported at the March board meeting: “It was the concensus of opinion of this Board that in every instance, the branches of the Federal Reserve Bank of Atlanta were satisfactorily serving the member banks in their respective zones, and that the services rendered more than justified the expense of continuing the functions they are now performing. The members  251  of this Board do not look with favor on the broadening of the powers of any of the branches or agencies of the Federal Reserve Bank of Atlanta, and have no suggestions to offer as to increasing or decreasing any of the functions now being performed, but believe that the service now being rendered by the branches fully justifies the expense of maintaining them, when compared with the saving that would be effected by transferring some of the functions to the parent bank.”30 In accordance with this thinking, steps were taken during 1924 for the improvement of branch facilities in both Birmingham. and Jacksonville. A lot was purchased on the southeast corner of Fifth Avenue and 18th Street, 50 x 140 feet, in Birmingham, for $125, 000 cash and Messrs. Warren, Knight & Davis, of that city, were retained as architects for a new building.31 In Jacksonville, as previously noted, the erection of a building for the branch had been authorized in 1923. The completed structure was officially accepted by the Board on August 8, 1924. Total cost was $281, 948.63.32 Earlier in the year the Jacksonville Branch had requested an automobile truck for transporting moneys and securities to and from the post office and to and from local member banks. The purchase was disapproved and the Branch was instructed to “discontinue the practice of transporting moneys and securities to and from local members, in view of the fact that this practice is not pursued by the Atlanta office or any of the other branches.”33 Since completion of the new addition to its building in 1923, the Atlanta Bank had enjoyed the luxury of excess space. Accordingly, in 1924, the War Finance Corporation was invited to occupy offices in the building rent free, which offer was accepted. A search was then instituted for another tenant on a paying basis, preferably 252  an insurance company. At year’s end none had been found.34 On December 12 Director McCrary, Chairman of the Building Committee, presented to the Board for acceptance the painting “Signing the Federal Reserve Act,” executed by Atlanta artist, Wilbur G. Kurtz. On motion of Mr. McCrary, secondedby Director Hartford, the picture was accepted and became an integral part of the Bank’s decor for many years.35 Operations-wise the Bank was doing well during this period of its history. Compared with other Federal Reserve Banks and under the heading “Efficiency and Economy,” Governor Wellborn reported in March, 1924: “In reviewing the Functional Expense Report for the quarter ending December 31, 1923, attention is directed to the fact that the Federal Reserve Bank of Atlanta shows the least number of employees and the second lowest total expense of any Federal Reserve Bank in the System, notwithstanding the fact that it now operates four branches and two agencies, which expense does not apply to a great many of the other Federal Reserve Banks. “In reviewing the volume of work handled during the quarter, the report shows that the Federal Reserve Bank of Atlanta handled the second largest number of notes of any other Federal Reserve Bank -the highest number being handled by the Federal Reserve Bank of Chicago, 41, 344 pieces, against 41, 287 for Atlanta. “The Federal Reserve Bank of Atlanta’s showing in currency handled is seventh highest as compared with the other Federal Reserve Banks; in other words, six of the Federal Reserve Banks handled more in number of bills than Atlanta, while five Fedral Reserve Banks handled a less number of bills. The cost per unit of the Federal  253  Reserve Bank of Atlanta as compared with other Federal Reserve Banks in the handling of currency appears high. However, this condition is due to the fact that we make one more verification of money than any other Federal Reserve Bank, which we believe to be a proper safeguard... Atlanta would, no doubt, make a better showing in currency operations if this extra verification were eliminated, but it is believed the extra cost is justified when compared with the protection it affords. “Transit operations of the Federal Reperve Bank of Atlanta appear to be the lowest in the system - Atlanta handling the least number of items, which condition, I presume is due to the fact that Atlanta has so few par points in comparison with other Federal Reserve Banks. “Taking the report as a whole, in my oppinion the Federal Reserve Bank of Atlanta shows up better than any other Federal Reserve Bank in comparing the number of employees, total expense and volume of business.”36 Total resources of the Atlanta Bank on December 31, 1924 were $242, 845, 000, an increase of $13, 839, 000 over the total of $229, 006, 000 on December 31, 1923. Total reserves increarred approximately forty-eight millions of dollars, from $128, 086, 000 at the close of 1923 to $176, 318, 000 at the close of 1924. Bills discounted declined $39, 672, 000, from $55, 742, 000 at the end of 1923 to $16, 070, 000 on December 31, 1924, and bills bought in the open market were nearly three million dollars less on the same dates. Federal Reserve notes in actual circulation were $140, 894, 000 and $142, 879, 000 on December 31, 1923 and December 31, 1924, respectively; total deposits were $9, 207, 000 greater at the end of the year 1924 than they were a year earlier, an increase of approximately 16 percent.37  254  The discount rate of 4-1/2 percent, which prevailed during 1923 on all classes of paper except open market transactions, continued in effect until June 18, 1924. On this date the rate was reduced to 4 percent. No further change was made during the year. Open market transactions were handled at substantially the same rate of discount prevailing in other money centers.38 There was no change in the functions and scope of branch operations during the year.39  NOTES Chapter 13.  255  1.  Keller, Dictionary of Dates, II, 336-340.  2.  Ibid.  3.  Ibid.  4.  Ibid..  5.  Garrett, Atlanta and Environs, II, 801-807.  6.  Minutes Directors, III, 754.  7.  Ibid., 742-745.  8.  Ibid., 746-747.  9.  Ibid., 747.  10.  Ibid., 762-763.  11.  Ibid., 783.  12.. Ibid., 800. 13.  Ibid., 859, 875-876.  14.  Ibid., 868-869.  15.  Ibid., 906.  16.  Biographical records, Federal Reserve Bank of Atlanta.  17.  Minutes, Directors, III, 910-935.  18.  Ibid., 797-798.  19.  Ibid., 783.  20.  Ibid., 789.  21.  Ibid., 826.  22.  Ibid., 808.  23.  Ibid., 802-803.  256  24.  Ibid., 907.  25.  Ibid., 881-894.  26.  Ibid., 926.  27.  Ibid., 756, 823, 835-837.  28.  Ibid., 916-17.  29.  Ibid., 771-73.  30.  Ibid. , 783-84.  31.  Ibid., 830, 893; Annual Report, 1924, p. 12.  32.  Minutes, Directors, III, 856; Annual Report, 1924, p. 12.  33.  Minutes, Directors, III, 789.  34.  Ibid., 811, 812, 920, 922.  35.  Ibid., 916. The picture now hangs (May, 1965) in the lobby of the Silvey Building annex.  36.  Minutes, Directors, III, 786-87.  37.  Annual Report, 1924, p. 6.  38.  Ibid., 11.  39.  Ibid., 12..  257  Chapter 14 1925 As the first quarter of the twentieth century came to a close a number of interesting acts were played on the national stage. The reticent Vermonter, Calvin Coolidge, having won a presidential term in his own right was inaugurated on March 4, along with his colorful running-mate, VicePresident Charles Gates Dawes. Soon thereafter the Teapot Dome naval oil reserve trial began at Cheyenne, Wyoming, involving several highly placed government and business officials. Later in the year Colonel William Mitchell, of the Air Service, was courtmartialed for outspoken criticism of the Administration for laxity and negligence in the operation of the Air Service. In April Henry Ford started the first commercial aviation on a regular schedule by airplane freight service between Detroit and Chicago. In midsummer William Jennings Bryan and Clarence Darrow pitted their legal and forensic talents against each other in connection with the Scopes anti-evolution trial in Dayton, Tennessee. The effort and the heat were too much for the aging Bryan, who died July 26, five days after the conclusion of the trial. Some other noted departures from the land of the living in 1925, were Walter Camp, football promoter and oracle; Robert M. LaFollette, governor, senator, and 1924 presidential candidate; John Singer Sargent, artist; Thomas R. Marshall, former vice-president, who asserted that “what this country needs is a good five-cent cigar,” and James Buchanan Duke, tobacconist and benefactor of Duke University.1 On the home front Candler Field, the former automobile race track at Hapeville,  258  was leased to the city by Asa G. Candler, Jr., for use as a municipal airport; the Southern Railway System inaugurated its elegant all-Pullman Crescent Limited on the New York to New Orleans run. The Davison-Paxon-Stokes Company, Atlanta’s number two department store, effected a merger with R. H. Macy and Company of New York; Courts and Company, noted local investment house, began operations modestly in an office in the Hurt Building. The dizzy Florida land boom reached tremendous proportions during the year, and the first Forward Atlanta campaign, under the leadership of Ivan Allen got underway. During the next four years it resulted in the location in the city of 762 new enterprises, employing over 20, 000 persons with an annual payroll of more than $34, 500, 000.2 At its regular meeting in December, 1924, on the 12th, the Federal Reserve Board elected directors and officers to serve both the Atlanta Bank and the branches for 1925. Eugene R. Black, of Atlanta was named a Class A director. for a 3-year term, beginning January 1, 1925. He had no opposition. J. A. McCrary, of Decatur, was opposed by Harry B. Hoyt, of Jacksonville, Florida for Class B director for the same period, but was handily re-elected by a vote of 144 to 91.3 The following gentlemen were elected directors of the various branches: New Orleans, Marcus Walker, J. P. ButLer, Jr., Leon C. Simon and R. S. Hecht, all of that city; Birmingham, A. E. Walker, W. W. Crawford, and T. 0. Smith, all of Birmingham; Jacksonville, G. G. Ware, of Leesbury, Florida, andEdwardW. Lane and C. P. Kendall, of Jacksonville; Nashville, Joel B. Fort, Jr., E. A. Lindsey and J. E. Caldwell, of Nashville, and T. A. Embrey of Winchester, Tennessee.4  259  An election of officers for Atlanta and the various branches eventuated as follows: Atlanta M. B. Wellborn, Governor  W. H. Toole, Mgr. Fiscal Agt. Dept.  J. L. Campbell, Deputy Governor  Randolph & Parker, Gen. Counsel  Creed Taylor, Deputy Governor  H. F. Conniff, Ass’t. Cashier  M. W. Bell, Cashier  J. B. Tutwiler, Ass’t. Cashier  Ward Albertson, Sec’y. Bd. Directors  R. A. Sims, Ass’t. Cashier  W. S. Johns, General Auditor  J. M. Slattery, Mgr. Bank and Public Relations  J. W. Honour, Ass’t. Auditor  Dept.  New Orleans Marcus Walker, Managing Director  Birmingham A. E. Walker, Managing Director  W. H. Black, Ass’t. Mgr.  H. J. Urguhart, Cashier  J. A. Walker, Cashier  T. N. Knowlton, Ass’t. Cashier  F. C. Vasterling, Ass’t. Cashier Lawson Brown, Auditor Jacksonville  Nashville  Geo. R. DeSaussure, Managing Director  Joel B. Fort, Jr., Managing Director  W. S. McLarin, Cashier  E. C. Huggins, Jr., Cashier  Havana Agency  Savannah Agency  L.C. Adelson, Manager  R. N. Groover, Manager  L.L. Magruder, Ass’t. Mgr.  D. E. Avery, Ass’t. Mgr.  260  Oscar Wells, of Birmingham, was named to membership on the Federal Advisory Council.5 While the position of Assistant Federal Reserve Agent at limited power branches had been abolished in 1924, the office was still applicable at Atlanta and New Orleans. Accordingly, Ward Albertson was elected for Atlanta and Lawson Brown for New Orleans. William Earl Miller was named Acting Assistant Federal Reserve Agent for New Orleans. At the same time the Bank’s new director, Eugene R. Black was given his first committee assignment. In the words of the Chairman of the committee: “It is my belief that the advice and counsel of Director Black, who is the president of a large commercial bank in Atlanta7, will be of great value to the new [special salary] committee.”8 As the new Board Chairman and Federal Reserve Agent, Oscar Newton, assumed the chair for his first meeting, at 11 o’clock on the morning of January 9, 1925, he asked the cooperation of the members of the Board and their support in his administration of the office, pledging his own best efforts in faithfully serving the interests of the Bank and the district.9 An additional junior officer was elected later in the meeting in the person of Leo Starr. He was named Assistant Cashier at the Nashville Branch, where he had previously served as utility clerk.10 As the year progressed other changes occurred in the official family of the Bank and its Branches. In February Thomas W. McCoy, who succeeded J. K. Ottley as  261  a Class A Director, attended his first meeting. Mr. McCoy, President of the Merchants National Bank and Trust Company, Vicksburg, Mississippi, was a native of Golconda, Illinois. He had spent his entire working life in the banking business, starting with the First National Bank at Greenville, Mississippi in 1891.11 As of April 1, 1925 the Bank lost three of its long-time officers by resignation. They were L. C. Adelson, Manager of the Havana Agency; W. H. Toole, Manager Fiscal Agent Department, and J. M. Slattery, Manager Bank and Public Relations Department.12 Mr. Adelson had performed his duties with distinction and great satisfaction to the bank. Indeed, his intimate knowledge of the Federal Reserve Act, due to his residence in Washington during the formative years of the System, and his earlier connection with the Federal Reserve Board had proved exceedingly valuable. Warren Harris Toole had been one of the original 1914 directors of the Bank and had served as such until October, 1917, when he assumed the position from which he resigned. He had been requested to make the change when the United States entered World War I so that his particular talent for painstaking work might be devoted to Liberty and Victory Loans. During this entire period he was in absolute charge of these .securities, most of them in coupon form. Over a billion dollars worth were handled by Mr. Toole to the satisfaction of the Bank, the Government and the pablic. Mr. Slattery, during his long connection with the Bank, had served many positions with distinction. He began as Secretary to M’. B. Wellborn; then progressed to Assistant Federal Reserve Agent; Secretary of the Bank; Manager of the Havana Agency, and finally, Manager of the Bank and Public Relations Department. His duties  262  were always handled with admirable precision.13 Meanwhile the Federal Reserve Board, at year’s beginning, exercised its perogative of appointing three directors for each Branch in addition to those already elected by the Atlanta Board. Its appointments were: Nashville: W. H. Hartford, 1 year; Paul M. Davis, 2 years; Joseph A. Chapman, farmer, Columbia, Tennessee, 3 years. Birmingham: W. H. Kettig, 1 year; Oscar Wells, 2 years; John P. Kohn, real estate and insurance, Montgomery, Alabama, 3 years. Jacksonville:J. C. Cooper, 1 year; Fulton Sausey, 2 years; L. C. Edwards, Florida Citrus Exchange, Tampa, 3 years. New Orleans: P. H. Saunders, 1 year; L. C. Simon, 2 years; A. P. Bush, 3 years.14 According to the by-laws branch bank directors elected by the Federal Reserve Bank of Atlanta “shall be chosen from the ranks of men well qualified and experienced in banking,” and the branch bank directors appointed by the Federal Reserve Board “shall be chosen from the ranks of men of high character and standing who are engaged in agriculture, industry or commerce, insofar as may be possible or practicable.” Since Leon C. Simon was a banker and already on the Atlanta Board, his appointment to the New Orleans Board had to be revoked. Frank W. Foote, of Hattiesburg, Mississippi, was appointed in his stead.15 In April, 1925, Nashville Branch Director Joseph A. Chapman resigned because of ill-health. He was succeeded by William P. Ridley of Columbia,  263  Tennessee.16 The Birmingham Branch lost a director in the death of Col. Thomas Octavius Smith on September 18. He was replaced by Walter E. Henley on November 13. Henley had also succeeded Col. Smith as President of the Birmingham Trust and Savings Company.17 At the August Board meeting Governor Wellborn announced the death, on the 10th, of Charles A. Lyerly, President of the First National Bank of Chattanooga, and formerly member of the Federal Advisory Council representing the Sixth District. Another of the Bank’s original official group had gone.18 While official salaries for 1925 were up somewhat from 1924, economies had been effected in both total number of employees and in total annual payroll. As of April 1, 1925 the number of employees, both Atlanta Bank and branches, stood at 383, compared to 489 on January 1, 1922. The annual payroll was $617,450 against $764, 780 for the earlier date - a saving of $147, 330. 19 The current Florida land boom was having an effect upon employment generally and upon the Bank in particular. Early in the year modest salary increases had been recommended by the Atlanta Board for eight lower echelon officers. They were disapproved by the Federal Reserve Board, due to its policy of considering general salary increases only at the end of the calendar year and because it had refused to give ear to similar recommendations from other Federal Reserve Banks. In this connection Deputy Governor J. L. Campbell, of Atlanta, observed, on August 6: “In view of the close proximity of our bank to the developments now going on in Florida, we have lost and are losing some of our best men to banks in that state. Our [Salary] Committee did not have in mind general salary increases, but recommended only particular cases, feeling that our position is not similar to that of other Federal  264  Reserve Banks, which are not confronted with this condition. Since the last Board meeting, Mr. Marvin Russell, field representative in the Failed Banks Department, for whom we recommended an increase from $2400 to $2700, has accepted a position with the First National Bank of Bradenton, Florida.”20 A month later, on the same. general subject, Mr. Campbell reported: “Due to a great many of our employees resigning to accept positions in Florida, our clerical staff has been badly disorganized for the past sixty days. We have had a very large turn-over during this period, and while we have succeeded in filling the positions of those who have resigned, our staff consists to a large degree of inexperienced people at this time. This situation, however, is. Improving daily, and we hope shortly to again have our organization functioning efficiently.”21 A number of matters concerning branch operations presented themselves for consideration during 1925. That the Havana Agency was becoming something more of a burden than a boon is indicated by the following comments by Coy. Wellborn at the February Board meeting: “The report of our Auditor’s examination of the Havana Agency, under date of January 19, 1925, discloses that the operating expenses for the Agency for the year 1924 were $34, 995. 86. This year that figure will be materially reduced inasmuch as the Manager, L. C. Adelson, has tendered his resignation effective April 1, 1925. The operating expenses for the current year will, therefore, be around $25, 000. Considering the fact that we are not permitted to have any earnings at all from the Havana Agency, its maintenance is quite a heavy tax on our bank. The Boston Federal Reserve Bank has an agency in Havana from which they derive a gross revenue of about $74, 000 per  265  annum. Inasmuch as the Atlanta Agency furnishes all the ‘sinews of war,’ which enable the Boston Agency to make these large profits, it does not seem exactly fair or equitable to the Atlanta bank that such should be the case. The original establishment of the Boston Agency took place over the protest of the Atlanta Bank, for we expressed the view that Cuba, being contiguous to Florida, which is in our District, came under what I may term our ‘sphere of influence’ rather than that of Boston. Retrenchments and economy are the watchwords today, and in view of this, it seems to us that there is no reasonable excuse for the Reserve System going to the expense of maintaining two agencies in Havana, when one would be able to carry on the work satisfactorily. It was claimed that the establishment of the Boston Agency would be very helpful to the New England States in their business transactions with Cuba, but so far, there has been no evidence of this. No bills have been bought or sold, only dealings in cable transfers have taken place, a matter which could easily be handled by the Atlanta Agency.”22 Boston was to withdraw two years hence. The resignations of L. C. Adelson, Manager, of the Havana Agency has been noted. He was replaced by L. L. Maghuder at the much lower salary of $5, 000 per year. At the same time H. C. Frazer was elected Assistant Manager at $3600. Both appointments were effective April 1. 23 In February Deputy Governor J. L. Campbell reported that the New Orleans Branch was “operating in a very satisfactory manner but that business was extremely quiet and suggested that the Branch might be over-staffed.24 Jacksonville was still pressing for an armored truck. Mr. Campbell pointed out, however, that, unlike Atlanta and the other branches, where clearing house balances  266  are settled by charges or credits to member banks on the books of the Federal Reserve Bank, Jacksonville had never so operated because it had not been possible to get local clearing house members to agree to such handling. Therefore, it was necessary to send to member banks to collect balances due the Branch. The Jacksonville Branch was asked to conform and, in March,. worked out arrangements to do so, thus obviating the necessity for an armored truck and the need to transport large amounts of cash through the streets of Jacksonville.25 By the end of the year building plans for Birmingham had become firm. In December a contract for the erection of a building was awarded to the A. J. Krebs Company of Atlanta at a cost of $289, 900. Stone Mountain granite was substituted for Bedford stone, previously approved for the job. Closer cooperation between the Atlanta Bank and its Branches was insured in November when a resolution offered by Director T. W. McCoy was adopted. It provided that the Managing Directors of the four branches meet in Atlanta with the officers of the parent bank at least semiannually, on dates to be fixed by the Governor.27 The Bank and Public Relations Department was reorganized and Ward Albertson was named Manager on April 15, 1925, succeeding J. M. Slattery, resigned. Gist of the reorganization was set forth in recommendations of a special committee, composed of Oscar Newton and M. B. Wellborn, as follows: “That the officers visit group meetings and association meetings of the bankers of the respective states in the District; also that they visit the member banks and make reports of their visits to the Manager. “That employees selected by the Manager, on account of their fitness, make  267  such visits and reports to him; the selection of employees to be made by the Manager with the advice and consent of the Executive Committee. “We believe that the work can be effectively done by the officers and selected employees as they have an intimate knowledge of the needs of member banks and of the operation of this bank. “We recommend that the Manager make a monthly report to  the Board of  Directors of the activities of the Department.”28 From the time the Federal Reserve Banks opened their doors in 1914, there had been a reluctance on the part of small town and country banks to join the System, and some, after joining exhibited a querulous attitude. In January, 1925, J. H. Ingram, President of the Lineville National Bank, Lineville, Alabama, wrote to Governor Wellborn: “…Then kindly give me some reasons in your opinion for a small bank to remain in the Federal Reserve System, and keep up the reserve balance with loss of interest and loss of exchange, and own stock in the Reserve Bank and get six percent dividend thereon. “What advantage have the National Bank over the State Bank under the present laws and practice? “I am thinking over the above matter, and the tendency of National Bank Laws at the present time, and would appreciate your reply, giving me some reasons, as you see them, for the smaller banks to remain in the Federal Reserve System.” To which Governor Wellborn ever the forceful advocate of the Re~erve System, promptly replied:  268  You make the additional request that I give you some reasons why, in my opinion, a small bank should remain in the Federal Reserve System, when such membership requires it to maintain a reserve balance upon which it receives no interest. I believe there are several good reasons why a small National bank should remain in the System, thereby retaining its National charter. In the first place, the general public has more confidence and faith in a National bank than in a state bank, and, under similar management, the National bank will always take the lead in a small community for this reason. “I am inclined to believe that you are asking these questions because at the present time you are not having occasion to borrow from us, but you will recall that there was a time when you availed yourself of this privilege. I am sure you found this service very helpful in 1920-21; and if you had not been a member of the System, you would have experienced considerable uneasiness through not having this great financial bulwark back of you to be called upon in times of stress. It is evident from your letter that you are somewhat restive on account of your membership in the System, which does not allow you to receive interest on your reserve balance nor collect exchange on checks which your customers draw on your bank. It is true that the benefits which the banks and business interests receive from the Federal Reserve must be paid for by someone. It is a very true saying that one cannot get something for nothing in this world. “I would like to ask you a question. How would you like for the Federal Reserve System to be abolished? Before answering, consider that this would mean that the banks and business world would have to go back to the old order of things when every bank looked out for itself, and there was no institution like the Federal Reserve to be  269  depended on to save the situation when an emergency arose. It is very easy for some to forget the dark days of the past, but I am sure that you will recall the collapse of business and the fall of 1921. I personally know you to be a thinking man; and I feel confident that you would be the first to admit that, if the Federal Reserve System had not backed up to the limit the business and financial world during these years, we would have experienced the most awful panic that our generation ever saw. As it was, with the help of the Federal Reserve, business recovered rapidly and pursued the even tenor of its way. “If you will go back further into history, you will come to the panic of 1873, from which it took this country six years to recover, and twenty years later, the panic of 1893 which caused financial depression for at least six or seven years. I mention these facts because if bankers like yourself are not willing to maintain the Federal Reserve System, then who is to do it? “I have been with the Federal Reserve for ten years, and I have seen very few national banks surrender their charters and take out state charters. Several of those which did so have since failed, and the depositers in these banks learned a bitter lesson - one which they will never forget.”29 Since the organization of the Federal Reserve System in 1914, a total of 40 banks in the Sixth District had, in fact, failed. Indeed, the Reserve System, useful as it had been, was not full insurance against inept or dishonest management. A tabulation of the failed banks, by state and year, follows: State Alabama  No. of Banks 7  Year 1915  No. of Banks 3  270  Florida  4  1916  2  Georgia  25  1917  1  Louisiana  2  1918  1  Mississippi  0  1919  1  Tennessee  2  1920  0  Total  40  1921  2  1922  2  1923  5  1924  13  1925 (to May)  10 30  Total  40  At about the same time Governor Wellborn wrote to Mr. Ingram at Lineville, Alabama, he was called upon for his opinion in another matter involving broad policy. The question was what method should be adopted in extending credit and giving aid and assistance to banks whose capital is impaired by losses and whose condition is critical, due in some instances to over-extended condition and in other instances to the fact that a large portion of their assets consist of slow and frozen paper. To which question Governor Wellborn, with the support of the Executive Committee, responded: ...Each case has its own particular difficulties and therefore must be given consideration on its own merits, taking into consideration the management of the bank, the standing of its directors and the confidence that can be placed in those operating it, particularly whether or not they have the confidence of the community. The Executive  271  Committee realizes that there is some risk involved in extending credit to banks whose condition is critical, due to impaired capital and the existence of frozen and doubtful assets, but if the bank can be saved, no loss will be sustained, whereas our experience has shown that when banks fail and their assets liquidated, that in spite of our caution and efforts to obtain ample security against their indebtedness, we frequently sustain a loss on account of a shrinkage in values from the depressed condition in a community brought about by the bank’s failure. “The Committee thinks that every effort should be made by us to rehabilitate these banks by urging the directors to see that the impairment of capital is made good, realizing of course that the extension of credit by us should not represent the furnishing of capital and the extension of credit alone will not save a bank, nor overcome its difficulties brought about by losses in its assets. However, a moderate amount of credit can be extended with little risk, pending the rehabilitation of a bank by its directors and stockholders, and in this way avert a crisis in its affairs, and enable it to care for seasonal shrinkage in deposits until a favorable time when its impairment may be made good.”31 Two events of the summer of 1925 had considerable effect upon the operations of the Sixth District Federal Reserve Bank - the worst drought in 70 years and an unprecedented real estate boom in south Florida. Writing to his son from Miami Beach at the height of the boom on October 5, Governor Wellborn said: “...This summer has been a remarkable one in many respects. The calm which always follows the storm has come upon the real estaters on the beach and thousands are now making time while waiting for the coming of a new supply of buyers to fill their  272  coffers. “I have been a spectator in the midst of the most active land speculation the world has ever had and now after the battle the weary combatants seek repose amid the graceful palms along these fateful shores. The building campaign follows slow behind and costly lots are made to produce revenue to satisfy the greedy owners. As usual, transportation has completely broken down while the clamor for building material is loud and fierce- -all construction projects are delayed and labor annoyed and harassed. In the faces of the populace you may read the old story- - one half is worried and weary and the other frivolous and ‘don’t give a damn’- -mingling in riotous endeavor for better or for worse, mostly the latter. “Everything is magnified and exaggerated. The superlative degree reigns supreme. I never before beheld such serious minded, hard workers, or so many unscrupulous adventurers. The bright sun shines upon the largest and most varied collection of thieves ever before gotten together in any clime- -they hesitate at nothing. All sorts and conditions of men are attracted here by the opportunities for moneymaking- -those without capital must compete with the majority who are smart and keen. The survivor is put to the most rigid test and deserves all he gets for he has been obliged to fight every inch of the way.32 In more sober vein, Wellborn reported to his Board of Directors during the same month: “Florida is highly prosperous and the boom in real estate has continued there throughout the year without abatement. In fact, it has developed each month so rapid a pace that the officers of our bank feel that when the collapse comes in the not distant  273  future, which we think is inevitable, we will have very serious problems to meet. When the balloon collapses, it falls to the ground very rapidly; and I venture to predict the result will be a very sudden and tremendous decline in bank deposits. As history has always shown in the past, many individuals will be completely wrecked, and their notes held by banks will be uncollectible. There is nothing we can do except to sit steady, and warn our banks to keep their funds in liquid condition, if possible. This we have been doing for the past three years, and it is hoped that when the crash comes, they will be prepared to some extent to meet the troubles that will arise. 33 “Over quite a large area in North Georgia, starting just above the middle part of the State, has occurred this summer the most severe drought in the past seventy years. Northeast Georgia in particular has been practically without rainfall front April to the present time (October). Naturally, cotton, the chief product of the farms of this section, has suffered badly, and in many instances not enough will be realized from the cotton raised to pay for the fertilizer and seed. The severity of the drought will, of course, be reflected in the business of our member banks in this territory, and this circumstance naturally gives us a great deal of concern... “My view is that well managed banks which are suffering through no fault of their own, but merely through untoward circumstances, should receive a helping hand from us. I believe that it is only right and fair that our bank should not only show a sympathetic attitude, but that we should do what we can to render such institutions substantial relief. “The conditions as a whole in our district appear to be very favorable. Nearly all of our industrial plants are operating to full capacity, and the crop conditions--outside of  274  the sections which have suffered from the drought--are very good indeed. South Georgia made a splendid cotton crop, and the crops in Alabama are also good. That state will probably make a million and a quarter bales of cotton. In Mississippi, they have the best crop they have had in a quarter of a century- -in fact, it has been an almost perfect one.”34 The following month, November, Wellborn again commented anent the Florida situation: “We are watchful of the Florida situation in contemplation of what may happen when the present ‘boom’ recedes. We are urging our members in Florida to hold their loans down to their local customers, and keep their funds with strong banks; to buy high-class commercial paper and Government securities. These being, in our opinion, the safest places to have a secondary reserve. 35 Meanwhile, a revolving currency fund of $2, 000, 000 was established on August 15 at the First National Bank of Miami in order to take care of currency requirements of member banks in that city and vicinity. 36 A reckoning on the Florida land extravaganza was soon to come. During the year 1925, total resource and liability items of the Federal Reserve Bank of Atlanta increased $53, 683, 000--from $242, 845, 000 on December 31, 1924, to $296, 528, 000 one year later. Cash reserves decreased during the same period from $176, 318, 000 to $123, 425, 000. The Reserve deposits of member banks amounted to $78,276,000 on December 31, 1925, which was $15, 379, 000 greater than on the same date in 1924.37 With a total membership of 495 banks at the close of 1925, the volume of  275  accommodation extended to 320 members during the year aggregated $527, 945, 000, which was $22, 367, 000 less than the amount extended to 390 member banks during 1924, when the membership at the chose of the year was 516 banks.38 On one front during 1925, the Bank did not progress. No tenant could be found for the unused space in the building. Necessary restrictions imposed by the nature of the business of the landlord were simply unpalatable to desirable corporate tenants.39  276  NOTES Chapter 14 1. 2. 3.  Keller, Dictionary of Dates, II, 340-345. Garrett, Atlanta and Environs, II, 811-815. Minutes, Directors, III, 925.  4.  Ibid. ,923-924.  5.  Ibid., 925-926.  6.  Ibid. , 926.  7.  Atlanta Trust Company.  8.  Minutes, Directors, III, 929.  9.  Ibid. , IV, 937.  10.  Ibid.  11.  Ibid. , 958; biographical records, Federal Reserve Bank of Atlanta.  12.  Minutes, Directors, III, 926.  13.  Ibid. , 926-927.  14.  Ibid. , IV, 954.  15.  Ibid. , 956-957.  16.  Ibid. , 996.  17.  Ibid. , 1049, 1061; Who Was Who in America, Vol. 1, p. 1149.  18.  Ibid. , 1040.  19.  Ibid. , 992.  20.  Ibid. , 1039.  21.  Ibid. , 1045.  277  22.  Ibid. , 964-965.  23.  Ibid. , 983.  24.  Ibid. , 968.  25.  Ibid., 969, 973, 980.  26.  Ibid., 1063.  27.  Ibid., 1061.  28.  Ibid. , 991.  29.  Ibid., 950-951.  30.  Ibid., 1005.  31.  Ibid. , 1009.  32.  Hopkins, M. B. Wellborn, 120-121.  33.  Minutes, Directors, IV, 1052.  34.  Ibid., 1051.  35.  Ibid. , 1058.  36.  Ibid., 1029, 1040.  37.  Annual Report, 1925, p. 6.  38.  Ibid. , 9.  39.  Minutes, Directors, IV, 979.  278  Chapter 15 1926  With Collidge in the White House during 1926, the equanimity of the American people was little disturbed from that quarter during the year. Henry Ford adopted the five-day week and eight-hour day as standard for his work force. Congress passed a Revenue Act reducing income taxes by nearly $400, 000, 000, with a maximum rate of 20% for individuals and 13-1/2% for corporations. A fund of $2, 500, 000 was established by Daniel Guggenheim for the promotion of aeronautics; the first successful radio-telephone conversation was held between New York and London, and an original Gutenburg Bible fetched $106, 000 in New York and was presented to Yale University. 1 It was an interesting year in the world of sports. Robert T. Jones, of Atlanta, won the British open golf championship; Gertrude Ederle, of NewYork, became the first woman to swim the English Channel, and Gene Tunney defeated Jack Dempsey, of Philadelphia, for the world heavyweight boxing championship. Some notable departures from the land of the living included Luther Burbank, the naturalist; Charles W. Eliot, president-emeritus of Harvard; Rudolph Valentino, movie actor and idol of countless American women; and Joseph G. “Uncle Joe” Cannon, speaker of the House for four straight terms. On September 17 and 18, a hurricane in the Miami, Florida, area killed 370 persons, injured thousands, caused property damage of $100, 000, 000 and, for practical purposes, wrote finis to the real estate boom.2 Closer to home, Dr. L. G. Hardman took over Georgia’s helm as Governor;  279  Walter F. George was re-elected to the Senate, defeating Georgia Chief Justice Richard B. Russell, and Isaac N. Ragsdale, a successful livestock dealer defeated four other candidates for the Atlanta mayor’s chair. Eugene Talrnadge came to prominence on the political stage by virtue of election to the post of Commissioner of Agriculture. 3 The City of Atlanta floated a bond issue of $8, 000, 000 for schools, sewers, waterworks improvements, a new city hall, and for the CentTal Avenue and Pryor Street viaducts. Private building included a greatly expanded Southern RaiLway Building, Pullman shops at Kirkwood, Whitehead, and Medical Arts buildings, and the Atlanta Athletic Club. The Atlanta Historical Society was organized and Thomas H. Pitts closed his famous Five Points soda fountaion. “To much decentralization and not enough people downtown,” he said. Neighbor hood shopping areas were coming to the fore.4 The Federal Reserve sank of Atlanta entered 1926 with the same roster of officers who had functioned during 1925, as did the various branches. 5 The following gentlemen were re-elected to serve three-year terms as Directors of the various branches: J. H. Frye, Birmingham; G. G. Ware, Jacksonville; T. A. Embrey, Nashville; and J. P. Butler, New Orleans. Randolph and Parker were re-elected General Counsel at a retainer fee of $3, 500 per annum, payable monthly, and an allowance of $1,500 for stenographic services.6 A contest developed for Class “A” and Class “B” Directors for the Atlanta Bank. Edward C. Melvin, of Selma, Alabama, defeated T. W. McCoy, of Vicksburg, Mississippi, for the Class “A” post by the narrow margin of 109 to 103. W.H. Hartford won the Class “B” position by a landslide, 109 to 26, over B. H. Baker, of Cottondale, Florida.7  280  The new Director, Mr. Melvin, destined to serve for 10 years, was born in Selma, Alabama, in 1870. Following a course at the Poughkeepsie Business College he began his career as an employee of the City National Bank of Selma. During the year 1904 he tried the wholesale grocery business, but soon returned to banking and served the Selrna National Bank as President and, finally Chairman, for nearly 50 years. He also functioned as President of the Selma Trust & Savings Bank from its organization until shortly before his death in 1954.8 At the January 1926 Board meeting, committees were appointed, with W. H. Kettig designated as Chairman of the Special Salary Committee; J. A. McCrary, Building Committee; and Oscar Newton, Bank and Public Relations.9 Branch Bank Directors, reappointed at the same time by the Federal Reserve Board were: P. H. Saunders, New Orleans; W. H. Kettig, Birmingham; J. C. Cooper, Jacksonville; and W. H. Hartford, Nashville. Oscar Newton was reappointed Federal Reserve Agent and Chairman, Atlanta; W. H. Kettig as Class “C” Director and Deputy Board Chairman, Atlanta; and Ward Alberta on and W. B. Miller, Assistant Federal Reserve Agents, Atlanta and New Orleans, respectively.10 Election of a Federal Advisory Council member, to succeed Oscar Wells, developed into a spirited affair. The name of E. W. Lane, of Jacksonville, was placed in nomination by Director McCrary. P. D. Houston, of Nashville, was nominated by Director Hartford. Two ballots by hand resulted in a tie. Three written ballots produced the same result. Finally, on the sixth ballot, Mr. Houston forged ahead five to three and was declared unanimously elected. 11 Persia Daniel Houston (1874- 1957) was, by profession, a banker. He was born  281  in Marshall County, Tennessee, and spent his adult business life in Nashville. At various times he was Board Chairman and Director of Southern Trust Company, Louisville; Honorary Board Chairman, First American National Bank,Nashville; Director, Hermitage Hotel Company; Chairman, Tennessee State Planning Commission; President, American Bankers Association and of the Railway Treasurers Association, and a trustee of both Vanderbilt and Fisk Universities.12 Atlanta Board members were saddened at their February meeting by the announcement of the death, on January 18, of Peter R. Kittles, a Director since 1918 and in the early days of the Bank, its Auditor. Several Directors paid personal tribute to their departed associate; appropriate resolutions of regret were adopted, and the chair occupied by Mr. Kittles as a Director and bearing his name, was sent to his widow. 13 On March 9, an election was held for a Class “A”, Group 3 Director of the Atlanta Bank for the unexpired term ending December 31, 1926. Julius Morgan, of Pembroke, Georgia, received 11 votes; T. Y. Smith, of Bartow, Georgia, 14; and G.G. Ware, of Leesburg, Florida, 118. Mr. Ware was welcomed by Board members at their meeting on March 12. 14 The new Director, who was to serve until the close of 1935, was that comparative rarity, a native of Florida, having been born at Providence, that State, in 1885. After serving various banks as bookkeeper and cashier, Mr. Ware became president successively of the Citizens Bank of Leesburg, Florida; the First National Bank of Leesburg; and the First National Company, of that city. He also served as President of the Lake County Chamber of Commerce and Director, Florida Development Board.15  282  Few other official changes took place .during the year. In August, Claude Gilbert was temporarily appointed Assistant Federal Reserve Agent to make a constructive survey of member banks at a salary of $10, 000 per year. He resigned November 23 in order to commence special work for the Federal Reserve Board in Washington. 16 The matter of Deputy Governor J. L. Campbell will be cited later in this chapter. Meanwhile, in August, James A. Goethe was elected Assistant Manager of the Savannah Agency at an annual salary of $2, 400. Indeed, for the preceding six months he had functioned as Manager during the absence of R. N. Groover. 17 Groover had been serving as a special agent of the Bank in Atlanta in connection with the assets of the defunct Georgia National Bank of Athens. Whi]e so serving he was guilty of an act of negligence which led to his discharge. Among the assets of the Georgia National was a note signed by J. B. Joel for $10,000 due in 1925. Joel made a $1,000 payment by check on January 28, 1926 and tendered it to Field Representative Groover. Groover later testified that there was no one in the bank at the moment to receive the check fzom him. So, prior to going to lunch he went by his hotel room to wash up and locked the check in his trunk for safekeeping. Other matters came up during the afternoon. The Joel check slipped Groover’s mind and did not again come to light until he was cleaning out his trunk in May. Greatly embarrassed, he turned the check in and added one of his own for $33. 00, representing an interest payment to Mr. Joel. Groover was given a hearing by the Board of Directors. While he was regarded as thoroughly honest, he was adjudged guilty of gross negligence and was relieved as  283  Savannah Agency Manager. He was tendered a position in the Discount Department in Atlanta at a reduced salary, subject to the approval of the Federal Reserve Board. The Board did not approve. In a letter to Chairman Oscar Newton, D. R. Crissinger wrote: “…Mr. Groover has been guilty of gross negligence in the performance of his duties. For this reason the Board disapproves the recommendation of your Board of Directors for the further employment of Mr. Groover, and the payment to him of any salary.18 Salaries generally throughout the Bank increased in 1926 over 1925. A comparison of officers’ salaries for the two years is shown below: Name  Title  M. B. Wellborn  Governor  J. L. Campbell  From  To  $20,000  $25,000  Deputy Governor  12,000  14,000  Creed Taylor  Deputy Governor  9,000  11,000  M. W. Bell  Cashier  6,000  6,500  H. F. Conniff  Assistant Cashier  4,200  5,000  R. A. Sims  Assistant Cashier  4,200  4,200  J. B. Tutwiler  Assistant Cashier  4,200  5,400  W. S. Johns  Auditor  4,200  5,400  J.W. Honour  Assistant Auditor  Ward Albertson  Asst. Federal Reserve Agent  3,300  3,600  6,500  7,200  A. E. Walker  Manager, Birmingham  6,000  6,600  G. R. DeSaussure  Manager, Jacksonville  5,500  5,500  Joel B. Fort, Jr.  Manager, Nashville  4,500  5,500  284  Marcus Walker  Manager, New Orleans  12,000  14,00019  During March 1926, Governor Wellborn submitted recommendations covering revised vacation schedules for officers and employees. They were adopted and provided as follows: Parent Bank and Four Branches: All officers - three weeks. Employees- -including Savannah Agency: Employees entering the service of the bank on or before January 2, 1926, to be granted six days vacation, plus one additional day for each full month’s service during 1925--no vacation to be granted until employees shall have served six months. No employee entering the service of the bank after January 2, 1926 to be entitled to a vacation during the current year. No vacation should be granted prior to April 1 nor later than September 15. Except in cases where employees are entitled to more than one week and less than two weeks, all vacations should start at the close of business Saturday, returning the second Monday--in the case of one-week vacations, and the third Monday for twoweek vacations. The Manager of the Havana Agency was given one month with transportation to and from Havana-Atlanta, paid by the bank. For the Assistant Manager and other Havana employees- -odd years of service, three weeks; even years six weeks, with same transportation as above. 20 A number of matters concerning operating policy were settled during 1926. At this particular point of time in the history of the Federal Reserve System, it appeared that the Atlanta Bank was the only Federal Reserve Bank where the Board of Directors  285  did not give approval, in some form, to actions of its Executive Committee. Upon the matter being cited by the Federal Reserve Board, it was recommended by a committee of the Atlanta Board that a digest of unusual and important matters acted upon by the Executive Committee be furnished the Secretary to be submitted to the Board at each regular monthly meeting.21 As the result of lengthy litigation between the Pascagoula National Bank and the Federal Reserve Bank of Atlanta, which began in 1924 and was concluded May 4, 1926, in the United States Supreme Court of Appeals for the Fifth Circuit, some important legal milestones were established. Reported Messrs. Randolph and Parker, General Counsel: “This important litigation is ended and the courts have squarely upheld and sustained the contentions of the Federal Reserve Bank of Atlanta on all issues or points involved. “As a result the following things are now conclusively established: “First: The Federal Reserve Bank can legally require, as provided in the Federal Reserve Act, a member bank to make remittance to it without deduction for socalled exchange charges.’ “Second: The Federal Reserve Bank can legally inaugurate and enforce a policy of ‘deferred credit’ to its member banks on all remittances made by them in accordance with reasonable time sechedules adopted. “Third: The Federal Reserve Banks are permitted, under the terms of Federal Reserve Act, to handle checks for non-member banks as well as member banks, and for its member banks can handle checks payable without as well as within its own  286  distirct. “We have taken occasion in passing to refer specifically to the very important ruling made by Judge (Srnauel H.) Sibley that suits cannot be brotgh.t against the Federal Reserve Board except in the District of Columbia. This was an issue squarely raised in this litigation and the decision is of far-reaching importance and should prove of the utmost value in the future. 22 Randolph and Parker, General Counsel for the Atlanta Bank, were assisted in this litigation by Walter Wyatt, General Counsel of the Federal Reserve Board, by M. B. Angell, of the John W. Davis law firm in New York, and by Newton D. Baker, of Cleveland.23 A general policy was enunciated at the September Board meeting relative to “Land Owners’ Endorsement on Tenant Farmers’ Notes,” in the following language: “It is the general practice of member banks in agricultural sections of this district since 1920 and 1921 to require land owners to endorse tenant farmers’ paper. In our numerous conferences with member banks, we suggest and urge that they obtain the endorsement of land owners, due to the hazard of making advances solely secured by crops since the boll weevil infestation in this district. However, we cannot determine in case of a particular note offered whether or not it should be endorsed by land owner. This must be left to the discretion of the officers of the offering member bank.24 For several years past, Governor Wellborn had worked strenuously in an effort to have the Bank discontinue the handling of non-cash collection items. In late September, 1926, a letter was received from Governor Crissinger, of the Federal Reserve Board, to the effect that each bank exercise its own option as to the collection  287  of such items at street addresses, but continue the collection of non-cash items collectible at banks. Wellborn’s happy reaction is indicated by a letter he wrote to ManagingDirector Walker, of the New Orleans Branch: “… Am delighted that we have now obtained what I regard as a signal victory. Only three of the twelve Federal Reserve Banks--Minneapolis, Kansas City, and Atlanta--were in favor of discontinuing non-cash collections, but we finally prevailed upon the Federal Reserve Board to adopt a ruling permitting each Reserve Bank to follow out its own discretion in the matter. I have long regarded the voluhtary performance of this service by a reserve bank as being very unjust and unfair to member banks located in Federal Reserve Bank or Branch cities. I do not think the Federal Reserve Bank should do business with the public…”25 Upshot of the matter was that the Atlanta Board, in December, authorized the preparation of a circular to be sent to member banks announcing the discontinuance of handling non-cash items payable at street addresses.26 At the January 1926 Board meeting, Governor Wellborn made an interesting report on bank failures during the preceding year. He said: “During the past year, we have had in our district eight national banks to fail and four state bank members of the Federal Reserve System “These failures were caused by conditions which existed in 1920 when cotton dropped from 40 cents to 11 cents a pound during the crop moving season. These particular banks27 might have been able to weather the storm if they had had good years immediately following, but these good years did not come. On the contrary, the crops have been small for the past five years; and, in 1925, to cap the climax, these  288  sections experienced the severest drought ever known, for practically no rain fell from March until the latter part of September. “With regard to taking care of these banks, we rendered them very liberal assistance, but were careful to follow out the policy of your Board in trying to avoid any losses ourselves. While we extended to the banks that finally failed liberal accommodation, I might say that we did not take any extraordinary or heroic steps to save them, for fear of involving ourselves in ultimate losses. Our procedure was to urge the directors either to guarantee their borrowings from us, or put into the banks sufficient funds to restore any impairment of capital. With many of these banks which were in dire distress because of diminition of deposits brought about by local causes, our experience was that when those interested in their management began to undertake a rehabilitation of their affairs through conferences with us or among ‘themselves, rumors of the nature of these conferences almost invariably leaked out. This was generally followed by increased deposit withdrawals, which, together with the banks’ inability to obtain further funds from us on the paper offered, resulted ultimately in their closing. “In the case of the Georgia National Bank of Athens, Georgia, we accepted a loss of $165, 000 in order that the institution might be taken out of the hands of a receiver and placed in charge of a holding company organized by the people of Athens to enable them to liquidate the bank’s affairs over a long period of time and thus avoid sacrificing its assets by forced collections, such as a receiver in all probability would have been forced to undertake. “Our estimated total losses for the other banks that- failed last year amount to  289  $108, 990.28 As the year progressed the situation in Florida demanded increasing attention from the officers and directors of the Atlanta Bank. The Miami Revolving Currency Fund, set up in 1925, was increased from $2, 000, 000 to $3, 000, 000 in January 1926 and was discontinued by order of the Federal Reserve Board in September. Also, in September, the Board turned thumbs down on establishing a similar fund at Tampa.29 Toward the end of 1925, Governor Wellborn called .the Directors of the Atlanta Bank together and told them the boom could not last forever and that the impending collapse might throw too heavy a burden on the Florida banks. He announced his plan to visit every member bank in the state.30 Accordingly, he bought a new car and started out, calling on the president of every member bank from Fernandina to Miami. He warned of the wrath to come and suggested that the banks be more chary of loans and concentrate more on collections. When the boom was over their swollen deposits would melt like snow before the sun, he told them. When asked for advice as to how the surplus funds should be invested, he recommended the purchase of high class securities on the New York Stock Exchange which could readily be converted into cash.31 Wellborn reported on the trip and on the Florida situation to the Atlanta Bank Board on March 12: “At the request of your Board, I left Atlanta on January 10 for Florida and returned February 16, having visited 38 member banks from Jacksonville southward. I did not make my trip hurriedly, because I wanted to have a full talk with the chief officer  290  of each bank and his associates. “I have found that speculaticmin real estate, in city property, and subdivisions are very numerous all over the State. I believe that the speculation, after going on for the past few years, probably reached its height last summer and prices are now so high that the buyers are on a strike and therefore not nearly so numerous. “I believe that the banks will have some very hard problems to solve within the next year or two and the burden will begin to fall on the banks, in my opinion, within the next few months. It will come first in the shape of a decline in deposits and those who are engaged in developing will appeal to the banks to aid them to carry out their projects. It appears to me that there are a great many notes which have been given for lots where subdivisions have been in the course of development, and many of these notes will not be paid promptly. Therefore, the owners of the subdivisions will have to seek financial assistance from whatever source it may be obtained. “In discussing matters with member banks, I laid stress on holding their loans down to a small percentage of their deposits, advising them that in my opinion when the tide turned (as it is now turning), they will not be able to reduce these loans to their customers very materially. In other words, it will be hard to collect their bills receivable. They asked for an expression of my opinion as to what percentage would constitute a conservative basis, and while I had no value to go by, I stated 25 to 33-1/3 percent would be a fair basis to work on. “I found that the small bankers did not look on the situation as being so serious as did those in the larger banks, for the smaller bankers feel that they can depend on their correspondents in the financial centers, such as Jacksonville, Miami, and Tampa,  291  where they are maintaining very comfortable balances. “Real estate prices appear to me to be out of all reason, and every town I visited seemed to have experienced a real estate boom. Should our member banks outside of Jacksonville and Tampa wish to rediscount with us in larger amounts, they will not be able to present eligible paper--that is, loans they have made to their local customers. .They may have commercial paper bought in the open market that would be eligible, but I am afraid that very little of their local paper is eligible as these latter are based more or less on real estate transactions. If my surmises are correct, they would have to rely very largely upon their correspondents in the State and without to help them in taking care of declines in deposits. “While I have stated above that speculation in Florida has reached its peak, I did not mean to imply that the bottom will drop out of Florida. On the contrary, I believe the state will continue to develop and develop along the right lines--that is, substantial improvements, beautifying the waterways to accommodate the tourists, who I believe will go to Florida in increasing numbers from now on. Thousands of people have been to Florida in the past few years who have never been there before, and on account of its attractive climate and the great advertisting it has had through its boom, Florida will continue to grow and develop as a natural result, and, agriculturally, because of its citrus fruits and early vegetables. 32 Deposits of Florida member banks had increased from $165, 984, 000 on June 30, 1924, to $445,917,000 on December 31, 1925.33 Eight months later, on August 13, 1926, Governor Wellborn reported. developments:  292  “The large number of state banks which have failed in Florida and Georgia within the past sixty days has attracted universal attention, naturally most marked in this vicinity, and has had the effect of creating a general distrust in banking by those of the public who are not familiar with the inner workings of the banking business. “In Florida, about 41 banks have closed their doors, and in Georgia about 83. However, only one bank in Florida was a member of our System, The Palm Beach National Bank, and only one in Georgia, the  The non-member banks  which have failed were members of a chain system of which W. D. Manley, of Atlanta, and J. R. Anthony, of Florida, were the ‘financial agents’. The failures began in Florida and were followed by those in Georgia. The Florida banks had had very large deposits for the past several years--in many instances eight or ten times the capital and surplus of the bank--they loaned the Georgia banks on call several millions of dollars. When deposits began to decline in Florida, and the Georgia banks were called on to pay, they could not respond. Also, I understand, the Florida banks had quite a large amount of paper discounted with Mr. Manley and his associates at attractive rates of interest, and a number of Georgia banks had the same kind of paper. “While these failures in Georgia have been disastrous to their own communities, the banks were small, and the general economic and business situation in the state has not been materially affected, it is currently reported that quite a number of these failed banks may be reorganized and put on a good basis. This,. however, is merely surmise based upon statements made in the press by those interested.  “The closing of these banks in Florida and Georgia naturally caused some  293  anxiety on the part of our member banks. The officers of our bank have been watching the situation closely and have come to the aid of our member banks in a substantial manner. In Florida, deposits continue to decline, and that is a problem which we will have to help our member banks in state (sic) to meet. It is a very serious one, because many of the banks are unable to collect their bills receivable in sufficient amount to take care of the deposit decline. Their only resources are to call upon the Federal Reserve Bank and upon their correspondents in various cities. “At the present time, Deputy Governor Taylor is in Florida, in company with Mr. Claude Gilbert, the newly appointed Assistant Federal Reserve Agent. These gentlemen went to Florida with a view to going into all these matters thoroughly with the banks in and around Polk County, special attention being paid to the Polk County National Bank of Bartow, which is borrowing very heavily, about $200, 000 from us and about $500, 000 from correspondents in New. York and elsewhere. This is a ‘key bank’, and if it should fail, it might cause many other failures. If we are to take care of our good solvent banks in Florida, it may require a very liberal loan policy on our part and those banks may be years in liquidating such indebtedness to us. “It is a very serious situation in that state, and I think will continue so throughout this year. Therefore, it behooves our bank to regard this as an emergency and to do all in our power to keep down bank failures, while we must at the same time be careful to accept only good eligible paper--that is, so far as we can judge from present conditions. If Florida comes back promptly, much of this paper will soon be retired. On the other hand, if things continue to go badly in Florida for several years, the borrowers from those banks may find themselves in the same position as those in Georgia for several  294  years following the deflation period of 1920-21.” 34 Governor Wellborn then went on to reiterate his faith in the solid and substantial future of Florida by repeating his report to the Board in March.35 In September, Wellborn again reported on the Florida situation: “The section of our district which is giving our bank the most concern is, as you gentlemen know, the state.of Florida, where deflation and readjustment set in during the spring of this year, following a long period of inflation, which was very intensive in the years 1923, 1924, and 1925. We are watching closely the banks that are most affected. “As set forth in my report on conditions in Florida after my visit to that state in January and February, the large city banks appeared to be more careful and cautious in anticipating what was to come, and therefore prepared themselves. The small banks and the intermediate sized banks, as a rule, were less cautious, and I presume they were in that state of mind because they excpected to rely on their city correspondents and the Federal Reserve Bank to help them in time of need. “Since the last meeting of your Board, there has been a very serious situation in and around Bartow, Florida, of which the Polk County National Bank was the center, and involved not only that bank but the First National Bank, Avon Park, the , and the First National Bank, Punta Gorda, which are more or less allied with the  interests, and the Polk County National Bank.  These interests were also connected with eight or ten state banks in that vicinity, which are non-members, but the failure of one o.r more might have caused very ~serious results on account of such connection. “On September 7, 1926, Florida banks’ borrowing from us amounted to $4,  295  398, 239. 74--about 8 percent of our total bans to member banks. “I want especially to call attention to the splendid manner in which the Tampa member banks and the Jacksonville member banks cooperated with our bank in taking care of the situation. These banks joined together and raised a fund of $600, 000 and we promised our hearty assistance in anything that was necessary to be done in aiding our member banks as above stated to pull through the present crisis, which arrangements have now all been perfected and, therefore, we do not look for any special disaster in that immediate section. If something had not been done as has been done, as above related, it would have affected, and might have resulted in the failure of, many member and non-member banks in the middle ridge section of Florida. This shows what cooperation and team work will do. Our Deputy Governor, Mr. Taylor, with Mr. Claude Gilbert, Assistant Federal Reserve Agent, made several trips to Florida and did splendid work in this connection. I think it is apt to quote Kipling in connection with what has been done: ‘It isn’t the individual Nor the army as a whole, But the everlasting team work Of every human soul!.” 36 At the October Board meeting, Ward Albertson, Manager of the Bank and Public Relations Department, read a letter received from Claude Gilbert, relative to conditions in Florida at that time. This letter was written after the hurricane of midSeptember. Reported Mr. Gilbert: “From what I have seen so far, it is beginning to appear that the most of the  296  banks, particularly in the producing sections of the state, are making good progress and may be expected to enter into the winter season without substantial further decline in deposits. Public alarm generally has died down, and unless it should be revived, the banks will have the time needed to reduce loans to a comfortable level. Most bankers are expecting an increase in deposits, commencing in the next fifteen to thirty days, with the return of the winter residents and the movement of the citrus crops to market. Very few are looking for the high level of deposits of last year to be reached, and practically all believe that there will be a substantial increase over present figures, and enough income from produce and tourists to pay obligations for money borrowed.37 An occurence that brought home to the public the value of the Federal Reserve System in time of emergency was the Cuban crisis of April, 1926. Indeed, the event may have influenced Congress when the question of renewal of the Federal Reserve Charter came up later in the year, for the charter was renewed without difficulty.38 Two other events were certainly brought about by the crisis--the discharge of Deputy Governor J. L. Campbell by the Federal Reserve Board and the closing of the Boston Bank’s Havana Agency.39 Early in the week of April 6, rumors were started in the interior of the island to the effect that the Royal Bank of Canada was in financial trouble and might suspend payments. By mid-week runs had been started on branches of the Royal Bank in the interior and on banks in Havana. The Havana Agency had on hand about $10, 000, 000, most of which was paid out on cable transfers by the end of the week. By Friday, the 9th, the Boston Agency had sold an aggregate of $39, 000, 000 in cable transfers to Havana banks which the  297  Atlanta Agency could not complete because of lack of currency. Something had to be done quickly to get currency to the Havana Agency by the opening of business Monday, April 12. At this point, Governor Wellborn picks up the story: “Under date of April 9th, we received a request from our Havana Agency to ship $3, 000, 000 in currency, which seemed quite a large amount to request at that time, and upon wire inquiry to our Manager of that Agency, he replied to double the shipment, as conditions there were becoming panicky. “When this message was received in Atlanta, I was attending a meeting of our Board of Directors in New Orleans, and upon receiving advice from Atlanta, I cancelled my New Orleans engagements and returned immediately to the Atlanta office. The next morning, Saturday, April 10th, we received a telephone call from our Havana Manager (L. L. Magruder), requesting that we ship immediately by aeroplane or special train between fifteen and twenty million dollars in currency as he had already received requests for payments equalling that amount, and that if such currency was not received by Monday morning, some of the banks on the Island of Cuba would have to suspend payments. “We immediately got into telephone communication with the Federal Reserve Board, Washington; Federal Reserve Bank of Boston; Federal Reserve Bank of New York; and the National City Bank of New York, all of which had received practically the same information in regard to the situation on the Island of Cuba. “We set to work preparing shipments of currency ranging from $5 denomination and up, aggregating $26, 500, 000. It was found that the weight involved in the shipping  298  of this currency would not permit the use of an aeroplane, and therefore we chartered a special train with the right-of-way set up through to Key West, Florida, which train left Atlanta at 4 o’clock, Saturday afternoon, April 10th.40 “The shipment of currency was handled by usual registered mail in charge of the U.S. Postal authorities, consisting of five Railway Mail Service employees and one Post Office Inspector. Deputy Governor J. L. Campbell accompanied the shipment on the special train, together with six employees of our bank, including guards and clerks. Under agreement with the Postal authorities, Mr. Campbell took three additional guards to Havana, and further deemed it necessary to take three experienced clerks from our Atlanta bank to assist our Agency employees at Havana in paying out the currency. “Mr. J. A. McCrary, a director of our bank, intended to go to Florida, and I suggested that he accompany the train as far as Cocoa, Florida, his intended destination. With him went a Mr. Loving, an employee in his engineering business. I considered that Mr. McCrary and his friend would be an additional protection, for Governor Crissinger41 had ‘phoned me that morning to be sure to have ample forces accompany the party. After arriving at Cocoa, Mr. McCrary consulted with Mr. Campbell and decided to go with the party to Havana. “The train arrived at Key West at 4 o’clock Sunday afternoon and was met by the cruiser ‘Cuba’,42 whereupon the shipment of currency was transferred to the boat and delivered to the Cuban postal authorities. Upon landing at Havana, the shipment was under military guard from the docks to the vaults of. the Agency, being transported by trucks. Deputy Governor Campbell, with the guards and other members of the Atlanta party, followed close behind. The boat arrived at Havana at 2 o’clock Monday  299  morning; the money was dispatched immediately to our Havana Agency, and payments were made to the banks at 7 o’clock Monday morning. The Havana banks thus received funds in ample time before the opening hour of nine o’clock. “It is our information that on Saturday the Cuban government deposited with the Havana banks twelve million dollars in currency, which together with other currency was shipped down the Island of Cuba to branch banks in the aggregate amount of eighteen million dollars, all of which was by special train. Everything was handled without interruption and to the entire satisfaction of all concerned, we receiving the highest degree of cooperation from every source. “After the above shipment, which was prepared on Saturday afternoon, we again got in telephone communication with Mr. Case, Deputy Governor of the Federal Reserve Bank of New York, who informed us that the amount of money being shipped would not be sufficient to care for the needs of the banks. Therefore, we immediately instructed our New Orleans Branch to ship by registered mail ten million dollars in currency, which arrived in Cuba on Wednesday, April 14th. All told, the following shipments were made to the Island of Cuba, on Saturday, April 10th: Prom Atlanta  $26,500,000  From New Orleans  10,000,000  From Washington  5,800,000  Total  $42,300,000”43  All pending payments in Cuba were completed early Monday morning and the runs subsided as banks were able to meet demands made upon them. In about two weeks conditions returned to normal and a large portion of the currency paid out flowed  300  back to the Agency in payment of cable transfers of funds to the United States. The Federal Reserve Agencies were highly commended by the Cuban government and press for the expeditious manner in which the situation was handled.44 About a year later, Cuban President Cachado arrived in Atlanta with his full staff for an official visit. The city gave the Cubans the most elaborate reception it could muster. GovernorWellborn was the principal speaker at the official luncheon.45 Meanwhile, the Cuban operation had some repercussions. On April 28, 1926, certain rumors, criticisms and charges of misconduct reflecting upon the character of service rendered by the Havana Agency of the Federal Reserve Bank of Atlanta in Cuba came to the attention of the Federal Reserve Board in Washington. On May 1, that Board adopted a resolution which authorized and directed its Board Member George R. James to go to Havana and make a thorough investigation of the bank run and its aftermath. Mr. James and a committee appointed to help him made an investigation. He subsequently personally appeared at a special meeting of the Atlanta Board on May 31 and made a report. The specific charges and criticisms investigated by Mr. James and his committee were six in number: “1. That the Havana Agency of the Federal Reserve Bank of Atlanta did not have a sufficiently large supply of currency on hand in Havana to meet or pay cable transfers received by the Boston Agency as they were presented. “2. That the Atlanta Agency was ‘asleep on the job’ and did not take proper steps to insure getting additional currency in Havana by Monday morning, April 12. “3. That nothing but praise is heard for the Boston Agency, but Atlanta is being  301  criticized for lack of cash reserves and initiative in Havana. “4. That all members of the party in charge of the currency from the Federal Reserve Bank of Atlanta proceeded from Key West to Havana on a ‘joy ride’ or pleasure trip. “5. That on the way over from Key West to Havana the entire party from Atlanta became intoxicated. “6. That the men were in a disgraceful condition upon arrival in Havana and conducted themselves in such a way when the boat was docked as to disgrace the Federal Reserve Bank of Atlanta in the eyes of the bankers and officers of the Cuban Government who were at the dock to meet the boat.”46 While the findings of the James Committee did not bear out all of these charges and criticisms, the smoke did, however, conceal a modest flame of irregularity: “1. The Atlanta Agency did not have sufficient currency on hand to pay the cable transfers received by the Boston Agency as and when presented; but the Committee is not disposed to lay particular stress upon this situation because there was a sudden and abnormal demand for currency arising out of the run on the two most important banks in Cuba. The Committee found, however, that the supply of currency on hand at the time the run developed was not sufficient to meet such an emergency as might have been reasonably expected. “2. The Committee finds that the Atlanta Agency was not ‘asleep on the job’ but had its hands full paying out such currency as it had on hand; that it was very busy at this task until 4 p. m. , Saturday, April 10th; that it did get word to the home office in Atlanta in time for the home office to start a special train for Key West carrying a large  302  amount of currency by 4 p. in., Saturday, April 10th. “3. Your Committee heard nothing but praise for the manner in which the Boston and Atlanta Agencies met the emergency. Atlanta was criticized for not having sufficient cash reserves on hand to meet the emergency, but the Committee heard no criticism of lack of initiative on the part of the Havana Agency. “4. This charge was substantiated. Nineteen men in all, including Messrs. Campbell, McCrary,  McLarin,  in addition to a  number of Post Office inspectors and at least one railroad man were taken to Havana over the protest of Mr. Montavvo, Cuban Director of the Post, and the officers of the Cuban gunboat. Of these men, only four or five were actually needed in Havana, and none of them were needed to guard the money on the way over because the money was in the custody of the Cuban Government. The Committee finds that Mr. Campbell was responsible for taking these men to Havana on a pleasure trip imposing an unnecessary expense on the Federal Reserve Bank of Atlanta. 5. This charge was not substantiated in full. There was evidence to the effect that there was general drinking among the party, and that Mr. Campbell and three unidentified men of the party were drunk on the boat. The only person identified and clearly proven to be intoxicated on the boat was Mr. Campbell. “6. This charge was not substantiated. The overwhelming preponderance of testimony showed that nothing improper occurred upon the arrival of the men in Havana, and that they did a good job unloading, checking, and paying out the currency.47 The James Committee made several additional findings of fact, substantially as  303  follows: That there is a feeling of jealousy and mutual distrust between the two Federal Reserve Agencies in Havana, causing confusion and misunderstanding, and that one Agency could best handle the situation; that the Atlanta Agency should carry at least $10, 000, 000 for current purposes and an additional $20, 000, 000 as a reserve to meet possible emergencies; that the currency in Cuba is disgracefully dirty and should be cleaned up and that W. C. Rich, Manager of the Boston Agency, did not play so large a role as reported in obtaining the cooperation of the Cuban Government in the emergency.48 After which the Committee made the following recommendations: “1. That Mr. Joseph L. Campbell, Deputy Governor of the Federal Reserve Bank of Atlanta, be eliminated from the Federal Reserve System. “2. That the Havana Agency of the Federal Reserve Bank of Boston be discontinued and all of its functions transferred to the Havana Agency of the Federal Reserve Bank of Atlanta. “3. That the Federal Reserve Bank of Atlanta be required to set up and maintain an adequate organization to provide the proper service for the Federal Reserve System in Cuba. “4. That on the basis of the Committee’s findings of fact regarding the amount of currency which should be carried in Havana, i. e., $10, 000, 000 for current purposes and a reserve of $20, 000, 000 additional to meet possible emergencies, your Committee recommends that the $10, 000, 000 be carried in Havana in the form of issued currency and that the $20, 000, 000 be carried there in the form of unissued  304  Federal Reserve Notes in the custody of an Assistant Federal Reserve Agent assigned to Havana. “5. That to this end the present organization of the Havana Agency of the Federal Reserve Bank of Atlanta be further augmented by the appointment of a man of proper education, training and experietee to the position of Manager of the Agency and that Mr. L. L. Magruder, the present Manager, be appointed Assistant Federal Reserve Agent and assigned to the Havana Agency. “6. Your Committee is very emphatic in its opinion that the Havana Agency of the Federal Reserve Bank of Atlanta should be housed independently of any commercial banking institution doing business in Cuba ... “7. Your Committee is deeply impressed with the responsibility of providing a clean currency for Cuba…”49 The Atlanta Board was, naturally, taken aback by the charges and criticisms of the James Committee, though it heartily endorsed the latter’s recommendation that the Cuba Agency be given to the Atlanta bank alone. Indeed, the dual operation, with Boston also in Havana, had always constituted an annoying situation for the Atlanta Bank. On the afternoon of the same day, May 31, that the charges and criticisms were made, the Atlanta Board resolved as follows: “First; That the Federal Reserve Board be requested to furnish us the charges made against this bank and its officers. “Second; That the Federal Reserve Bank be requested to furnish us the names of the party or parties making such charges.  305  “Third; That the Federal Reserve Board furnish us the evidence concerning the Cuban shipment as gathered by its committee.”50 The fourth paragraph of the resolution provided for a committee to confer with the Federal Reserve Board; to investigate every detail of the Cuban shipment; to go wherever necessary and to employ such help as may be necessary; and finally, a request to the Federal Reserve Board to defer any action until the investigation had been completed.51 The Atlanta Committee consisted of E. R. Black, Chairman, and Directors E. C. Melvin and G. G. Ware.52 These gentlemen made a thorough investigation and reported their findings at the regular Atlanta Board meeting on September 24, 1926. The report was quite lengthy and went into much detail, though its gist is reflected in the concluding paragraph: “We have in fairness to everybody endeavored to present a full report to this Board and our conclusion is that the Federal Reserve Bank of Atlanta did a good job in this Cuban shipment; that all of its officers and employees were loyal, faithful, intelligent and capable in the discharge of their duties in the matter of this shipment; that none of these officers and employees acted in a manner that was not gentlemanly and not in accord with the dignity of our Bank, and that our Bank and its officers have the right to feel proud that as a member of the Federal Reserve System the Federal Reserve Bank of Atlanta in this emergency did its full part towards meeting the Situation which was forced upon it. 53 A discussion of the report followed, after which, on motion of Director Hartford, seconded by Director Hopkins, it was approved, though not unanimously. Chairman  306  Newton voted in the negative with the comment that, “I cannot vote to approve the report of the Committee which absolves Mr. Campbell from all blame in the matter of his conduct as the official head of the expedition which transported twenty-six million dollars in currency from the Federal Reserve Bank of Atlanta to Havana..”54 The Campbell matter came .to a head in October upon receipt of a, letter from the Federal Reserve Board in Washington, signed by Walter L. Eddy, Secretary, in which, by order of the Board, Joseph L. Campbell was discharged. In part, the letter read: “…After careful consideration of the evidence ... the Board is of the opinion that most of the charges against Mr. Campbell are substantially true and supported by the facts. “…Mr. Campbell demonstrated a lack of certain qualifications which are requisite and necessary for a senior officer of a Federal Reserve Bank...”55 Though the action of the Federal Reserve Board prevailed, Mr. Campbell ‘s associates on the Atlanta Board, with the exception of Mr. Newton, moved and passed resolutions of confidence and respect. In part, they read: “…The Board of Directors of the Federal Reserve Bank of Atlanta voices its implicit and unshakeable confidence in the high character and integrity of J. L. Campbell, Deputy Governor, and deeply regrets the action of the Federal Reserve Board in ignoring the action taken by this Board in exonerating the said Campbell.56 He was allowed to resign, effective November 15, l926. As the furor over Deputy Governor Campbell was at its height in early November, the dual Atlanta-Boston operation in Havana was being considered. The  307  Federal Reserve Board scheduled a hearing in Washington to discuss a two-point proposal: 1. To consolidate the Havana Agencies of the Federal Reserve Banks of Boston and Atlanta, and 2. To place under the supervision of the Federal Reserve Bank of Atlanta an agency performing all of the functions now performed by the existing agencies.57 A committee from the clearing houses of the Sixth District, chaired by Oscar Wells and the Atlanta Bank’s Committee on Cuban Agency, composed of Directors Kettig, Black, Hopkins, Simon, and Ware, went to Washington to plead the cause of the Atlanta Agency. The groups were armed with convincing data prepared by a Committee of the Atlanta Clearing House Association, headed by John K. Ottley.58 On December 7, the Federal Reserve Board, in a letter signed by D. R. Crissinger, Governor, the Atlanta Board was officially notified that effective January 1, 1927, the Boston Agency in Havana would be closed and its functions taken over by the Havana Agency of the Federal Reserve Bank of Atlanta. Resolutions of appreciation were adopted by the Atlanta Board and forwarded to Washington. 59 All in all, 1926 was a busy and somewhat exciting year for the Federal Reserve Bank of Atlanta. Earnings, compared with the three previous years, were excellent. On a total of $3, 045, 867, net earnings, available for dividends, surplus and franchise tax came to $1,228, 327.60  NOTES Chapter 15  308  1.  Keller, Dictionary of Dates, IL, 345-350.  2.  Ibid.  3.  Garrett, Atlanta and Environs, II, 818-825.  4.  Ibid.  5.  Minutes, Directors, IV, 1071.  6.  Ibid., 1072.  7.  Ibid.  8.  Biographical Records, Federal Reserve Bank, Atlanta.  9.  Minutes, Directors, IV, 1083.  10. Ibid., 1085-1086. 11. Ibid., 1086. 12. Who Was Who in America, III, 420. 13. Minutes, Directors, IV, 1087, 1092-1093. 14. Ibid., 1094. 15. Biographical Records, Federal Reserve Bank, Atlanta. 16. Minutes, Directors, IV, 1171, 1233. 17. Ibid., 1185, 1187. 18. Ibid., 1209-1212, 1230-1231. 19. Ibid., 1064-1065. 20. Ibid. , 1098.  21. Ibid., 1113.  309  22. Ibid., 1139. 23. Ibid. 24.  Ibid. , 1180.  25. Ibid. , 1226-1227. 26. Ibid. , 1244. 27. National Banks: Georgia National, Athens, Georgia; First, Buena-Vista, Georgia; First, Conyers, Georgia; First, Covington, Georgia; First, Greensboro, Georgia; First, Hampton, Georgia; First Sylvester, Georgia; First, Quincy, Florida. State banks: Bank of Bowersville, Southern• Exchange Bank, Dublin; Oglethorpe County Bank, Lexington; and American State Bank, Athens, all in Georgia. 28. Minutes, Directors, IV, 1078. 29. Ibid., 1079, 1186. 30. Hopkins, M. B. Wellborn, 121. 31. Ibid. 32. Ibid., 1096-1097. 33. Ibid. , 1097, 34. Ibid., 1165. 35. Ibid., 1165—1166. 36. Ibid., 1184. 37. Ibid. , 1204.  38. Hopkins, M. B. Wellborn,114.  310  39. Frazer, “Brief History, Havana Agency”, 14. 40. The train, chartered from the Southern Railway, consisted of locomotive, express car and  one coach. It stopped only for fuel and made  the run through Georgia and 500 miles down the east coast of Florida five hours ahead of its schedule. 41. Of the Federal Reserve Board, Washington. 42. The ‘Cuba’ was a gunboat rather than a cruiser. 43. Minutes, Directors, IV, 1139-1140. 44. Frazer, “Brief History, Havana Agency,” 15. 45. Hopkins, M. B. Wellborn, 119. 46. Minutes, Directors, IV, 1124-1125. 47. Ibid., 1125. 48. Ibid., 1126. 49. Ibid., 1127. 50. Ibid., 1129. 51. Ibid. 52. Ibid. 53. Ibid., 1201.. 54. Ibid. 55. Ibid., 1218-1219 56. Ibid., 1214 57. Ibid., 1216 58. Ibid., 1217  311  59. Ibid., 1237-1238 60. Annual Report, 1926, p. 13  312  Chapter 16 1927  By all odds the most dramatic event of 1927 occurred in May when a daring young man named Charles A. Lindberg made the first solo flight from west to east across the Atlantic Ocean. He was accorded a series of ovations and his plane, “The Spirit of St. Louis,” found permanent sanctuary in the Smithsonian Institution. On the scientific and construction front the first transatlantic commercial telephone service was opened between New York and London in early January; the $12 million Moffat Tunnel, seven miles long, under James Peak, Colorado, on the Denver & Rio Grande Western Railroad, was completed in February, while the Holland Tunnel under the Hudson River in New York City, longest vecular tunnel in the world, was opened in November.1 In March a Federal Board of Radio Control was appointed by President Coolidge and held its first meeting on the 15th. Disastrous spring floods, the worst in history, caused tremendous damage in the Mississippi River Valley. Commerce Secretary Herbert Hoover was placed in charge of relief.2 On the financial front, a number of events, national in scope, occurred. On February 6, the Federal Reserve Board established a rediscount rate of 3-1/2% for the Federal Reserve Bank of Chicago--the first time this power had been used by the Board of direct determination of rate of discount for member banks.3 The Atlanta Bank went along with the lower rate on August 13, following comment on the subject by Governor Wellborn the day before:  313  “Since the other Federal Reserve Banks have recently reduced their rediscount rate from 4% to 3-1/2%, I suppose it will be in order for our bank to do likewise. While there is no apparent reason for the Atlanta bank to have such a low rate under present conditions, yet our borrowing banks would conceive that they were not being treated justly if we did not give them the same rate enjoyed by member banks in other districts. The Federal Reserve Act says that rates shall be fixed with a view of accommodating commerce and business. Our present rate of 4% seems to be to be low enough to serve this purpose.”4 A few days after the Federal Reserve Board acted on the rediscount rate, the World War Foreign Debt Commission was dissolved after having negotiated settlements with 13 countries for eventual payment of $11,522,354,000 of principal and interest. 0h February 25, the National Bank Consolidation Act of Congress provided for indefinite extension of the charters of Federal Reserve Banks and allowed national banks to establish branches. In late May, Treasury Secretary Andrew Mellon authorized a reduction in the size of paper money by about one-third. The new bills measured ô-l/8x 2-5/8 inches.5 Smaller sized wallets became the order of the day. In Atlanta, during 1927, Lindberg Day, October 11, was a colorful occasion. The flyer received a great airport welcome; thousands lined the streets to catch a glimpse as he rode by; and others thronged Grant Field at Georgia Tech to hear him speak. 6 The City was engaged in an extensive street widening program in order to cope with an ever increasing traffic problem. Among the principal streets involved were Courtland, Luckie, Peters, Fair, Capital Avenue, and Techwood Drive. Also, during ‘27 a piece of downtown real estate brought an all-time high front foot price- -$13, 000 per foot for the Clarke corner at the northeast intersection of Peachtree and Edgewood.7  314  The official family of the Federal Reserve Bank of Atlanta and its branches for 1927 was provided for at the December 1926 Board meeting, when all officers and directors were reelected. 8 As always, however, there were some changes as the year progressed. Effective January 15, 1927, V. K. Bowman, Chief Clerk, Discount Department, became Assistant Cashier in charge of the same department at an annual salary of $4, 200.9 The resignation of Deputy Governor J. L. Campbell in late 1926 had created a vacancy which was filled on February 11, 1927 by the election of Hugh Foster to the position. He was a banker of wide practical experience, having served for 17 years as President of the First National Bank of Union Springs, Alabama. Later he was connected with the Exchange National Bank of Montgomery, and then with the First National Bank of Montgomery, as Vice President. 10 Assistant Cashier George J. White, of the Jacksonville Branch, a veteran of seven years service, resigned in early June. He was succeeded in August by the first woman to be elevated to an official position in the Bank, Miss Mary E. Mahon, an employee of the Branch.11 Assistant Cashier J. B. Tutwiler, an officer of the Atlanta Bank for many years, resigned effective August 1 to accept a position with the National Bank of Commerce in New York City. The Board, in accepting Mr. Tutwiler’s resignation, extended felicitations for “abundant success in his new field for which his past banking experience has equipped him.12 Two officers of the New Orleans Branch swapped jobs in early August. Assistant Manager W. H. Black became Cashier, and Cashier James A. Walker became Assistant Manager, both at an annual salary of $6, 200. 13 The thinning rank of original Atlanta Bank directors was further depleted on August 1, 1927, by the death, in Nashville, Tennessee, of Captain William H. Hartford, at age 67. He had served as a Class B Director since November 1914 and had been Chairman of the Nashville  315  Branch since its organization. In its resolution upon the death of Captain Hartford, the Board of Directors said: “... As a Director he was always mindful of the interests of the Bank, always attentive to his duties, and always courteous and kindly in his relations with his fellow directors. His record of attending every directors’ meeting, until illness prevented, was striking evidence of his deep interest in this Bank. His keen judgment and unselfish interest in the Bank enhanced his value as a Director, and his kindly disposition and gentle courtesy endeared him to all the members of our Board.14 The colorful newspaper publisher, soldier and United States Senator, Luke Lea, of Nashville, Tennessee, succeeded Captain Hartford as a Class B Director a~ October 8 and attended his first Board meeting in Atlanta on October 14.15 Colonel Lea (1873-1945) was born in Nashville and attended the University of the South and Columbia University. He organized the Nashville Tennesseean in 1907 and became its publisher. During World War I he organized and became Lt. Col., 114th Field Artillery and served 10 months in combat in France, even leading an unsuccessful attempt to kidnap the Kaiser. He was awarded the Distinguished Service Medal. Prior to the war, Col. Lea had represented Tennessee in the United States Senate from 1911 to 1917. 16 Colonel Lea served as a Director of the Federal Reserve Bank of Atlanta until November 14, 1930. In 1934, he was imprisoned for his part in the $17, 000, 000 failure of the Asheville Central Bank & Trust Company. He was later paroled and finally pardoned in 1937 by Governor Clyde R. Hoey of North Carolina. 17 Prior to 1927, the Executive Committee of the Federal Reserve Bank of Atlanta was a bit on the informal side as to membership and continuity. It had always comprised two Board  316  members appointed monthly and rotating among the various Directors. In January 1927, a committee 18 appointed to study the matter recommended as follows: First, a Discount Committee composed of the Governor, the Chairman of the Board, the two Deputy Governors, and the Assistant Federal Reserve Agent, which Discount Committee should meet daily and handle all discounts offered the bank. The Chairman of this Committee should be the Governor of the Bank. 19 Second, an Executive Committee, composed of the Governor, the Chairman of the Board, and three members of the Board, the Governor to be Chairman. The Committee should meet twice a week and should consider and handle all questions of importance similar to those handled by the Executive Committee in the past. At the present time the three directors, members of this Committee, should be the three engaged in business in Atlanta. This suggestion is made because these three directors can attend meetings twice a week without inconvenience, and will make certain that the Executive Committee at its meeting will have present at least two of the three directors doing business in Atlanta. This Committee should be elected for a period of six months in order to give it a full test as to efficiency and service. The Executive Committee may be called into session oftener as may be desired by the officers of the Bank, but unless so called should meet only twice a week at the regular meeting each week. Such meetings should be at 11 o’clock Tuesday and Thursday of each week. The officers should have the right at any time to invite other directors to meet with the Committee and other directors as they may be in the city at the time of such meetings will be expected to attend, but the duty shall be upon the three members appointed to attend the meetings.20  317  On February 11, 1927, the By-Laws of the Bank were amended substantially in compliance with the above recommendations. The following powers were vested in the Discount Committee: (a)  To pass upon all commercial paper submitted for discount.  (b)  To initiate and conduct open-market transactions.  (c)  To buy and sell securities.21  The powers of the Executive Committee were defined as follows: (a)  To initiate and conduct open-market transactions.  (b)  To recommend to the Board of Directors from time to time changes in the discount rate.  (c)  To buy and sell securities.  (d)  To apply for and provide for the security of such Federal Reserve notes as may be, in the judgment of the Committee or of the Board, necessary for the general requirements of the bank.  (e)  To employ or to delegate to officers of the bank authority to employ clerks and other subordinates and to define their duties and to fix their compensations.  (f)  (g)  To approve bonds furnished by the officers and employees of the bank and to provide for their custody. In general, to conduct the business of the bank, subject to the supervision and control of the Board of Directors.22  During the first quarter of 1927 a long-range building program was completed wherein the four branches of the Atlanta Bank, New Orleans, Nashville, Jacksonville and Birmingham, in that order, were housed in buildings owned by the bank.  Moving day for Birmingham was January 23, 1927. According to the report on the  318  subject by Managing Director Walker, the moving was accomplished by the bank in a careful and expeditious manner. No chances were taken. Said Mr. Walker: “…The time required was three hours and forty-five minutes. Through the Secret Service Department of the United States Government, the help of armed Marines was secured, and the Chief of Police of Birmingham furnished a squad of policemen, automobile scouts, and plain clothes men to guard the money while being loaded and unloaded, and also while enroute to the new building.23 The formal opening of the building was held on March 11, at which time the Atlanta Bank Board held its monthly meeting in Birmingham. The Federal Reserve Board in Washington was represented by Member Edmund Platt. 24 During the course of his dedicatory speech, Governor Wellborn paid tribute to his old friend W. P. G. Harding, Governor of the Federal Reserve Bank of Boston. He said: “We are gathered here today to pay tribute not only to those directly responsible for the erection of this beautiful building, but, in a broader sense, to the spirit and enterprise of the City of Birmingham. There is another reason why I feel an unusually keen pleasure at helping you to dedicate this handsome new building today- -a sentimental reason. The Federal Reserve System is growing every year, its value to the country increasing, and to my mind the man who contributed most to its success by nursing it through the dangerous days of its infancy is my friend and your friend, Mr. W. P. G. Harding. 25 Later in the year it became necessary to build a tunnel under Fifth Avenue to connect the Birmingham Branch with the U. S. Post Office. The low bidder, Johnson-Woolley Construction Company, was awarded the job in October for $13,951. 26 It has already been noted that effective January 1, 1927, the Federal Reserve Board authorized the Federal Reserve Bank of Boston to discontinue its Havana Agency. At the same  319  time it authorized the Federal Reserve Bank of Atlanta to assume, through its Havana Agency, the function of the Boston Agency and to operate as the sole agency. The principal difference in operating as sole agency was that the Atlanta Agency dealt directly with the local banks in negotiating for cable transfers of funds rather than through the Boston Agency. 27 Effective March 1, 1927, the Federal Reserve Board modified the powers of the Havana Agency, substantially as follows: “To make direct exchanges in like denominations and amounts of new or fit currency for mutilated or unfit currency tendered by the treasury of the Republic of Cuba or by any banking institution doing business in Havana, charging for such exchanges a commission at the rate of $1.00 per $1,000. 28 This change in the service rendered by the Havana Agency cured a long standing ill and was beneficial to the Cuban Treasury as well as the Havana banks. Heretofore in order to exchange unfit or mutilated currency for fit or new currency it had been necessary to tender unfit or mutilated currency in payment of the transfer to the United States paying $1.00 per $1,000 for the transfer, and to request a like transfer of funds from the United States payable in new and fit currency again paying a commission of $1,00 per $1,000. This arrangement had cost the banks $2.00 per $1,000 to exchange their unfit for new currency. Under the new authority the banks could accomplish the same result at half the cost. 29 An urgent need in connection with the Havana Agency at this time was space--both adequate and suitable. On March 10, 1927, a Committee composed of Board members W. H. Kettig and E. R. Black, after a visit to Cuba, made the following observations relative to this need: “We found the Agency in quarters on the second floor of the National City Bank Building.  320  The entire space occupied by our Agency was approximately 30 x 15 feet. This space was divided into two rooms, one room about 10 x 15 feet in size was used as the office of Mr. Magruder, Mr. Frazer and the stenographer. The other office was used for counting and sorting currency. The space was totally inadequate for the uses involved. Neither Mr. Magruder nor Mr. Frazer had any room for the transaction of their business. There could be no privacy in any business transaction in that room and there was not space enough in the room for more than three or four people. The space in the adjoining room was limited and the transactions in that room necessarily crowded. “The office was hidden on the second floor behind the legal department of the National City Bank and was utterly devoid of any prominence. In our opinion such quarters could give no publicity to the fact that the Federal Reserve Bank of Atlanta was operating in Cuba and any knowledge relative to such operations must necessarily have been confined to the banks transacting business with them. “The currency of our Agency is stored in steel boxes in a cutoff portion of the vault of the National City Bank. The space in this vault is very limited and some of our currency is stored in the front part of the vault occupied by the National City Bank. Certainly there is not enough room in this vault for the currency which will have to be kept in Cuba for the purposes of our Agency. “We are of opinion that the Agency in Cuba of the Federal Reserve Bank of Atlanta is entitled to a prominent location, both because of its importance to the Federal Reserve Bank of  Atlanta and its importance to Cuban interests . Our Agency in Cuba is entitled to the best and safest quarters obtainable and should be so located as to be in position to take part in the  321  economic and financial life of Havana.30 The upshot of this situation was that in May 1927 a lease was negotiated for satisfactory space on the ground floor of “La Metropolitana” office building immediately adjacent to the National City Bank Building on Progresso Street, comprising about 2200 square feet. Plans for construction of a vault, office space, currency sorting area, a teller’s cage, and currency cancellation and shipping area were initiated. The architectural firm of A. Ten Eyck Brown prepared plans and bids on the work which were requested in April 1928. In June of that year bids were accepted and contracts were awarded. Total cost of completed quarters amounted to approximately $70, 000 which included ADT Phonetalarm system and other extras not included in original contract. 31 Actual work on the new quarters began in July and was completed in mid- December 1928. Creed Taylor, Deputy Governor of the Atlanta Bank, went to Havana to assist Messrs. Magruder and Frazer in the moving of some $20 millionin currency then held by the Agency. Full cooperation of the Havana Police Department and of the Cuban Army was secured. The Police Department closed one block of the street immediately fronting on the Agency quarters. The Army provided soldiers to police the entire block which was closed to traffic during the move. The currency was placed in buses, locked and sealed, and rolled out of the rear entrance of the National City Bank to the sidewalk and then about 200 feet up the sidewalk to the entrance of the new Agency quarters. The entire move was completed smoothly and without incident. 32 Following a trip to Florida, Governor Wellborn reported briefly on conditions there in January 1927, during the aftermath’ of the real estate boom:  “I have just returned from a ten days trip through Florida. I visited a number of banks in that state, including those in Jacksonville and Miami. The decline in deposits of the Jacksonville  322  member banks has not been such that they have found it necessary to rediscount, and the only one of the Miami members now under rediscount with us is the result of taking over two other banks.33 On failed banks generally in the Sixth District territory, Governor Wellborn reported in July: “Of the 63 banks which have failed since the organization of the Federal Reserve Bank of Atlanta, we have sustained losses on 21 banks and on 42 banks have had no losses. 34 Later in the year, in November, it appeared timely, in Governor Wellborn’s opinion, to make a statement relative to credit policies. Said the Governor: “In view of occasional criticisms which have been directed against this bank on account of losses sustained in the attempt to save member banks which became deeply involved, I feel that the broad question of whether we have been right in the policy we have pursued since the trying days of 1920-21 should be freely and franking discussed by us at this meeting. It is gratifying that our bank has never had any criticism from the Federal Reserve Board about this subject or any other of our policies. “It is quite true that there have been considerable losses, but, in my opinion, any Reserve Bank which fulfilled its duty towards its members was bound to incur losses. We could have operated our banks in such a manner as never to have had to charge off a dollar by pursuing a ‘safety first policy and simply allowing those of our member banks who got into difficulties to struggle along with only our passive support, and in the great majority of instances, eventually close their doors. There have been many cases where we have deliberately and knowingly run the risk of losses, all with the sanction of our Board. Sometimes we have failed to pull the banks through, but I feel that such unfortunate experiences are more  323  than compensated for by the large number of banks which we have been able to put on their feet and’ which are now showing an active and healthy condition. If we consider purely the question of money lost, you gentlemen in New Orleans 35 would come in for a large share of the blame because your losses have been very heavy, but I think your Board has acted for the best interests of the District in what it has done, and that it would have been doing less than its duty to refuse to go to the aid of these banks.36 The Board thereupon supported the Governor by the following resolution upon the subject of credit policy: “WHEREAS, There has been from a few sources criticism of the credit policies of the Atlanta Federal Reserve Bank and its branches during the past six years, owing to the exaggerated statements of losses sustained; and “WHEREAS, We conceive that this impression should be corrected, if possible, and that the whole questions hinges upon to what extent- -if any-- a Reserve Bank should risk loss by going to the aid of involved member banks; and “WHEREAS, It is our belief that a Reserve Bank should extend every reasonable assistance to a member bank in difficulties where there is a reasonable chance for such bank to survive, even at the risk of some loss to the Reserve Bank; “THEREFORE, BE IT RESOLVED, That this Board desires to go formally on record as approving the policy that has been followed by the Federal Reserve Bank of Atlanta and its branches as best for the interests of the District.37  Following his statement on credit policy, Governor Wellborn took occasion to comment on withdrawal of state banks from membership. He said:  324  “During the past few years, nineteen state banks have withdrawn from membership in the Federal Reserve Bank of Atlanta. This large number of withdrawals is unusual, and I thought it best to bring the matter to your attention. My knowledge of their reasons leads me to believe that the main factor in their determination was the circumstance that the small banks at the present time are earning very little, and take the position that it is expensive for them to hold membership in the Federal Reserve System because of their loss of exchange charges and interest on their reserve deposits with us.38 Indeed, during 1927, due to new banks organized, conversions, other changes, and suspensions, there was a net gain of two national banks and a net loss of 13 state bank members for a total membership of 464 against 475 at the beginning of the year. 39 In reporting upon general business conditions in the Sixth District during 1927, Chairman Oscar Newton wrote: “Activity in most lines of industry and trade averaged somewhat lower in 1927 than in 1926. Production of bituminous coal in Alabama and Tennessee was smaller than in 1.9 26 and 1925 and the output of pig iron and furnace activity in Alabama were at somewhat lower levels. Permits issued for the construction of buildings within the corporate limits of 20 reporting cities averaged 34. 8 percent less in value in 1927 than in 1926, and contracts awarded for new building in the district as a whole averaged 26.5 percent less than in 1926. Sales of merchandise by 120 wholesale firms in eight different lines of trade averaged 14 percent  smaller in 1927 than in 1926. Retail trade of 46 department stores in the larger cities of the district, on the other hand, increased slightly and averaged 1.1 percent larger than in 1926 and  325  5.7 percent larger than in 1925. “Commercial failures during 1927 were greater, both in number and in liabilities than in either of the two preceding years. Agricultural conditions improved during the year, largely as the result of higher cotton prices in the last six months of the year. The money returns from agricultural production in the six states comprising the district, based upon prices prevailing December 1, were estimated by the Department of Agriculture at $1,057,957,000, an increase of $97, 635, 000 over the value of crops in 1926, but less than the value of crops produced in 1925…”40 It was not surprising, therefore, that the Federal Reserve Bank of Atlanta did not do as well in ‘27 as in ‘26. Reported Chairman Newton: “A comparison of the balance sheets of the Federal Reserve Bank of Atlanta at the end of 1927 and 1926 shows a decrease of $20, 449, 000 in the total of resources and liabilities. The total at the close of 1927 was $258, 662, 000, compared with $270,111,000 a year earlier… “Total current expenses during 1927 amounted to $1,264,156, and were smaller by $725, 012 than in 1926. Salary expenses were only slightly larger, and decreases were shown in traveling expenses, insurance on currency and security shipments, rent, office supplies and printing and stationery, telegraph, postage1 and express expenses. “Current net earnings in 1927 were a little less than half as large as in 1926. After deduction for depreciation on bank premises and furniture and equipment, net earnings  available for dividends, surplus and franchise tax amounted to $669,904. Of this amount, dividends amounting to $365, 817 were paid, and $364, 087 was transferred to surplus.”41  326  The careers of most successful and forceful men are marked by turning point years. Such a year for Maximilian B. Wellborn was 1927. On March 25, after a long illness, Mrs. Mary Graves Wellborn, his wife since 1889, died at 60. The bereaved husband’s grief is best expressed in his own words: “Mary was my ideal of a wife. She had a very strong character, being determined and aggressive like her father; yet with her soft but determined mouth, her gentle blue eyes and her fair skin, she had beauty and grace to a marked degree, and withal she was sweet and gentle and lovable. No man ever had a dearer wife, and I shall mourn her loss to the end of my days.”42 Governor Wellborn had always planned to retired when he reached 65, but he was just a month short of his 66th birthday when he left the bank at the end of 1927.43 At the October 1927 Board meeting, and in anticipation of Wellborn’s retirement, a committee composed of Directors Melvin, Ware, Lea, and McCrary was appointed to draft suitable resolutions of appreciation for his long and distinguished service. 44 The resolutions were presented at the December meeting by Director Ware, seconded by Director Hopkins and adopted. As an important chapter in the history of the Bank, they follow: “For some years prior to 1914, Governor Wellborn was a successful banker in Alabama. In that state he had engaged largely in its commercial and banking life, was intensely interested in its public affairs and was regarded as one of its leaders. “In 1914 he was President of the First National Bank of Anniston, President of the First National Bank of Piedmont; of the First National Bank of Jacksonville and President of the Anniston Banking and Loan Company. These several positions identified him prominently with the commercial life of that State. In 1914 he resigned the presidencies of these four banking institutions and at a large financial sacrifice moved to Atlanta to accept the first office created for  327  the Federal Reserve Bank of Atlanta. “At the urgent request of his friend, Hon. W. P. G. Harding, a member of the Federal Reserve Board, Governor Wellborn accepted the chairmanship of the Board of Directors of our Bank. He immediately proceeded to organize the bank. Directors were selected and in the fall of 1914 held their first meeting in Atlanta, over which Governor Wellborn presided. At that meeting the officers of the bank were selected. The bank moved into small quarters in the Hurt Building and the Federal Reserve Bank of Atlanta was established and ready for business. “Governor Wellborn continued as Chairman of the Federal Reserve Bank of Atlanta until March 1919, when at the request of our Board of Directors he assumed the Governorship of this Bank and has continued from that date to act as Governor. “His leadership in this Bank is best evidenced by a brief narrative of the growth of the Bank. “On December 30, 1915, its capital stock was $2, 422, 400, its surplus was nothing, and its reserve deposits were $8, 501, 512. On December 31, 1926, or about twelve years since its opening date, its capital was $5, 020, 000; its surplus $9,632,000, and its reserve deposits $71,413, 000. “In addition to its accumulated surplus this Bank has paid in to the Federal Government as a franchise tax $7, 323, 470. If this sum were added to its surplus today, it would, besides paying its dividends, have accumulated in eleven years time on earned surplus of $16,955,470. On December 30, 1915, it had small rented quarters in the Hurt Building in Atlanta. It has today invested in bank premises in Atlanta $1,813,765, in Jacksonville $282, 776, in Nashville $284, 717, in Birmingham $436,643, in New Orleans $1,097,233, or; a total in such investments of $3,915,134,000. “At the end of 1914, the officers and employees of the Bank numbered twenty-seven, 328  with a salary list for the year 1915 of $53, 602, 00. During the year 1926, the Bank had 403 employees and 27 officers, with an annual payroll of $678,444.00. “The recital of these figures is given with some pride on our part, as evidencing the growth of our Bank, and are stated in simple justice to Governor Wellborn as a striking tribute to the growth and success of this Bank under his able leadership. “Probably the most striking policy inaugurated and insisted upon by Governor Wellborn during his administration has been his determination to aid consistently deserving member banks. This policy has been followed rigidly by him during his entire tenure of office and a statement of the application of this-policy during the trying days of 1920 will serve as an illustration of the tenacity with which he adhered to this purpose and the scope to which this purpose was pursued. “In 1920 the Atlanta Bank, under his leadership and following his policy, helped the South materially in passing through its financial crisis. At the beginning of the year 1920 there was little indication of impending trouble. This Bank had a reserve percentage of 60. 6, which was the second best showing at that time of any bank in the entire Reserve System. In the summer of that year things grew rapidly worse financially, and on September 28, the high peak of rediscounts was reached, totalling the amazing figure of $183, 000, 000. The actual reserve percentage fell to 40. 85 against an adjusted reserve percentage of only 14. 9. This strain was terrific, but this Bank, through Governor Wellborn’s leadership, served this section, gradually bringing about sounder credit conditions.  “At this time statements were issued by this Bank to the effect that ample credit accommodations would be extended to the member banks in order to allow these member banks to furnish their customers funds to prevent the dumping of the cotton crop on a weak and  329  falling market. These loans to member banks on January 1, 1920 amounted to $88, 052, 000, while on November 20, 1920 the total loans to member banks were $182, 258, 000. Again, Federal Reserve notes issued by this Bank were $155, 000, 000 on January 1, 1920, and increased steadily to $174, 000, 000 on January 21, 1921. During this time, this Bank loaned not only all of its own available funds, its capital, its surplus, and its reserve, but after it-s own resources were exhausted, actually borrowed from other Federal Reserve Banks $49, 000, 000 to take care of the situation in this District. “These facts are given as an evidence of the extent to which Governor Wellborn served in solving the strenuous problems of that period, and as further evidence of that policy of aid to member banks and to this section which has dominated his career as Governor. “High testimony has been given to Governor Wellborn’s action during this period. In January 1922, Senator E. D. Smith, of South Carolina, during an investigation by a Congressional committee, after hearing Governor Wellborn’ s testimony on the subject of farm credits, said: ‘In all of these trying times the country has been through, a clear note of sound common sense has rung through it all from the Governor of the Federal Reserve Bank of Atlanta. “Another tribute to Governor Wellborn’s part in handling the banking situation during this period was delivered by Hon. D. R. Crissinger, then Comptroller of the Currency, at Gainesville, Florida, in 1922, when he said: ‘A year ago when I assumed office as Comptroller of the Currency, the Fifth and Sixth Federal Reserve Districts offered the greatest problems of any to the Federal Re serve Board. The heavy accommodations which these Districts, particularly the Sixth, had granted to the member banks in order to avert the economic disasters which would have resulted in a further slump in the agricultural field, had of necessity brought about the gravest conditions in these sections and it seemed doubtful to us whether the situation could be worked out without the greatest hardship to all concerned. We were inclined at first to disagree with Governor Wellborn of Atlanta in some of the policies which he pursued, but I desire to state right here that he was right and that we, the members of the Federal Reserve Board, were wrong. Governor Wellborn gave to his District the  330  benefits of a lifelong experience and sound banking ability. Thanks to his courageous, intelligent and consistent direction, the Sixth District is now giving the Board less concern than any other Reserve District in the United States. Governor Wellborn is justly entitled to full credit for having handled the administration of the Atlanta Bank so successfully. “We are glad to record in these resolutions this tribute from the recent Governor of the Federal Reserve Board. Any statement relative to Governor Wellborn’s career as head of this Bank would be incomplete without giving him due credit for his achievements during this trying period and it must have been pleasing to him that full praise and credit were given at that time by Governor Crissinger. “Innumerable instances could be given of Governor Wellborn’s ability in dealing with the intricate problems facing him in the inauguration of this Bank and in conducting its affairs through trying crises and through the period of thirteen years in which it has developed. We might instance the Florida situation. In a very short period of time the banking situation in Florida materially changed and in order for him to be fully advised as to that changing situation and the general conditions in Florida, it was necessary for him to visit the different member banks in Florida and at the proper time he made a trip through Florida, visiting each member bank, ascertaining its condition, giving it encouragement, and letting not only the banks in Florida but also the people of Florida know that the Federal Reserve Bank was interested in conditions in  that state and desired through the proper channels and in the fullest measure in a proper way to aid in that situation. This but evidenced Governor Wellborn’s intimate knowledge of conditions throughout his District and his earnest desire to know personally of these conditions. “It has, of course, been during his administration that the Cuban Agency of the Federal Reserve Bank of Atlanta has been established and through his leadership our Bank has the only agency in the Federal Reserve System located on foreign soil. In the spring of 1926 when a  331  financial crisis arose in Havana and a run was impending upon member banks in Havana, this Bank shipped and mailed currency to its agent in Cuba something over $40,000,000, the report coming in on Friday and the money being on hand in Havana Monday morning to save the situation. This is cited as an evidence of the ability of Governor Wellborn in a trying situation which called for all his resources as an able man and called heavily upon the resources of this bank. “Your committee has narrated these different events in Governor Wellborn’s career as Chairman of the Board and Governor of this Bank in order to have inscribed on our minutes a permanent record of his achievements. “Throughout the years in his relations with the Directors and officers and employees of this Bank, he has been courteous and considerate. In his home, aided by his most estimable wife, there has had the Directors as his guests on many occasions and between him and his Directors there has existed a cordial relationship and a lasting friendship. “One year ago he announced to us, his purpose to retire as Governor of this Bank on January 1, 1928, in order that he may enjoy that rest to which his labors have eminently entitled him. This Bank will miss his wise leadership and his careful guidance and strong personality and eminent ability which have characterized him as Governor. We regret this decision to retire, but we want him to know that he carries out of his office the very best wishes of the Directors for many years of enjoyment and contentment.” 45  After the passage of brief, but appropriate formal resolutions, Chairman Oscar Newton, on behalf of the members of the Board, presented to Governor Wellborn twelve silver goblets as a token of friendship and expressed the sincere wishes of the members of the Board for his  332  future happiness and welfare.46 Of the many testimonials paid to Mr. Wellborn, both editorially and by personal letter, the following from the Birmingham News is notable: “Voluntary retirement of Maximilian B. Wellborn, Governor of the Federal Reserve Bank of Atlanta, after almost 13 consecutive years spent in building that establishment from a delicate experiment in infancy to a titan for strength and service to ‘the whole South, is of more than passing significance. “When called in 1914 to accept the chairmanship of the board of directors of the newly created bank, Mr. Wellborn conceivably had no desire to neglect his personal pressing business engagements. As president of three strong going Alabama banks, it was no mean sacrifice he was asked to make to give up his life work- -the very children of his well organized brain- -and see this experiment through. In those far-off days not every American financier was confident the scheme would work. Eastern capital was rather skeptical of this democratic effort to guarantee the equilibration of currency which so long had been left to the tender ministrations of Wall Street. One imagines that even bankers of Mr. Wellborn’s type felt, in a way, as if his bridges were being burned behind him, and that he was quitting the old certain and sure avenues he understood well for some uncertain port he could not quite divine “One spark of that humanness in Maximilian B. Wellborn’s nature is that, despite his long residence in a neighboring state, he has never relinquished his Alabama citizenship.  Always he has called Anniston his home. After his return from abroad 47 he will come back to Anniston to live. “Indubitably, Mr. Wellborn is not a man who will be content to sit with folded hands and  333  rest. Dynamic, resourceful, sagacious, progressive, and proud of his home state, it may be expected that hereafter he will play no small part in the development of the state he loves.48 Nearly 30 years of useful life lay ahead for M. B. Wellborn. Though he took up permanent residence at Maxwellborn, his country place near Anniston, Alabama, he devoted some time to public service. In 1932 he moved back to Atlanta for a year to accept a special post created by President Hoover- -adviser to the RFC in the Sixth Federal Reserve District. Subsequently, In 1934, he was elected to the Alabama State Senate, a position to which he brought wisdom, experience and integrity. Max Wellborn outlived practically all of his contemporaries. He died at 95 on November 28, 1957 and was laid to rest beside his wife in Edgemont Cemetery, Anniston.49 Prior to 1927 it had been the custom to elect officers of the Bank at the December Board meeting to serve for the ensuing year. This custom was changed by the following resolution, offered by Director G. C. Ware at the meeting of December 9, 1927: “WHEREAS, it is our belief that it will be pleasing to the members of the Federal Reserve Board for our annual election of officers to be held at our meeting in January; and  “WHEREAS, such act will work to the end that there may be unanimity in our own Board; and “WHEREAS, the election in January will further work for the promotion of that harmonious relation between our Board and the Federal Reserve Board that is so much desired by us; “THEREFORE, BE IT RESOLVED, that the election called for under our amended bylaws for this meeting be deferred until the January, 1928 meeting of our Board, and that notice be accepted at this time by this Board of such necessary change in our amended by-laws  334  relating to elections as will accord with this action.” The resolution was seconded by Director E. C. Melvin and adopted.50 Approval was not, however, unanimous. The recent Cuban matter and the discharge of Deputy Governor Joseph L. Campbell by the Federal Reserve Board In Washington had been a source Of annoyance and displeasure to Director Lindsey Hopkins, who, incidentally, was retiring from the Board effective December 31, 1927. He not only voted against the above resolution but gave vent to his feelings in the following language: “I object to the passing of the resolution on the grounds that it does not alter the outcome of the election in the least, and can only serve to make further subservient the independent will of the Directors of this Bank. “I am convinced that practically all, if not all, of the friction and unpleasantness in the conduct of the affairs of this Bank have been occasioned by the meddling and gossiping of Mr. George R. James. 51 Specifically: “(1) His going direct to Cuba and investigating the conduct of one of our employees without first advising this Bank. “(2) That in discussing the matter of Mr. Campbellts conduct on the trip to Cuba with the Board, Mr. James insisted that the matter be held in strict confidence, but subsequent to this time it developed that Mr. James had discussed the matter with a member or members of the Atlanta Clearing House Association. “(3) That Mr. James greatly exaggerated the incidents and details of the alleged unbecoming conduct of Mr. Campbell on the Cuban trip, as was later disclosed by a full and free investigation on the part of this Board.  335  “(4) In making the statement to our Directors that three members of the Federal Reserve Board at Washington had said to him that they would not support the Federal Reserve Bank of Atlanta in its efforts to secure the Cuban Agency while Wellborn, Campbell, and McCrary were connected with our Bank. “I think that these activities and statements are contrary to the best interests of the Federal Reserve System, and that these activities and statements and other statements have created discord and dissension in our Board.”52 Time was destined to heal these wounds.  NOTES Chapter 16  1/  Keller, Dictionary of Dates, II, 350-356  336  2/  Ibid.  3/  Ibid, 350.  4/ Minutes, Directors, V, 1336; Annual Report, 1927, p. 10 5/  Keller, Dictionary of Dates, II, 352.  6/  Garrett, Atlanta and Environs, II, 828-834  7/ Ibid. 8/  Minutes, Directors, IV, 1246-1247.  9/  Ibid., V, 1263; Annual Report, 1927, p. 10  10/  Minutes, Directors, V, 1275.  11/  Ibid, 1302, 1334.  12/ Ibid, 1333. 13/  Ibid, 1334.  14/  Ibid, 1338.  15/  Ibid, 1343.  16/  Who Was Who in America, II, 315.  17/  Biographical Records, Federal Reserve Bank of Atlanta; Time Magazine, July 12, 1937, p. 70.  18/  Composed of E.C. Melvin, Chariman; W. H. Kettig and E.R. Black.  19/  Minutes, Directors, V, 1253.  20/  Ibid.  21/  Ibid, 1277.  22/  Ibid, 1278.  23/  Ibid, 1274; Annual Report, 1927, p. 10  337  24/ Minutes, Directors, V, 1283. 25/ Hopkins, M.B. Wellborn, 113. 26/  Minutes, Directors, V, 1345.  27/ Frazer, “Brief History, Hvana Agency,” 17. 28/ Ibid., 18. 29/ Ibid. 30/ Minutes, Directors, V, 1285-1286. 31/ Frazer, “Brief History, Havana Agency”, 19-20. 32/ Ibid., 20. 33/ Minutes, Directors, V, 1258. 34/ Ibid., 1325. 35/ Hopkins, M.B. Wellborn, 113. 36/ Minutes, Directors, V, 1357. 37/  Ibid. , 1359-1360  38/  Ibid. , 1357-1358.  39/ Annual Report, 1927, p. 9. 40/ Ibid., 5. 41/ Ibid., 6.  42/  Hopkins, M.B. Wellborn, 141.  43/  Ibid.  44/  Minutes, Directors, V, 1353.  45/  Ibid., 1373-1376.  338  46/  Ibid., 1376.  47/  He and his daughter Margaret sailed from New York in mid-January 1928 for a tour of Spain and Southern Europe.  48/  Quoted in Hopkins, M.B. Wellborn, 151-152.  49/  Hopkins, M. B. Wellborn, 168, 173, 273.  50/  Minutes, Directors, V, 1371-1372.  51/  Member of Federal Reserve Board and a merchant, manufacturer and banker of Memphis, Tennessee. He spearheaded the Cuban investigation for the Federal Reserve Board.  52/  Minutes, Directors, V, 1372.  339  Chapter 17 1928  Nineteen twenty-eight was another year of general prosperity and progress on many fronts. In early April, the American Telephone and Telegraph, for the first time in history, transmitted a moving picture by wire. In mid-June, Miss Amelia Earhart became the first woman to make a trans-Atlantic flight, flying from Newfoundland to Wales in 20 hours and 45 minutes in a Fokker monoplane. Warner Brothers produced the first all-talking motion picture in New York in July. It was titled “The Lights of New York.” The year produced an exciting presidential contest, wherein Republicans Herbert Hoover and Charles Curtis defeated Democrats Alfred E. Smith and. Joseph T. Robinson. In Congress the Clayton Anti-Trust Act, was amended in March to permit limited interlocking’ bank directorates, while in May, an Act provided that state banks might be designated by the Federal Reserve Board as general depositaries of public money by the Treasury.1 On the local political front, L. C. Hardman was re-elected Governor of Georgia, defeating E. D. Rivers. On September 26, Franklin D. Roosevelt made his maiden Atlanta speech. As Governor of New York, he spoke on behalf of Al Smith for President against Herbert Hoover.  340  Construction-wise Atlanta reached a new high in ‘28, $27,580,541. Included were a General Motors assembly plant for Chevrolet; two stories to the Southern Railway Building to accommodate 1200 office workers transferred from Washington, D. C.,; and a new store for J. P. Allen and Company at Peachtree and Cain Streets. A city planning commission was set up to aid in a more orderly growth, and Carlyle Fraser, a native of New York, founded the Genuine Parts Company, destined to become a giant in the automotive parts field. As the year drew to a close, Georgia Tech drew national football attention and renown by an undefeated season and a Rose Bowl victory.2 About three years before he retired as Governor of the Federal Reserve Bank of Atlanta, M. B. Wellborn began to ponder the inevitable matter of a successor. One of Atlanta’s most popular citizens of the period was Eugene R. Black, lawyer and banker. Indeed, his daughter Julia, had married Governor Wellborn’s son, Walter, in 1921. The two men were long-time friends and business associates. “I’d like to have you succeed me,” Wellborn told Black one day. “That would be bully,” Mr. Black replied. “How do we go about it?” The first step was election to the Board of Directors. The custom, evolved by Governor Wellborn, was for the three Atlanta Clearing House banks to nominate their candidate, who would then be voted on by all the member banks. Mr. Black told Governor Wellborn next day that two of the three banks had agreed to support him. The third later made it unanimous, so he was nominated a Class “A” director in due course, and elected for a term of three years beginning January 1, 1925.3  341  Three years later, at the Board of Directors’ meeting of January 13, 1928, Chairman Newton proposed that the regular order of business be suspended; that Eugene R. Black be elected Governor of the bank. He was unanimously elected, accepted in a few well chosen words, and sat with the Board during the of the meeting. 4 Governor Black, able as he was in the law and in banking, brought a certain informality and a leavening spirit of wit to banking floor and board room. An associate remembers that Governor Black liked people and never saw a stranger since everyone (to him) was a friend until proven otherwise. On the occasion of a business trip to Miami with two associates, Mr. Black insisted that both spend most of the time in his Pullman drawing room where the hours were spent in conversation and dice shooting. The Governor was excellent in both.5 On another occasion the same associate recalled that Black was in great demand as a speaker. One of the civic clubs in Decatur, Georgia persuaded him to make an address and a subject was chosen. After a laudatory introduction, the speaker arose, bowed to the master of ceremonies, stood looking at the audience for a period and, without cracking a smile told amusing and extraneous stories for thirty minutes. He ended by announcing the subject about which he had been asked to talk, said he did not know much of interest about it and sat down. 6 Another associate recalls a motor trip to Southeast Georgia with Governor Black during the banking troubles prior to the Banking Holiday of 1933. One of the bank’s chauffeurs was driving. After passing through a small town local officers stopped the car for speeding. The Governor asked the officer the amount of the fine, and upon  342  being told $5, asked the officer to make it $10, because he would be coming back through within two hours. Said the same associate: “Governor Black was a man that just couldn’t say no to his friends, beggars, or panhandlers. It was amazing the number of people who made a path to his office for handouts. I never saw him refuse anyone.7 During Governor Black’s first year in office a number of changes took place in the official family of the Bank. In December 1927, J. A. McCrary was re-elected a Class B Director by the member banks of Group 2 and H. Lane Young was elected Class A Director by the member banks in Group 1. Both for terms of three years beginning January 1, 1928.8 The new Director, Mr. Young, though self-made, had been in the banking business for nearly 30 years. Born in Quitman, Georgia, in 1878, he began his career as a runner for the Merchants & Farmers Bank in his native town in 1899. Subsequently, he organized the First National Bank of Quitman and operated it from 1905 to 1918. During the next year or so he was connected with the National City Bank of New York. In 1920 he became Vice President of the Citizens and Southern Bank in Atlanta and was holding that title in addition to that of Executive Manager when he became a Director of the Federal Reserve Bank.9 To succeed Director Lindsey Hopkins, who retired December 31, 1929, the Bank secured the services of George Simmons Harris (1881-1950), then President of the Exposition Cotton Mills in Atlanta. He was a native of Cedartown, Georgia, and, after schooling at the United States Naval Academy, the Georgia School of Technology, and  343  the Lowell (Massachusetts) Textile School, spent his entire business career in the textile field.10 The annual election held on January 13, 1928, did not produce any changes in the official family of the Bank, but as the year progressed, some changes were inevitable. In late January acceptances were received from the following appointees as Branch Directors: New Orleans,  Albert P. Bush  Nashville,  W. P. Ridley  Birmingham,  E. F. Allison, President, Allison Lumber Company, Bellamy, Alabama  Jacksonville  S.0. Chase, Chase & Company, Sanford, Florida11  George R. DeSaussure, Manager of the Jacksonville Branch since its establishment in August, 1918, died in early 1928.12 W. S. McLarin was named to the vacant post and George S. Vardeman was made Cashier at Jacksonville, both effective February 11.13 At about the same time two resignations were received. Director R. S. Hecht, of the New Orleans Branch, being about to depart upon an extended European trip, resigned in late January. B. C. Huggins, Jr., Cashier at Nashville, resigned effective March 1 in order to accept a position with better salary opportunities.14 Both vacancies were filled promptly. John E. Bouden, Jr., President of the Whitney-Central National Bank of New Orleans, was elected to the vacant Board post. E. R. Harrison, Assistant  344  Vice President of the American National Bank of Nashville, succeeded Mr. Huggins in the Nashville Branch.15 Much later in the year two other official resignations were received. Captain T. A. Embrey, because of’ failing health and inability to attend meetings, tendered his resignation in September as a Director of the Nashville Branch. The position was not filled until early 1929. 16 In December, C. P. Kendall, a Director of the Jacksonville Branch, resigned because of his contemplated withdrawal from the Barnett National Bank. Arthur F. Perry, President of the Florida National Bank, was named to the vacancy.17 In response to a bound copy of the resolutions adopted at the time of his retirement, former Governor M. B. Wellborn wrote to Governor Black on May 20, 1928. His letter, significant historically, follows: “I want to express to you, and through you to the Board of Directors, my sincerest thanks for the folio containing the resolutions in reference to my work as Chairman of the Board and later as Governor of the Bank; in all thirteen years of service, I greatly appreciate the complimentary expressions of the Board. “These resolutions speak largely the history of the Federal Reserve Bank from its organization in November 1914, to the completion of my efforts in its behalf down to my retirement from the bank in January, 1928. This period of events meant much to the section of our country embraced in the Sixth District and the work accomplished, with the concurrence and hearty support of the Board during that time, was an invaluable service to the agricultural, commercial, and industrial interests of our district. “During these momentous times, including a severe business depression at the  345  beginning of the bank’s existence the World War having began in August), then followed by our participation in the great war which upset the ordinary affairs of Europe and this continent, the Federal Reserve played a conspicuous and valuable part in financing the war, which never could have been done with such success without the active aid of the Federal Reserve Banks. “Following these great events an extraordinary inflation took place, as was usual after great wars, then came a deflation of tremendous magnitude which strained almost to the breaking point the resources not only of the commercial banks but of the Federal Reserve System itself. The Atlanta bank then took an advanced position and ‘stepped out’, probably to a greater extent than any of the twelve Reserve Banks, to the relief of business in our district and with your support, rendered an assistance to the banks in the District that, in my opinion, prevented a panic and utter collapse in business. “I, therefore, repeat that I have a just pride in what our bank has accomplished and, at the close of my business career of fifty years, I am happy to have been officially connected with your great institution from its beginning and that the pages of its history are filled with my name during this strenuous period of the world’s affairs. “Truly the Federal Reserve Bank has left its footprints on the sands of time and it is my sincere hope that it will continue forever in its splendid work. “The bound copy of the resolutions, which you were so kind as to have made in such a handsome and attractive type, will ever be kept in loving rememberance of my association with the Atlanta Reserve Bank, and I shall leave it a rich heritage to my children and their descendants. “With warmest regards to each member of the Board, I am Yours sincerely, 346  (signed) M. B. Wellborn”18 It was natural that Governor E. R. Black, with his friendly and outgoing personality, should have been public and bank relations minded. In April 1928, a committee composed of Mr. Black, H. Lane Young, J. A. McCrary, and Oscar Newton, recognizing an increasing need for such activity, wrote: “...We recommend that an active committee on Public and Member Bank Relations be established, composed of senior and junior officers of this bank, with Ward Albertson, present Manager of Bank and Public Relations as Chairman of such Committee, the Chairman to have active charge of the work of such Committee and to keep full data relative thereto. This Committee will work along the following lines: “(1) It will seek to cultivate the good will and cooperation of member banks and non-member banks and to ascertain the extent to which member banks are availing themselves of the privileges and facilities of their membership, and to do everything possible to encourage them to avail themselves of these benefits and services, and to obtain information-for the use and benefit of our discount committee concerning the conditions, management, and operating program of the bank visited, and the business, industrial and agricultural conditions of the community where such member bank visited is located. “(2) To adjust specific complaints and grievances of member banks and to persuade our member banks of the correctness of our general policy and to fully inform member banks as to our regulations and endeavor to get them to understand such regulations and to persuade them that regulations are necessary and not just red tape making transactions with this bank difficult.  347  “The member of the committee visiting such member bank shall make a full report to the Chairman of the committee of his visit to such member bank, such report to cover: (a)  Management of the bank and its personnel  (b)  General situation of the bank  (c)  Information as to the customers of the bank  (d)  Information as to community conditions  (e)  Details of such visit, character of his reception as representing this bank, attitude of the member bank towards this bank, any antagonism or lack of understanding on the part of the member bank.  “This committee in its work through its representatives shall visit non-member banks of the community as well as member banks, and shall endeavor in every way to obtain the good will and friendship of such non-member banks. “This committee shall also have charge of the public relations work of this bank. We believe that this bank should be represented upon every reasonable opportunity, in order that the work of the bank and the services of the bank to this district may be properly set forth by a representative of this bank and be fully understood .throughout the district. To this end, we feel that a representative of this bank should attend each state convention of the banks of this district and should attend as many group meetings of banks as possible and at other public functions should represent the bank, and through all these mediums, should engender throughout the district a feeling of respect and good will towards this bank... “This committee will also see that through letters written by this bank arid its officials the good will of member banks is obtained and through the press and other mediums the objects of the bank and its services axe properly presented.... “  348  At midyear, Governor Black was moved to the following comment relative to “member bank relations:” “During the month of June, 64 visits were made to member banks by the officers of this bank and since January 1 to the end of the six months’ period, 160 visits have been made to member banks. “In connection with our member bank work, my mind has undergone a radical change as to the general feeling among our member banks toward our bank. To be perfectly frank, I had the feeling that our relations with member banks were rather distant and formal and that there was not the close feeling of cooperation and friendship which there should have been. My feeling in this regard has been entirely changed. At first, my visits with the bankers of Florida, Alabama, and Georgia at their annual conventions and my meeting with the Tennessee bankers at the Nashville meeting of our Board convinced me that the member banks had a warm regard for our bank,, appreciated our facilities and desired in every way to cooperate with us in making our bank just such a successful institution in the promotion of community conditions relating to agriculture, commerce, and industry as we would want it to be. “If the visits with those member bankers had not persuaded me that this was the case, I would have been so convinced by letters received from member banks during the past thirty days. Beginning early in June, I wrote a personal letter to the President of each member bank and in that letter called his attention to our desire to be of service to his bank and to the different facilities which we offered for that service and to the facilities which he was using and those which he was not using, and expressed the hope that he would continue to use the facilities that he was using and suggested that it  349  would be to the interest of his bank to use those facilities which he was not using. I also asked for any suggestions that he might make which would aid us in better serving his bank. “I have received replies from a great many of these banks. In some of the replies some requests were made and these requests have been promptly corn-plied with. I should like very much for our Directors to read these letters. All of them express appreciation of my letter, the highest regard for the Federal Reserve Bank, the value of the services of our bank to the member bank, and expressions of appreciation of the cordial relations with our bank. I am certain that if our Directors read these letters they would feel that the old impression as to the lack of close relationship with our member banks was wrong and that on the contrary the member banks have a very high and personal regard for our efforts in their behalf.”20 During his first year as Governor, Mr. Black was largely responsible for two other moves that tended to better bank and public relations and to a better understanding within the bank and among its branches. Weekly officers’ meetings, including all, not just senior, officers were instituted and semi-annual meetings of branch bank managers were started. In addition, the four branch managers were added to the member bank relations committee. 21 In the spring of 1928, with the scars of boom and hurricane about healed and with business humming in Miami,  of that city applied for a  revolving currency fund. The application was not without precedent, a similar fund having been set up a couple of years earlier for use of Miami banks during the boom. The Atlanta Board approved the application and placed $1,500,000 in custody of the  350  applicant for a period of six months. Upon the expiration of this, period, a request was made for a six-months extension. The Atlanta Board acquiesed in only a three-month extension with the following comment: “…An extension of six months in the period of operation of the fund is not looked upon with favor by the Board, which feels that if the emergency which made necessary the re-establishment of the fund still exists and it is desired that the fund be continued, the Board would be justified in designating Miami as a reserve city....”22 At the beginning of the year, on February 7, cash holdings of the various components of the Sixth District Federal Reserve totalled $55,269,719.00, divided as follows: Atlanta New Orleans Birmingham Jacksonville Nashville Savannah Havana  $ 8,019,059.89 $ 8,957,368.20 $ 7,213,159.54 $ 6,164,177.30 $ 4,566,212.20 $ 1,463,071.00 $18,886,731.19  Holdings in Havana were soon increased to $20, 000, 000. 00.23 Since August, 1927, the discount rate of the Atlanta Bank had been 3-1/2%. The rate had been fixed so as to put the Bank in line with every other Federal Reserve Bank.24 As 1928 progressed, however, the rate nearly doubled. On February 11, it went from 3-1/2 to 4%; on May 26 from 4 to 4-1/2, and to 5% on July 14. During the early months of the year, interest rates charged by member banks in Atlanta on prime commercial loans eligible for rediscount with the Federal Reserve Banks ranged from 41/2 to 6%, and at branch Federal Reserve Bank cities in this district from 5 to 6%.  351  During the last five months of the year, rates at Atlanta and New Orleans ranged from 5-1/2 to 6%. 25 In commenting on the discount situation in November, Governor Black wrote: “The large volume of business of this bank during 1928 has resulted in large surplus earnings. There has not been a time during the year when we have not given earnest consideration to our rediscounts. It has not been our purpose to endeavor to earn excessively, but rather to accommodate our member banks and to promote commerce, industry, and agriculture, and our rediscount rates this year have been fixed with regard to the preservation of our reserves, to the safeguarding of the credit of this bank, and to the proper accommodation of our member banks in their credit needs. We would have been glad during the fall season to have lowered our discount rate, but demands upon us and the condition of our reserves prohibited this. At such time as the demand upon us may sufficiently abate and our reserve position warrant it, I will make recommendations relative to a change of rate. At the present time, in my opinion, our present rate must be maintained.”26 Though activity in nearly all lines of industry and trade in the Sixth Federal Reserve District averaged somewhat lower in ‘28 than in ‘27 and, though the total resources and liabilities of the Bankat the close of business on the last day of the year were smaller than at the close of any year since 1923, total earnings during 1928 were larger than for any year since 1921, and exceeded those for 1927 by 73%.27 Current net earnings for 1928 came to $2,325,022, compared with $803,683 for ‘27. After deductions for depreciation on bank premises, and furniture and equipment, reserves for probable losses, and other deductions, the net earnings available for  352  dividends, surplus and franchise tax amounted to $1,693,985, compared with a total of $669,904 for 1927. Dividends amountings to $312,259 were paid to member banks; $558,425 was transferred to surplus account, and a franchise tax to the United States Government amounting to $823, 301 was paid.28 Some personal recollections by a retired officer concerning day to day activities at the Bank during this period of its history will be interesting: “From the mid-twenties until the bank holiday in 1933, the Discount function was very active, up to 40 clerks working in the discount and credit functions. That was the day when financial statements were required for every line exceeding $500. Also, notes from 50~ up were tendered for rediscount or as additional collateral to a member bank’s ‘line of credit’. The daily rush to inspect the notes received for negotiability and correctness, the pulling of the credit information on all notes, the necessary review and notation on the applications, preparation of discount status of the respective bank requesting further credit, all completed in time to present it physically to the 2 P. M. meeting of the Discount Committee, made old people out of young people rapidly. “The periodic examination by the examiners of the Federal Reserve Board was a nightmare in those days. All notes had to be balanced by the 10 classes or divisions then required (commercial, agricultural, livestock, secured, unsecured, real estate security, government bond secured, additional collateral, etc.). A detailed listing of notes held for each bank, showing those forwarded to the bank in anticipation of maturity, was prepared as a reconcilement. Nearly every typist and steno in the bank was used. Financial statements on all notes of over a designated amount had to be pulled for review by the examiners. Then the big argument started trying to justify the  353  rediscounting of certain notes. Examination after examination- -Creed Taylor, Deputy Governor; Ward Albertson, Assistant Federal Reserve Agent; and the writer argued practically the night through with the Chief Examiner over the lines, amounts advanced to banks, and the condition of the member bank in requiring such advance. “During these years many trips were made to banks in trouble, credit examinations made of assets, and on occasion, special trips made by car, train, or plane carrying large sums of currency to stop bank runs. Governor Black participated in some of these. One, in particular, still is a vivid memory. We, H. F. Conniff and the writer, conveyed by train a large sum to Miami, Florida, placing the currency in the vault of the First National Bank of Miami. Several times each day we would enter the vault to see that the money was there, recounting it each morning. Credit asset checks were made in two banks and advance lines determined. The coldness of the economic climate in that city was then underscored, as the weather changed to a North-Easter with temperature down in the thirities. We with our summer clothes since we were going to the ‘deep South’ that December.” 29  354  Notes Chapter 17  1/  Keller, Dictionary of Dates, II, 356-361.  2/  Garrett, Atlanta and Environs, II, 837-846.  3/  Hopkins, M. B. Wellborn, 141-142.  4/  Minutes, Directors, V, 1377.  5/  Recollections of V. K. Bowman, typescript.  6/  Ibid.  7/  Recollections of Lewis M. Clark, typescript.  8/  Minutes, Directors, V, 1372.  9/  Biographical Records of the Bank; Who’s Who in America, 1963-1965.  10/  Biographical Records of the Bank; Who Was Who in America, II, 236.  11/  Minutes, Directors, V. 1388.  12/  Ibid, 1390.  13/  Ibid., 1400.  14/  Ibid., 1391.  15/  Ibid., 1400.  16/  Ibid., 1478, 1494, 1498.  17/  Ibid. , 1497-1498.  18/  Ibid. , 1442.  19/  Ibid. , 1417-1418.  20/  Ibid. , 1451.  21/  Ibid. , 1404-1427.  355  22/  Ibid., 1413, 1419, 1475.  23/  Ibid., 1394.  24/  Ibid. , 1396.  25/  Annual Report, 1928, pp. 10-11.  26/  Minutes, Directors, V., 1491.  27/  Annual Report, 1928, pp. 5-6.  28/  Ibid. , 6  29/  Recollections of V. K. Bowman, typescript.  356  Chapter 18 1929  The big news in 1929 and the events felt most keenly by most of the population for years to come were financial. True, invention and exploration made an annual bow as usual--airmail lines between the United States and Cuba, Puerto-Rico, Santo Domingo, Nassau and the Bahamas went into service; the Richard Byrd expedition reached the South Pole in November, and telephone service from shore to ships at sea was successfully demonstrated in December--but the big news of the year was financial.1 On March 26, trading on the New York Stock Exchange totalled 8, 246, 740 shares, highest record, marked by severe declines with call money 20%. Over 300 low records of the year were made. A couple of months later, on May 22, stocks broke from two to 18 points with 200 at a new low for the year on news that the Federal Reserve Advisory Council bad recommended a 6% New York Reserve bank rate, but rallied the following day on failure of the advanced rate to materialize.2 The new smaller sized national currency went into circulation on July 10. A week later, on the 17th, two large banks in Tampa, Florida, and 12 smaller banks with about $2Z, 000, 000 deposits suspended payments because of depression caused by damage charged to the Mediterranean fruit fly. On August 8 the Federal Farm Board made its first loan, an advance of $300, 000, to the Florida Citrus Exchange in order to relieve growers affected by a quarantine imposed in April because of the Mediterranean fruit fly.3  357  Meanwhile, the stock market boiled. A committee of the Investment Bankers Association reported, on October 16, that speculation in public service stocks had reached a danger point, and that many stocks were selling for prices far above their intrinsic value. A week later, on the 20th, the New York Stock Exchange experienced the most severe break in its history. Trading of 12,894,650 shares set a record. So did the Curb, with 6,337,415 shares traded. The industrial average went down 12.18 points. On November 12, the market collapsed. During a three-hour market (10 a.m. to 1 p.m.) sales of 6,452,770 shares were recorded and on the Curb Exchange, 2, 204, 700 shares. Average of industrials descended 16 points. The next day stock prices reached new lows for the year in a 7,761,000 share market.4 Between November 14 and December 6, the Federal Reserve Bank of New York lowered its rediscount rate from 5 to 4-l/2%--the second cut in two weeks; the Chicago Federal Reserve and the San Francisco Federal Reserve Banks followed suit. Then, on December 12, stocks on the New York Exchange declined again, from 2 to 22 points, the worst break since November l3.5 The stage was being set for the years of depression to follow. At the same time, financial history was being made in Atlanta. On November 25, the city became the home of the largest financial institution south of Philadelphia, This came about as the result of a merger between the Atlanta and Lowry National Bank and the Fourth National Bank to form the First National Bank of Atlanta. As Ralph Smith, of the Atlanta Journal, wrote at the time: “Not since the location in our midst of the Federal Reserve Bank of the Sixth District, in 1914, has there been any material development in Atlanta, in Georgia, or in  358  the South, of such far-reaching consequences as the bank merger. The First National Bank confirms and copper-rivets Atlanta’s financial preeminence, and widens, too, its sphere of usefulness, influence, and supremacy...”6 Concurrently, the Atlanta Trust Company, for some time past in a bind, was being bailed out. On December 3, the Citizens & Southern National Bank loaned the Atlanta Trust Company a sufficient sum to pay its depositers in full and purchased its headquarters building at Marietta, Broad, and Walton Streets. A remodeling job was begun in March 1930 and, on January 19, 1932 the C. & S. occupied its present Atlanta headquarters.7 The Federal Reserve Bank of Atlanta, of course, had a stake in the affairs of the Atlanta Trust Company. Governor Black, former President of the latter, during the course of the December 1929 Board meeting of the Reserve Bank, recited the efforts made by the Re serve Bank and the agreements made by that bank in the matter, they being: “First: That the Reserve Bank would look primarily to its rediscounts for their collection, and only to assets of the Atlanta Trust Company after the Citizens & Southern National Bank bad been repaid its advances and expenditures in connection with the liquidation of that company, and explained that this action was in line with the law of Georgia which gives depositors a preference over the other creditors. “Second: The guaranty of $1,050,000 given by the Reserve Bank and the three other banks named, in which guaranty the Reserve Bank joined to the maximum extent of $200, 000 ...”8  359  Governor Black also called attention to the fact that the Directors of the Atlanta Trust Company had furnished to the Reserve Bank their guaranty in the sum of $200,000 to guarantee the Reserve Bank against loss by reason of its connection with the guaranty. 9 Meanwhile, Atlanta’s great building boom of the ‘20’s was giving into its declining phase. Completed during ‘29 were the Pryor Street, Wall Street, and Central Avenue viaducts; the Rhodes-Haverty and Southern Bell Telephone Company Buildings, and the new City Hall on Mitchell Street which was occupied in February of the following year. In April of 1929, the City of Atlanta purchased Candler Field--all 297 acres of it--for $94,500 and the stage was set for Atlanta’s future pre-eminence as an air transportation center.10 As usual some changes and re-elections involving the official family of the Bank and its branches occurred at the beginning of the year. Branch Directors named for a three-year term beginning January 1, 1929, were: Birmingham, J. H. Frye; Jacksonville, G. G. Ware; and New Orleans, R. S. Hecht. The vacancy at Nashville, to succeed Captain T. A. Embrey, was not filled until March 8, when J. B. Ramsey, President of the Holston Union National Bank, of Knoxville, was named to the post.11 W. H. Kettig, P. H. Saunders, J. C. Cooper, and Luke Lea were all reappointed as Directors at Birmingham, New Orleans, Jacksonville, and Nashville, respectively. 12 J. H. Frye, who served several years as a Director of the Birmingham Branch, was a well-to-do though frugal man. In that connection, a member of the staff in Atlanta remembers an amusing incident.  360  During his tenure, Mr. Frye was asked to make some calls at rural banks in Alabama. He couldn’t drive a car but used a chauffeur for the purpose. Following a day’s trip he turned in an expense account for five cents. This, no doubt, was the smallest such account ever prepared by anyone connected with the Bank. The incident was. brought to Chairman Newton’s attention, who was asked if he didn’t think the account was in error and that $5. 00.was intended. Newton knew Frye well and commented: “No, I’m sure the amount is correct. Mr. Frye no doubt bought a peanut butter sandwich and gave his chauffeur half of it. “13 Branch Managers A. E. Walker, W. S. McLarin, Jr., Joel B. Fort, Jr., and Marcus Walker were all re-elected to their respective posts, Birmingham, Jacksonville, Nashville, and New Orleans,14 while E. C. Melvin and Colonel Luke Lea were reelected as Class A and Class B Directors.15 All officers of the Atlanta Bank were re-elected at the January 1929 Board meeting and, in addition, P. L . T. Beavers was elected an Assistant Cashier in charge of the Transit Department and S. P. Schuessler to the same rank, in charge of the Fiscal Agency Department. All Branch officers were re-elected to their respective positions.16 J. P. Butler, Jr., President of the Canal Bank and Trust Company, New Orleans, was elected as the member of the Federal Advisory Council to represent the Sixth District for 1929. He succeeded P. D. Houston, of Nashville, Tennessee, who had served usefully during 1926, 1927, and 1928. 17 The number of officers and employees of the Bank, including branches and agencies, remained steady throughout 1929. On January 1, the total was 430; on  361  December 31, 434. 18 Late in 1928, the officers and directors of the Bank had planned a trip to Havana to attend the opening of the new quarters there. However, because of a completion delay until mid-December, it was decided to postpone the trip until January 1929. The group, which arrived in Havana on the 14th, was composed of Vice-Governor Edmund Platt, Federal Reserve Board, Washington, D. C., and Mrs. Platt; Governor and Mrs. E. R. Black, Chairman and Mrs. Oscar Newton, Director George S. Harris, wife and daughter; Director J. A. McCrary and two daughters; Director E. C. Melvin and two daughters; Director and Mrs. L. C. Simon; Director and Mrs. G. G. Ware; P. D. Houston, of Nashville, representing Director Luke Lea; Vice-Chairman W. H. Kettig, Mrs. Kettig, daughter and a friend; and Haynes McFadden, representing The Southern Banker. 19 A reception was held at the Agency, located in the Metropolitana Building. Commented J. A. McCrary, Chairman of the Building Committee: “The grille work, vaults, counters, desks, and furniture present not only an attractive appearance but one of safety and economical installation. Our Havana Agency quarters are now in keeping with our bank.” 20 The improvements at Havana came to a total cost of $70,672. 53.21 And, since the cost of living in Havana ranged from 30 to 40% higher than in the States, the salaries of Manager Magruder and Assistant Manager Frazer, of the Agency, were upped substantially, effective January 1, l929--Magruder’s from $6, 000 to $8,400; Frazer’s from $4,200 to $6,300.22 Beginning in January 1929, General Auditor W. S. Johns was requested by Governor Black to make a brief annual report to the Board. As an interesting 362  commentary on current operations, Mr. Johns’ first report is informative and is herewith quoted: “In order that there might be some uniform procedure in the auditing work of the twelve reserve banks, the Federal Reserve Board appointed a committee to make a study of auditing procedure and under date of December 12, 1924, the findings of this committee were submitted by the Federal Reserve Board to our Board of Directors, who referred the report to the General Auditor for study and recommendation. The Board’s procedure, with a few minor exceptions, was recommended by the General Auditor and in February 1925, this procedure was adopted by our Board of Directors as the auditing procedure for the Federal Reserve Bank of Atlanta. “HEAD OFFICE “At the Head Office a continuous examination of the various departments is made... Where two departments are closely allied in their functions, such departments are examined simultaneously. While a balance sheet examination is most desirable, it has been attempted infrequently due to the difficulties in making such an examination. We have four branches and two agencies, far apart geographically, and the expense of a force sufficient to make a balance sheet examination is not warranted in my opinion by the results obtained, as the Auditing Department would have an excessive force for a large part of the year. So far, I have been unwilling to go outside of the bank to employ temporary examiners for a balance sheet examination as I am unwilling to certify as correct work performed by men unless I have had sufficient opportunity to determine their ability and reliability. I have found by long experience that a close relation and observation of the various departments is most effective in obtaining correct operating  363  procedure. “NEW ORLEANS BRANCH “Two balance sheet examinations of the New Orleans Branch were made during the year, which is the minimum, usually three are made. The examination consists of a complete count of all tangible assets and verification of all accounts as reflected in the balance sheet. “BIRMINGHAM BRANCH, JACKSONVILLE BRANCH, NASHVILLE BRANCH “These three branches are operated on the memorandum plan. Five examinations were made of the Birmingham Branch, four of the Jacksonville Branch, and five of the Nashville Branch. As far as possible, a balance sheet examination of these branches is made by including a verification of the accounts that are maintained at the head office, such as the Reserve and Deferred Credit balances of the branch zone members and branch deferred debits due from other Federal Reserve banks. The Auditing Department also makes a daily check of all transactions of the limited power branches forwarded to the Head Office for entry. “HAVANA AGENCY; SAVANNAH AGENCY “Our agency at Havana maintains a stock of currency for the purchase and sale of cable transfers and denominational exchanges of currency. The Savannah Agency maintains a stock of currency and coin for the convenience of the Savannah member banks and holds a limited amount of securities for the account of the Head Office. Two examinations of the Havana Agency and four of the Savannah Agency were made during the year 1928 and a complete verification of the currency and security holdings was made at each examination.  364  “SAFETY OF OPERATION “A system of joint controls has been established over all currency, coin, securities, or other valuables and, in my opinion, the amount of single control valuables has been reduced to a minimum. Due regard has been given for the safety of valuable receipts or shipments. At our Nashville Branch the post office and express company call for and deliver all valuable shipments and there is, therefore, no liability at this branch. Our Birmingham Branch has a tunnel connection with the post office, through which all valuable shipments are transported. At our Jacksonville Branch, valuable shipments are transported in an armored car at so much per trip, the bank sending its guards with each receipt or shipment. The truck is not owned by the Jacksonville Branch. At Savannah and Havana, shipments are transported by automobile under proper guard. The Head Office owns its own armored car and shipments are made under proper guard. “CURRENT EXPENSES “In September, 1926, the General Auditor was made responsible for the proper authorization, proper approval, and propriety of all expenses of the Federal Reserve Bank of Atlanta before the expense was incurred. All expenses at the Head Office are examined and approved by the Auditing Department before a purchase is made. It was found very inconvenient to require the branches and agencies to forward all expenditures to the Head Office for approval before purchases and the branches have been allowed to incur the necessary expenses of operation without the approval of this department before purchase. The expense incurred by our limited power branches and agencies are immediately forwarded to the Auditing Department, where they are  365  scrutinized for approval. The current expenses of our New Orleans Branch are examined during the periodical branch examination. The branch and agency expenditures have been conservative and the present method of handling their expenses by the Auditing Department is considered satisfactory. “The Auditing Department has the full cooperation of all officers and employees and they have materially assisted this department in doing a constructive work. I am of the opinion that the Federal Reserve Bank of Atlanta is operated in accordance with the rules and regulations of the Federal Reserve Board, of its Board of Directors, and in conformity with the Federal Reserve Act. “23 With a spirit of speculation becoming more widespread throughout the country at the beginning of 1929, the Federal Reserve Board addressed a letter to Chairman Newton of the Atlanta Bank and presumably to the Chairmen of the other eleven Reserve banks, under date of February 2, 1929. The burden of the letter was a warning against the granting of speculative credit. It concluded by requesting the following information from the Chairman: (a) How they keep themselves fully informed of the use made of borrowings by their member banks; (b) What methods they employ to protect their institution against the improper use of its credit facilities by member banks; (c) How effective these methods have been. To which Chairman Newton replied promptly: “Your letter of February 2nd, advising us of the attitude of the Federal Reserve Board with respect to the credit situation and the problem confronting the administration of the Federal Reserve Banks, has been read with interest and carefully considered. “Answering your inquiries: “(a) The members of this Board reside in Alabama, Florida, Georgia, Louisiana,  366  and Tennessee, five of the six states and parts of states which comprise this district. They keep themselves informed in regard to the general uses of Federal Reserve credit in their respective sections by conference with representatives of member banks, and at the meetings of the Board discuss freely the credit conditions which prevail in their respective sections of the district. In fact, the meetings of the Board frequently served as a clearing house for the interchange and discussing of views regarding the uses of credit and other matters pertaining to the operations of the bank. At the daily meeting of our discount committee, there are generally two Directors present, and at the semiweekly meetings of our executive committee there are generally four Directors present. At these meetings and at the Board meetings, the Directors are given information by the Governor and Chairman regarding the uses of Federal Reserve credit by member banks, which information is obtained from interviews with the representatives of the member banks and from the reports of member banks. “(b) The officers and Directors have from time to time conferred with representatives of member banks who use Federal Reserve credit, and have informed these representatives of the policy of the bank; namely, that the Federal Reserve credits should be used for agricultural, commercial, and industrial needs as provided in the Federal Reserve Act, and not speculative purposes. Last summer, when there was a rapid expansion in loans to member banks in this district, the Governor and Chairman called a conference of representative bankers from different points in our district for a discussion of the proper use of Federal Reserve credit by our member banks, and at this conference assurances were given of their hearty cooperation in our effort to restrict Federal Reserve credit in our district to its proper uses.  367  “(c) We believe that a proof of the effectiveness of the methods employed is shown in the figures from the reports of condition of member banks as of October 3 and December 31, 1928. These figures reveal that on October 3, 1928, 31 member banks (not having bills payable or rediscounts with the Federal Reserve Bank of Atlanta ) had loans to New York brokers and dealers aggregating $26, 092, 296. 52, and nine other member banks having bills payable and rediscounts with the Federal Reserve Bank of Atlanta, had loans to brokers and dealers aggregating $2, 041, 385. 60. On December 31, 1928, 43 member banks (not having bills payable or rediscounts with the Federal Reserve Bank of Atlanta) had loans to New York brokers and dealers aggregating $21, 060, 233. 70, and three other member banks, having bills payable and rediscounts amounting to $668, 546. 90, had loans to New York brokers and dealers aggregating $1,468, 354. 21. “This matter was today fully discussed by our Directors, and I am instructed by them to advise that in the Statements in this letter they are in full accord, and that the policy of this bank will continue to be adverse to the use of our credit for speculative purposes. They and I feel that our record, as disclosed in this letter, will reveal that our effort to conserve our credit for legitimate uses, evidences our accord with the spirit of your letter to us on this subject. 24 The hatches were being battened down for the storm that lay ahead. In May, Governor Black, in reporting to the Board of Directors on the subject of credit conditions, wrote: “…We are giving close study to credit conditions in our territory and are endeavoring to protect the bank in all lendings to member banks, having due regard for  368  the situations in the different banks and in the different communities. In the case of any bank in a weakened or extended condition, we are protecting our bank by the requirement of additional collateral. In the case of some banks we are declining any rediscounts because of the impaired capital of such banks and in such cases are lending only on commodity secured or government secured paper. We are working with member banks under a restricted line of credit where the solvency of such banks is questionable or where, in our opinion, the management has not taken proper steps to put the bank in good condition. In a number of other cases, we have consulted with the officers of banks in an effort to aid them in getting their banks in good condition. Certain portions of our territory have been affected by flood conditions and crop conditions, and special attention is being given to demands of banks in such localities....”25 In September the Governor again reported on credit: “I am glad to report that our member banks are almost unanimously following our policy of restricting Federal Reserve credit to the uses named in the Federal Reserve Act. In the weekly condition report of member banks of August 28, we have only two reporting banks who are borrowing from us who were lending on call in New York. One of these accounts is $224, 000 and was really loaned on local collateral through local agencies of a New York broker. The other amount is only $110, 000, so that of the reporting member banks in our whole district, there is only $334, 000 that could possibly be charged to loans to brokers in New York by banks who are borrowing from us. This cooperation on the part of our member banks is enabling us to make effective the policy of direct action which was announced by the Federal Reserve Board and adopted by our bank and has been adhered to since its announcement.26  369  Meanwhile, between July 11 and July 24, five bank failures occurred in Florida. The closing of all of them was incident to and followed upon the closing of the Citizens Bank & Trust Company of Tampa and practically grew out of the alarm that the failure of that bank spread among depositers in Florida. In addition to the failure of these Florida banks there were heavy runs upon the St. Augustine National Bank, and the First National Bank of Gainesville. These two banks were in excellent condition and in each case, after a run of two days upon them, weathered the storm and re-opened.27 Following a visit to Florida, Governor Black reported to the Board on August 9: “In a visit which I made to. Florida, I found that there was a general unrest among the depositers in a large number of Florida banks; that confidence had been lost in a large measure by those depositers. I found that all the banks were strengthening as far as possible their cash position and were endeavoring to allay the alarm insofar as each individual bank was concerned. The banks in St. Petersburg and Orlando took advantage of the sixty-day clause in connection with their savings deposits. I doubted the wisdom of this but it may have been a necessity. We are watching this drastic measure with these banks in an effort to learn whether such a step can be successful with a commercial bank... “The Florida banking situation is, of course, the culmination of the history of the last three years in Florida, augmented by the unrest, distrust and lack of confidence engendered by the situation in regard to their vegetable crops and citrus fruits caused by the presence of the Mediterranean fly. The Government’s efforts in Florida should help much towards clearing up the financial situation in that State, and when it is demonstrated that fruit and vegetables may be shipped from Florida during the coming  370  season a very radical step will be taken towards permanent improvement among the financial institutions of that State…”28 In November, concerning the situation at Tampa, the Governor wrote: “During October there was a run upon our two member banks in Tampa and upon two non-member banks in Ybor City, adjoining Tampa. We were called on for immediate assistance, and we had $1, 000, 000 transported by airplane in charge of Mr. McLarin, Manager of our Jacksonville Branch, and $5, 000, 000 sent by registered mail. Deputy Governor Taylor and I went by automobile to Tampa and arrived there before the banks opened the next morning. We saw that the cash position of the two banks was all right and remained until Monday, when the situation was entirely remedied.29 At the same time, Governor Black reported to the Board on the situation of Reserve Banks during the week of the stock market crash. “It will be interesting to note the situation as to all the Reserve banks from October 23, 1929, to October 30, 1929, or during the week in which the New York stock situation existed. The earning assets of the System during that week increased from $1, 336, 656, 000 on October 23 to $1,648, 742, 000 on October 30, or an increase of $312, 000 ... In New York there was an increase of $114,849,000 in holdings of Government securities and an increase of $138,971,000 in bills discounted, these two figures showing an increase in the earning assets of the New York bank during this week of $253, 820, 000, which was doubtless primarily had in order to aid the situation in New York during the past week. In our own bank there was an increase of Government securities owned of $5,087, 000, a decrease in bankers acceptances of $1, 011, 000, and an increase in bills discounted of $5, 400, 000.  371  “REPORT OF OPEN MARKET COMMITTEE: “The Open .Market Committee reports that during this week the call rate remained relatively easy. On all days of the period, call money was quoted at six percent, except on Tuesday when, due to the acute unsettlement in stock prices, the renewal rate was set at five percent before the opening of the stock market and that rate held until shortly after two o’clock, when there was an advance to six percent. The Open Market Committee also reports that: “The principal development of the calendar week with respect to the money market situation was a further increase of $150, 000, 000 in the reserve requirements of the New York City member banks, following a rise of $67, 000, 000 in the preceding week. This increase in reserve requirements accompanied a huge increase in the deposits of the city banks, which in turn was due to the taking over by these banks of brokers’ loans which had been called in very heavy amounts by out-of-town banks and other lenders. During the reporting week ending Wednesday, October 30, a period in which total brokers’ loans in New York showed an unprecedented reduction of $1,096,000,000, loans placed by New York City banks for others declined $1, 380, 000, 000 and loans for out-of-town banks decreased $707, 000, 000, while loans placed by New York City banks for their own account actually rose $392, 000, 000. The New York City banks were able to shoulder the huge burden which was transferred to them without any disturbance to the money market by reason of an increase of over $150, 000, 000 in the security holdings of the Reserve Banks and a further increase of $50, 000, 000 in their borrowings from the New York Reserve Bank, following practically as large an increase in their borrowings in the preceding weeks. From other sources of  372  funds the New York market gained very little, as an inflow from other parts of the country was largely offset by an increase in requirements for currency. “Quotations for time money dropped further early in the week to a flat six percent level for all maturities. With the stock brokers as busy as they were, little attention was paid to time money on most of the days, though toward the end of the week a fair volume of loans for periods of one to four months was reported as having been arranged at a six percent rate. The present level for time money is at least three percent below the highest level of the year and is the lowest quotation since August 1928. “The dealers’ rates for commercial paper declined rather promptly on the reduction in the New York Reserve Bank’s discount rate. Prime names were offered principally at a range of 5-3/4 to 6 percent, as against 6 to 6-1/4 percent earlier in the week. The bank investment demand for paper was reported to have been better than in a considerable number of months. Orders emanated both from the country banks direct and also through the New York City banks for account of out-of-town correspondents. The rate reduction effected by the dealers was, of course, a quick move in order to induce larger commercial borrowings through the open market, as dealers’ sales operations had to a considerable extent been hindered by the lack of material on hand. “Accompanying the unprecedented stock market activities during the current calendar week, the volume of trading in government securities on both the New York Stock Exchange and the over-the-counter market was enormous. This activity was due principally to selling and buying in the first and last part of the week, respectively, by large corporations and banks and the Federal Reserve Bank purchases during the early part of the week. Prices of all issues advanced sharply during the early part of the week  373  and fell off considerably during the middle of the week… However, on Friday and Saturday, due to the large volume of buying, on the part of New York City banks and the reduction in the rediscount rate at the Federal Reserve Bank of New York, prices in the over-the-counter market for all issues of Government securities again advanced sharply and dealers’ offering prices at the end of the week showed that loss which occurred in the middle of the week had been discounted and the net changes at the erd of the week over the previous week’s close in most cases showed substantial gains. “SYSTEM’S SPECIAL INVESTMENT ACCOUNT OF GOVERNMENT SECURITIES: “The total holdings in the Systems Special Investment Account of Government securities on October 30 was $47,500,000, of which amount our bank owned $2,496,500. During the week ending October 30, the Federal Reserve Bank of New York bought $120,000,000 of short-term Governments, of which $25,000,000 was transferred to the System Account. In the $25,000,000 purchase of Governments during the week named, all Federal Reserve Banks participated except Richmond, Minneapolis, and San Francisco. All the Federal Reserve Banks are participating in the holdings of bankers’ acceptances except the St. Louis bank. “On October 30 the holdings of Government securities in the System was $292,688,000 and bills purchased $339,885,000, giving a total of both amounting to $632,573,000. “I have given you the details of the System’s operations during the past week because I know it is a matter of interest to you and because you should be fully advised as to these facts and especially as to the operations of the Open Market Investment Committee for the account of the other Federal Reserve Banks and our bank. It is a  374  matter of congratulation that the Stock Exchange situation which existed in New York did not result in a business panic or disaster and that it was not accompanied by the collapse either of brokerage houses or financial institutions. Certainly this bank would regretfully see either a business panic or financial disaster and very earnestly hopes for a return to normal conditions in the market and in the business of the country. “Most financial writers, including economists and financiers, have been actively discussing the question as to the effect on business of this collapse of the stock market. The agreement among these writers is general that business dealing in luxuries will be materially affected by reason of the widespread loss throughout the country and most of them agree that business dealing with essentials will be somewhat affected. All of them agree, and I feel that they are right in feeling that the loss of confidence in business circles engendered by the disaster on the Stock Exchange will affect business generally. I am hopeful that with a return to normal conditions on the Stock Exchange, when stocks are selling on a basis of real value and when purchasers are influenced in their investments in seeking sound investments and in determining values upon the basis of the return upon investments, business may return to a normal basis. “The disaster on the New York Stock Exchange in the amount involved exceeded any similar situation, so far as I know, in past history, and we cannot hope to escape its full effects without paying some of the penalties involved to finance and business. “ 30 In his last statement, Governor Black was a prophet indeed. For 1929 as a whole, the Federal Reserve Bank of Atlanta did well. Total resources and liabilities at the close of business on December 31 were larger by  375  $11,961, 000 than at the close of 1928, but were smaller than at the end of other years since 1924. Totals were $250, 843, 000 for ‘29, compared with $238, 882, 000 for ‘28. Total cash reserves at the close of 1929 amounted to $153,517,000, and were $25, 808, 000 greater than at the close of 1928.31 Total earnings for the year 1929 amounted to $4,116,049, an increase of $537,893 over the preceding year, and were greater than for any year since 1921. Current net earnings for ‘29 amounted to $2, 602, 810, compared with $2,325,022, for 1928, and were larger than for any other year since 1921.32 An interesting facet of the Bank’s 1929 business concerned the substitution of old large size for new small size currency. The exchange of old for new began on July 10 and between that date and July 12, the Federal Reserve Bank of Atlanta placed in circulation $13, 009, 390 of the new size bills.33 In summing up the 1920’s, Journalist Herbert Brotter wrote:34 “The 1920’s saw the closing of many smaller banks, particularly in agricultural communities, but also saw improving industrial conditions after the relatively short depression (of 1920-21), and a substantial decrease upon the Reserve banks for discounts took place. Even so, there were fluctuations, and operations by the Reserve banks in the Government securities market taught the System that under coordination they had the quality of a major instrument of credit policy. “Also in this period, through the initiative of the New York Reserve Bank, strong and enduring correspondent relations were established with the Bank of England, the Bank of France, and other European central banks. These arrangements have been of great importance in the ultimate achievement by the United States of world leadership in  376  finance. “During the latter part of the twenties there was building up an economic situation which resulted in the stock market crash of 1929 and the American share in the depression of the thirties. When the speculative situation became apparent through rapidly rising security prices and the increasing demand for bank credit to finance security operations, the Reserve banks attempted to deal with it through advances in discount rates, and the Federal Reserve Board through public warnings. After the collapse, discount rates were reduced and purchases of Government securities were made by the Reserve banks to ease the banking situation “ In more critical vein, Mark Sullivan, writing much earlier, said:35 “... Daniel R. Crissinger was head of the Federal Reserve System during a period (1923-1927) in which was made a mistake of Federal Reserve policy that was the largest single cause of the depression of 1929 so far as the causes arose in America. “I refer to the failure to raise rediscount rates at the end of the rising market that should have come to a normal end about 1925. As a consequence of the failure to raise discount rates, a second rising market was piled on top of the first, inviting the collapse of 1929. The motive for keeping discount rates low was laudable- -to present no temptation to European gold and capital to come to the United States, and thereby to enable Britain, France, and Germany to get back on a normal fiscal basis ...” But, continued Mr. Brotter: “The ability of the System to deal adequately with the situation was hampered by legal restrictions upon the discounting powers of the Reserve banks and on the  377  collateral that could be used to secure Federal Reserve notes until 1932, when the Congress authorized the use of Government securities as collateral for the notes and somewhat relaxed the discounting restrictions. The Reserve banks were thus enabled to buy Government securities in greater volume and to increase the reserves of the banking system. Even so, as the 20’ s ended, the economic situation was destined to get much worse before it got better.  NOTES Chapter 18 1/  Keller, Dictionary of Dates, II, 36 1-368.  2/  Ibid.  378  3/  Ibid.  4/  Ibid.  5/  Ibid.  6/  Garrett, Atlanta and Environs, II, 856-857.  7/  Ibid. , 340.  8/ 9/  Minutes, Directors, VI, 1671. Ibid.  10/ 11/  Garrett, Atlanta and Environs, II, 848-856. Minutes, Directors, V, 1498; VI, 1555.  12/  Ibid. , VI, 1534.  13/ 14/  Recolletions of Lewis M. Clark. Minutes, Directors, V, 1498.  15/  Ibid. , 1509.  16/  Ibid. , VI, 1514-1515.  17/  Ibid. , 1515-1536-1537.  18/ 19/  Annual Report, 1929, p. 11. Frazer, “History Havana Agency,” 20-2 1.  20/  Minutes, Directors, VI, 1553.  21/ 22/  Ibid. Ibid. , 1567.  23/  Ibid. , 1519-1520.  24/  Ibid. ,  1550-1552.  25/  Ibid. ,  1582.  26/  Ibid. ,  1634.  27/  Ibid.,  1620-1621.  379  28/  Ibid. ,  1621.  29/  Ibid. ,  1651.  30/  Ibid. ,  1653-1654.  31/  Annual Report, 1929, pp 6-7.  32/  Ibid.  33/ 34/  Minutes, Directors, VI, 1607. “The Fed’s First Half-Century”, Banking, Journal of the American Bankers Association, Dec. 1963, p. 44.  35/  Our Times, The Twenties, (New York, 1935) Vol. 6, p. 143.  380  SECTION IV The Troubled Thirties Chapter 19 1930  The year 1930, like the last quarter of its predecessor, was marked by financial news of a depressing nature. In February, the Federal Farm Board and Cotton Cooperative Association took over the handling of cotton; the Federal Reserve Bank of New York reduced its discount rate from 4½ to 4 percent and, on the 24th, the New York Stock Exchange had its first 5,000,000 share day since October 10, 1929. In March cotton went to 14.5 cents, lowest price since 1927; the New York Federal Reserve again reduced its discount rate from 4 to 3½ percent, while on the 18th a merger of the Chase National Bank of New York and the Equitable Trust Company and the Inter-State Trust Company, created the world’s greatest bank, with resources of $3,000,000,000. On May 1 the New York Federal Reserve lowered its rate of discount from 3½ to 3 percent. Five weeks later stocks broke heavily on the New York Exchange and reached a new low on June 18. Meanwhile, on the 14th, wheat fell below $1.00. Before the month was out the New York Reserve discount rate had been cut to 2½ percent; wheat went to 87-3/4, lowest since 1914, and cotton to 13¢. As June closed, the public debt stood at $16,185,308,299. On September 16, President Hoover named Eugene Meyer, Jr., subsequently publisher of the Washington Post, to the governorship of the Federal Reserve Board in Washington, succeeding Roy A. Young, resigned. October 9 saw another severe break in stock prices, led by ‘United States Steel. On the 29th Treasury  381  Secretary Andrew Mellon issued a statement to the effect that “the underlying causes of the present world-wide depression could be traced primarily to overproduction.” In mid-November Caldwell & Company, investment brokers in Nashville, Tennessee, went into receivership, which event led to the failure of several banks, including the State Bank of Tennessee. Less than a month later the Bank of the United States in New York City, with 60 branches and 400,000 depositers, suspended, followed two weeks later by the closing of the Chelsea Bank in New York, as the result of a run. At the same time the Federal Reserve Bank of New York reduced its discount rate to 2 percent, lowest in history. Concurrently wheat sank to 62.75¢ per bushel and cotton to 9½ per pound, new lows. Altogether, during 1930, commercial failures as reported by R.  G. Dun &  Company, totalled 26,355 with liabilities of $668,283,842, compared with 22,109 in 1929. Bank failures were reported as 1326 representing 903,954,000 depositors.1 Meanwhile Congress was not idle. On March 31 an Act authorized an appropriation of $230,000,000 for the erection of public buildings in all sections of the country; in April the Federal Road Act was amended, appropriating $300,000,000 for highway construction to States; in December President Hoover asked Congress for $150,000,000 to aid the unemployed, a Joint Resolution provided $45,000,000 for agricultural relief in drought and storm stricken areas, and $150,000,000 was appropriated for addition to the Federal Farm Board revolving fund.2 The Federal Reserve Act received attention too. During April it was amended three times--as to limitations upon the rediscount by member banks; to permit member banks to withdraw without waiting six months after filing intention and, as to bank liquidation. It was amended again in June as to the election of directors of banks, trust powers rights, and assessments of cost of examinations.3  382  The year was of course notable for events other than financial. In January a new planet was recorded and named Pluto; in February Chief Justice William Howard Taft resigned and was succeeded by Charles Evans Hughes. Taft died March 8. On April 1 results of the Census of 1930 were announced. Total population of the United States came to 122,775,046, a 16 percent increase over 1920. The four largest cities were New York, Chicago, Philadelphia and Detroit, in that order. The number of unemployed stood at 2,508,151--about 2 percent of the population. This figure was destined to increase markedly soon.4 Locally, Atlanta posted a population of 270,035, a gain of 70,000 over 1920; James L. Key became mayor of the city after an interval of several years, and Richard B. Russell was elected to the Governor’s Chair. Robert T. Jones won the grand slam of golfdom and brought international fame to himself and to his native city. Natural gas was piped into Atlanta, supplanting the time-honored manufactured gas, in use since 1855, and the building boom of the 20’s sputtered to a halt with the completion of the William-Oliver Building, Ten Pryor Street Building, the Georgia Power Company’s Plant Atkinson near Bolton, and the Union Passenger Station on Forsyth Street.5 Official elections within the Atlanta Federal Reserve Bank during 1930 produced some re-elections, some promotions and some new members of the official family. The terms of Directors Oscar Newton, Leon C. Simon and G. G. Ware all expired on December 31, 1929. They were all re-elected for the three year term ending December 31, 1932. In addition, Mr. Newton was reappointed Deputy Chairman for 1930. At the January 1930 Board Meeting all officers were re-elected and, in addition, L. M. Clark was elected an Assistant Cashier.6 Early in the year the New Orleans Board suffered a severe loss in the death of Director John E. Borden. In February he was replaced by J. D. O’Keefe, of New Orleans.7  383  At its April 12 meeting the Atlanta Board took occasion to note the death of W.P.G. Harding, which occurred on the 7th. Suitable resolutions were adopted in memory of this key figure in the early history of the Federal Reserve System, both as an original member of the 1914 Washington Board and subsequently as Governor of the Boston Bank.8 Effective May 1, 1930 the law firm of Randolph, Parker & Fortson, General Counsel for the Bank, was dissolved. On the 9th, Robert S. Parker and Hollins Randolph were named attorneys for the Bank, Mr. Parker at an annual salary of $2900 per annum, plus an extra $1500 for clerk hire, and 9 Mr. Randolph, $600 per annum.9 While on vacation in Atlanta, Havana Branch Manager L. L. Magruder died on July 30. In the service of the Bank for twelve and a half years, Mr. Magruder was highly regarded. In his personal relations he was quiet, kindly and courageous and through his friendly qualities endeared himself to the Directors and his fellow officers.10 The vacancy created by Mr. Magruder’s death was filled by the promotion of Assistant Havana Manager H. C. Frazer. A. H. Alston was elected Assistant Manager. The first order of business at the November Board meeting was the reading of a telegram of resignation from Class “B” Director Luke Lea of Nashville. The resignation was accepted, and the chair bearing his name which he had used while a board member was ordered sent to Colonel Lea.11 The Board thus lost a banker and newspaper man but gained a railroad president. At a special meeting held in January 1931, James B. Hill (1878-1952), of Nashville, then President of the Nashville, Chattanooga & St. Louis Railroad, was elected to the vacancy.12 On October 24, 1930 the Bank suffered the sudden loss of a key officer when Deputy Governor Creed Taylor was fatally burned in a fire which heavily damaged his home on Fifteenth Street in Atlanta.13  384  Mr. Taylor took employment in a country bank at Demopolis, Alabama at the age of 16 and all through his subsequent career never forgot this useful experience. He entered the employ of the Atlanta Federal Reserve on July 1, 1918. His progress through the years was steady. Resolutions adopted by the Board at its November meeting defined some of his characteristics in the following language:14 “No man in the Reserve System had more intimate knowledge of the Federal Reserve Act and of the functions of a Reserve Bank . . “He intimately knew the condition and problem of each member bank. He was firm in his effort to improve banking conditions, but in his firmness was sympathetic of the conditions involved in the improvement of each bank.. The problem of the large bank engaged his best ability. “His outstanding characteristics as an officer were his ability, his courage and his loyalty. A problem of the Reserve Bank was his personal problem. The bank was first with him. He had no other thought than it should have its full rights. “As a man he was modest, gentle, courteous and helpful always. His relations with his fellow officers and the directors were close and the friendships formed with him were warm and sincere... 15 On November 14 the Chairman of the Board and the Governor presented the Board a number of applications for the position of Deputy Governor, together with letters of endorsement. After considerable deliberation W. S. Johns, veteran General Auditor, was elected Deputy Governor to replace Mr. Taylor, and E. P. Paris was elected General Auditor. Salaries for the two men so elected were fixed at $12,000 and $6500 per annum respectively.16 In early December 1930 resignations were received from Nashville Branch Directors J. B. Ramsey and E. A. Lindsey. Their places were filled later in the month by Frank J. Harle, Cashier of the Cleveland Tennessee. National Bank, succeeding Mr. Ramsey, and C. W. Bailey, President of the First National Bank of Clarksville, succeeding Mr. Kindsey.17 Since E. R. Black succeeded M. B. Wellborn as Governor in 1928, the Bank and  385  Public Relations Department had become more and more active. During 1930, from year’s beginning to November 14, the Governor, Chairman Newton and a number of their associates made a total of 364 talks and visits to various banks. The value of personal contact in the field was being demonstrated.18 To augment the already busy officers in this activity, a new position, called “special representative”, was created in November. The principal duty of the position was to visit member and non-member banks in the interest of better relations. The salary range was fixed at $2,400 to $3,000 per year. Accordingly two young men were transferred to the Bank Relations Department, H. N. Harrison from Credit, and A. A. McCurry from Transit.19 A proposal was received in January 1930 of a community relations nature--an invitation to join a newly formed Central Marietta Street Association. To be composed of property owners along Marietta Street from Five Points to Spring, the principal purpose of the Association was to enhance values and improve conditions in the area. It was well sponsored and officered. After considerable deliveration the Reserve Bank voted to join for annual dues of $675 based on property valuation. Two Board members, Newton and Kettig voted in the negative. So did the Federal Reserve Board in Washington which felt that the expenditure was not justified.20 As the financial depression continued to deepen, more and more attention was devoted to suspended banks and to banks in an unsatisfactory condition. In January 1930 anent this subject, Governor Black reported: “Every earnest effort possible is bring expended in the collection of amounts due us by suspended banks. We have representatives working to make collection on our paper. The Failed Bank Division itself is working tirelessly and the officers of the bank are aiding in every effort that is being made. Deputy Governor Creed Taylor has spent the present week in Tampa, Florida, where he is making every effort to reduce the indebtedness of the Citizens Bank and Trust Company very materially during the winter season. Special efforts are being made in the case of other failed banks in Florida, since it is the season of the year in that state when collections should be made . “The great number of banks in unsatisfactory condition, the increasing amount of claims account of suspended banks and the many exceptions taken to the statements  386  supporting paper held by the Reserve Bank, indicate the seriousness of the situation which requires the closest attention on the part of the management and emphasizes the need of extending credit in the cases of banks in an unsatisfactory condition only to such banks as are making every effort and showing ability to improve their condition…”21 In 1930 as in 1926, the Cuban Agency made history. For approximately two years after the Agency occupied its new quarters business conditions were generally normal and operations moved along smoothly. Early in 1930, however, the Cuban government was faced with meeting some relatively heavy payments to banks in the United States on its outstanding bonded indebtedness. The Treasury balance in dollars were relatively low and it was faced with the possibility of having to pay out about $2,750,000 of its gold coin reserve which it was extremely anxious to retain for future reserve purposes. At the request of the Cuban government and by authority of the Atlanta Bank, the Agency was authorized to make an advance of $2,750,000 in Federal Reserve notes to the Cuban treasury against security of like value of Cuban gold coin which was received and held by the Agency under a re-purchase agreement. The Cuban government was thereby enabled to meet its obligation in dollars and the gold was retained in Cuba and redeemed by the Cuban Treasury in small lots over a period of six months. Late in September 1930, another banking crisis arose. The morning papers of Friday, September 26, carried notice of the closing of the  one of  the Cuban banks and member of the Havana Clearinghouse Association. This incident caused heavy withdrawals on Friday from all Havana banks and by Saturday the run had spread to the banks in the interior of the Island. By the close of business Saturday, September 27, the cash reserves of the Havana banks as well as the Havana Agency were practically exhausted, and based on experience with similar runs in the past, local banks had requested transfers aggregating over $20-million for Monday of the following week. The Federal Reserve Bank of Atlanta took immediate action and arranged for shipment of $5-million from the Jacksonville Branch by plane and $25-million from the  387  Atlanta Bank by special train. Indeed, declared Governor Black, “Cuba will have the money that it needs.” There being no regular boat sailing from Key West on Sunday, the Cuban government again, as in 1926, made the gunboat Cuba available to the Havana Agency to proceed to Key West to meet the special train and transport the shipment to Havana. H. C. Frazer, who recently had succeeded the late L. L. Magruder as Manager of the Havana Agency, made the trip to Key West aboard the Cuba. Jacksonville Manager W. S. McLarin, Jr., accompanied the shipment by train and boat. The latter shipment was delivered in Havana early Sunday morning and was transferred to the Agency vault by Cuban armored trucks guarded by soldiers. With $25 million additional reserves the Agency was in position to meet alldemands of the Havana banks on Monday, September 30, and by the end of the week conditions were again relatively normal. Within several weeks after the bank run in September, public confidence in banks appeared to be completely restored and business throughout the Island was reportedly normal.22 A couple of months later the Nashville Branch became the scene of some feverish action. It was reported to the Board by Governor Black on November 14: “On Monday November 3rd, I was notified that Caldwell & Company, of Nashville, Tennessee, would close Wednesday morning and that the closing of this bond house would cause much trouble in the Tennessee region. We immediately shipped ample funds to our Nashville Agency and Mr. Conniff and Mr. Bowman, Assistant Cashiers, and I went to Nashville. We spent the entire week there endeavoring to aid in every way that the Reserve Bank could aid and we feel that the result in Nashville that no bank in that city has closed is due in part to the efforts of the Reserve Bank. Ample credit facilities and ample funds were at hand for every call and any emergency. “We returned to Atlanta on Saturday night, the 8th. On Sunday afternoon, November 9th, I was notified that the Holston-Union National Bank of Knoxville was in trouble and Mr. Coniff was immediately sent there and I immediately went to Nashville. I spent Monday and Tuesday in Nashville endeavoring to aid in the Knoxville situation in any way that I could and endeavoring to hold the Nashville situation in check. Little aid could be rendered the Holston-Union National Bank because of its condition and because of its large present borrowings from us. The Holston-Union closed today,  388  November 12th, and there has been a run on the City National Bank of Knoxville and the East Tennessee National Bank of Knoxville. This run was caused largely by certificate holders and savings depositors. About $500,000 was drawn out of each bank today. These two banks with other banks have invoked the thirty day clause on certificate holders and savings depositors. We have today approved approximately $800,000 rediscounts for the City National Bank upon condition that additional collateral of $400,000 be furnished us. No call has been made upon us by the East Tennessee National Bank for credit facilities. We are today shipping sums to these two banks in Knoxville which will be adequate for any demand made upon them and I am hopeful that the situation there has been relieved. “The affairs of Caldwell & Company in Nashville are being handled by a committee of bankers and the outcome of that situation cannot be foretold. It extends from the Banco Kentucky in Kentucky to Nashville, Knoxville, Memphis, and into Arkansas. We are watching developments in our territory affected by this situation and are prepared to render every aid that can be consistently rendered.” 23 A few months before, during the summer and early fall, the Nashville Branch had undergone an $8000 interior remodeling and modernizing job.24 On January 28, 1930 there was held in Washington with the Federal Reserve Board a conference, of a representative from each Federal Reserve Bank, with the exception of Kansas City. Each was represented by its Governor, except Boston, from which the Deputy Governor was in attendance. The principal business of the conference was discussion of the question as to whether any steps should be taken by the Open Market Committee at the present time which might make money easier or tighter or leave it practically where it was. In reaching a judgement the following facts, as they appeared to be, were considered: “1.The panicky feeling has subsided. 2. A business recession has taken place, the extent or duration of which is not yet possible to determine. 3. Money has been made available to commerce and industry at more reasonable rates. 4. Liquidation is progressing in an orderly fashion. 5. Rediscounts have 1~een reduced to under $450,000,000. 6. However, there is a large variety of security loans in member banks which they are anxious to get reduced. 7. Liquidation has been slower in country banks than in city banks. “Under the circumstances it is the judgment of the Committee that no open market operations in Government securities are necessary at this time either to halt or to expedite the present trend in credit.  389  “The Committee believes, however, that it would have an unfortunate effect upon business if the demand for additional credit for spring business, concurrently with the running off of the present bill portfolio of the System should result in a hardening of rates. “It therefore recommends that the minimum buying rate for bills, fixed by the Federal Reserve Board, be reduced so that the Federal Reserve banks may have such flexibility in their bill operations that the present portfolio be not only maintained but may if necessary be increased to such extent as to avoid the hardening of rates which might result from a seasonal demand for additional reserve credit.25 On March 25 there was a meeting in Washington of the new Open Market Committee, composed of a representative from each of the Federal Reserve Banks. At this time the old committee was discontinued and a new committee, voluntary in character, to be known as the Open Market Policy Conference was set up in its place. Briefly, the function of the Conference was to consider, develop and recommend policies and plans with regard to open market operations. Governor Black, who represented the Atlanta Bank, reported to his own Board upon his return.” “I very heartily approve of the action taken at Washington, as I have always felt that the Federal Reserve Bank of Atlanta, and indeed each Federal Reserve Bank, should have a representative on the Open Market Committee and should take part in its purchases and sales in the formulation of its policies.” 26 On September 27 the Open Market Policy Conference made the following recommendations, which were approved by Eugene Meyer, Governor, Federal Reserve Board, Washington: “In view of the continued severe depression in business activity, trade and commodity prices in this country, as well as the rest of the world, it is the sense of the conference that it should be the policy of the System so far as possible to maintain the present easy money rate position in the principal money centers, it being the opinion of the conference that under present conditions no further easing of such money rates would be advisable and that no firming of such rates would be desirable whether because of seasonal requirements, gold exports or other causes. “It is, therefore, recommended that the executive committee authorized, if necessary, to supplement bill purchases by the purchase of government securities in the event that the seasonal demand for Federal Reserve credit, gold exports, or other  390  factors should tend unnecessarily to tighten present money rates, and that in the event any condition should develop which would require sales of government securities to execute this policy the executive committee should be authorized to make such sales. It is understood, however, that if the committee should have to buy or sell more than $100,000,000 of government securities to maintain the status quo, new authority should be procured in accordance with the prescribed procedure…”27 Meanwhile, in May, Governor Harrison, of the Federal Reserve Bank of New York, having recently been to Europe, made an economic report to the Open Market Policy Conference. He emphasized the worldwide nature of the recent price declines and business depression and indicated the influence of this world depression. upon the position of the United States as reflected in part by the fact that this country’s export trade for the first quarter of 1930 was about 22 percent less than for a like period in 1929, and the import trade was approximately 20 percent less. While the worldwide depression appeared in part to be an over production of certain principal commodities, it also appeared to reflect a shortage of working capital, and thus a restriction of purchasing power in a number of countries, and had been affected by the stringent credit conditions prevailing last year in world money markets, which, in turn, were a part of the reflection of the use of funds for speculation centering about the New York security markets but world-wide in its scope. The recovery of the world trade appeared in turn to be in no small degree dependent upon the restoration of purchasing power through the medium of foreign borrowings in the New York money market, just as the recovery of domestic trade appeared to be much dependent on the new financing for domestic enterprise in the United States.28 At the July meeting of the Atlanta Bank Board, Governor Black gave his views on the current economic situation which, incidentally, was due to get much worse. “I am not going to outline business conditions at length. You gentlemen are thoroughly familiar with them. There is little difference in conditions in our District and other Districts. Commodity prices are at low level. Business depression is acknowledged, pessimism is present and harmful. Improvement this year in our District is largely dependent upon crop returns and prices and any permanent improvement is dependent upon practically the same conditions as would show improvement in other districts--that is, upon improved world markets for surplus agricultural and industrial  391  products, the employment of funds in new enterprises in this country and abroad, an increased demand for products to improve commodity prices, limitation of production until surplus can be materially reduced, increased consumption and increased purchasing power here and abroad, a return of faith in the commercial world, and the replacement of the present pessimism with at least a determination to succeed coupled with such economies as will make possible debt retirement…”29 “In our own District I feel that our bank should aid our member banks directly in every way possible. I doubt if any rate we fix will immediately affect industry, agriculture or commerce, nor do I believe it will affect rates on short time loans, but, to be specific, most of our member banks need all the earnings they can get and to save all the charges they can save. In an effort to aid toward these earnings and the reduction of these charges I should like to see our rate reduced to 3-½ percent. I should also favor such reduction at this time as an evidence to business and agriculture that we want to aid in supplying funds on a basis of encouragement to business and agriculture.”30 After a general discussion of the situation and at the request of Mr. Black, each Director expressed his views. It was moved and seconded that this Board approve a policy of further purchases of Governments at the rate of $25,000,000 per week and the participation by this bank in such purchases, all with the purpose of providing funds through the bond market for the financing of enterprises, the encouragement of commerce, industry and agriculture, to the end that commodity prices might be improved and funds provided for the purchase in our own and the world market of American products. The motion was carried, only Director H. Lane Young voting in the negative.31 In October Governor Black enunciated a policy, through the medium of a circular, concerning cotton. A large crop of the southern staple had been produced, but much distress was being occasioned by two factors--the low price of the product and undue haste in its sale. Said the Governor: “Our bank has shown its intense interest to be of aid in the orderly marketing of crops and we have used our credit facilities in purchasing bankers’ acceptances secured by agricultural commodities, by loans to the Intermediate Credit Banks upon paper secured by agricultural commodities, and by direct discounts to our agricultural banks. Heretofore we have loaned to member banks 80 percent of the market value of cotton at the time the loan was made. We are willing now to increase this loan to 90 percent to be made upon notes, drafts and bills of exchange secured by warehouse receipts, shipping documents or other evidences of title to cotton. “It is of course understood that our requirements as to independent storage of cotton must be followed… 392  “The purpose of this circular is to emphasize our desire to cooperate to the fullest extent in making available the resources of the Federal Reserve Bank of Atlanta in any proper manner to permit and further the orderly marketing of cotton.”32 At the beginning of the year 1930 there were 366 national banks and 62 state bank members of the Federal Reserve System in the Sixth District, a total of 428 member banks. During 1930 there were two new national banks organized in the district, three state banks were admitted to membership, and five non-member state banks converted into national banks, thereby becoming members. There were, however, during the year numerous other changes in membership due to consolidations, withdrawals, suspensions and other causes, resulting in net losses for the year of 25 national bank and 13 state bank members, a total reduction of 38.33 Total earnings during 1930 for the Sixth District Federal Reserve Bank amounted to $1,963,724, smaller by $2,152,325, or 52.3 percent than for 1929, and the smallest since 1924. The decrease was only partly due to the fact that the rediscount rate was lower in ‘30 than in ‘29. It was due principally to a decline of 61.8 percent in the volume of discounts handled. A larger volume of purchased bills was handled during 1930 than in any other year excepting 1925, but earnings from them were 42 percent less than in 1929 because of lower rates. Volume of United States security purchases also increased and earnings from them increased 84 percent over those in l929.34 Current net earnings for the year amounted to $590,842, a decline of 77.3 percent compared with 1929, and smaller than for any year since 1917. After deductions for depreciation on bank premises and on furniture and equipment, reserves for probable losses and other deductions, there remained $323,307, an amount sufficient to pay the regular dividend of six percent per annum on the paid-in capital stock of the bank. No change in the surplus account was made, nor was a franchise tax paid to the United States Government for l93O.35  393  Thus, for the Atlanta Federal Reserve Bank ended the first full year of the Great Depression. The outlook was bleak.  394  NOTES Chapter 19 1.  Keller5 Dictionary of Dates5 II, pp 368-377.  2.  Ibid, 375-377.  3.  Ibid.  4.  Ibid, 368-377.  5.  Garrett, Atlanta and Environs, II, 866-882.  6.  Annual Report, 1929, p. 11; Minutes. Directors, VI, 1672, 1674-1675.  7.  Minutes, Directors, VI, 1693,1698.  8.  Ibid., 1730-1731.  9.  Ibid., 1732, 1743-1753.  10.  Ibid., 1775; Atlanta Journal, July 31, 1930.  11.  Annual Report, 1930, p. 12.  12.  Minutes, Directors, VI; 1809.  13.  Director Hill was a native of Spencer, Tennessee and graduated from George Peabody College for Teachers in 1898. The same year he began his railroad career as a telegraph operator for the N.C. & ST. L. After many successive steps he became president in 1926 and served as such until 1934, when he was elected president of the larger Louisville & Nashville and moved to Louisville. Retired in 1950. He served the Atlanta Federal Reserve as a Director from January 21, 1931 to December 14, 1934; as a Director of the Nashville Branch for the same period of time and of the Louisville Branch of the Federal Reserve Bank of St. Louis from 1935 to 1941.  14.  Atlanta Journal, Oct. 24, 1930.  15.  Minutes, Directors, VI, 1816-1817.  16.  Ibid., 1818.  17.  Ibid., 1820, 1834.  18.  Ibid., 1811. 395  19.  Ibid., 1810.  20.  Ibid., 1689-1690, 1707, 1718, 1732.  21.  Ibid., 1680, 1683.  22.  Frazer, “Brief History, Havana Agency”, 22-24; Minutes. Directors, VI, 1801-1803.  23.  Ibid., 1815.  24.  Ibid., 1755-1756.  25.  Ibid., 1705-1706.  26.  Ibid., 1724.  27.  Ibid., 1799.  28.  Ibid., 1750.  29.  Ibid., 1763.  30.  Ibid., 1764  31.  Ibid., 1765-1766.  32.  Ibid., 1800-1801.  33.  Annual Report, 1930, p. 11.  34.  Ibid., 7.  35.  Ibid.  396  397  CHAPTER 20 1931  Spain became a republic in 1931 and the Japanese invaded Manchuria, the latter a roundabout prelude to another invasion ten years later which plunged the United States into World War II. The “Star Spangled Banner” was officially declared the U. S. national anthem, and the Wichersham Report on Prohibition indicated local enforcement impossible but stubbornly opposed repeal. The Hawley-Smoot Tariff schedules reached an all-time high: a total of 2294 banks failed as against 6987 in 1-930, and President Hoover proclaimed a one-year moratorium on Allied war-debt payments.1 In connection with President Hoover’s action on debt payments, Governor Black, just back from an Executive Committee meeting of the Open Market Policy Conference in New York on June 22, reported to the Atlanta Board: “At the meeting this action of President Hoover2 was discussed and commended. A very hopeful feeling prevailed as the result of this action. It was thought that with the concurrence of the other powers interested in such a step it might bc- the one step necessary. to start an upward trend in business. . . I am of the opinion that it was an absolutely necessary.act, due not only to the condition in Germany but throughout central Europe. The response to it among bank circles in Germany was almost instantaneous. I am hoping as I dictate this report that France will give her accord and that the result of this action among the nations will be an immediate commencement of improvement in worldwide conditions…”3 At its December, 1930 meeting the Atlanta Board re—elected H. Lane Young as a Class A director and J. A. McCrary a Class B director, both for 3-year terms beginning January 1, 1931. At the same time W. E. Henley, Arthur F. Perry, C. A. Craig and J. D. O’Keef were elected directors of the Birmingham, Jacksonville, Nashville and New Orleans Branches respectively, all for three-year terms. Managing Directors for the above four branches were all re-elected for one-year terms.4  At the January 1931 meeting, the resignation of W. S. McLarin, Jr., Managing  397  Director of the Jacksonville Branch was accepted, and Hugh Foster, formerly Deputy Governor, was elected to succeed him. H.F. Conniff, formerly Assistant Cashier, was elected Deputy Governor to succeed Mr. Foster, and W. S. McLarin, Jr., was elected Assistant Deputy Governor. Other officers of the bank were re-elected at the same meeting.5 Only one change in the officer group occurred during the remainer of the year. On April 9, J. P. Butler of New Orleans, having resigned from the Canal Bank & Trust Company to enter the field of private business, also resigned as a member of the Federal Advisory Council. He was replaced by John K. Ottley, President of the newly organized First National Bank of Atlanta and a former Director of the Atlanta Reserve Bank.6 At this time the five highest paid officers of the bank, not including Chairman and Federal Reserve Agent, Oscar Newton, were E. R. Black, Governor, $25,000 per annum; W. S. Johns, Deputy Governor, $12,000; H. F. Conniff, Deputy Governor, $10,000; M. W. Bell, Cashier, 9,000; and Marcus Walker, Managing Director, New Orleans Branch, $15,000.7 Financial stringency to the contrary notwithstanding, funds were appropriated, as they had been in 1928, 1929 and 1930, for welfare and educational work. Upon the recommendation of Governor Black and the Managing Committee $6,850 was earmarked for the Federal Reserve Bank Clubs at the parent bank and branches for 1931. The money was used for recreation, athletics, annual outings, entertainment, sickness, flowers, expenses of Chapters of American Institute of Banking, and for prizes for completing A.I.B. courses. It was realized that man does not live by bread alone. Matters concerning failed and suspended banks continued to occupy the best  efforts of Governor Black and his associates during 1931. On January 9, by way of  398  summation, he reported.8 “On January 1, 1931, we had completed the liquidation of 68 failed banks, which banks at the time closed owed us $8,290,913.72. Of this amount $7,649,082.53 was collected; $641,830.19 was loss. The loss on these 68 banks whose liquidation has been completed was little less than 7 percent of the total due us at the time of their failure. “Prior to the failure of the Holston-Union National Bank of Knoxville, the City National Bank in Miami and the consolidation of the New Orleans Bank & Trust Company, we had reduced the amount due us in our Failed Banks Department to $2,182,718, which was the lowest figure that we had reached in a long while. These three banks added the following amounts: Holston-Union National Bank, $1,374,450; the City National Bank in Miami, $366,159.59; New Orleans Bank & Trust Company, $1,405,163.81, bringing the grand total against us to $5,333,490.18. “The closed banks now being handled by us are 54 in number. Their liability at date of closing was $14,209,298.58. Of this sum we have collected $7,390,420.71; having charged off $1,545,825.09; have recovered $6O,437,40, and as against any further liability we have reserves set up of $1,303,490.33. In addition to this reserve we have some capital stock, some real estate, and a great quantity of notes from which to collect or materially reduce the amount due us…”9 Continued the Governor: “Uneasiness exists all over our District, following the failures throughout the country. Inquiries are being received from a large number of banks as to their paper and the attitude of this bank. We have exerted every effort to allay the feeling of unrest in our section and to aid our member banks as far as we consistently can in the present situation. “I will enter into no discussion as to the situation in this country by reason of closed banks because you gentlemen are as familiar with it as I am, but it is appalling to consider that during 1930 banks closed in America with an aggregate of deposits of $700,000,000. This has brought consternation in the localities where banks have closed; and looked at from a cold business basis it has very largely curtailed buying power throughout the nation. The energies of every officer of our bank are directed toward relieving the situation that can be relieved in our own District and these efforts will be continued. Up to the present time we-feel that our District has, comparatively speaking, largely escaped the result of the panicky feeling throughout the nation concerning the banks of the country. I am hopeful that this panicky feeling may soon be allayed and that the banks will be allowed to perform normally their valuable services to their respective communities. It is this hope that is spurring our efforts at this time…”10 Again, on March 13 to the Board: “The real problem in our bank at the present time is the solution of the question of our extended banks and the accommodations which this bank may extend to such banks. A general policy may not be adopted as to this because of the differing conditions in each of these banks. In connection with each bank, where justified, we have been endeavoring to aid them through our credit facilities in the solution of their problems, extending such aid, under such terms and conditions as make our advances 399  reasonably safe. Consultations are being had with the officers of these banks as to their requirements. Efforts are being made to get them to exert every effort to make collections and better their condition. Encouragement is given them in their work and we are hopeful that crop returns this fall will, in connection with our efforts, materially improve the conditions of these banks.”11 In October, 1931, the Governor discussed suspended banks with the Board in the following language: “We now have 58 suspended member banks in the course of liquidation. These 58 banks are all located in small cities or country towns with the exception of one in Knoxville, Tennessee, one in St. Augustine, Florida, one in St. Petersburg, Florida, one in Tampa, Florida and one in Jackson, Mississippi. With the exception of these five city banks each of the closed banks has the same character of assets, these assets practically all arising from agricultural operations and when secured being secured by first or second mortgages on real estate, scattered live stock, farming implements, etc. Where the closed bank is located in a small town having been dependent largely upon agriculture for its business, the assets are of the same character and in some cases include mortgages, first and second, upon real estate in the town or city where the bank is located. “A number of these suspended banks have been in receivership for a year or more. In the case of such banks the quick assets have been collected in and dividends have been paid, so far as such dividends could be paid, and these now remain in the hands of receivers, real estate, first and second mortgages on farm lands or city property and live stock. The liquidation of these reamining assets, especially due to conditions during the pasj2 two years has necessarily been slow and will continue slow.”12 “We are facing these problems as best we can. Visits are being made to a number of these banks to ascertain their exact condition. Collateral in the case of each of them is being required in order to protect our position with them. Conferences are being had with their officers in an effort to have them remedy their position, if possible, and frank statements as to their needs are being given us and frank statements on our part as to remedies which should be applied by them are being given them and an understanding had as to our position relative to further aid. In the case of some banks we still have past due paper. We have carried it in this shape believing it could be better collected. This situation is limited to a few banks…”13 At the May Board meeting Governor Black made the not surprising statement that ‘‘every Reserve Bank is experiencing a deficit in operations. He went on to submit figures showing the net deficits of Reserve banks of comparable size to Atlanta during the first three months of 1931:  Minneapolis  $ 48,123  400  St. Louis Kansas City Dallas Atlanta Richmond  81,219 101,380 115,890 148,292 213,847  The Governor then elaborated the subject: “The smaller deficits in the St. Louis bank, the Minneapolis bank, the Kansas City bank and the Dallas bank were due to their ability to participate fully in Government operations of the Open Market Committee . “…The Federal Reserve Bank of Atlanta during 1930 was operated as economically as any reserve bank. We are watching our expenses as closely as we can. We are not replacing employees unless such replacement is demanded, and our general policy has been to retain the employees that we have in order to have trained help when we need it and to refrain as far as possible from augmenting the present employment situation. This policy, I believe, is correct.”14 At the same meeting and on the subject of expense of operation, the following resolution, offered by Director Kettig, was adopted: “WHEREAS, the Federal Reserve Bank of Atlanta is operating at a loss and it does not appear at present that the situation will soon improve; and WHEREAS, all commercial and industrial companies are reducing their expenses by reduction in salaries and the elimination of unnecessary employees, BE IT RESOLVED, THEREFORE, that a committee of two, composed of the Governor of the Bank and the Chairman of the Board, be requested to make a survey of the bank’s expenses in all of its departments. BE IT FURTHER RESOLVED that this committee take under consideration the following questions: FIRST: Should the salaries of all the employees of the Bank, from top to bottom, be reduced, say, 10 percent? SECOND: Should all employees that are not necessary for the operation of the Bank be eliminated? THIRD: Is there any other way of reducing expenses? RESOLVED that the above name Committee be requested to report its findings and recommendations to this Board at a future meeting.” 15 The June meeting the Board produced a long, well-documented re ort from Committeemen Black and Newton. Careful studies had indicated that dismissal of 19 employees and cuts in o  401  officers and employees salaries would result in a total annual saving of $53,662--not a significant amount in the total operation of the Bank and its branches. Black and Newton then boiled their report down to three moral questions, which in effect, they said, were economic questions: “(1) By dismissing these employees we add to the present unemployment problem, and the Reserve Bank should consider squarely whether in this time of emergency it can afford, for the saving involved, a step which would materially add to the problem. “(2) By wage reduction we would at this time tacitly admit the necessity of a wage reduction and would be construed to have affirmed that if a wage reduction is necessary in the Federal Reserve Bank, it is necessary everywhere. Until the present situation has had more time in which to iron itself out and our economic life has had more opportunity to adjust itself, we would hesitate to have the Reserve Bank proclaim this position. We rather think that the Reserve Bank should be one of the last to proclaim this attitude. This wage reduction question is a very vital question in America today. Purported promises, agreements and understanding are being announced in regard to it. Bad faith on the one side or the other is being proclaimed, and very serious consideration should be given as to whether the Reserve Bank should lead in such a movement. “(3) The Reserve Bank is considered by the public as a quasi governmental institution, and it might be well understood by the public that a governmental institution had taken an advance stand in the matter of the necessity of a general wage reduction. This might be considered a very expensive step for a Reserve Bank to take for the saving involved in such a step. We would anticipate that such action on the part of the Reserve Bank might well be taken as a reason or excuse for such reductions in the financial and industrial corporations in our section, and if we set the precedent such action would be taken at least as a precedent. At this time we hesitate to recommend such action in view of the price we might pay for it and especially in view of the limited saving which at this time could be effected by it. “It is our belief that our present policy should for the present be continued, this policy being: (a) economic operation and elimination of waste and all unnecessary expense; (b) no replacements where employees leave the service; (c) elimination of any drones in our service and gradual reduction of force as the present situation may continue. “We feel that this policy should be pursued and that further action should not be taken at this time because it has not yet been demonstrated that the present situation is permanent and that present interest rates have become normal. If it becomes demonstrated to our Directors that the present depression is to be of long duration, then it will be necessary to minutely study our bank, its branches and agencies and the departments in each one of them and consider the elimination and/or curtailment of service. . .16 It was just as well that the Directors, as of June 12, 1931, could not foresee  402  either the length or the depth of the depression. The Havana Agency carried on during the year, even though the political situation in Cuba was, as a live volcano, always about to erupt. Manager H. C. Frazer, in Atlanta on vacation in August, made an interesting report to the Board: “…You gentlemen are familiar with the physical properties of our quarters. The front of our agency is well protected by steel gratings, the door is kept locked, our vaults are most modern. During the present political trouble in Cuba we have extra guards and extra protection day and night. I feel little apprehension as to the safety of our holdings. Newspaper reports narrate the spread of the present revolutionary efforts. Those efforts appear to be centered largely in the outlying provinces. The situation in Havana seems to be well under control by Government authorities. As long as the army remains loyal the revolution cannot gain much headway. I have no reason to suspect that the army will not remain loyal and will keep control. In any event, I feel that a revolution in Cuba will be entirely political and I would not apprehend danger to our holdings if, through revolution, there should be a change of government.” 17 During lids same period, May to August, 1931, the Federal Reserve Bank of Atlanta took on even more of an international flavor. Discussions at Open Market Policy Conferences in both New York and Washington, attended by Governor Black, led inevitably to methods for further augmentation of market funds, with emphasis on foreign credit and foreign bill holdings. The European situation, it was felt, made necessary the participation of Reserve Banks in the purchase of foreign bills.18 Accordingly participations, ranging in amounts from $50,000 to $900,000 were approved for the Atlanta Bank, guaranteed respectively by the Austrian National Bank, the National Bank of Hungary, the Reichsbank, the Bank of England, and the Bank for International Settlements.19 In advocating participation in these foreign loans, Governor Black said: “(1) Because I felt that the richest country in the world should join in solving the market problems of the world. “(2) Because the Reserve System should have a part in protecting American investment and the holdingsof our member banks in German investments. “(3) Because keeping open the markets of Germany and of Europe to our cotton is absolutely essential to the welfare of the South. “It may be that we will lose something in these participations. If so, what we lose would be infintesimal in comparison with what we would lose if there were a European 403  collapse and a closing of European markets to our products…”20 The only actual action taken by the Bank in connection with foreign loans, however, was the renewal of a participation in a loan of $1,400,000 to the National Bank of Austria by the Reserve Banks. The Atlanta participation in the loan was $39,418.34 and was made on condition that the second loan agreed to be made this bank be cancelled.21 It was just as well. Central Europe experienced a financial collapse in May, 1931. President Hoover believed the situation so serious that he secured consent from the interested governments, and later approval of the American Congress, of a one-year moratorium on inter-governmental debts. This step unfortunately did not prove so effective as he had hoped and did little to improve the immediate situation either in Europe or the United States. In fact, the picture grew darker in September when Great Britain, followed by many others, suspended gold payments, and did so despite aid extended by the Federal Reserve Bank of New York in an effort to bolster her monetary system. The disastrous effect of all this on the American securities market and in turn upon the solvency of many American banks led Hoover to initiate the organization of a voluntary agency, known as the National Credit Corporation, by means of which the strong banks might help the weak.22 In November Federal Advisory Council Member John K. Ottley attended a meeting in Washington concerning the National Credit Corporation.. Upon his return he described the plan of the President for the formation of the Corporation to the Atlanta Board. Resolutions of approval were passed. Office space was tendered in buildings of the Bank in Atlanta, Nashville, Birmingham, New Orleans and Jacksonville and the opening of a deposit account for the Corporation was authorized.23  Another current problem of the year was the low price and its effect on banks-404  primarily small banks in rural acreas. In commenting upon this situation, in September, Governor Black said: “We have been concerned at the low price of cotton as it affects our district, its agriculture and commerce, and as it might affect our country banks primarily, and secondly, its effect upon the repayment of obligations of some of our small banks to this bank. Banks in this district of $160,000 capital and surplus and under owe us $2,675,514. Liquidation by these banks has been retarded by the lateness of the cotton crop. We are anticipating a normal liquidation by most of these country banks as the cotton is picked. The low price will necessarily affect liquidation by .some of our smaller banks whose condition is extended. “The questions involved in this situation are receiving our best attention. We are giving every aid to those banks needing our assistance in gathering the crops and are ready to follow our policy established last year of handling for our member banks cotton secured paper to ninety percent of the market value of cotton, all in an effort to further the orderly marketing of the crop.” 24 Agricultural production during 1931 in the six states comprising the Sixth Federal Reserve District increased substantially over 1930 and 1929, although total crop values were lower, and other available statistical evidence for 1931 disclosed unfavorable comparisons with 1930 in business and industry in the district, with the exception of a small gain in textile activity. These statistical comparisons were accentuated by a continued decline in the price of commodities.25 Results of operation for the Federal Reserve Bank of Atlanta reflected the poor general economic situation. Total resourses of the Bank amounted on December 31, 1931, to $201,896,000, and were smaller by $26,206,000 than the total of $228,102,000 on the corresponding date a year earlier, and were also smaller than at the close of any year since 1917.26 Total earnings during the year 1931 amounted to $1,448,835, smaller by 26.2 percent than in 1930, and less than for any other year since 1917. This decline in earnings was due partly to a lower discount rate (3 percent since January 10) in effect most of the year, and in part also to a decline of 12.7 percent in the volume of paper purchased. Costs of operation declined 7.6 percent from 1930.27 Current net earnings for 1931 amounted to only $180,059. There were  405  miscellaneous additions to current net earnings amounting to $45,598. These combined amounts were sufficient to provide for depreciation on bank premises, and on furniture and equipment; reserve for probable losses and other minor deductions. It was necessary, however, to make a charge against surplus account covering dividends paid during the year and depreciation on United States securities. This reduced the surplus account from $10,857,310 to $10,448,658 on December 31, 1931. As was the case in 1930, no franchise tax was paid to the United States Government for 1931.28 By way of summation Governor Black wrote: “The year has been a hard one on our member banks and on the Reserve Bank. Problems have presented themselves which were both new to our member banks and to the Reserve Bank. Our officers and employees have expended every effort to the solution of these problems and hardly a day has passed that a new problem, either in a member bank or in the Reserve Bank has not presented itself. We in the Reserve Bank have known no office hours and distances have been largely eliminated in the solution of problems throughout the district…”29  406  NOTES Chapter 20 1.  The Life History of the United States (12 Vols. New York, 1964), 10, pp. 152-153. Hereafter cited as Life History.  2.  Announced on June 21.  3.  Minutes, Directors, VII, 1916.  4.  Ibid., VI, 1834  5.  Ibid., VII, 1835—1836; Annual Report, 1931, pp. 12-13.  6.  Ibid., 1872, 1882.  7.  Ibid., 1838.  8.  Ibid., 1847.  9.  Ibid., 1842  10. Ibid., 1843 11.  Ibid., 1865  12.  Ibid., 1953  13.  Ibid., 1978  14.  Ibid., 1885-1886.  15.  Ibid., 1890  16.  Ibid., 1899  17.  Ibid., 1923  18. Ibid., 1927 19.  Ibid., 1929  20.  Ibid., 1927-1928.  21.  Ibid., 1936  407  22.  Harold U. Faulkner, From Versailles to the New Deal (New Haven, Conn., 1950). 349.  23.  Minutes. Directors, VI, 1969.  24.  Ibid., 1936.  25.  Annual Report, 1931, p. 7.  26.  Ibid., 10.  27.  Ibid., 10—11.  28.  Ibid., 11.  29.  Minutes. Directors, VII, 1995.  408  CHAPTER 21 1932  If the depression as a whole and the year 1932 in particular had a theme song, it must surely have been Harbury and Garney’s “Brother, Can You Spare a Dime.” It seemed to epitomize the period. The image was heightened, to some extent, by Erskine Caldwell’s novel of poverty, Tobacco Road, published the same year. The depression was more than two years old when the seventy-second Congress met in December, 1931. It was quite clear by now that Government efforts to halt or relieve the catastrophe had failed. It was even more so heavy and bank failures so numerous that business loans and credit were obvious in late January and February of 1932 when the drain of gold became rapidly shrinking. Bank failures and the fear that the United States would follow Great Britain and other European countries in going off the gold standard spread pessimism throughout the business world and started numerous runs on the banks. In many respects February, 1932 marked the worst crisis of the depression until the final bank debacle a year later.1 Although President Hoover in his message to Congress warned against excessive expansion in the schedule of Federal public works, he was now in the mood for more strenuous Federal action in the economic crisis. He proposed that the Treasury be empowered to subscribe to further stock in Federal Land Banks to aid agriculture; that a system of home-loan banks be created to aid home owners in saving or improving their homes and that a Reconstruction Finance Corporation with a “reasonable capital” be established. The last recommendation came because of the inadequacy of the National Credit Association in savings banks and providing  409  necessary credit. These were the main proposals as suggested by Hoover after two years experience and they comprised the chief program of the Seventy-second Congress.2 Urged by a special message from the President, Congress, in January established the Reconstruction Finance Corporation, the best known and undoubtedly the most useful of the agencies set up during the Hoover administration to counteract the depression. The FRC was to have a capital stock of $500,000,000 to be subscribed by the Treasury with power to issue obligations up to three times that amount. The act authorized it to loan on security to banks of various types, trust companies, building and loan assaciations, insurance companies, mortgage and loan companies, agricultural and live-stock credit associations and, with the approval of the Interstate Commerce Commission, to railroads. Its life was set at ten years and it was to be governed by a board of seven including the Secretary of the Treasury, the Governor of the Federal Reserve Board and the Farm Loan Commissioner.3 In the pessimism of the last months of the Hoover administration many criticized the RCS as simply a means of ladling out credit to banks and industries who had already proved incapable of directing the nation’s economic life. The fact remains, however, that it saved many a bank, industry, and railroad from destruction and thus played an important part in mitigating some of the force of the depression. It proved itself so valuable that the Roosevelt Administration continued it and rested heavily upon it.4 On the local front, as 1932 opened, Fulton County was nearly tripled in area as Milton County to the north and Campbell to the south were merged into the former. In May the Roswell District of Cobb County was added. Richard B. Russell was elected to the United States Senate and Eugene Talmadge defeated five other candidates for the governship. On July 1, the day Franklin D. Roosevelt won the Democratic nomination  410  for president at Chicago, machinery was set in motion in Fulton County to succor destitute families of the unemployed. The Atlanta Chamber of Commerce launched a “back to the farm” movement. On October 24 Nominee Roosevelt visited Atlanta, spoke at the Auditorium that evening, and was accorded a great ovation.5 At its meeting in December, 1931, the Atlanta Federal Reserve Board elected the following Branch Directors to serve three-year terms beginning January 1, 1932: Birmingham, J. H. Frye; Jacksonville, C. C. Ware; Nashville, Frank J. Harle; and New Orleans, R. S. Hecht. Managing Directors A. E. Walker, Birmingham; Hugh Foster, Jacksonville; Joel B. Fort, Jr., Nashville; and Marcus Walker, New Orleans, were all reelected to serve for 1932.6 Directors E. C. Melvin, J. B. Hill and W. H. Kettig were all re-elected to serve until December 31, 1934. Oscar Newton was reappointed by the Federal Reserve Board as Chairman and Federal Reserve Agent, and W. H. Kettig as Deputy Chairman. All officers of the Bank were re-elected for the year.7 The only change during the year was occasioned by the death, on July 3, 1932, of Managing Director A. E. Walker, of the Birmingham Branch. John H. Frye, a Director of that Branch, was named to succeed Mr. Walker on July 8. The Board vacancy was filled by John G. Farley of Birmingham on September 9.8 Two actions concerning personnel during the year reflected the ever-worsening financial crisis. The usual annual appropriation of $6850 to the Federal Reserve Bank Clubs for recreational and educational work was cut to $245O.9 In December the Salary Committee of the Board recommended that the salaries of all employees be reduced 12 percent, without the dismissal of any employee. The recommendation was adopted and the Chairman, Governor and Managing Committee were empowered to act in the matter.10  411  Creation of the Reconstruction Finance Corporation, destined to play an important role in the operations of the Federal Reserve System, brought immediate comment from Governor Black. “This Corporation /R.F.C./ was organized about ten days ago and already has established agencies in New Orleans for the states of Louisiana and Mississippi and in Atlanta for the rest of our territory. The organization will be enlarged to cover our different branch cities as need arises for such enlarged organization. We have cooperated with the Reconstruction Corporation in the establishment of these agencies and have given them quarters in our banks in Atlanta and New Orleans and have agreed to act as custodian and depositary for them and to furnish them our credit facilities. A large demand from all over the district is apparent in connection with the operation of this corporation.”11 Three months later in May, the Governor was able to make a very tangible report on the R. F. C. “The Reconstruction Finance Corporation is continuing to do fine work in our territory. The Atlanta office has extended credit to 71 banks, totaling $10,000,000; the New Orleans office, 63 banks, totaling $9.784,566; Nashville, 55 banks, totaling $3,023,304; Birmingham, 47 banks, totaling $2,106,651; and Jacksonville, 2 banks, totaling $30,000. Total credit extended to 238 banks, totaling $24,993,000. Other loans approved and authorized but not yet paid aggregate $13,534,500. “This has had a fine effect in our district and has aided in holding failures down to a minimum. The same effect has been had throughout the country during the month of April, there being only 67 failures in the United States during that month.” 12 “The Citizens Reconstruction Corporation, seeking to bring money out of hoarding, is apparently have a fine effect throughout the country. This was a courageous step and one apparently fraught with danger, but the very courage of the undertaking appears to have insured its success. My information is that banks are receiving new time deposits and that the general effect of this special movement is recognized as good.” 13 The passage of the original Glass-Steagall Act of February 27, 1932 had a farreaching effect upon the operations of the Federal Reserve System. Briefly, it provided for three things: 1. For group loans to groups of five or more member banks within the district, a majority of them independently owned or controlled, provided the bank or banks receiving such loans have no adequate amount of eligible and acceptable assets available to enable such bank or banks to obtain sufficient credit from the Federal  412  Reserve Bank through rediscounts or advances further than provided in the second section of the bill. 2. Until March 3, 1933, and in exceptional and exigent circumstances and when any member bank having a capital of not exceeding $5,000,000, has no further eligible and acceptable assets available to enable it to obtain adequate credit accommodations through rediscounting of the Federal Reserve Bank . . . then any Federal Reserve Bank, subject to approval of not less than five members of the Federal Reserve Board, may make advances to such member bank in its time or demand promissory notes secured to the satisfaction of such Federal Reserve Bank . 3. Amends the Federal Reserve Act by providing that until March 3, 1933, should the Federal Reserve Board deem it in the public interest, it may, upon a majority vote of its members authorize the Federal Reserve Bank to offer and the Federal Reserve Agents to accept as collateral security direct obligations of the United States. This provision is capable of greatly broadening the free gold position of the system.14 It was decided, during a meeting of the Federal Reserve Governor’s Conference in Washington in May, to hold District meetings of leading bankers and industrialists. The Sixth District meeting was held June 2. Thirty-seven were in attendance, including financiers and industrialists from Atlanta, Nashville, Birmingham, New Orleans, Jacksonville, Savannah, Selma, Leesburg and Chattanooga. In reporting upon the meeting, Governor Black wrote: “The meeting was well attended and intense interest was manifested in it. A statement of the Federal Reserve policy of purchasing Governments and the objects and purposes of that policy were fully explained and unanimously approved. A discussion was had as to ‘business conditions in our district and a number of constructive suggestions were made as to betterment of both credit and business conditions. A committee of twelve were our Mr. George S. Harris as Chairman was appointed to consider credit and business conditions in this district and to take steps to improve them.” 15 In spite of all that anyone could do the business situation remained dismal. Governor Black, reporting to the Board in July on conditions in the Sixth District, said:  413  “The economic and banking situation has shown little change. Business conditions show little improvement. Confidence has been largely restored in our banks. Credit demands are limited and credit conditions show little change. Fortunately, we have escaped the banking panic that has existed during the past month in the Boston and Chicago districts. The Chicago situation has been felt in the northern part of our district but without appreciable effect. This situation up to date has not spread to other districts, but the 49 banks in the Chicago district and the situation in the larger Chicago banks has had its effect all over, these effects being the loss of deposits, the increase in currency, a stimulas to further hoarding, and a general uneasiness in all financial circles. We should congratulate ourselves that these effects have been appreciably smaller in our district.”16 The Havana Agency during 1932 did not pursue an altogether even tenor of way. In midsummer word was received that Cuban secret police had searched the home of Manager H. C. Frazer while he was in the United States on vacation. Governor Black began an immediate investigation through Cuban Ambassador Guggenheim. It appeared that the police searched the house on information that a large quantity of arms had been hidden in some house in the general area to be used for revolutionary purposes. They were unaware of the identity of the occupant of the Frazer house. A letter of apology from the Cuban Foreign Office, reading in part as follows, closed the matter: “With the greatest pleasure I inform Your Excellency that the Government of the Republic has the highest regard for Mr. Fraser and the institution which he represents here, and laments what occurred and the molestation and trouble which was caused Mr. Frazer as a result. We believe it was demonstrated that there was no deliberate intention on the part of our police to cause the slightest disturbance to Mr. Frazer, who, as has been previously stated, is a person held in our highest esteem.”17 Early in 1932, the Cuban Congress passed legislation authori:ing the coinage of silver pesos. The agreement was conferred into with the Export-Import Bank of the United States whereby the Export-Import Bank would advance funds for the purchase of silver bullion, have the coins minted by the Philadelphia Mint and shipped to Cuba against payment of cost of bullion, interest and mint charges. The Havana Agency was designated as Agent for the Export-Import Bank and drafts (payable in United States  414  dollars) were drawn on the Cuban Treasury Department payable to the Havana Agency as Agent for the Export-Import Bank to cover each shipment. Proceeds of the drafts were transferred by wire for the account of the Export-Import Bank at which time release of the shipment by the Philadelphia Mint was authorized.18 The first contract was made for 20,000,000 pesos with a schedule for shipments of 500,000 pesos weekly. The shipments were consigned to the Havana Agency, received by it from the Railway Express Company shipside, and delivered shipside to the representative of the Cuban Treasury Department. Additional contracts were made over a period of several years until an aggregate of 80,000,000 pesos were minted and delivered to the Cuban Government.19 During the fall of 1932 Governor Black visited Cuba and reported conditions there to the Atlanta Bank Board: “I found general conditions in Cuba very slow. Bank clearings were off. The turnover of checks was off, receipts at the Customs House were off and the price of Cuban raw sugar was down. The silver problem showed considerable improvement during October, silver coin now being quoted at 17/8 to 2 per cent discounts. The rise in silver is attributable to its wide distribution throughout the Island, to its being accepted in part payment of taxes, and Dr. Ferrara is of the opinion that it will go to par with our currency. His reason for his desire to export American silver La to remove it as a factor of comparison of values with Cuban silver coin. “Manager Frazer and Assistant Manager Alston were performing every service satisfactorily. I am of opinion that our bank is to be congratulated upon having two men of the caliber of these two in charge of its foreign agency.”20 One result of the new Federal legislation, typified by the Reconstruction Finance Corporation Act, was a plethora of loan applications. Reporting to the Board in September Governor Black said:  415  “During August we have had innumerable applications for loans to individuals, partnerships and corporations. Applicants have come in person and requests for loans have come in large number through the mails. This department has been handled by Deputy Governor Conniff, who has exercised great patience and care and given due consideration to each ‘applicant and to each request for information as to a loan. During the month we have declined loans because of ineligibility, unacceptability, lack of endorsers or lack of collateral. During the early part of September we have made one loan to the  located in Tennessee in the sum of $50,000.00.  My information is that these loans have been very few throughout the system.”21 In November Governor Black made an interesting report to the Board on both country and city banks in the Sixth District. It is an interesting exposition of current economic conditions: “Collections have been exceedingly slow with country banks. They have been unable to collect. Cotton that has sold has been limited in. quantity and the price low. The Government Seed Office has been insistent upon the collection of its loans upon the crops and Federal Land Banks have been active in collecting interest and installments. Many of our banks made limited loans as related to this years crop. All of the factors named’ have in a large number of cases greatly restricted collections by our member banks. The result oust be a carryover on our part for many of these banks. In each such case we are carrying large additional collateral in an effort to protect our position with these banks in connection with our advances to them. “A serious question is being presented to a number of these country banks under present conditions. Collections have been small with them and their cash position is low. Many have borrowed from the Reconstruction Finance Corporation. The funds borrowed have been consumed in operations and they now find themselves in a position where their cash position is low, their collections exceedingly limited, their  416  assets largely pledged, and before them a years operation before further substantial seasonal collections can be made. In the case of each of these banks we are aiding as far as we can, but we, as well as these member banks, realize the seriousness of their present situation. Some of them can be aided, some of them can pull through, but in my opinion some of them must succumb. A revival of business, the reestablishment of land values, especially agricultural land values, an increase in commodity prices, especially agricultural products--all combining to aid in increasing deposits and in the collection of their receivables--is apparently the one remedy which will avail these banks. I should like the Directors to know that in this situation concerning these agricultural banks we are acting with caution and with an earnest desire to aid those that are solvent to have an opportunity to realize upon their present frozen assets and to weather present conditions. Our Finance Committee and Executive Committee are diligent in considering this aggregate proposition and the problems by each one of these banks as its condition is presented by officers of such banks to this bank.22 “We also have problems in connection with many city banks. The condition of these banks is such that only a revival of business and reestablishment of values, both of securities and of real estate can ultimately save them. The cash position of most of these city banks is all right. Their intrinsic condition oust ultimately be remedied. In the case of each such city bank our officers are giving their earnest attention to efforts to aid them in the solution of the different problems presented by the different banks. “As a whole, the demand upon us by our banks for our credit f aduties is limited. It is not a question of credit so much with them as it is a question of soundness. There oust be a revival of business and there must be a substantial increase in values ultimately in order that the problem of these banks might be worked out. Reserve Banks during the past year especially have aided in a very large degree in maintaining credit conditions. The Reserve Banks can aid in many ways in the revival of business. They  417  can lend their different agencies to the restoration of fair values, but in the end they can not aid in capitalization or in the repairing of impaired capital. That is inherently a problem for the bank involved and oust be solved by each individual bank if our banking structure is to be placed on a firm basis. Credit has been superabundant from Reserve Banks and other Government agencies, but credit cannot solve the problem of impaired capital. “Applications to the Reconstruction Finance Corporation have become fewer in the past few weeks. In my opinion this is due to two things: (1) a large number of the banks desiring aid from that Corporation have already obtained that aid; (2) a number of the banks hesitate to have their loans with that Corporation made public. “In addition to the. Reconstruction Finance Corporation, the Home Loan Banks have been established and the Agricultural Credit Corporation has been established. These agencies should aid home owners and agriculture in refinancing present debts. Neither of them will pay debts, and ultimately debts must be paid. They are of large advantage in bridging over the period between the solution of unemployment, restricted wages and depression in values of real estate and farm property, but again we come to the conclusion that for ultimate relief to be afforded, there must be a revival of business and agriculture, a rise in value of real estate and commodities, so that ultimately these classes of our people may be enabled to pay the debts represented by their home mortgages and the liens upon their farms and farm crops. I believe that the conditions of the past three years have taught material lessons to our people. Lessons of thrift and economy have been deeply learned. I also believe that in our country there will be a revival of business and the reestablishment of values will go a long way toward solving our problem. The Reserve Bank is intensely interested in all this and it should stand ready with its resources and its facilities to aid in every movement that looks to its accomplishment. We are proceeding with all our member banks and with each bank  418  fully cognizant of our responsibilities in the present situation.23 Brave words on the part of the Governor, to be sure, and fundamental to the revival of the economy. But the road back was destined to be long and steep. In commenting upon the subject of relief and unemployment at this time, Governor Black said: “The unemployment and relief problem is a pressing one. Outside of the efforts of each corporation and each community in this regard it may be interesting to you to be advised of the following amounts that have been advanced to our different Sixth District states for relief purposes: Florida  $835,715.00  Georgia  345,093.22  Tennessee  467,536.00  Louisiana  2,385,258.00  Mississippi  850,000.00  Alabama  225,000.0024  Eugene Meyer, noted public figure, newspaper executive and, since September 16, 1930, Governor of the Federal Reserve Board, visited Atlanta in late November, 1932, accompanied by Floyd R. Harrison, his assistant. Both attended a special meeting of the local Federal Reserve Board on November 26. The meeting was devoted for the most part to a talk by Governor Eugene R. Black, who took the occasion to capsule the operations of the Sixth District Bank from its inception in 1914 to date. After introducing the Atlanta Directors individually and noting that two, Messrs. J. A. McCrary and W. H. Kettig, had both served since the bank opened, Governor Black reported: “In December 1914 we had 381 member banks with capital and surplus of $88, 476, 000 and deposits of $237, 566, 000. In June 1932 we had 338 member banks with a capital and surplus of $153, 558, 000 and with deposits of $832, 835, 000 and with  419  total reserves of $1, 123,433,000. “During the seventeen years of its existence from the middle of November 1914, through the year 1930, this bank has extended credit to commerce, industry, and agriculture to the extent of $16, 145, 148, 000. $14, 384, 667, 000 of this extenstion of credit has been through the discount or rediscount of negotiable paper offered by the member banks in this district, the balance through purchase in open market or from other Federal Reserve Banks of acceptances and government securities. “Through this large amount of credit accomodation there have resulted earnings which have amounted to $47,932,930, which earnings have been made through average normal interest returns. “During this period, current operating expenses and the cost of printing and shipping currency have totaled $17,997, 132 and there has also been set aside out of earnings over $6,409, 126 for depreciation and reserves, etc. These deductions have left during this period more than $23, 709, 132 as net earnings available for dividends, surplus and franchise tax. Of this amount $4, 214, 508 has been paid to member banks in the form of dividends, $10,448, 658 carried to surplus account, and $8,950,561 has been paid to the United States Government for franchise tax. “At the present moment our capital is $4,681,500 and our surplus $10,448,658. Our member banks reserve account is $41,919,345, as against $49,915, 295 on the same date last year. We have earning assets totalling $71, 072, 808, made up of bills discounted secured by Government obligations, $2,467, 376; other bills discounted, $18, 340, 194; bills bought in open market, $3, 663, 438; United States bonds and notes $19, 375, 550; Treasury Certificates and Bills, $27, 226, 250. Our Federal Reserve  420  notes in actual circulation are $97, 241,730. “For the current year our gross earnings have been $1,826,695; our current expenses $1,069,240; our net earnings $757,455; our dividends, paid and accrued $261,310; and our net earnings available for depreciation allowance, reserve, surplus and franchise tax, are $469,476, as of date November 23rd. “During the past three years we have participated in all open market purchases of bills and in all open market purchases of Governments where our gold position or reserve position would allow. “We have four branches and two agencies ... In addition to our main building in Atlanta, we have adequate buildings and facilities at each of our branches. In Havana we have leased quarters with our own constructed vault facilities. We have maintained in Havana about $12, 500, 000 for uses of the Agency and in New Orleans we keep $10,000,000 of unissued currency for any emergency conditions there. In Jacksonville we have $10, 000, 000 unissued currency for purpose of transportation to Cuba in the event of an emergency. “During the years 1930, 1931, and 1932 we have had 72 member bank suspensions. These have consisted practically of the smaller banks and we have averted any suspensions, with the exception of the Holston-Union National Bank of Knoxville, among the banks of our district in larger cities. “At the present time, practically one-fourth of our banks are in an extended condition, these banks being continued in large measure to country banks and their condition being due to crop conditions and managerial problems during the past three years. We have, however, certain situations among the banks of our cities that are requiring and receiving our constant attention. 421  “The bank as a whole receives the loyal and faithful services of its officers and employees. Our relations with the Federal Reserve Board have been most cordial and we have appreciated such suggestions as they have made and such directions as they have given. In the larger problems for the past three years, our bank has taken an active and earnest interest in close collaboration and cooperation with the other reserve banks of the System as a whole.25 Governor Meyer spoke on general banking and business conditions. His remarks were helpful and constructive and were very much appreciated by all those present.26  422  NOTES Chapter 21 1. Faulkner, From Versailles to the New Deal, 351. 2. Ibid., 351-352. 3. Ibid., 352-353. 4. Ibid., 353. 5. Garrett, Atlanta and Environs, II, 893-900. 6. Minutes, Directors, VII, 1988-1989. 7. Annual Report, 1931, p. 11. 8. Ibid., 1932, p. 16. 9. Minutes, Directors, VII, 2047, 2055. 10. Ibid., 2109. 11. Ibid., 2010. 12. Ibid., 2038. 13. Ibid., 2019. 14. Ibid., 2019-2022. 15. Ibid., 2054. 16. Ibid., 2063. 17. Ibid., 2070. 18. Frazer, “Brief History Havana Agency,” 24-25. 19. Ibid. , 25. 20. Minutes, Directors, VII, 2103-2104. 21. Ibid., 2084.  423  22. Ibid., 2099-2101. 23. Ibid., 2100. 24. Ibid., 2100-2101. 25. Ibid., 2106-2108. 26. Ibid., 2108.  424  Chapter 22 1933  Nineteen thirty-three was a fateful year. Hitler came to power in Germany and that country promptly left the League of Nations. Franklin D. Roosevelt was inaugurated President; the Democrats came into control of both houses of Congress; the 21st Amendment ended prohibition; Roosevelt announced a “Good Neighbor” policy toward Latin America; the London Economic Conference failed to promote international cooperation; and the United States recognized the U. S. S. R.1 Meanwhile a banking panic had preceded Roosevelt’s inauguration and unemployment had reached an estimated 15 million. The new President had a mandate to do something. He did. The First Hundred Days of his administration saw New Deal agencies proliferate-- CCC, FERA, AAA, TVA, HOLC, FDIC, NRA,C WA, etc.2 Early during the “Hundred Days” came the Banking Holiday. Since early in the year, banks were forced to close in one state after another. The final crisis was reached in March as President Franklin D. Roosevelt took office. Proclaiming a four-day bank holiday, he closed all banks, and only those which were sound were allowed to reopen. Some 2, J13 remained closed. Chairman Oscar Newton reported the matter in detail: “The uncertainty prevailing throughout the country in regard to banking conditions, and the continued suspension of banks, resulted in the banking crisis early in March. Difficulties which resulted in a banking holiday in Michigan on February 14 spread rapidly, and similar moratoria were declared in Indiana on February 23, Maryland on February 25, Arkansas on February 27, and Ohio on February 28. As the  425  number of states having these holidays increased, banks in those states withdrew funds from their correspondents in other states. On March 1, holidays or restrictions were imposed in four additional states, two of them Alabama and Tennessee, in the Sixth Federal Reserve District; on March 2, six additional states were added to the list, among them Louisiana and Mississippi; on March 3 seven other states, including Georgia, were added to the list, and on March 4, suspension of banking operations became virtually complete with suspension in 25 other states, including Florida. “By Presidential Proclamation all banking institutions were required to remain ..closed during the week beginning Monday, March 6, through Saturday, March 11, and beginning on March 13, 14, and 15, banks considered to be in sound condition were issued licenses by the Secretary of the Treasury to resume normal banking operations. In a number of unlicensed banks plans for reorganization were made, and others were placed in the hands of Conservators. In the Federal Reserve Bulletin for March and subsequent months were published the President’s Proclamation, regulations issued by the Secretary of the Treasury prescribing the limited banking functions which were permitted under certain conditions during the banking holiday, emergency banking legislation passed by Congress on March 9, the Banking Act of 1933 passed by Congress in June, interpretations of these Acts of Congress, and other important matters relating to the banking emergency. “In the Sixth District the demand by member banks for Federal Reserve currency began to be felt early in February. In the three weeks from February 1 to February 21, Federal Reserve note circulation of this bank increased by $13,370,000; from February 21 to March 1, there was an increase of $14,884,000; and during the first half of March,  426  there was a further increase of $50,484, 000. From February 1 to March 15, the total increase was $78, 738, 000. From that time there was a decline each week to a low level for the year of $115, 765, 000 on July 26. In order to obtain this large supply of currency, member banks increased their discounts by about 34 millions of dollars between February 8 and March 15, this bank increased its holdings of United States securities by nearly 30 million and its holdings of purchased bills by more than 17 millions, and member bank reserve accounts were reduced by less than 10 millions of dollars.”3 In somewhat more informal vein, V. K. Bowman, now 4 retired, in 1933 an assistant cashier, reminiscening in 1961, wrote: “The banking holiday arrived! Phoned around 1 a.m., to come to the bank, picking up the two senior secretaries enroute. Feelings indescribable! Business halted on dead center. Phones constantly ringing. City bankers crowding Governor Black’s office. Plans made to make advances to member banks on any asset having value were made. The personnel of the Examination and Accounting divisions were assigned to assist the Credit division in this work. The bank was filled with bank officers from all over the District. Mail sacks, garbage cans, waste baskets, card board boxes, anything that would hold and carry notes and collateral were stacked up in the vault, they having been inspected, listed and valued for collateral to advances to be made on request to the respective member banks when they were licensed to reopen for business at the end of the Holiday. Fortunately, not many advances were required, and in a few weeks the remaining assets deposited for that purpose had been returned to the owning banks without the loss of a single item.  427  “The period of the holiday was one of real ‘team effort’ on the part of all, from janitor to office boy to Governor. Governor Black showed his recognition of this by inviting all of the officers and department heads of the bank to his home for a dinner. A host extraordinary, his ability as a raconteur made the meal and after dinner talks one of those rarely experienced events in life. “During the after-dinner conversations, his radio suddenly stopped in the middle of a symphony movement. An announcer came on with a special report from Washington to the effect that the President was considering calling Mr. Newton to Washington to head up the Federal Reserve Board. Congratulations showered on Mr. Newton and a toast was given with loud acclaim! The time of denouement arrived- Grady Black5 had cut in on the radio from outside and made the announcement. All a grand leg-pulling; the inflation and deflation of personal hopes and gratification had been so obvious--made your heart ache ...”6 As a matter of fact, Governor Black was called to Washington in May by President Roosevelt and appointed to the governorship of the Federal Reserve Board, succeeding Eugene Meyer. 7 A telegram from Black was read to the Board members of the Atlanta Bank at their regular meeting on May 12: “I hereby tender my resignation as Governor of the Federal Reserve Bank of Atlanta effective upon my confirmation in my new position. This resignation is tendered with great regret and with very deep appreciation of the cordial relations which have existed between the directors of the Federal Reserve Bank and me. “I am especially appreciative of the attitude of the directors toward the resumption of my duties with the Federal Reserve Bank of Atlanta upon the termination of  428  emergency duties here.” 8 The following resolution was then offered and adopted: “WHEREAS, the Governor of this bank has been signally honored by an appointment to the Governorship of the Federal Reserve Board; and “WHEREAS, the Governor has tendered his resignation as an officer of this bank, effective upon the assumption of his new office, “THEREFORE, BE IT RESOLVED By the directors of the Federal Reserve Bank of Atlanta, in meeting regularly assembled, that the resignation so tendered be and the same is hereby accepted. “BE IT FURTHER RESOLVED That we extend to Governor Black our sincere and ..cordial congratulations, and at the same time express the hope that the present trying and emergent conditions will shortly so far abate as to permit of the resumption of his duties as Governor of this bank.” W. S. Johns, Deputy Governor, was appointed Acting Governor and assumed that office May 19 upon the departure of Governor Black. Meanwhile, following the Bank Holiday, there took place, on June 16 and August 23, 1933, a thorough revision of Federal banking laws. The chief changes fall under four heads. First, to restore public confidence in banks, an independent Federal Deposit Insurance Corporation was founded. All member banks of the Federal Reserve System had to join it and most other banks did likewise. By paying annually 1/12 of 1% of its average deposits, a bank guaranteed its depositors against losses up to $5, 000. By 1945, 92% of all banks in the nation belonged, 96% of all depositors were protected, and 46% of all depositors were safeguarded. Bank failures dropped to 57 in 1934 and  429  none in 1945. 10 The F. D. I. C. was a creation of the second Glass Steagall Act and, while there were strong theoretical objections on the basis that well-managed banks were made to pay for the badly managed banks over whose policies they had no control, the Corporation has become an integral part of the banking system. The second great change was the divorcement of commercial and investment banking. Third, restrictions on real estate loans were relaxed, partly to help farmers and partly so that member banks could compete better with state banks. Fourth, the Federal Reserve Board was reorganized, renamed the Board of Governors of the Federal Reserve System, and given greater control over banks. Supervisory functions became direct-control functions. The board was granted authority to increase member banks’ reserves against deposits up to double of what they had been and also to increase the margin requirements on stock exchanges.11 In addition to the resignation of Governor Black and the designation of W. S. Johns as “Acting Governor”, a number of other changes took place in the Bank’s official family during 1933. At the December 1932 Board meeting, Directors G. G. Ware and Leon C. Simon were re-elected Class “A” and Class “B” Directors for the three year term beginning January 1, 1933, while at the January meeting, following, all officers were re-elected for the year.12 In June, George S. Harris, a Class “C” Director, resigned because of his removal, for business reasons, to Charlotte, North Carolina, outside of the Sixth Reserve District. On July 27, James P. Allen, President of the J. P. Allen Company, a leading Atlanta department store, and active in the civic and business life of the city, was appointed by the Federal Reserve Board to succeed Mr. Harris.18  430  Ward Albertson, connected with the Bank since its organization, Assistant Federal Reserve Agent since early 1919, and Secretary of the Board of Directors since 1923, died on May 16, 1933. Lewis M. Clark, formerly Assistant Cashier, was appointed to succeed Mr. Albertson as Assistant Federal Reserve Agent and at the August Board meeting was elected Secretary of the Board.14 John C. Cooper, of Jacksonville, Florida, who had served as a Director of the Jacksonville Branch since its establishment on August 1, 1918, died December 17, 1933. On the 23rd, Bayliss W. Haynes, President of the Wilson and Toomer Fertilizer Company of Jacksonville, was appointed to succeed Mr. Cooper. It will be remembered that the Board of the Atlanta Bank voted in December 1932 to reduce salaries 12%, without the dismissal of any employee. The action was pron3ptly approved by the Federal Reserve Board.15 Before these actions took effect, however, the Atlanta Board met on January 6, 1933, at which time Governor Black presented a memorandum of facts covering the question of employees’ and officers’ salaries in the bank. After full discussion and in consideration of the lowest paid employees, as set forth in Governor Black’s memorandum, the following motion was put by Director Melvin: “(1) That for the year 1933 salaries of all employees receiving $1,000 per year or less be the same as for 1932. “(2) That for the year 1933 salaries of all employees receiving between $1, 000 and $1, 200 per year be reduced five percent below the salary paid such employees respectively in 1932.  431  “(3) That for the year 1933 salaries of all employees receiving over $1,200 per year be reduced ten percent below the salary paid such employees respectively in 1932. “(4) That necessary adjustments be made in salaries on the border line in the groups named in paragraphs 1, 2, and 3, so that reductions will not reduce any salary in paragraph 2 below the salary paid any employee in paragraph 1, or the salary in paragraph 3 below any salary in 2. The above was seconded and adopted, Directors Young and Simon voting in the negative. 16 Director Young explained his negative vote as follows: “Some six or eight years ago the commercial banks of Atlanta furnished to the Federal Reserve Bank a list of all their employees, giving the position and annual salary of each, and it was agreed between the Federal Reserve Bank and the commercial banks of Atlanta that the salaries of employees of each, as living and working conditions were the same, would be adjusted and maintained on practically the same basis. This was done at that time and kept approximately on that basis until about three years ago, at which time the depression came on and the commercial banks set about reducing their expenses, including salaries of employees, and as the Federal Reserve Bank has not reduced such salaries during that period, the average of the Federal Reserve Bank of Atlanta is about 25% above the average paid by the commercial banks in Atlanta at this time. I feel there is no good reason for this difference and that it should be adjusted. Therefore, I have to vote against the small reduction which the resolution carries. “17  432  A reduction in officers’ salaries was covered in a motion put by Director Melvin: “That for the year 1933 all officers’ salaries in their respective official positions be reduced ten percent below the respective salaries paid such officers for the year 1932, and that such salaries be fixed for the year 1933 at the same figure as 1932 less such reduction of ten percent; except that the salary of the Managing Director of the Jacksonville Branch be first placed at the same figure ($6, 500) as the salaries of the Managers at Birmingham and Nashville, and for 1933 be reduced said ten percent, so that with such ten percent reduction it would be $5, 850.” The motion was carried.18 As it turned out the salary reductions were of short duration. On July 14 Chairman Newton read to the Atlanta Board a letter he had received from the Federal Reserve Board, dated June 23, with ‘which was enclosed a resolution adopted by the Board, as follows: “The Federal Reserve Board has given consideration to the general policy involved in general or flat rate reductions of salaries which have been made at various Federal Reserve banks, either in connection with share-the-work plans or independently thereof, and a copy of a resolution adopted by the Federal Reserve Board with regard thereto is enclosed. “In accordance with the last paragraph thereof, it is requested that you bring the resolution to the attention of the board of directors of your bank at its next meeting, and it will be appreciated if you will advise the Board of the action taken by your directors in connection therewith.  433  “WHEREAS, Nation-wide efforts are now being made to encourage industrial and business interests to raise salaries and wages in order to increase the purchasing power of the people and thereby to promote business recovery, a movement in this direction is already under way, and it would be well for the Federal Reserve banks to participate in this movement; “WHEREAS, all of the Federal Reserve banks are operating at a profit, most of them having already realized sufficient net earnings to pay their dividends for the first six months of 1933, and the aggregate net earnings of the twelve banks are far in excess of the aggregate dividend requirements; “WHEREAS, the Banking Act of 1933 amends Section 7 of the Federal Reserve Act so as to relieve the Federal Reserve banks of the necessity of paying any franchise tax to the Government, thus eliminating any financial interest of the Government in their earnings; “WHEREAS, the increased duties devolving upon the Federal Reserve banks under legislation enacted during 1933, together with the improvement in business conditions, are resulting in a substantial increase in the volume of their work, thereby eliminating the necessity of reducing the number of employees of the various Federal Reserve banks, including those where additional employees were taken on in carrying out the share-the-work plans in effect at those banks; “WHEREAS, it appears that the cost of living is advancing; “NOW, THEREFORE, BE IT RESOLVED, That there appears to be no occasion for continuing in effect the emergency reductions in salaries of the officers and employees of the Federal Reserve banks;  434  “BE IT FURTHER RESOLVED, That it is the sense of the Federal Reserve Board that the Board of Directors of each Federal Reserve bank should give prompt consideration to terminating the emergency reductions in the salaries of their officers and employees, effective July 1, 1933, or as soon thereafter as it is practicable to do so; “BE IT FURTHER RESOLVED, That the Board’s Secretary be hereby instructed to transmit a copy of this resolution to the Chairman of the Board of Directors of each Federal Reserve bank and request him to bring it to the attention of the Board of Directors at its next meeting.”19 After considerable discussion, in which it was pointed out that the cost of living was indeed on the rise, it was voted to postpone a decision until the August Board meeting so as to give the Salary Committee more time for study. 20 The study apparently supported the conclusions of the Federal Reserve Board, for, on August 1.1, it was voted to restore the salaries of officers and employees to schedules in effect before the emergency reductions, effective August 1, 1933.21 In early May 1933, a letter was received from the Federal Reserve Board in Washington setting forth the undesirability of Federal Reserve Agents, their assistants and staff members incurring indebtedness directly or indirectly to member banks and asking for a report on any individuals so indebted.22 At the same time the Board called attention to a 1924 circular letter, the gist of which was: “…the Federal Reserve Board believes it will be as obvious to the directors of the Federal Reserve banks as it is to itself that the good conduct and repute of the Federal  435  Reserve System require that the officers of the reserve banks shall give their entire time and attention to the affairs of the banks and not to be identified with any outside business interests. “23 After careful consideration of the above matters, the Atlanta Board expressed the opinion that the relationship of debtor and creditor of officers and heads of departments of Federal Reserve banks and their member banks is undesirable, and went on record as favoring that principal. “However, ‘ said the Board, “in order that the policy resulting from such a declaration of principle may not fall unduly hard on officers and heads of departments having existing loans, if any, it was agreed that reasonable time should be given the makers to liquidate such loans and in determining what constitutes a ‘reasonable time’ it was agreed that all the facts and circumstances should be considered, but that officers and heads of departments who may have existing loans should liquidate them as soon as possible without entailing undue hardship upon the makers.”24 During the entire history of the Federal Reserve System, little opportunity has existed for its officers and key personnel to wheel, deal, or deviate from the path of rectitude and honesty. By the summer of 1933, particularly in the cotton growing South, conditions were showing a slight improvement. In a report on June 9, Acting Governor Johns told the Board that total loans to member banks amounted to $18, 247, 000 and on June 30 to only $7, 894, 000--a decrease for the month amounting to $10, 353, 000. He went on to say:  436  “On account of the continued increase in the price of cotton, very few of our agricultural member banks are asking for additional accommodation. Many of them are further decreasing their indebtedness to the Reserve Bank, and several have paid their indebtedness in full during the month.”25 On October 13, the Acting Governor reported again in similar vein: “In former years at this season, the Reserve Bank has carried a large amount of commodity discounts for its member banks, but we are being offered at this time practically no cotton or commodity secured paper. On account of the Government’s expected cotton financing program, there appears to be a disposition on the part of farmers to hold their cotton, and on account of the improved positions of our agricultural member banks they are able to carry cotton or other commodity loans in their own portfolio and their appears to be no necessity for them to offer this paper to the Reserve Bank.”26 A month prior to the bank holiday of early March, a crisis arose among the banks in New Orleans which was resolved by the recently organized Reconstruction Finance Corporation plus the personal presence of Atlanta Bank Governor Eugene R. Black. Indeed, as Governor Black left New Orleans on the afternoon of February 9, R. S. Hecht, President of the Hibernia Bank & Trust Company, telegraphed Chairman Oscar Newton of the Atlanta Bank as follows: “Mr. Black left this afternoon after having spent five strenuous days with us. I will leave it to him to advise you of the harrowing but interesting details of this Black Week, but I want to add something else which I know he won’t tell you, that is, that he was a tower of strength to the situation as a whole and I don’t know how we could have ever  437  got the results we did without his splendid cooperation and his patience and tact, which held all the various interests together at all times. I will not speak of the gratitude which I and my directors feel for the help he rendered our own institution but I want you and his other colleagues to know that the whole city of New Orleans owes him a real debt of gratitude for his untiring and effective work.27 The following day at a meeting of the Atlanta Board, Director Leon Simon of New Orleans made the statement that when Governor Black arrived in New Orleans Sunday morning the bankers were demoralized. In this situation he did a wonderful piece of work in that he materially aided the banks and the Reconstruction Finance Corporation in the determination of the large sums necessary to avert this crisis. Director Simon further stated that, in his opinion, Governor Black’s presence in New Orleans was the main factor in accomplishing those things that were necessary to the restoration of confidence and the return to a normal state.” 28 The entire history of the Havana Agency was marked by periodic crisis and its 1933 operations were no exception to the pattern. Wrote H. C. Frazer:29 “The impact of the banking crisis which developed in the United States in late February and early March 1933 was strongly reflected in banking in Cuba. With the announcement of banking moratoriums in various states within the United States, the Cuban public became extremely apprehensive and Havana banks began reinforcing their cash reserves. On Friday and Saturday, March 3 and 4, the Agency paid to the Havana banks around $20 million, completely depleting its reserves. Withdrawals from Havana banks were rather heavy on these two days.  438  “To cope with the situation which was becoming critical, the Cuban President, General Gerado Machado, after consultation with representatives of the Havana Clearinghouse banks, the Manager of the Havana Agency, the Secretary of the Treasury, and other high government officials, issued a decree on Sunday, March 5, declaring Monday, Tuesday, and Wednesday, March 6, 7, and 8 as bank holidays. The decree cited the banking holidays declared last week in many of the states in the United States, including New York, and set forth the close relationship existing between American and Cuban banks. “Banking circles felt certain the hysteria induced locally by closing of banks in the United States would have worn off before Thursday, but prepared to add to their reserves of cash in the event that the pattern of Saturday’s withdrawals should continue when the banks reopened for business. Shipments aggregating $20 million were received by the Havana Agency early in the week of March 6, but because of the freeze on Federal Reserve funds imposed by the Presidential order in the United States, no payments could be made to the Havana banks.  , on which  withdrawals had been heaviest, received shipments aggregating $10 million by air from its head office in New York.  also received shipments of  sizeable amounts from New York. “On Wednesday, March 8, after further conference with Havana bankers and government officials, President Machado extended the bank holidays for an indefinite period to run until the closing order in the United States was lifted. During the period the banks were closed, each of the eight Clearinghouse banks insisted that before reopening for business it would need considerable additional cash reserves. The  439  Agency held around $20 million but the banks felt that this would not be sufficient to meet their requirements. None of the banks would divulge to the others its cash position, which made it extremely difficult for the Agency Manager and Atlanta officials to analyze the true situation. “Finally, each of the Clearinghouse banks agreed to divulge to the Agency Manager in strictest confidence the amount of cash reserves held by it. When a tabulation was completed, it showed that in the aggregate the eight Havana Clearinghouse banks held around $50 million and the Agency held $20 million. This figure, in the opinion of the officials of the Atlanta Bank and Agency Manager, was more than adequate to meet whatever situation developed. “Governor Black instructed the Agency Manager to assure the banks that should an unusual situation arise after reopening, the Federal Reserve Bank of Atlanta would promptly make additional funds available through the Agency. Upon being informed of the aggregate reserves available, the Havana bankers were agreeable surprised and promptly petitioned President Machado to withdraw the closing order. This was done and when the banks reopened later in March, contrary to expectations, very moderate withdrawals were experienced. In about a week or ten days conditions had returned to normal.” During this time the Cuban political situation had become extremely tense. The Machado regime was publicly charged with tyranny and dictatorship and numerous demonstrations and riots had occurred throughout the island. Open defiance of the administration in all instances had been successfully suppressed by the Army which had remained loyal to President Machado up to this time. A strong anti-Machado force  440  had developed, however, among citizens and some segments of the Army, and as this revolutionary movement gained in momentum, riots and disorders became more frequent. Finally, early on the morning of September 4, 1933, Sergeant Fulgencio Batista, with other non-commissioned officers of the Army, staged a bloodless coup, taking over the Army and arresting most of the old officers who were Machado supporters. Machado and many of his associates fled the country. Immediately following, complete disorder prevailed in Havana and throughout the Island. The Presidential Palace and many government buildings and homes of Cabinet members were ransacked. The Army, under Sergeant Batista (after the coup to become “Colonel”), took over the government and, on September 5, declared martial law, which brought some semblance of order. During the week or so it required to restore partial order, all banks and business houses were closed. The guards at the Agency quarters maintained their regular tours of duty and received full cooperation and protection from police and members of the armed forces. On the morning of September 5,when Manager H. C. Frazer arrived at the Agency, he encountered a machine gun manned by a squad of soldiers, mounted on the sidewalk in front of the building. The officer in charge of the group greeted Frazer and said, “You have nothing to fear. We are here on orders of Colonel Batista to protect the Federal Reserve Bank and its personnel.” This protection was maintained for a week and within a month or so conditions returned to normal.30 Even so, Acting Governor W. S. Johns took occasion to report briefly on the Havana Agency situation at the December Board meeting.  441  “While conditions in Havana have improved, our Agency Manager is still retaining his extra guard force, as an extra precaution, and this extra force will be retained until conditions will fully warrant a reduction in the number of guards…”31 Since its opening in 1919, the Savannah Agency had never been characterized by high volume. Periodically, the question arose as to the feasibility of its continuance. It arose in May 1933 and a committee, composed of Director Kettig and Chairman Newton or Deputy Governor Johns was appointed to investigate the need for keeping the Agency in operation.32 The Savannah Clearing House, composed of the four Reserve member banks, urged continuance and assured the Committee that all reasonable safety measures as to protection of funds were being taken. After due consideration the committee made its report on July 14, which concluded as follows: “…It is the opinion of your committee that this Agency is performing a valuable service to the four member banks in Savannah, and that, in view of its importance as a port and the need for large sums of money from time to time beyond the normal amount of money that a bank would carry, the continuation of the Agency is justified. “The Savannah banks make large shipments of currency to banks in their territory and some of these banks are members of the Federal Reserve System. To this extent the Federal Reserve Bank is relieved of transportation cost on money shipped by Savannah banks to our member banks. “In view of the long and satisfactory operation of the Agency as it relates to our Savannah member banks, and after considering the service to our Savannah member  442  banks that this Agency renders, it is the opinion of your committee that it should be continued, and we so recommend.” The Agency was continued for another 12 years. In American economic history, 1933 was indeed a watershed year. The winter was grim. Fifteen million men and women had no jobs and millions more were working for reduced salaries and wages. At least three million were on relief. Farm prices had fallen so low that a wagonload of corn would not pay for the shoeing of a pair of horses. A truckload of hogs would barely buy a new set of tires. The dollar value of American exports was the lowest in 30 years. General Motors and United States Steel shares were selling at about 8 percent of the prices they had commanded in 1929. At a lavish dinner given by the Spanish ambassador, Secretary of the Treasury Mills was called from the table every few minutes for telephone reports of the latest bank closings.34 Yet, before spring the picture began to brighten and the character of a rew era began to take form. Indeed, Chairman Oscar Newton was able to devote the first paragraph of the Bank’s Annual Report for the year to relatively good news. He wrote: “Although business and industrial activity, which had been declining for more than three years, reached new low levels during the first quarter of 1933. The year in retrospect may be considered one in which considerable progress was made toward improved business, industrial, and banking conditions. The seasonally adjusted index of retail trade in the Sixth District reached an all-time low in March but by December department store sales had increased to the highest level in two years. Wholesale trade reached the lowest level on record in February, but increased each month through  443  October, and declined less than usual in November and December. Building permits issued at twenty cities in the District were less in February than in any other month for which figures are available, and building and construction contract awards reached their lowest point in April but for the year exceeded the 1932 total by 51. 5 percent.”35 Total resources of the Federal Reserve Bank of Atlanta at the close of 1933 amounted to $233, 384, 000, greater by $55, 716, 000 than the total at the end of 1932, and also larger than at the close of 1931 or 1930. 36 Earnings, however, were off. The total came to $1,686, 497 for the year, smaller by 15. 8 percent than in 1932, but 16.4 percent larger than in 1931. With the exception of 1931, however, earnings in 1933 were smaller than for any other year since 1917. Current net earnings for 1933 amounted to $365,230, a decline of 53.5 percent compared with the total for 1932, and except for 1931, the smallest for any year since 1916.37 An episode which took place in mid-summer of 1933 illustrated the fact that hard times breed desperation and desperation in turn often finds expression in spectacular crime. So it happened that on the hot morning of July 6, John K. Ottley, President of the First National Bank of Atlanta, was boldly kidnapped for ransom, the first crime of its type ever consummated in the annals of the city. As Mr. Ottley drove from the driveway of his Peachtree Road estate, he was accosted by a young man who indicated a desire for a ride into town. Having previously seen the young man in the vicinity of his home, Ottley stopped to pick him up. As he did a pistol was thrust into his side with a command to get into the back seat and keep still. The banker complied. Another young man, heretofore concealed, took the wheel. The  444  car was driven to a remote spot some 30 miles north of Atlanta. A ransom note, asking for $40, 000, was crudely written and later delivered to the Negro caretaker of the Ottley estate. It was turned over to the police. The man who first held up Mr. Ottley disappeared. The younger man was arrested at Suwanee, Georgia, where he and the victim had walked following the disappearance of the first man. This man, an ex-convict named Delensky, was captured in Texas in August and given a long prison sentence. Banker Ottley was shaken but uninjured. All he lost was the ten dollar bill he had on his person and his glasses. 38  445  NOTES Chapter 22  1.  Life History, Vol. 11, p. 168.  2.  Ibid.  3.  Annual Report, 1933, p. 7-8.  4.  March, 1966.  5.  A son of the Governor.  6.  Typescript on file at the Bank.  7.  Annual Report, 1933, p. 16.  8.  Minutes, Directors, VIII, 2162.  9.  Ibid.  10.  Collier’s Encyclopedia, 20 vols., (New York, 1957), 3, p. 80.  11.  Ibid.  12.  Minutes, Directors, VII, 2119; VIII, 2121-2122.  13.  Ibid., VIII, 2184, 2193, 2203; Annual Report, 1933, p. 17.  14.  Annual Report, 1933, p. 17; Minutes, Directors, VIII, 2176, 2203.  15.  Annual Report, 1933, p. 17.  16.  Minutes, Directors, VIII, 2132-2133.  17.  Ibid., 2133.  18.  Ibid.  19.  Ibid. , 2187-2188.  20.  Ibid., 2188.  21.  Ibid., 2208.  446  22.  Ibid. , 2168-2169.  23.  Ibid. , 2169.  24.  Ibid., 2170.  25.  Ibid., 2190.  26.  Ibid., 2222.  27.  Ibid., 2135.  28.  Ibid.  29.  “Brief History, Havana Agency”, 25-28.  30.  Ibid., 28-29.  31.  Minutes, Directors, VIII, 2239.  32.  Ibid., 2172.  33.  Ibid. , 2194-2 195.  34.  Conrad Knickerbocker, “1933 in America: The Low Point,” Atlanta Constitution, March 21, 1966.  35.  Annual Report, 1933, p. 7.  36.  Ibid., 12.  37.  Ibid., 13.  38.  Garrett, Atlanta and Environs, II, 911-912.  447  Chapter 23 1934  New Deal legislation continued to proliferate during the second year of the Roosevelt administration and, in 1934, involved the Export-Import Bank, Cotton Control Act, SEC. FHA, Corporate Bankruptcy Act, FCC, and the Silver Purchase Act. The latter provided for the purchase of all new domestically-mined silver at a rate nearly twice the world price. Silver was no longer bought for the formal purpose of “increasing and stabilizing domestic prices. “ Catering to this sectional interest meant the accumulation of great silver stocks to add to the problem of the gold stocks. None of the critics or defenders of the silver program could have foreseen that, within a few years, $400, 000, 000 of the accumulated metal would be used in the machinery that produced the atomic bomb. 1 Gold also received attention. Congress passed the Gold Reserve Act of January 30, 1934. Wrote Dennis W. Brogan:2 “The Act authorized the President to fix the gold content of the dollar at between 50 and 60 percent of its former weight. Of the profit which the Treasury would make through the revaluation of its gold stocks, two billion dollars was to be used as a stabilization fund to keep the dollar in reasonable balance with foreign currencies. All the gold owned by the Federal Reserve Banks was to be handed over to the Treasury and paid for with dollar certificates. Gold coin was removed from the monetary system. Two days after this sweeping measure became law, the President revalued the dollar at a rate that kept just inside the maximum legal devaluation of 60 percent, and gold was now bought at a rate ($35 an ounce) that reflected almost exactly the devaluation.  448  Nearly $3, 000, 000, 000 profit resulted from these measures. Although the formal purpose of the Stabilization fund was to control the external value of the dollar, it put great internal inflationary powers in the hands of its administrators; they had to get dollars to sell abroad and to get the dollars they had to deposit gold with the Federal Reserve System, adding to the banking reserves in an inflationary sense. “One result of this policy was a drain of European gold into the United States. A permanent and increasingly favorable balance of trade existed on the American side, and especially after the armament race had begun in Europe, an increasing demand for goods that dollars or gold could buy in America, with no corresponding increase in American demand for European goods. Each new crisis that racked Europe caused a further movement of gold to America, until the great gold hoard buried at Fort Knox in Kentucky became a symbol of fantastic times. For as the influx continued, the Treasury cut off the new gold from the general currency system by purchasing it direct and allotting it to an ‘inactive account’; it was sterilized. This hedging against inflation seemed less prudent in the recession of 1937-38, and by the spring of 1938, sterilization was abandoned.” Passage of the Gold Reserve Act was taken cognizance 0± by the Directors of the Atlanta Federal Reserve Bank at their regular meeting on February 9. Reported Acting Governor W. S. Johns: “At 3:30 p.m. on January 30, the President approved the ‘Gold Reserve Act of 1934’ and immediately the Secretary of the Treasury demanded a transfer of title and interest to all gold coin or bullion held by the Federal Reserve Bank of Atlanta. The Bank had no bullion but gold coin held by the bank amounted to $7, 685, 000 which was  449  transferred to the Secretary of the Treasury as to title and interest, this gold coin being held in custody for the account of the Treasury Department, under custody prescribed by the Secretary of the Treasury. This transfer of title and interest was made after conferring with Mr. Oscar Newton, Federal Reserve Agent and Chairman of the Board, and we also had a telegram from the Federal Reserve Board, dated January 30th, which quoted an opinion given by Newton D. Baker, System’s Counsel, and Walter Wyatt, Federal Reserve Board’s Counsel, that when demand was made for this gold coin, after the Gold Reserve Act of 1934 had been signed by the President, such demand should be complied with by the Federal Reserve Banks without any reservation or protest, but before making the demanded transfer, an opinion was obtained from the banks General Counsel, Mr. Robert S. Parker, who concurred in the conclusions reached by Messrs. Baker and Wyatt that we should comply with the law, without reservation or protest.”3 The Board ratified and confirmed the above action.4 Locally, in Atlanta and Fulton County, 1934 was an improvement over 1933. As the year moved along, money became more plentiful and agricultural conditions improved. True, the City began the year with a deficit of $1,047,399.68. Mayor Key asked city leaders to meet the situation courageously. The Coca-Cola Company advanced the city $800, 000 with which to help meet the emergency. But slowly and surely the times were getting better.5 In commenting upon the Atlanta unemployment situation, the City Builder for March, 1934, said:  450  “At the close of the year 1933, records showed, as a result of a survey, that 5, 339 firms employing 50, 641 people had added 5, 316 new employees, making a total of old and new, 56, 957. With these figures as a basis, our estimates are that between seven and eight thousand additional people were put on payrolls during the last six months of the year. “The maximum number receiving unemployment relief during the peak of 1933 was 22, 000 people. The number now receiving direct relief is about 10,000. In February of 1934, there were in Fulton County 15,000 people working on CWA jobs.” At its January, 1934 meeting, the Board re-elected all officers of the Atlanta Bank. During the year, however, certain changes among Board members and branch managers took place. Ryburn G. Clay, President of the Fulton National Bank of Atlanta, was elected a Director by member banks in Group I for a three year term beginning January 1. He succeeded H. Lane Young whose term expired with the end of 1933. Mr. Young was elected as the member of the Federal Advisory Council to represent the Sixth Federal Reserve District for 1934, succeeding John K. Ottley who retired from the Council at the close of 1933. 6 William Webb Crawford, a Director of the Birmingham Branch, noted for his ability and good humor, died on January 15. He was replaced, effective April 16, by Frank M. Moody, President of the First National Bank of Tuscaloosa, Alabama. Following his Service as Governor of the Federal Reserve Board, in Washington, from May 19, 1933, Governor E. R. Black returned on August 15, 1934, to the governorship of the Federal Reserve Bank of Atlanta at an annual salary of $35, 000.-  451  At the same time he assumed, at the request of President Roosevelt, the duties and responsibilities of Liaison Officer between the Administration and the banks of the nation, presenting the recovery program to the banks and other financial institutions. After serving in this dual capacity for more than four months, during which time he was in constant demand as a speaker at bankers’ conventions throughout the country, Governor Black died on the morning of December 19.8 On September 17, 1934, George S. Vardeman, Jr., was appointed Acting Manager of the Jacksonville Branch on account of Manager Hugh Foster’s lengthy illness. On October 31, Mr. Foster died, and Mr. Vardeman was elected Managing Director of the Branch. T. A. Lanford, of the parent bank, was elected Cashier, succeeding Mr. Vardeman.9 Hugh Foster was a man of engaging personality. Endowed with distinctive natural gifts, he was also highly educated, having graduated from Southwestern Presbyterian University at Clarksville, Tennessee, and Princeton University. In 1905, he organized the First National Bank of Union Springs, Alabama, and served as Cashier of that institution until January 1922, when he moved to Montgomery to accept the vice presidency of the Exchange National Bank of that city. He served in that capacity until 1926, when the Exchange was merged with the First National Bank of Montgomery. He served as vice-president of the merged bank until January 1, 1927, when he was elected Deputy Governor of the Federal Reserve Bank of Atlanta. In January 1931, he became Managing Director of the Jacksonville Branch and so served until illness forced his retirement. 10  452  As the year drew to a close, two Directors of the parent bank and a Director of the New Orleans Branch tendered their resignations. E. C. Melvin had served since January 1, 1926, three terms, as a Class A Director. J. B. Hill, a Class B Director since January 21, 1931, resigned because his election to the presidency of the Louisville & Nashville Railroad required his removal from Nashville to Louisville, outside of the Sixth District. Dr. P. H. Saunders, a Director of the New Orleans Branch since its establishment in 1915 and its Chairman since 1922, resigned because of the press of other business interest.11 In November, successors were elected to Messrs. Melvin and Hill, whose terms ran to year’s end. Mr. Melvin was succeeded by W. D. Cook, Executive Vice President of the First National Bank, Meredian, Mississippi. Fitzgerald Hall, President of the Nashville, Chattanooga & St. Louis Railway, succeeded Mr. Hill and was also appointed a Director and Chairman of the Board of Directors of the Nashville Branch. 12 At its regular meeting, on February 9, 1934, the Directors of the parent bank adopted the following resolution: “RESOLVED That the Federal Reserve Bank of Atlanta adopt, subject to the approval of the Federal Reserve Board and effective March 1, 1934, the Retirement and Pension System submitted and recommended by the Pension system Committee of the Governor’s Conference and set out in a report of that Committee made to the Federal Reserve Board under date of November 22, 1933.” It was also voted to discontinue the Group Insurance on the lives of the employees upon the adoption of the above retirement and pension plan. Membership in  453  the retirement system was a requirement for all new regular employees and the passing of a physical examination became mandatory. 13 The Acting Governor was able to make, in January 1934, a sanguine report as to the aftermath of the banking holiday of March, 1933. He wrote: “On March 18, just subsequent to the banking emergency, 62 member banks did not open --52 of these banks were indebted to the Reserve Bank. The total indebtedness of these 52 banks to the Reserve Bank was $10,889,231, of which amount $9, 165, 890 was indebtedness other than Government or commodity secured. These banks have now been reduced to 9 banks with an indebtedness of approximately $1,321,000, and in my opinion the remaining conservator or restricted banks will not cause any loss to the Reserve Bank as we appear to have ample collateral to liquidate our indebtedness. Most of the conservator banks have under way plans for reorganization or payment of their indebtedness to the Reserve Bank through the organization of new banks.”14 By mid-April only two member banks were operating under a conservatorship, owing the Federal Reserve an aggregate amount of $68,565.15 The Reconstruction Finance Corporation was playing a large role in this favorable situation. During the exigencies of the banking holiday and attendant emergencies the Bank Relations Department had practically ceased to function. Indeed, a discussion was had at the May, 1934 Board meeting relative to the inactivity of the Department during the past several months. The Chairman of the Bank Relations Committee explained that the two field representatives heretofore assigned to the work were being  454  used in the Examination Department but would resume their normal duties soon. Indeed, the Chairman stated he would call a meeting of the Committee soon and review the situation.16 By early June, the Department had begun to function again and by year’s end was going full blast, with a total of 352 calls on banks having been made by officers, field representatives and employees.17 On July 6, 1934 Chairman Newton informed the members of the Board that he and Acting Governor Johns recently attended a joint conference of Chairmen and Governors of the Federal Reserve Banks in Washington at which conference careful consideration was given to Section 13(b) of the Federal Reserve Act, which relates to discounts, purchases, loans and commitments by Federal Reserve Banks to provide working capital for established industrial and commercial businesses. The Chairman explained that the conferees had given earnest consideration to the law and the regulations to be issued by the Federal Reserve Board relating to loans to be made under this section. 18 After a general discussion of the law, the Chairman opened the meeting to nominations by the Directors of five individuals whose duties would be to serve as members of the Industrial Advisory Committee for the Sixth Federal Reserve District. The following were appointed: William A. Parker, President, Beck & Gregg Hardware Co., Atlanta Ga. Morgan McNeel, President, McNeel Marb.e Works, Marietta, Ga. John Sanford, President, Armour Fertilizer Works, Atlanta, Ga. A. R. Forsyth, Executive Vice President, Gulf States Steel Co., Birmingham, Ala.  455  Ernest T. George, President, Seaboard Refining Co., New Orleans, La. 19 The gist of the new law as to industrial loans was set forth in a letter from the Federal Reserve Board: “That in exceptional circumstances when it appears to the satisfaction of your bank that an established industrial or commercial business located in your district is unable to obtain requisite financial assistance on a reasonable basis from the usual sources, your bank may make loans to, or purchase obligations of such industrial or commercial business, or may make commitments with respect thereto, on a reasonable and sound basis, for the purpose of providing it with working capital. “That your bank shall have power to discount for, or purchase from, any financing institution operating in your district obligations entered into for the purpose of obtaining working capital for any established industrial or commercial business; to make loans or advances to any such financing institution or the security of such obligations, or to make commitments with regard to such loans or advances on their security, including commitments made in advance of the actual undertaking of such obligations. This provision requires participation by the financing institution. “Under these two provisions, loans may be made direct to established industrial or commercial businesses or indirectly through financing institutions, such loans in either case to be for working capital.”20 Rates for these loans were covered in a telegram from the Federal Reserve Board: “On direct loans or advances to established industrial or commercial businesses, 6% per annum; and on advances to member banks, nonmember banks and other  456  financing institutions, 5% per annum; Board also approves for your bank, effective immediately, following flat rates on commitments for industrial advances computed on percentages of commitment, and varying with duration of commitment: 1/2% up to ninety days; 1% ninety-one to one hundred eighty days; 1-1/2% one hundred eighty-one to two hundred seventy days,; and 2%, two hundred seventy-one to three hundred sixtyfive days.” 21 On September 14, Governor Black was able to report: “Our bank is making real progress in the matter of industrial loans. Our Industrial Committee is working faithfully and our officers are giving a large part of their time to this function...”22 At year’s end, under the heading “Industrial Advances,” Chairman Newton reported: “During the last five months of 1934 there were 75 Industrial Advances made by this bank, totalling $872, 443 in amount, under authority contained in the Act of Congress of June 19, 1934, which authorized such advances in exceptional circumstances to established industrial or commercial businesses unable to obtain necessary financial assistance from the usual sources. In addtion to these advances, commitments to make further advances were made during this period to the extent of $761,500.” 23  457  Because of the extra load of work thrown upon General Counsel Robert S. Parker as a result of industrial loan activity, Governor Black recommended in September that Mr. Parker’s salary be increased by $500 per month, effective July 1, 1934. The recommendation was approved by the Board. 24 At its meeting on August 10, 1934, the Board welcomed the return of Governor Black. The Governor acknowledged the greetings of the Chairman and the Directors and discussed briefly general conditions as they affected the country as a whole. He referred particularly to the sound condition of the banks of the country and the part they may contribute to the Recovery Program.25 A month later Mr. Black reported that he had visited Birmingham, Nashville, and New Orleans and found the branches in each city “in good condition, well-officered, and functioning properly.” He also reported that he had- talked with numerous bankers and industrialists in all three cities and that business had improved and that credit was readily available. 26 The depression had. lost its deepest sting. The Board meeting of November 2 was distinguished by the presence, in addition to the Directors of the Atlanta, of the Branch Directors and Managing Directors of the branches. Practically everyone present commented upon the economic situation. It was the concensus of opinion “that agricultural conditions in the Sixth District are very good. Farmers are liquidating their current bills and paying on indebtedness contracted in previous years. The citrus crop in Florida will be large and representatives from that State expressed the opinion that if a fair price is obtained many old debts will be paid. “ The speakers were unanimous in their assertion that industrial conditions have materially improved, except in the coal and iron sections.27  458  Ever since 1923, when it was placed in operation, the Havana Agency had been a recurring problem. It produced a profit of $14, 578 in 1927. Expenses exceeded gross by $10, 884 in 1928 and volume of operations had declined ever since. In June 1934, the Atlanta Bank requested permission of the Federal Reserve Board to close the Agency. Political and economic conditions in Cuba were unstable. The Cuban government had issued a decree prohibiting the exportation of money, from which decree the Agency was able to obtain exemption. By this time the so-called Platt Amendment of 1901 had been abrogated by treaty. The State Department, however, speaking through Assistant Secretary Sumner Welles, favored maintenance of the Agency as a stabilizing factor in the political and economic affairs of the Island. It was, therefore, continued although cash holdings were reduced in September to $5,000,000. 29 Total resources of the Federal Reserve Bank of Atlanta at the end of 1934 stood at $255,823,000, larger by $22.4 million that at the end of 1933, and larger than at the close of any year since 1927. The increase in total resources on December 31, 1934, compared with a year earlier was almost identical in amount with an increase in holdings of United States Government securities, an increase in reserves being practically offset by decreases in other items in the comparative balance sheet. Total reserves held by the bank at the end of 1934 amounted to $139, 177, 000, greater by $9,085,000 than a year earlier, and the largest total since the close of 1930.30 Total earnings during 1934 amounted to $1, 818, 161, larger by 7.8% than during 1933, and also larger than in 1931, but smaller than in any other years since 1917. Net earnings for 1934 amounted to $512, 067. 31  459  In accordance with a provision in the Banking Act of 1933, which required Federal Reserve Banks to subscribe to stock in the Federal Deposit Insurance Corporation to the extent of fifty percent of their surplus on January 1, 1933, this bank early in 1934 purchased stock in that corporation to the extent of $5, 272, 031. 55, and its surplus was accordingly reduced by that amount.32 The sudden death of Governor Eugene R. Black on December 19, 1934, has been briefly noted. On January 10, 1935, at a special Board meeting, Chairman Newton stated that the meeting was the first since the death of Governor Black and that he felt he could not begin the session without first referring briefly to the loss sustained by the bank in the passing of Governor Black. The Chairman spoke of Mr. Black’s faithfulness, loyalty to duty, and friendliness. He emphasized the fact that Governor Black had a keen interest in the Federal Reserve System and gave of his time and advice freely in all matters pertaining to the strengthening of the System. The Chairman stated that the Directors of the Federal Reserve Bank of Atlanta had lost a faithful friend. The Directors then stood for several moments with bowed heads in memory of their departed associate.33 While not a banker’s banker, in the usual sense of that term, Eugene Black provided the Federal Reserve Bank of Atlanta with courageous leadership. The impress of his attractive personality was long felt by the bank and by the community he had served so well.  460  NOTES Chapter 23 1.  Dennis W. Brogan, The Era of Franklin D. Roosevelt, (New Haven, 1950) p. 68.  2.Ibid., p. 65-66. 3.Minutes, Directors, VIII, 2272. 4.Ibid., 2273-2274. 5.Garrett, Atlanta and Environs, II, 916. 6.Minutes, Directors, VIII, 2248, 2251. 7.Ibid., 2268; Annual Report, 1934, p. 19. 8.Annual Report, 1934, pp 18-19; Minutes, Directors, VIII, 2351. 9.Minutes, Directors, 2345-2346, 2365; Annual Report, 1934, p. 20. 10. Minutes, Directors, VIII, 2365. 11.  Ibid., 2380-2381.  12.  Ibid., 2385; Annual Report, 1934, p. 19.  13. 14. 15. 16.  Minutes, Directors, VIII, 2274, 2285, 2296. Ibid., 2258. Ibid., 2293. Ibid., 2303.  17.  Ibid., 2312, 2379-2380.  18.  Ibid., 2330.  19.  Ibid.  20.  Ibid., 2323.  21.  Ibid., 2343.  22.  Ibid. 2348.  23.  Annual Report, 1934, p. 17. 461  24.  Minutes, Directors, VIII, 2346.  25.  Ibid. , 2336.  26.  Ibid., 2348.  27.  Ibid., 2365.  28.  Adopted following the Spanish-American War in an effort to stal~Lize conditions in Cuba.  29.  Minutes, Directors, VIII, 2316, 2318, 2319, 2328, 2336, 2351, 2357, 2375.  30.  Annual Report, 1934, p. 15.  31.  Ibid. , 15—16.  32.  Ibid., 16.  33.  Minutes, Directors, IX, 2387.  462  Chapter 24 1935  As the decade of the 1930’s reached midpoint, events of great future import were taking place. Hitler, coming rapidly to the fore in Germany, proclaimed anti-Semitic laws; Congress defeated a proposal that the United States join the World Court; the Supreme Court upheld the 1933 gold legislation but invalidated the National Industrial Recovery Act. Huey Long was assassinated in Louisiana. New Deal legislation brought forth the NLRA, Social Security Act, Wealth Tax Act, Banking Act, and the Public Utility Holding Company Act. Italy invaded Ethiopia, ignoring League of Nations sanctions, and industrial unionists within the AFL formed the Committee for Industrial Organization, better known simply as the CIO.1 Business generally improved. Indeed, nearly all of the available series of statistics gave evidence of widespread improvement in the Sixth Federal Reserve District in comparison with other recent years. The volume of trade at both wholesale and retail was the largest since 1930. Residential building was at its highest level since the same year, and electric power production reached the highest level on record. Deposits and investment holdings of member banks in the District continued to increase, but loans to customers declined.2 Locally, State Auditor Tom Wisdom announced, on January 5, that Georgia finished 1934 with a balance of $6, 697, 860, greatest in its financial history. A week later salaries of Fulton County employees were hiked $140,000 annually. On April 3, deposits in Georgia banks showed an increase of $21, 000, 000 over the preceding  463  year, while a survey in October revealed Atlanta’s per capita debt to be the lowest in the country. Nineteen thirty-five was not a flush year but things were getting better.3 At year’s beginning, W. H. Kettig began a new three-year term as a Class C director of the Atlanta bank; a new one-year term as Deputy Chairman, and the same as a director of the Birmingham Branch.4 A special Board meeting of the Bank was held on January 10, 1935, during the course of which Chairman Kettig announced he would entertain nominations for Governor, a position vacant since the death of Eugene R. Black three weeks before. After a discussion it was agreed that in view of Director McCrary’s continued service as a member of the Board since the organization of the Bank, he be given the honor of nominating a candidate for Governor. He nominated Oscar Newton and spoke of the service rendered by Mr. Newton since his election to the Board in 1919 and his subsequent service as Chairman of the Board and Federal Reserve Agent. The nomination was seconded by Director Cook, and Mr. Newton was unanimously elected by a rising vote.5 L. M. Clark, than an officer of the bank, reminiscing many years later tells an amusing story about Mr. Newton. Soon after he became Governor, Mr. Newton was preparing to go to Sea Island, Georgia, to a bankers’ meeting. He was trying to be very careful in getting together the proper clothes for the occasion and went to especial pains to get a blue coat and white trousers, of which outfit he was very proud. But when he arrived at Sea Island, much to his consternation and embarrassment, he found most of the visiting bankers in white coats and blue trousers.  464  During 1934, one of the veteran officers of the Bank, Deputy Governor W. S. Johns, fell by the wayside. In his recollections, V. K. Bowman wrote: “Some months after the bank holiday, L. M. Clark and V. K. Bowman were given a very disagreeable task to perform. During one of the regular meetings of the Governors of the twelve Federal Reserve Banks in the office of the Federal Reserve Board, Washington, Mr. Johns had given way to his weakness for drink and returned to Atlanta in that condition on the same train with one of the Federal Reserve Board members. The Federal Reserve Agent instructed us to go to the home of Mr. Johns,6 inform him he had been removed from his position of Deputy Governor, but would be given a clerical job in the Discount Department. A few months later he was forced to resign.” Actually, Mr. Johns was allowed to resign as Deputy Governor, which he did on January 11, 1935; He pulled himself together and after serving some months in the clerical position mentioned above, left the Bank and for several years was employed as an examiner for the Reconstruction Finance Corporation. 7 To fill the vacancy created by the resignation of Deputy Governor W.S. Johns, the services of a distinguished Atlanta banker were obtained. Hiram Warner Martin, President of the Trust Company of Georgia from 1931 to 1933, and of noted Georgia lineage, was born at Greenville, Meriwether County, July 30, 1882, and attended Emory College at Oxford. He began his banking career in 1901 as a messenger for the Lowry National Bank in Atlanta. Twenty years later he was its president. From August 15, 1933, to October 31, 1934, he served as Assistant to the Governor of the Federal Reserve Board in Washington, D. C. Mr. Martin was by nature  465  gentle, courteous, generous, considerate, fair, honorable, and just in all of his dealings with his fellow man and always had a smile and a word of encouragement for all. 8 As the year 1935 progressed, other official changes in personnel occurred. On January 11, T. A. Lanford, formerly Chief Clerk of the Discount Department in Atlanta, was elected Cashier of the Jacksonville Branch. At the same time, E. T. George resigned as a member of the Industrial Advisory Committee for the Sixth District. He was succeeded on January 22 by Andrew M. Lockett, a contracting engineer, of New Orleans. William A. Parker resigned from the same committee on September 20 because of increased duties in his position as President of the Beck & Gregg Hardware Company of Atlanta.9 The long and ably served terms of George G. Ware and Leon C. Simon as Class A and Class B Directors, respectively, came to an end on December 31, 1935. Mr. Ware had served 10 years and Mr. Simon 16. Deputy Chairman Kettig, at the December 1935 meeting, compared the Board of Directors to a club composed of selected members and stated that in such an organization it is but natural that the closest of fellowship and brotherly love exists. He said that it seemed only yesterday since these two men were elected as members of the Board and he compared the passing of time to a “short walk around the block.” He also said that at most we are here for only a short time and that on an occasion like this the members were made sad due tote discontinuance of the monthly association and fellowship with old friends that had through the years endeared them to their associates. The Deputy Chairman referred to Director Simon as an aggressive director but one who always gave plausible reasons for any position he might take and voted his convictions after careful deliberation. He  466  referred to Director Ware as a man with a quiet, composed disposition, and compared his nature to the orange blossoms that are so plentiful in his native state. He said that Director Ware was not the type to be the first to speak on every subject that came up for discussion, but that when he voiced an opinion it was evident that he had given careful consideration to the issue.10 Mr. Ware was succeeded by George J. White, Executive Vice President of the First National Bank of Mount Dora, Florida, and Mr. Simon by Ernest T. George, President and Chairman of the Seaboard Refining Company, Ltd., New Orleans, both for three-year terms beginning January 1, 1936. Another long official service record came to a close on December 31, 1935, when Frank W. Foote, a Director of the New Orleans Branch since January 1920, retired. Mr. Foote, in fact, was an original Director of the Atlanta Bank, serving from November 16, 1914 to December 31, 1919. Being a deep student of finance and political economy, Mr. Foote’s advice and counsel were invaluable during the formative period of the Federal Reserve System.11 Under date of January 5, 1935, the attitude of the Federal Reserve Board toward bank salaries and employment generally was set forth in a letter to Oscar Newton by Governor M. S. Eccles: “The Board has been considering the situation with respect to the salaries of officers and employees of Federal Reserve Banks. It has noted that during the period from 1928 to 1933 the total number of officers and employees of the twelve Federal Reserve Banks increased from 9,989 to 11,781; that the total of all salaries paid increased from $17, 200, 000 to $20, 400, 000 and that there was an increase in the  467  average salary paid. These figures, of course, include all salaries for which reimbursement is made to the Federal Reserve Banks. The figures for 1934 had not been prepared at the time of this compilation, but it seems likely that for the system as a whole the increase was accentuated. During this period of five years, living expenses have undergone a material reduction throughout the United States and, while there have been for short periods some relatively small general reductions in salaries at the Federal Reserve banks, such general reductions were terminated more than a year ago, and where additional people were taken on to provide increased employment there was no corresponding subsequent curtailment of working forces. “The Federal Reserve banks in their personnel policies have recognized their favorable position with respect to their earnings and have shown a considerate attitude toward their officers and employees in respect not only to salaries but also to other phases of their employment relations, while other banking institutions and industrial enterprises have been compelled to curtail farces and reduce salaries to a great extent. Various provisions for the welfare of the employees of the banks have been made at the expense of the banks and within the past year there has been introduced a retirement system to which the banks are contributing a large sum annually. “With these considerations in mind, the Board has reviewed its policies in passing upon salaries of officers and employees of the Federal Reserve banks and has decided that there should be no increase at this time in salaries of officers and employees receiving more than $5, 000 per annum, or in any salaries not covered by the approved salary classification plan, unless there is involved a change from one position to another of greater duties and responsibility for which the salary proposed is  468  reasonable in relation to the other salaries paid by the bank. The Board has also decided not to approve increases in maximum salaries for positions covered by the existing classification plans, except where there is involved a change in duties and responsibilities, calling for a revision of the specifications, for which higher compensation should be allowed. It is felt that the subject of the salary classification plans should be discussed with the governors of the banks at their next meeting in Washington. “Under these policies it would not be a sufficient ground for approving an increase of salary merely that the volume of work has increased or that the officer or employee has rendered good service or that he might go elsewhere if his salary were not increased. “In this connection, the Board believes that when a vacancy occurs anywhere in the organization of a Federal Reserve Bank, an effort should be made to carry on the work through the other members of the existing forces and therefore that new people should not be employed unless absolutely essential and when persons capable of doing the work are not already available elsewhere in the organization. “The Board feels further that any readjustments that may be found necessary should not result in increasing the aggregate payroll. In fact, it would be the expectation of the Board under existing conditions that notwithstanding any increases in salaries in individual cases there should be some decrease in the total payroll as the result of deaths, resignations, and retirements. “It is the view of the Board that boards of directors of the Federal Reserve banks and the Federal Reserve Board share in the responsibility of seeing that every  469  reasonable effort is made by the banks not only to build up the efficiency of their organizations but also to be watchful against increases in expenses which can be avoided without impairment of the quality and adequacy of the services which the banks are called upon to render, as would be their duty if they were operating privately owned commercial banking institutions, and therefore that all changes in salaries as well as other expenses should be made the subject of special scrutiny in the light of this responsibility. “It will be appreciated if you will call this letter to the attention of your Board promptly as it expresses the general position which the Board will take in acting upon pending or proposed salary increases.” 12 Needless to say, few raises in pay were granted during 1935. Indeed, a few official salaries were reduced, including that of Deputy Governor H. Warner Martin’s from $15, 000 to $13, 500. A proposal to fix the salary of General Counsel Robert S. Parker at $15, 000 per annum was put in abeyance even though Mr. Parker had withdrawn from the firm of Colquitt, Parker, Troutman, & Arkwright in order to devote full time to the legal affairs of the Bank.13 The matter of separation pay came up for lengthy discussion at the July Board meeting and eventuated in a motion by Director Cook “that the Federal Reserve Bank of Atlanta adopt the policy of continuing to pay an employee salary at the current rate for a period up to a maximum of six months from the date of the involuntary termination of his employment by the bank, in the case of employees who have had more than five years of service, and that for employees with service of five years or less payments be made for periods of less than six months.” The resolution was to the further effect that the  470  Executive Committee be empowered to act in the case of individual employees and be clothed with full discretion in particular cases, to provide the number of months for which salaries are to be paid, not, however, in excess of the limitations stated in the resolution. 14 Despite the current policy of austerity as to salaries, the Board, in January 1935 voted to pay to the widow of the late Governor E. R. Black the sum of $25, 000, as partial compensation to her for financial sacrifice made by her husband while serving as Governor of the Federal Reserve Board in Washington. Several months later, in October, a portrait of Mr. Black, commissioned by the Federal Reserve Bank Club, was officially presented to the Bank. 15 In order to clarify some of the far-reaching effects of the Banking Act of 1935 and its relationship to the Federal Reserve System, the following is quoted from a discussion published on the occasion of the System’s 50th anniversary in 1963. 16 “Under the terms of the Federal Reserve Act of 1913 it is worthy of note that the Reserve bank charters were to run for 20 years. But such was the change of political climate that, unlike the First and Second Banks of the United States, and with very little debate, the charters of the 12 Reserve banks were extended without limit before the 20year period expired. “Mr. Brotter: ‘Well, Mr. Morrill, you have brought us now to the period of the 1930’s17 and the great changes that were made by the Congress. Governor Szymczak, that was exactly the time when you came on the Board, and I wonder if you would discuss some of the big changes that were made during the thirties, particularly those that you witnessed.’ “Mrs Szymczak: ‘When I came to the Board in 1933, some of the legislation was 471  already passed by Congress, because an emergency developed that required quick action by the legislative authority to enable the Federal Reserve System to function, with the intent of having an influence on business and industry, through the credit situation in the country. ‘So, therefore, in the thirties--I believe it was in May 1933--Congress passed emergency legislation enabling the Federal Reserve Board, under an emergency, to increase or decrease reserve requirements with the approval of the President of the United States and with a minimum vote of five of the then seven Board members. This, of course, was not used because it became evident that, should the Board declare an emergency in order to increase or decrease reserve requirements, it would add to rather than take away from the emergency in the economy and in the money market. It was not a good instrument of monetary policy. ‘However, the Banking Act of 1935 supplemented the legislation on reserve requirements by giving the Federal Reserve Board power to increase or decrease reserve requirements up to twice the statutory minimum. At that time the statutory minimum was 13% for demand deposits of central reserve city banks, 10% for reserve city banks, and 7% for country banks. On time and savings deposits the Board was given the power to double the statutory minimum, which was 3%. ‘Because of a huge increase in bank reserves, with inflationary threats, the Board used this instrument of monetary policy even though, at that time, it had no experience in the use of an instrument that was so blunt. It affected all member banks  no matter what their position in loans and investments and in their reserves. The Board.  472  used it twice on the upside and once on the downside during this early period. ‘Then, of course, there developed in 1933 a new organization in the Federal Reserve that was based upon an agreement among the presidents, then called the governors, of the 12 Federal Reserve banks and which developed later, in the Banking Act of 1935, into an Open Market Committee. However, it began through the original authority in the Federal Reserve Act. ‘In the Banking Act of 1935, the Open Market Committee was to consist of the seven appointed Board members. Under the Banking Act of 1935, the two ex-officio members (the Secretary of the Treasury and the Comptroller of the Currency) were no longer members of the Board and instead of five appointive members of the Board, the legislation authorized the seven appointive members plus five presidents of the 12 Federal Reserve banks. ‘This was further changed a little later so that, instead of a rotation of all the presidents of the Federal Reserve Banks, the president of the New York Federal Reserve Bank became a continuing member of the Open Market Committee, inasmuch as the New York bank was located in the money and the capital markets and inasmuch as the New York bank was and continued to be the agent of the Open Market Committee. ‘A real System developed then, in my opinion, because the presidents, all of them at one time or another, worked together with the Federal Reserve Board in the monetary field. No longer was there a separation of the Federal Reserve banks and the Board of Governors, but rather there was a system for formulation and operation, not only in open market policy which was very important, but also at these meetings of the  473  Open Market Committee there could be and there were discussed the economy, the credit situation, and the use of other instruments of monetary policy, such as reserve requirements and discount rates which, according to the Banking Act of 1935, had to be reviewed every 14 days by the directors of the 12 Federal Reserve banks and submitted to the Board in Washington for approval or disapproval, for review and determination. Cooperation, therefore, on reserve requirements, open market operations, and discount rates made the whole system participate in effectuating monetary policy in the interest of the economy. ‘Therefore, the whole situation created by this System cooperation enabled the Board members to understand what was going on in various parts of the country, not only by their own direct contacts and knowledge, but also from the presidents of the Federal Reserve banks as they attended the meetings. It also enabled the Federal Reserve banks to cooperate with the Board in Washington by holding annual meetings of new directors of the 12 Federal Reserve banks. Every new director of a Federal Reserve bank now comes to Washington for about a day or two. With this constant contact there is no separation of Washington from the rest of the country, but there is a unified System approach to the whole country- -and its economy. ‘Also, the Federal Advisory Council -- consisting of 12 bankers appointed by the directors of the 12 Federal Reserve banks--brings to the Board in Washington not only the view of these bankers, but also the knowledge they obtain in their particular parts of the country.  ‘And, the chairmen and vice-chairmen of the Federal Reserve banks, who are  474  appointed by the Board of Governors, meet with the Board at least once a year.“ “Mr. Brotter: ‘Do you believe those contacts are important?’ “Mr. Szymczak: ‘I think, from my experience, they are the most important contribution that the System has made over the years to consolidate its manpower and know-how in the money and credit field to serve the public interest. There is not a separation between the private banking interests and the public interest, as personified by the Government in Washington. These two become one- -the public interest. That is a very vital thing, in my opinion, because economic and money and credit policy must have a national approach to the whole economy, not merely parts of it. “Mr. Morrill: ‘In saying they become one, however, you don’t mean to imply they always agree?’ “Mr. Szymczak: ‘No, there is disagreement, not only among the presidents who attend the meetings of the Open Market Committee, but there is also disagreement among the Board members who are on the Open Market Committee--and that is as it should be. ‘It is also important to note here that in the Banking Act o~ 1935 there is a provision for an annual report by the Board of Governors to Congress on the monetary policy questions as they arise and this report shows how the individual members of the Open Market Committee voted and why. This also informs the public. ‘There are other matters that are important, in my opinion. For instance, the original open market operations started by each Federal Reserve bank buying or selling to meet its own requirements; to earn its living. One of the original purposes of those open market operations was not only to meet the situation, but also to get revenue by  475  which to operate.’ “Mr. Morrill: ‘It might be commented in that connection that the freedom of any bank to participate or not participate continued on down until the Banking Act of 1935.’ “Mr. Szymczak: ‘Yes. In this connection there were several developments. The first was before 1922. Then in 1922 until 1923 there was a voluntary agreement among the Federal Reserve banks to get together under the direction of the chairman, who was the president (governor) of the New York Federal Reserve Bank. And there were in this voluntary committee four banks- -New York, Philadelphia, Boston and Chicago. Later on, Cleveland was added to the first four, making five.’ “Mr. Burgess: ‘In 1923 the important thing that happened was the Federal Reserve Board passed a resolution which recognized this committee and its relation to the Board and specified what it considered should be the objectives of the work of the Committee. It gave the Committee for the first time a kind of a System status. That was the beginning of the steps that you outlined to make this thing into one organ for the whole System.’ “Mr. Szymczak: ‘That is right. You see, 12 heads of the Federal Reserve banks were organized under regulations issued by the Federal Reserve Board and that Board had the power of approval or disapproval. If a bank did not want to join in the buying or selling of securities in the open market, it had to notify the chairman of the Open Market Committee and likewise the chairman of the Federal Reserve Board.’ “Evolution of the Open Market Committee. “Mr. Morrill: ‘It is fair to comment at this point that probably the first time the System realized that open market operations had an effect upon the reserves of  476  member banks was shortly following the original organization of this group of presidents. For example, some Reserve banks discovered that when they bought Government securities their discounts were retired, and vice versa.’ “Mr. Szymczak: ‘Yes. That was one of the reasons for the development which was initiated by the New York Federal Reserve Bank. It was evident that member banks borrowed at the Federal Reserve banks when they had to meet the situation in which they had no reserves. Therefore, when the system operated to provide them reserves by buying Government securities, the member banks reduced their borrowing at the Federal Reserve banks. In the original, of course, even the bankers’ acceptances were not bought or sold for the purpose of affecting the reserves of the banks. They were for the purpose of developing a bankers’ acceptance market in this country such as was developed abroad, and we were trying to follow in this country what other central banks were doing in their countries.’ “Mr. Burgess: ‘The interesting thing to me about all this is that there was a process of evolution. A process of finding out by experience how these things operated all through the early and middle 1920’s. We were finding out by practical experience how all these things would work and we did not need a Congress to come and tell us what we should do. In the Banking Acts of 1933 and 1935, Congress was simply putting into law what the System had learned from experience.’ “Mr. Szymczak: ‘And we learned more and more that interest rates, discount rates, generally throughout the country, are national. We learned that we could not change a discount in one Federal Reserve district and not do it in another.’ “Mr. Brotter: ‘Does that mean that the original concept of a group of 12 regional  477  banks with some degree of autonomy was gradually being lost in a national concept?’ “Mr. Szymczak: ‘No, I would not say that. I think it was the national concept of monetary policy that made the System one. I am trying to bring out the fact that the System became a true unity, not two parts, one consisting of the 12 Federal Reserve banks and a Board in Washington, and one representing the interests of the banks who were considered for a period of time as the owners of the Federal Reserve System because they owned stock in their Federal Reserve banks. They soon learned they weren’t the owners of the Federal Reserve System, that it was and is a public institution- -part of our Government.’ “Mr. McKee: ‘I want to make an observation in that connection. I think that if you were looking at the time when the System was set up, one could imagine that they had in view creating a nationwide debt payment system in this country in place of one that had been very limited. How many people had checking accounts? The only money that was saved was saved in savings accounts. But, as the country grew, the economy required the check collection as it has become today through the Federal Reserve. What would you do without it? ‘Now I would like to give some of those people some of the credit for foresight because it was through the building of the 12 Federal Reserve banks which took the place of sub-treasuries that there was produced the ability to handle the large volume of not only the public’s exchange of credit and debt, but the Government’s as well.’ “Mr. Burgess: ‘That meant that checks, when they were used in payment of debts or other contracts, could be collected promptly. A check on Dallas is just as good as a check on New York now because it is collected through the Federal Reserve System so  478  quickly.’ “Mr. Brotter: ‘Would you tell us, Governor McKee, something about changes that were enacted in the thirties, such as control over the stock market margins, consumer credit, and so forth?’ “Mr. McKee: ‘From the experience gained from the great depression, Congress, after extensive hearings, passed the Acts of 1933, 1934, and 1935 that created the Federal Deposit Insurance Corporation, the Securities and Exchange Commission, and gave statutory recognition to the Federal Reserve System Open Market Committee. These acts did much to restore confidence and create sound policies for the future regarding credit and economic stabilization. ‘While the authority granted under the Acts of 1933 and 1935 presented the problem of many new regulations to be issued, the Federal Reserve System issued such regulations after exhaustive hearings were held with interested parties.’ “ The general subject of relations between the Federal Reserve Board and the Federal Reserve Banks and member banks is set forth in the answer by the Atlanta Bank to a letter from Governor M. S. Eccles, dated February 6, 1935 wherein certain questions were asked. The following represented the concensus of opinion among the officers and - directors as to how the questions should be answered: “1. General credit situation (a) Are commercial banks doing everything in their power to improve the situation? “We believe that banks in the Sixth Federal Reserve District are doing everything  479  which they might reasonably be expected to do in order to improve the situation. In our opinion the banks are generally desirous of extending credit and making sound loans and are vigorously exerting themselves to do so. “The difficulty does not appear to be an unwillingness on the part of the banks to extend credit. On the contrary, there appears to be a scarcity of demand among borrowers who are in position to use available funds advantageously and at the same time offer reasonable assurance of repayment. A number of banks have representatives in the field actively soliciting loans and are also extensively advertising for loans. “2. Interest rates. (a) On time and savings deposits of member banks. “We are of the opinion that under conditions such as now obtain the permitted maximum rate of interest should remain at 2-1/2% per annum. A lower prescribed maximum rate might place member banks at a disadvantage because of competition of postal savings bonds, and it is believed that the banks of the country, rural as well as city, .are unable at the present time to pay more than 2-1 / 2%. “(b) On loans of member banks and on industrial advances and commitments by Federal Reserve Banks. “No answer is made to this question at this time. Governor Newton will shortly attend a conference in Dallas, Texas, between the officers and directors of the Dallas Bank and Governors of several of the other Reserve Banks. Our answer to this question may be molded by the discussion which will be had at that conference. “3. Matters affecting admission of nonmember banks to Federal Reserve System. “(a) Earnings of nonmember banks from exchange collection charge.  480  “This is a question of considerable importance in the Sixth Federal Reserve District. A number of nonmember banks, in making inquiries concerning membership in the Federal Reserve System, have stated that they feel that they could not forego the exacting of charges for the payment and remission of checks drawn on themselves. This applies peculiarly to banks located in the smaller communities. While member banks may, of course, make charges within the limits prescribed by law for collecting items placed with them on deposit (and city banks customarily make such charges), member banks located in smaller communities would be unable to receive any considerable amount of revenue from this source, even if a long established custom of not making collection charges did not militate against their doing so. “It has been stated by the officers of some of these institutions that the revenue from exchange (and by this we mean charges for the payment and remission of checks as distinguished from collection charges) will average in a bank with a capital as small as $15,000 from $1,500 to $1,800 per annum. If deprived of this revenue such banks of necessity would be compelled to liquidate. Revenue from this source, according to reliable information obtained from the nonmember banks, in most instances is sufficient to cover the salary of the executive officer in charge of the bank. “We believe that a large percentage of nonmember banks in the district would apply for membership if they felt that they might retain the equivalent of a substantial portion of the exchange charges which are now being made. “3 (b) Present conditions of membership “Laying to one side for the moment questions of capital requirements of nonmember banks, we give it as our opinion that the conditions of membership  481  presently being prescribed by the Federal Reserve Board should not be materially changed; this for the reason that it is believed that modification of the conditions would have a tendency to lower the standards of membership and give the member banks opportunity to deviate from sound banking principles. Member banks, almost without exception, regard their membership very highly and would not appreciate the lowering of standards in order that membership in the System might be easier of attainment. “Assuming that the Federal Reserve Board is to be invested with the right to waive, in whole or in part, the capital requirements of banks applying for membership, we believe that the Board might properly admit to membership any sound bank having the capital required by State law and be rather liberal in fixing the time within which the bank would be compelled to bring its capital requirements up to those set out in Section 9. “(c) Advisability of extension of membership to banks outside the States and the District of Columbia. “We know of no reason why the privilege of membership should not be extended to national banks located in Alaska and in the insular possessions of the United States. “4. Need for continuance of assistance of Reconstruction Finance Corporation in connection with rehabilitation of capital structure of banks. “It is felt that for several years at least there will be a real need for ... this assistance. Our conclusions are based upon the belief that a number of banks which sold preferred stock will in all likelihood be compelled later on to strengthen their capital structures, and it does not appear possible for such banks under present conditions to  482  secure additional capital from private investors. “5. Adequacy of reimbursement of Federal Reserve banks by Treasury and other Governmental agencies for various services rendered and for space used in Federal Reserve bank buildings. “Reference to the statistical data prepared by the Federal Reserve Banks incorporated in a report of the fiscal agency and depositary expenses to the Federal Reserve Banks, compiled by the Division of Bank Operations for the six months period ending June 30, 1934, reveals that Federal Reserve Banks expended $932, 000 in the performance of services, no part of which was reimbursed by the United States Treasury Department. It is our opinion that a considerable part of these expenditures should be reimbursed and we therefore suggest that a careful study be made of all these expenditures with a view to securing ... adequate reimbursement ... in connection with services rendered exclusively in a fiscal agency capacity. “6. Regulations fixing margin requirements for loans by banks upon equity securities registered on national security exchanges. “(a) Circumstances under which regulation should be issued. “The regulation should be issued at such times as the Board may deem advisable. We believe, however, that its effective date should be fixed at least 15 and perhaps 30 days after the date of its release, in order that the banks may have ample time in which to familiarize themselves with its provisions. We think also that as to loans held by banks at the time of the effective date of the regulation, reasonable time should be given for the bringing of margin requirements within the prescribed limits; this fcr the reason that any unusual volume of sales occurring within a comparatively short time  483  and occasioned by the regulation might demoralize the securities market. “(b) Whether regulation should permit borrower to obtain from bank more than he could obtain from broker under Regulation T. “In our opinion there is no logical basis for a discrimination by the Federal Reserve Board in favor of a bank and against a broker in fixing margin requirements for such advances. “7. Economic and statistical divisions of Federal Reserve Banks. “(a) Usefulness to officers and directors. “The directors and officers of this bank believe that the information furnished by the economic and statistical division of the bank is of value to them and they recommend continuance of the service. “(b) Value of Federal Reserve Bank Monthly Review. “The directors and officers also feel that the issuance of the bank’s Monthly Review is of general value and that this is demonstrated by the constant demand for copies. Approximately 3, 400 of our Reviews, including those sent to member banks in the Sixth District, are mailed each month. These Reviews go into 45 of the States and 15 foreign countries. We are constantly adding new names to our list and noting changes of addresses. An effort is made to assemble in one document all available data in regard to business conditions and business trends in the district. Such data is accompanied by citations of sources of information and consists of statements of existing facts as distinguished from prophecies as to business trends or developments. A number of individuals have stated that our Review gives more actual information and reliable statistics than they are able to obtain elsewhere. For this reason, an effort is  484  made to place in the Review information concerning as many different lines of business as is reasonably feasible. “8. Establishment of career system for personnel of Federal Reserve Banks. “It is the consensus of opinion that there should be established the basis of a career system for the personnel of the Federal Reserve Banks. It has been tentatively suggested that each Federal Reserve Bank might furnish the Federal Reserve Board with the names of junior officers and employees who have demonstrated exceptional ability and whose services might be employed to better advantage by another Federal Reserve Bank because of lack of opportunity for advancement with the bank of present connections. “9. Criticisms of existing regulations or rulings or procedure of the Federal Reserve Board, with specific recommendations as to changes which would correct any unsatisfactory features of relations between the Board or its staff and Federal Reserve Banks or member banks. “The examiners stationed at this bank often advise the officer in charge of bank examination that the management of our member banks complain of the number, variety, and extent of reports that they are required to prepare. The banks themselves would welcome a revision of report forms and the reduction of requests for reports to a minimum. They would also like consolidations of reports wherever possible. “The officers and directors of this bank do not recommend the discontinuance of any reports now required nor the elimination of information sought to be elicited thereby. We believe that the Federal Reserve Board and the office of the Comptroller of the Currency have from time to time been advised of the viewpoint of the member banks on  485  this subject and are endeavoring to comply with the wishes of the banks to the full extent consistent with the gathering of necessary or important statistical or other data. We do say, however, that any progress in the direction of the lightening of what member banks regard as a burden would be welcomed and appreciated. “In connection with our dealings with member banks, and particularly in the handling of the work of the Federal Reserve Agent, promptness on the part of the Board in giving rulings and replying to letters asking for advice would be of great assistance. This is not said by way of criticism, since we realize the unusual pressure which has been put upon the Board in recent years. We might add also that we now receive rulings and replies to inquiries much more promptly than was formerly the case. In this bank we have endeavored to reduce to a minimum requests for rulings and advice. “We believe that it would be beneficial to the officers of the reserve banks were the examiners of the Federal Reserve Board at the time of making examinations of reserve banks to offer constructive and helpful suggestions. This would bring about frank discussions which would not only be beneficial, in our opinion, but would also eliminate discussions by correspondence. Through such constructive suggestions the officers of the reserve banks might also learn more clearly the viewpoint of the Board on matters, some of which are of relatively small importance and could be disposed of during the period of examination. “In your letter you make reference to the possibility that to some of the member banks the actions of the Board or its staff may seem ‘bureaucratic or impractical or unduly rigid’. It is undoubtedly true that a number of the member banks may have regarded some of the rulings, decisions, and requirements of the Board as being  486  somewhat harsh and burdensome. We think that we should say, however, that in many instances this point of view was the result of a failure to understand that the Board’s actions were required by the Banking Act of 1933, and were not the result of some arbitrary action taken by the Board itself. In all such cases we have endeavored to make plain to the banks that the particular ruling of the Board or some specified requirement was made or imposed because of provisions of law and not as a regulation originating in the Board. “Some complaint was occasioned by reason of reports made to United States Attorneys of possible violations of Section 22(g) of the Federal Reserve Act, in cases where it seemed apparent that no actual violation was intended or was at most technical. This source of possible friction has now been eliminated. “We believe that no harm would result from the standpoint of the public interest or otherwise were the Board to modify some what its requirements in the granting of permits under the Clayton Act to serve more than one bank as director. In cases where an officer or director has manifestly abused his office or has been negligent in the discharge of his duties, we believe that the grant of a permit would be incompatible with the public interest, and that the sole question of inquiry should not center around the question of curtailment of credit facilities or the lessening of competition. However, technical questions such as the possibility of the lessening of competition and restriction of credit in cases of banks which are not within the prohibitions of Section 8 might be regarded as of relatively minor importance. “As regards the relations between the Board and the Federal Reserve Banks, we desire at all time the utmost of harmony and cooperation. It might be well, however, for the Board to take under advisement the question of whether the expenditure of 487  relatively small amounts, in cases where there is no specific authorization by law and the object to be attained is not improper or unlawful, might perhaps be left to the various Federal Reserve banks and not call for special authority given by the Board. “The examiners also sometimes criticse unimportant matters involving questions of local management rather than of general policy. “We are not endeavoring to particularize and are only suggesting that in so far as minor matters are concerned--matters which involve no question of general policy and are of purely local concern- -more of autonomy might be left to the Federal Reserve Banks and greater latitude be given to its officers and directors for the exericse of their discretion. “As stated, the above are the answers approved by the officers and directors of this bank to the questions submitted in your letter of February 6, 1935.”18 The Banking Act of 1935 provided for important organizational changes within the Federal Reserve System. As set forth in a press release by the Board of Governors of the System, they were: “The Board of Governors of the Federal Reserve System19 today, in connection with important changes in the organization of the Federal Reserve System which go into effect on February 1 and on March 1, 1936, under the terms of the Banking Act of 1935, issued the following statement: “On February 1, 1936, the Board of Governors of the Federal Reserve System will be succeeded by a new Board, as provided by the Banking Act of 1935. As of March 1, 1936, by the terms of the Act, each Federal Reserve bank will elect, in lieu of its governor, a president, who will thereupon become and be formally recognized in the law  488  as the chief executive officer of the bank when approved by the new board. “In order that the new Board which takes office on February 1, 1936, may be free to make its own designation of chairmen and Federal Reserve agents at the same time that it is required to pass upon the selection of the newly-elected presidents of the Federal Reserve banks, the present Board of Governors has decided to have the designation of all chairmen and Federal Reserve agents expire on March 1, 1936, and has also decided for the same reasons not to fill existing vacancies.20 The new Board will thus be enabled to be represented at the different Federal Reserve banks by Chairmen and Federal Reserve agents of its own selection, chosen in accordance with its views as to how the chairmanships may best be made to fit into the changed organization of the Federal Reserve System ... “In acting upon other Class C directorships expiring December 31, as well as upon the appointments of such directors as it is authorized to appoint at branches of the Federal Reserve banks, the Board of Governors has also been guided by the views it expressed by letter of January 9, 1935, to directors of Federal Reserve banks and of their branches, as follows: “In view of the special character of the functions of these institutions and the public interest in them, the Board believes that the composition of the boards and the tenure of service of their members are matters of great importance. The Board recognizes that experience gained from participation in the direction of the management of the Federal Reserve banks and their branches has its distinct value, but believes that this can be overstressed and that there are special advantages that would come to these institutions from bringing to bear on their management from time to time new  489  points of view and differing backgrounds of experience. In consequence, the Board believes that neither great length of service nor too frequent changes are desirable and has endeavored to find a solution which on the whole and in the long run will be conducive to the best development of the policies of the banks and at the same time protect them against criticisms based either upon the fact or the possibility of crystallization of control of their managements by particular individuals or groups through long continuance in power. “Therefore, the Board has reached the conclusion that six years of service represents the maximum period during which a director should remain continuously in office. It will be guided by this view in future and will not continue in office as directors men appointed by it who have served six or more consecutive years (except in the cases of chairmen of the Federal Reserve banks). “It is also the view of the Board that the welfare of the Federal Reserve banks will be served best by directors whose business and financial interests are primarily within and representative of the bank or branch territory for which they are selected rather than of interest controlled or owned outside of such territory. “With respect to directors of branches, the Board also stated: “It is the intention of the Board to follow uniformly in all districts the policy of selecting as its appointees individuals who are not officers of banks or primarily engaged in banking, although they may be stockholders or directors of banks. “The Board expects to apply these principles in the selection of directors appointed by it in the future ... “Vacancies which will occur as of January 1, 1936, as a result of the application,  490  of the Board’s policy, are not being filled at this time, for the reasons stated, but will be left for the new Board to fill in accordance with such policies as it may wish to adopt.” As noted, the Banking Act of 1935, enacted in August, amended Section 4 of the Federal Reserve Act, to become effective March 1, 1936, by providing specifically for the appointment by the Board of Directors of each Federal Reserve Bank of “a president, vice-presidents and such other officers and employees as are not otherwise provided for.” Prior to the effective date of this amendment there was no designation in the Act of the official titles of officers of Federal Reserve Banks with the exception of the Chairman of the Board and Federal Reserve Agent, and the Assistant Federal Reserve Agents. In accordance with this provision of law, Oscar Newton, who had served as Governor., of the bank since January 1935, and as Chairman and Federal Reserve Agent for ten years prior to that time, was, at a meeting of the Board of Directors in February, elected President of the bank for a five-year term, effective March 1.22 Robert S. Parker, who had served as General Counsel for a number of years, was elected First Vice President for a term of five years, effective March 1, continuing to serve also as General Counsel. H. F. Conniff and W. S. McLarin, Jr., formerly Deputy Governor and Assistant Deputy Governor, were elected Vice President and Assistant Vice President, respectively, for the remainder of 1936. H. Lane Young was re-elected to represent the Sixth Federal Reserve District on the Federal Advisory Council during the year 1936. 23 In the fall of 1935 it was decided to accelerate the activities of the Bank Relation Committee by having all officers participate.  491  As the committee met at the New Orleans Branch on November 8, Chairman W. H. Kettig stated that following an informal discussion by the directors at the October meeting he had requested Board Secretary L. M. Clark to prepare a memorandum for consideration of the Committee in line with a suggestion that Bank Relations work be conducted by officers of the parent bank and branches. Consideration was given to a suggested itinerary which provided that the officers visit each member bank and, as far as practicable, each nonmember bank in the district. The itinerary was arranged so that each officer is to visit an allotted number of banks within a period of one to two weeks. When this officer has completed his itinerary and forwarded to the Manager of the Bank Relations Department a separate report of his visit to each member and non-member bank assigned to him he will exchange itineraries with other officers of the parent bank or branches. The same procedure to be followed until all officers have had an opportunity to visit the banks in the Sixth District. It was the opinion of the Committee that the adoption of the suggested plan will be an improvement over that now in effect, and will bring about a Closer relationship between the officers of the parent bank and branches and of member banks. At the same time the plan would provide the officers an opportunity to become personally acquainted with officers of prospective member banks. 24 From 1934 on, the activities of the Havana Agency showed a Steady decline. In an effort to distribute the burden a memorandum of agreement was signed by all 12 Federal Reserve banks in May 1935. Under the agreement, effective June 1, the Agency began operations as a joint enterprise of all of the Federal Reserve banks, though the Atlanta Bank continued its actual operating functions. At the same time, it was resolved “that under normal and usual conditions the stock of fit or usable currency 492  kept at said Agency shall be as nearly $5, 000, 000 as may be reasonably practicable.”25 It will be remembered that under the provisions of Section 13b of the Federal Reserve Act, approved June 19, 1934, Federal Reserve banks began in August of that year to make loans direct to established industrial and commercial businesses for the purposes of providing working capital, and to make commitments to banks, trust companies and other financial institutions with respect to such loans. Reporting upon results of this operation at the end of 1935, Deputy Board Chairman W. H. Kettig wrote: “Efforts have been made continuously to acquaint banks and the business public with the provisions of the legislation relating to these industrial loans, and with the requirements to be met and the methods of obtaining them. The Industrial Advisory Committee for the Sixth Federal Reserve District is composed of the following: John E. Sanford, Chairman President and Chairman, Armour Fertilizer Works Atlanta, Georgia A. R. Forsyth, Vice-Chairman Vice President and Treasurer, Gulf States Steel Co. Birmingham, Alabama George Winship A. M. Lockett President, Fulton Supply Co. President, A. M. Lockett & Co., Ltd. Atlanta, Georgia New Orleans, Louisiana I. C. Mimer Executive Vice-President, Gate City Cotton Mills Atlanta, Georgia “During the last five months of 1934, industrial advances were made in 75 instances, aggregating $872,443, and in addition, commitments amounting to $761, 500 were made to banks or other financial institutions in Connection with such loans made 493  by those institutions. During 1935 industrial advances amounting to $635, 097 were made in 81 instances, an increase of 8. 0 per cent in number, but a decrease of 27. 2 per cent in total amount, compared with such advances made in 1934. In 16 other instances commitments were entered into to the extent of $346, 950 in Connection with such advances made by banks to business firms.”26 Total resources of the Federal Reserve Bank of Atlanta at the close of the year 1935 amounted to $312, 248, 000, the largest total for any year since its organization. This represents an increase of more than 56 millions, or 22. 1 per cent, over the total a year earlier; was nearly 79 millions greater than two years earlier, and 134. 6 millions greater than at the close of 1932.27 Total current earnings during 1935 amounted to $1,672,606, the smallest since 1931, and except for that year, since .1917. Earnings on discounted bills were the smallest on record, and on purchased bills the smallest since 1915. Earnings on United States Government securities, which accounted for 91 per cent of total earnings, were slightly less than in 1934, but larger than for any other year. Current net earnings in 1935 amounted to $235, 421. 28  NOTES Chapter 24 1.  Life History of the United States, Vol. 11, p. 168. 494  2.  Annual Report, 1935, p. 11.  3.  Garrett, Atlanta and Environs, II, p. 924.  4.  Minutes, Directors, IX, p. 2391.  5.  Minutes, Directors, IX, 2391-2392.  6.  934 Lullwater Road, Druid Hills.  7.  Atlanta City Directory, 1940, et. seq.  8.  Biographical records of the Federal Reserve Bank of Atlanta.  9.  Minutes, Directors, IX, 2395, 2426, 2518.  10.  Ibid. ,2551-2552.  11.  Ibid., 2554.  12.  Ibid., 2390-2391.  13.  Ibid., 2536, 2543.  14.  Ibid., 2490.  15.  Ibid., 2392-2393, 2419, 2517.  16.  “The Fed’s First Half-Century,” Banking Journal of the American Bankers Association, Dec. 1963, p. 42, et. seq. A symposium composed of Herbert Bratter, Washington Correspondent, Banking, moderator; W. ~Randolph Burgess, banking and Chairman, Atlantic Treaty Assn; Chester Morrill, former Secretary of the Federal Reserve Board; M. S. Szymczak,,. member Federal Reserve Board, 1933-61; and John K. McKee, retired banker.  17.  Mr. Morrill had reviewed the history of the Reserve System since 1913.  18.  Minutes, Directors, IX, 2435-2439. The letter gave the officers and directors of the Atlanta Bank an opportunity to express themselves freely on many policy matters concerning the Federal Reserve System.  19.  Quoted from Minutes, Directors, IX, 2540-2542, Dec. 13, 1935.  495  20.  The office of Chairman and Federal Reserve Agent in Atlanta had been vacant since the elevation of Oscar Newton to the governorship in January 1935.  21.  Annual Report, 1935, p. 20.  22.  Ibid.  23.  Ibid.  24. Minutes, Directors, IX, 2537. 25. Ibid., 2389, 2455, et. seq., 2477. 26. Annual Report, 1935, p. 18. 27. Ibid., 16. 28. Ibid., 17.  496  Chapter 25 1936  Nineteen thirty-six, like its predecessor, was a year in which events of great future portent were chronicled. Germany remilitarized the Rhineland; the Spanish Civil War began; Edward VIII abdicated the throne of England for marital reasons and George VI was crowned. Franklin D. Roosevelt was re-elected President of the United States, defeating Alfred Landon by a landslide. The Supreme Court invalidkted the Agricultural Adjustment Act; major testing of sulfa drugs was begun, and Margaret Mitchell’s Gone With the Wind was published in May. 1 The local economic situation was highlighted by Mayor James L. Key, a. staunch supporter of President Roosevelt, in a speech to council on January 6: “We enter upon the business of the city for the year 1936 with a feeling of hope and optimism which comes from improvements in business and industry on every hand, from a returning market for property and from increased employment. The mounting bank deposits, liberality of credits and reduction in interest charges, all of which indicate that we are recovering rapidly from the depression and that a momentum has been taken in business and industry on all sides which will emble it to carry on, regardless of whether Federal aid is continued or not, in the future. I feel that we can safely say for our city, at least, that we have seen the end of the depression ... “If it were not for the fact that this city has suffered from many indiscretions, from poor judgment and living beyond its income, it would be in perfect financial condition  497  today. Covering a period of several years the city has accumulated a deficit of more than $1, 500, 000. This deficit remains and cannot be removed until tax values have returned to a normal state…”2 ‘Thirty-six was a key year in the annals of the Federal Reserve Banking System. Under terms of the Banking Act of 1935 and the influence of a strong chief executive in the White House and a strong System Governor in Marriner Stoddard Eccles, the System became much more Washington oriented. In late January, President Roosevelt sent to the Senate the nominations of six of the seven members of the Federal Reserve Board which, according to the Banking Act of 1935, was to be reconstructed February 1. Only two members of the old board were named to the new: Governor Eccles, New Dealing banker from Utah, and Menc S. Szymczak, one-time comptroller of Chicago. The new appointees: Joseph A. Broderick, one-time New York State Superintendent of Banks; Ronald Ransom, Executive Vice President, Fulton National Bank of Atlanta; John K. McKee, one-time receiver for national banks in Ohio and Pennsylvania, for the last two and one-half years chief examiner for the RFC; Ralph W. Morrison, Texas hydro-electric figure, who in 1933 was one of the U. S. delegates to the World Monetary and Economic Conference at London.3 On February 10, Time reported:4 “Without debate, without dissent, the Senate last week confirmed six appointments to the Federal Reserve Board submitted by President Roosevelt. The seventh appointee is yet to be chosen. Three days later the old Board, set up by Woodrow Wilson 22 years ago, passed out of legal existence. Though their terms had  498  not expired, four members of the old Board were retired without pensions. At 67, John Jacob Thomas, a Roosevelt appointee, returns to his farm and his law practice in Nebraska. George Roosa James, 69, wise and crotchety, goes back to Memphis to train his son in the wholesale dry goods trade. The two members who have sat on the Board since its first meeting in 1914 will stay on in Washington: Charles Sumner Hamlin, 74, as a technical advisor to the new Board; Adolph Caspar Miller, 70, as an advisor on its new $3, 400, 000 marble building, contracts for which were let last week. “The new Board is new in far more than personnel. Now called the Board of Governors of the Federal Reserve System, it is headed by a chairman instead of a governor. Annual salaries have been upped from $12, 000 to $15,000. The Board’s powers were so vastly augmented by the Banking Act of 1935’that it now sits virtually as the directorate of a central bank of is sue. Along with the Board’s enlarged authority over the country’s currency and credit goes a greater responsibility for U. S. economic life than any single body has ever had before in U. S. history. Today the U. S. has a managed currency. With the advice and consent of the administration, the Reserve Board is the manager. And in the management process a tremendous potential momentum toward inflation has been built up. If this force is not properly braked, most disinterested observers agree that the U. S. may go on a reckless ride which would make the boom of the 1920’s seem like a harmless trolley trip. “Indeed, there is some doubt whether the Board can keep this momentum under control, because many of the inflationary threats lie not upon the records in its rented quarters across from the Treasury but in the cloak rooms of the Capitol ... “In personnel the Reserve Board that took office last week differs from all former  499  boards. For the first time in history it is predominantly a debtor board, representing people who borrow money rather than lend it. Though the influence of big Eastern bankers upon Reserve Board policy has been largely exaggerated, previous boards have tended to think of U. S. economic life in terms of the banking system. The new Board will think of the banking system in terms of U. S. economic life. “Every member is a Roosevelt appointee. Besides Chairman Marriner S. Eccles, only one member is a carryover from the old Board--Menc Stephen Szymczak, whom President Roosevelt added to the old Board in 1933. Born in Chicago 42 years ago, Governor Szymczak has often thought of changing his name, used to preface political speeches with an explanation that it was pronounced Szymchak. His father, a Pole, was a day laborer. Tall, robust, good-natured, Governor Szymczak went to St. Mary’s College in Kansas, continued his studies at DePaul University in Chicago, eventually joined the faculty there, teaching business logic, psychology, ethics. For two years he was superintendent of Cook County’s Forest Preserve District. A political protege of Chicago’s late Mayor Anton Cermak, and a Roosevelt campaigner in Polish districts, Mr. Szymczak was Comptroller of the City of Chicago when the President named him to the Board. To bankers he is that rare creature- -a political appointee who turns out better than expected. “Since the full term for a Board Governors is 14 years, the fir* appointments were staggered to allow for one retirement every two years. Governor. Szymczak got the twelve-year appointment. Only full (14-year) term went to Joseph A. Broderick, one-time (1929-1934) New York State Banking Superintendent. His appointment was something of a homecoming, since he had served on the organization committee which worked out  500  the technical details of the Federal Reserve Banks in 1914, was the Board’s first chief examiner. After a nine-year turn as vice president in a big Manhattan bank, Mr. Broderick was picked to head New York’s Banking Department by Governor Franklin D. Roosevelt. “While Mr. Broderick was in office, Manhattan’s Bank of the United States blew up. In the horrid aftermath the Banking Superintendent was indicted for neglect of duty and conspiracy along with the bank’s officers and directors. One of the trial’s high points was the parade of Broderick witnesses, inclu4ing Governor Roosevelt, Alfred E. Smith, Charles Edwin Mitchell. He was acquitted. Now 54, brisk, hard-working, humorous, he is popular with bankers, is the only member with anything like an Eastern banking background. “The ten-year term went to John Keowan McKee, a Pittsburgher who has lived in Washington for the past four years, lately as RFC’s chief examiner. Husky, energetic, 43, he made a name for himself as a receiver of closed banks in Ohio and Pennsylvania, acting for the U. S. Comptroller of the Currency. Much of RFC’s rosy record is attributed to Mr. McKee’s examining department. “Having no political qualifications, appointments to the Board must be made with ‘due regard’ to geographical and economic interests. No two members may be named from the same Reserve District. The South’s representative is Ronald Ransom, 54, Executive Vice President of Atlanta’s Fulton National Bank. A suave, studious, blueeyed six-footer, he is the one member who looks the banker’s part and dresses accordingly. He got into banking by way of the Law, founded Fulton National’s trust department, married the daughter of Georgia’s late great Hoke Smith. His is the six-year  501  term. “Shortest term (two years) went to Ralph Waldo Morrison, Texan utilitarian, whom President Roosevelt sent to the London Economic Conference in 1933. He is a close friend of Vice President Garner, a generous contributor to the National Democratic Committee’s campaign funds. A Missourian by birth, he spent his youth in South America, selling railroad equipment and adding machines. Later he promoted and operated a tramp steamship line, finally became interested in Texas power companies. The system he built up was shrewdly sold to Samuel Insull before 1929. Today he owns hotels, ice companies, Mexican power companies, does large scale entertainment on his ranch at Spotford, Texas. Jowled, powerfully-built, 53, he is suspicious of the press, which he thinks mistreated him in London three years ago. To newshawks last week he drawled: ‘A Federal Reserve Board membership is not a talkin’ job. “The one remarkable man on the new Board is the governor appointed to the four-year term and designated by the President as Chairman. At 45, Marriner Stoddard Eccles is lean, smallish, nervous, intense. In manner he is pleasant, impersonal. Like many another New Dealer he is convinced that in money management lies the salvation of Capitalism ...“ Meanwhile, on January 10, 1936, the Atlanta Bank filled its Branch direct3rates by appointment and re-appointment and elected officers to serve until February 29 of the same year. Frank M. Moody and C. W. Bailey were reappointed as directors of the Birmingham and Nashville branches, respectively. W. R. McQuaid, President, Barnett National Bank, Jacksonville, and H. Holmes, Executive Vice President, Delta National  502  Bank, Yazoo City, Mississippi, were appointed as directors of the Jacksonville and New Orleans branches, respectively.5 All of the officers of the Atlanta Bank and branches were re-elected for the short term, the four top spots being filled by Oscar Newton as Governor; H. Warner Martin, Deputy Governor; H. F. Conniff, Deputy Governor, and W. S. McLarin, Jr., Assistant Deputy Governor. 6 Then, on February 14 and February 25, the Board proceeded to an election of officers as provided by the Banking Act of 1935. The titles of governor and deputy governor disappeared from the official roster. Oscar Newton was named President for a term of 5 years at a salary of $25, 000 annually. Robert S. Parker was named First Vice President, at $15, 000 per year; H. F. Conniff, as Vice President at $10, 500, and W. S. McLarin, Jr., as Assistant Vice President at $8, 500. Deputy Governor H. Warner Martin read a communication from Chairman Eccles, of the Federal Reserve Board in which he was tendered an appointment as Class C Director to be designated Chairman of the Board and Federal Reserve Agent. He had accepted, effective March 1. At the same time Director W. H. Kettig, who had functioned as Chairman during the years more than twelve! the position had been vacant, was tendered a vote of thanks and re-appointed Deputy Chairman.7 The Washington influence was felt right away with receipt 0± the following letter from Chairman M. S. Eccles, dated March 25, 1936: “In considering salaries of officers of the Federal Reserve banks for the year 1936, recommended by the Boards of Directors of the respective Federal Reserve banks, the Board of Governors of the Federal Reserve System, as constituted prior to  503  February 13, 1936,.. decided to approve salaries of Governors, Deputy Governors, and Assistant Deputy Governors for the period January 1 to February 29, 1936, and of other officers of the bank for the year 1936 at the rates the officers were receiving at the end of 1935, and in doing so expressed the view that there should be no increases in salaries of officers except in exceptional circumstances, until a thorough and careful analysis had been made of the organizations of the Federal Reserve banks. “Since entering upon its duties the new Board of Governors has had before it many important questions with respect to the personnel and salary payments of the Federal Reserve Banks and the distribution of duties between the Federal Reserve banks and the Federal Reserve agents. After studying these ~atters the Board decided to approve all recommendations submitted by the respective Boards of Directors with respect to salaries of Presidents, First Vice Presidents, Vice Presidents and Assistant Vice Presidents for the period March 1 to December 31, 1936, inclusive, at the rates which were being p~ to such officers prior to that date, and that no recommendation involving an increase in salary should be approved in the absence of unusual circumstances or a change in position. “Before taking this action the Board decided to ask the Presidents of the Federal Reserve banks to institute promptly a thorough survey of the organizations and salary payments of their respective banks and in order that the Board night fully acquaint the Presidents with the policies it had adopted with respect to these and other matters, it asked them to come to Washington for a conference with the Board of Governors on Monday, March 16. At the conference the Board told the Presidents that it had already instituted a thorough survey of its own organization here in Washington.  504  “In connection with the distribution of duties between the Federal Reserve banks and the Federal Reserve agents, the Board had in mind a procedure looking toward the placing of the chairmanships largely upon an honorary basis, with the thought that the routine duties with respect to the issuance of Federal Reserve notes and the holding of collateral security therefor would actually be performed by assistant Federal Reserve agents who would be experienced in such work and who would receive salaries commensurate with the duties and responsibilities to be assumed. This would make it possible for the Board to obtain outstanding men of recognized prestige and influence in their communities to act in the capacity of Chairmen and Federal Reserve agents with the understanding that it would not be necessary for them to devote their full time to the position. “The procedure contemplated would result in the transfer of the bank examination work and the research work heretofore handled by the Federal Reserve agents to the banking departments with the understanding, however, that such functions would as heretofore be conducted under the general supervision of the Board of Governors. Heretofore, as you know, all appointments of Federal Reserve Examiners have been subject to the approval of the Board of Governors and the Board would expect such appointments, including particularly that of the person in charge of the examination function, to continue to be subject to its approval. “The Board of Governors at the conference held in Washington on March 16 and 17 asked the Presidents to review their entire organizations with a view to effecting economies wherever possible to do so without impairing the efficient operations of the banks. The Presidents were also asked to furnish the Board with reports as to how they  505  would propose to effect the transfer of certain duties now handled by the Federal Reserve agents to the banking departments; of the personnel they would expect to place in charge of the several operations; and of the economies which would be effected by making such transfers, in addition to the economies which would be effected by placing the chairmanships of the Federal Reserve banks largely upon an honorary basis. “The Board would like to have these reports include an organization chart which will bring out clearly the principal functions o r units into which the bank is to be divided after the transfer of certain duties from the Agent’s department to the bank. Such charts should show the name of the officer in charge of each unit and be accompanied by a brief description of the duties of each officer of the bank. Separate charts should be prepared for the head office and each branch. In making these studies it is important that careful thought be given to the operations now handled by branches of Federal Reserve banks with particular reference to the necessity for the branches. If the branches are considered necessary, a review of their operations should be made to determine whether any of the operations now being handled by them could be transferred to the head office at a substantial saving in operating cost and without impairing the services which the System is now rendering to member banks and through them to commerce, industry, and agriculture. “Pursuant to a recommendation made by a sub-committee of a conference of representatives of all Federal Reserve banks, the Board has approved a revised personnel classification plan which will necessitate the Federal Reserve banks’ classifying all non-official positions in accordance with the revised plan. Under this plan  506  the duties of each non-official position of the bank will be described briefly, and this, together with the organization charts, should give the Board of Governors a complete picture of the organization adopted by the Federal Reserve banks following the completion of the survey which the Board has requested the Presidents to undertake. “In making the survey the Board will expect the management of each Federal Reserve bank to give careful consideration to the qualifications and salary of each officer and employee of the bank and to the need for their services. As you have been previously advised, the Board expects that salaries paid to employees of the Federal Reserve banks will not be out of line with salaries paid for corresponding work by local member banks. With respect to salaries of officers, the Board realizes that the duties required of officers of Federal Reserve banks are substantially different from those required of officers in the larger member banks and for that reason the salaries paid by local member banks, particularly to the senior officers of such banks, cannot, of course, be considered as a guide in fixing salaries of the senior officers of the Federal Reserve banks…”8 After the letter was read, President Newton said that some progress had been made in the conduct of the survey but that he would delay making any statement until a later meeting of the Board. At the June 12 meeting of the Atlanta Board, President Newton did submit to the Board a revision of the personnel classification plan, which, after discussion and on motion of Director Clay, seconded by Director Cook, was unanimously approved.9 President Newton’s report was, in due course, forwarded to Washington and, on August 20, elicited the following letter from Chester Morrill, Secretary to the Board of  507  Governors: “The Board has reviewed the report of the survey made of the operations of the Federal Reserve Bank of Atlanta, a copy of which was recently transmitted to the Board.10 “In the Board’s letter of March 25, 1936, it was stated that the Board had in mind a procedure looking toward the placing of the chairmanship largely upon an honorary basis ... In this connection, there is attached a copy of a letter to Mr. Walsh, Federal Reserve Agent at Dallas, with respect to the duties to be performed by him as Chairman and Federal Reserve Agent on an honorary basis. The Board would expect the principles and procedure set forth in the letter to Chairman Walsh to be followed at all Federal Reserve Banks. “The Board’s letter of March 25, 1936 also stated that the procedure contemplated would result in the transfer of the bank examination work and the re search work, heretofore handled by the Federal Reserve agents, to the banking departments with the understanding, however, that such functions would, as heretofore, be conducted under the general supervision of the Board of Governors. “In order to acquaint you more fully with the conditions under which it is contemplated that the examination and research work will be transferred to the banks, these conditions are set forth below in general terms.. With respect to the examination function, the plan contemplates that: 1.  All appointments of examiners at the Federal Reserve banks will continue to be subject to the approval of the Board of Governors.  2.  The examination department will continue as a separate unit.  508  3.  The examination department will be under the supervision of a vice president to be designated by the bank after consultation with the Board.  4.  The budget for this function will be subject to advance approval of the Board of Governors.  “The Vice President in charge of examinations will be designated as an examiner for the Federal Reserve bank and the Board would expect that official to be responsible directly to the president of the bank and not to another vice president or other officer. The Board notes with approval the proposed plan to elect Assistant Zeder al Reserve Agent (L. M.) Clark a Vice President and to place the bank examination department under his supervision. It is understood that your directors propose that Mr. Clark as Vice President will continue to receive a salary of $7, 500 per year, and the Board approves. The Board approves also the designation of Mr. Clark as an examiner for the Federal Reserve Bank of Atlanta. “While it is expected that the President will keep himself informed of the activities and policies of the examination department, it is contemplated that correspondence, other than that relating to policy matters, would be carried on by the Board and its staff directly with the Vice President in charge of examinations. This procedure would be similar to that generally followed with respect to other correspondence about routine operating matters. “After the transfer is made the Board will expect that the present policy of decentralization of examination work under the ultimate responsibility of the Board will continue, that the examination work will be conducted by the Federal Reserve banks under the general policies adopted by the Board, and that general supervision of the  509  examination work of the System as a whole will continue to be exercised by the Board’s Division of Examinations. “In the past the Federal Reserve agent’s department has had custody of reports of examination made by the various agencies, which reports have been made available to certain officers of the bank and to certain designated employees in the Credit and Discount and other departments of the bank. When the bank examination department is transferred to the Federal Reserve bank, instructions should be issued providing that the bank examination department will continue to have custody of reports of examinations, and proper safeguards should be established in order to preserve the confidential character of such information and to insure that the reports will be made available to officers or employees of other departments only when justified in the performance of their duties. “The principles to govern the operations of the research and statistical organizations after their transfer from the agent’s department to the bank