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Federal Reserve Bank of St. Louis
PROCEEDINGS O F A CONFERENCE O F THE FEDERAL RESERVE BOARD
WITH T H E
GOVERNORS OF THE FEDERAL RESERVE BANKS
ASSEMBLY ROOM
FeperRaL Reserve Boarp
METROPOLITAN BANK BuiLpING
WASHINGTON, D. C.
OCTOBER 29, 1921
ASSOCIATED S H O R T H A N D R E P O R T E R S
WASHINGTON, D ; Cc.
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Federal Reserve Bank of St. Louis
JOINT CONFERENCE
OF THE
FEDERAL RESERVE BOARD H I T H T H E G O V E R N G S
OF &
FEDERAL R E S E R V E BANKS.
Washington, Db. C.,;
Saturday, October eoth, 1 9 2 1
The Conference was callecé t o order a t 11 o'clock an,
at t h e N a t i o n a l M e t r o p o l i t a n B a n k Building, H o n . J . P . G .
Harding, G o v e r n o r
o f t h e F e d e r a l R e s e r v e Board, p r e s i d i n g .
Present:
Hon. « . P. G . Harding, Governor o f the Federal
poard,
Hon. Bamund Platt, Vice Governor o f the Federal
Reserve Board.
Comptroller
o f t h e C u r r e n e y Crissinger.
Cherles A. Morss, Governor o f the Federal Reserve
Boston.
Benjemin Strong, Governor o f the Feacral Reserve
New Y o r k .
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Federal Reserve Bank of St. Louis
Go* ernor
H. Pancner, G o v e r n o r
of
o f the
the F e c e r e l R e s e r v e B a n i :
of
Cleveland.
George Jd.
Reserve
G o v e r n o r
i. PP. wellborn, G o v e r n o r
Atlante.
Governor
Governor
,
g Governor
n u o
Federal
Reserve
o f
nal
Yo f
the F e d e r a l
yOVErnNor
of t h e F e d e r a l
Reserve
Reserve
RLJeCui
n i=r
Bank
o f
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Federal Reserve Bank of St. Louis
PROG
o k ee
Governor Strong. R e f o r e taking u p some matters w e went
to discuss w i t h the Board, t h e r e i s one matter t h e t Hr.
Gilbert w o n t e d m e t o mention.
i n the
T h e a c m unting people
Troasury a r e complaining that t h e deferred erecit o f checks
deposited
t o t h e credit o f the Treasury acqunt appears
to
pe excessive i n some o f the Reserve Banks, a n d the accountents i n the Treasury a r e under t h e impression t h a t this
arises f r o m the fact that t h e erecit o f the entire ceposit
4
Geferred u n t i l a l l i t e m s a r e collected.
guires w h e t h e r
i t will n o t b e possible
M r . Gilbert in-
t o change t h i s
method s o that crecit m a y b e more promptly given. I
not know whet t h e preetice i s even i n our o w n bank.
is a
Go
T h i s
question [ I did n o t d i s c u s s b e f o r e c o m i n g o v e r here.
each bani woulé report t o the Trecsury
pursues i n withholcing crecit o f items
av. FerCire
C e n y o u d o it?
Governor itrong.
T h a t has just come up.
I t i s a new
subject.
Gov. Fording., G o v e r n o r V a n Zandt,
Governor V a n Zanct.
c a n y o u c o £7?
W e treat t h e Treasury acaunt t h e
game a s w e d o a member bani: acount.
‘ v e give t h e m a n averag
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Federal Reserve Bank of St. Louis
of four days.
As I understand,
h e wants t o get the bene-
s that what h e wants?
Governor V a n Zandt.
H e wants a n assortment mace i n our
panic o f his deposits.
Governor Harding.
W i l l i e te a
b l e t o make t h a t
arrangement?
Governor V a n Zandt. I
will have t o look into that.
It
would necessitate revision.
You a r e willing t o look into i t and d o
Goyernor V a n Zendt.
Governor Harding. G o v e r n o r hicDougal’
Govermor McDougal.
credited
M y impression i s that such items
o n the same basis
member banks.
a s accordcd checks receievec
J I will investigate.
Governor Harcing.
Governor Morss.
or n o t t h e y
Governor
Go,yernor Mosss. P r a c t i c a l l y , y e s .
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Federal Reserve Bank of St. Louis
Gevernor Harcing. G o v e r n o r Fancher?
Governor
Fencher/M
y impression i s , I
know w e c i d s o m e -
time a g pursue the same practice that w e do i n clearing
items from member banks. W h e t h e r t h e t has been changed I
am not sure, I
may have a memorancum o n that.
Slble t h a t some average t i m e i s determincd. I
Governor Harding.
I t is poscannot sq@.
A r e y o u willing t o look into it?
Goycrnor Fancher, Y e s .
Governor Harding. G o v e r n o r Norris?
Go,ernor Norris. I
everage them, I
Imow w e cdo not assort then,
think e t five cays.
Governor Harding.
s r e y o u willing t o look into
matter a n d a d v i s e H r . G i l b e r t w h a t y o u c a n d o ?
Governor N o r r i s .
Y e s .
Governor Harding. G o , e r n o r Weliborn?
Governor wWellborn.
W
e handle those like w e c o other
ehecks, p u t them t o their credit w h e n availseble. I
will
look into i t when I go home.
Governor Harding. Governor Callrins?
Governor Calkins. I
have m a d e a
memorencumo
t notify
Secretary Gilbert.
Governor Harcing. G o v e r n o r Young?
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Federal Reserve Bank of St. Louis
195
Governor Young.
w eg
Twin City items.
o C . a f t e r four deys, o t h e r
I n the a n
h e x payment w e
of o u r m e n over t o the Internal Revenue
sorted checks f o r them, end o n that special occasion w e gave
n t o our time schedule.
credit a c c o r c i g
w e woule b e very glad
to report a l l this t o the Secretery o f the Treasury, t h e w a y
we hendle it.
Governor Seay.
v e heave
i v e d a t en a
greement with t h e
Treasury t o credit i t o n the average o f three
eee G e y
i e
A a s i n three cays w e give t h e m c
enefit o f that.
v e advise
s m i n connection w i t h
the matter.
Governor Strong. I
have o n e subject
t h a t ocarred t o
Governor Harding which has n o t been Giscussed e t the mecting,
but wes mentioneé indivicually, w h i c h results f r o m the
character o f the discussion about o u r rete policy.
The joint meeting yesterday secmec t o result i n a fairly
unangmous v i e w a s t o a
p o l i c y a b o u t rates.
expressed t h a t i f a n y publicity,
F e a r has becn
e n y notice, p o s s i b l y s l i p s
out o f the character o f that Giscusdon, t h a t some o f the
Go,ernors m a y have cifficulty w i t h some o f their cirectors
when they g e t home, w h o m a y gain t h e impression t h a t w e g e t
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Federal Reserve Bank of St. Louis
arounc t h e table here a n d f i x u p these matters o f policy
without consulting anybody obout it.
Governor Harding.
Governor Strong.
T h e r e i s danger o f that.
Y e s , a n d I was asted t o mention here n o t
SO much with reference t o the Federal Reserve Board a s with
all the Governors o f the Board-Governor Harcing. I
pave b e e n careful w i t h t h e press t o
sey that this Conference h a s been t h e annual conference a n d
{Icould n o t s a y anything further.
Mr. Mitchell.
I t strikes
m e t h a t n o transcrizt s h o u l d
be taken a t all o f t l m e e t i n g here t o
f a transcript
i s taken
2
tf t Ii i
thing g e t t i n g i n t h e press.
thsec-3 l a n g e r
o f some~
S o m e o f t h e remarks m a d e h e r e
were m a c e f o r t h e b e n e f i t e x c l u s i v e l y o f t h e Conference,
and
Canger o f some o f those statements becoming public
end causing a
lot o f harm. I
think they ought t o b e with-
helc f r o m e v e r y bans.
Governor Strong.
T h e y d o not g o i
=
4
t h i n k ,
as a yolo,
Mr. Mitchell.
B u t permission w a s asked yesterday
have some o f the s p e e c h e s ,orfinsta
to
t h e talk of Dr.
and also t h e speech o f Mr. Crissinger talen t o
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Federal Reserve Bank of St. Louis
the banks.
Governor &
t
h
Governor Harding.
a
t was t h e c a s e I think, yes.
T h e general sentiment yesterca
to b e i n favor o f each Governor having a
transcript,
it with h i m a n d using i t i n his ciscussion.
Gavernor Strong.
ic r e p o r t
O u r cirectors n e v e r s e c
o f t h e s e Contcrences.
slLons 37. >
Conferences
T h e reports
o f t h e Governors a r e
that t h e r e s u l t s o f t h e C i s c u s s i o n may b e a c c o m p l i s h m e n t
towards G e c i s i o n s
anc u n l e s s a
a n g policics
anc
s o o n about t h e System,
record i s k e p t w e w o u l d h a v e t o r e l y u p o n o u r
memories entirely.
Mr. ligtchell. I
record,
but I
thint: i t is quite necessary
woule m o f e r
t o have t h e addresse
made yesterday repeatec before
i
Governor H a r d i n i
o not rates
to w h e t h e r r
s h
b
@ i t comes b a c k t h e n a s
e established s o l e l y w i t h t h e
view t o local conditions, a n d whether t h e general situation
in the system o f banis a l l over t h e country that a r e affectea b y the Federal Reserve statements w o u l d b e o f consicerable
etrects
h
e
r
e a
change
o n the part o f t h e Governors
as t o wanting these t r a n s c r i ~ t s with them?
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Federal Reserve Bank of St. Louis
198
Governor Norris.
I t was I
who aslred t h a t t r a n s c r i p t
of
that portion might b e prepared more promptly t h a n t h e rest,
and I would b e frank t o explain w h y I did i t .
because o f the meeting o f our board a
few weeks
we mace o u r last reduction--while I Gic not oppose it, I
dié. n o t r e c o m m e n d i t ,
a n d I
thin’: p r o b a b l y l e f t t h e i m m e s =
Sion with o u r board t h e a g r e e d t o i t rather reluctantly.
7
Now y o u a s k e d
yestercayw
o
h meny o f t h e G o v e r n o r s w o u l d
reo m n e n d
Now, I
t o their boards a
go
further reduction,
cannot g o back t o m y boarc after having r a t h e r r e -
luctantly agreed t o a reduction f r o m 5-1/2 t o 4 and a s k
to make a
further reduction without giving
of m y reasons f o r i t , e n d i t i s t h e r e s u l t o f informa-
tion that comes t o me'outsice o f >
Cistri
had n o i n t e n t i o n o f p u t t i n g t h e t r a n s c r i p t
n
d while I
i n the hancs
o f
eny Girector o r of giving t h e entire transcript t o then,
I thought I could present t h e views t h a t h a c been advanced
here yesterday better i f I coulc. reac a
sentence o r two
here and there, o r the development o f a n idea i n the
language o f the speaker rather than ettempting t o repeat
it
In the remarks I
made yesterday f
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Federal Reserve Bank of St. Louis
enceavored t o get altogether a n y criticism t h e t h a d been
levélec. a g a i n s t t h e F e d e r a l R e s e 2 v e S y s t e m ,
and I
took
occasion t o say, w h i c h I now want t o emphasize, t h a t just
&t t h e m o m e n t t h e r e i s n o i m m e d i a t e p r e s s u r e
Reserve B o a r d t o a m o u n t
litical pressure,
o n t h e Federal
t o anything, t h e t y o u e s n c a l l p o -
a n d certainly n o acministration pressire
in the matter o f rates; b u t I had some information this mornid n o t k n o w w h a
going t o s a y when h e spoke Sass legend e n d
certainly coulc have
had n o influence whatever o n what I
I learn this morning f r o m a
had previlously said, b u t
very authoritative a n d reliable
source o n e r e a s o n w h y t h e r c h a s n o t b c e n a
Reserve matters i n the Senate
attacks t h a t have b e s n made persistently b y two
attacks o n the Federal R e s e r v e System a n d Board,
there h a v e b e e n n o r e p l i e s m a d e h a s b e e n t h a t
in charge o f the revenue b i l l d i d n o t want t e a n y =
thing t o celay the passage o f that bill.
thought t h a t i f they engaged
I t has been
i n c i s c u s s i o n o f Federal Re-
Surve matters i t might indefinitely
revenue bill. T h e y have been t a liking about putting i n
a
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Federal Reserve Bank of St. Louis
eloture r u l e a n d all sorts o f things
they have cetermined t o g e t that bill
t h g h i n some shape,
and i t will undoubtedly g o t o 6onference before t h e close o f
the p r e s e n t s e s s i o n o f Congress.
T h e y a r e v e r y anxious
that this should b e done, because otherwise I
understand t h e y
would have t o start a l l over again a t the reguler session,
which meets i n December. I
a m told this morning thet this
bill will possibly b e o u t o f the w a y b y tonight i n
the Senate a n c that a s soon a s that revenue
the way they will probably take u p this matter o f
when t h e y g e t that important m e s t i o n settled
get your prescriptions f o r beer, t h e n they a r e going
with a
gencral d i s c u s s i o n o f t h e F e d e r a l n e s e r v e s y s t e n
=
d
a
1
the artillery n will b e let loose
o n both sides.
That i
mation,
erday.
w h
e u a c i o n a t the moment. I
l
i
d not have w h e n I
T h a t confirms
have thet infor-
mace m y remarks y e s -
m e i n t h e v i e w t h a t a n y changes
or
revisions that a r e going t o b e made w e hac better make
zht gets r e d hot.
Governor Strong.
T h e matter that I referred t o was
simply cue t o facilitating the very thing that you went-to e n a b l e t h e G o v e r n o r s
o f t h e respective b a n k s
t o return
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Federal Reserve Bank of St. Louis
their o w n r e c o m m e n d a t i o n s w i t h impression t h a t i t i s a
they h a v e n o voice.
cuteanc~-dried s i t u a -
N o w it is a
fact
number o f psepers h a v e n u b l i s h e c a r t i c l e s i n d i c a t i n g
pe &
recommeoncation a s t o rates t h r o u g h o u t t h e
anc. that woulc. make embarrassment i n some cistricts,
although I
do not think i t would i n New York--
Governor HarcGing. Yes, i n t h e Federal Reserve salaries,
while t h a t was conceived i n h a 3
.
6 a lot o f personal-
ity eattachec t o it, t h e real purpose o f it, t h e underlying
purpose
o f i t i s t o e s t a b l i s h wheat w o u l d b e i n effect a
ni, a
benking system, p r o b a b l y n o t a l t e r i n g t h e
structure o f the Federal Banks o n the face o f it, b u t
banking system whose pates a r e regulatec b y act o f
Congress, salaries regulated b y Congress,
a n d w h o l e thing
put o n ae plane o f a Government beni, w i t h salaries approxi-~
meting saleries paid Government officials a n d Government
employes.
T h a t woulda b e t h e opening g u n for t h e revision
of the o l d Federal Reserve Act, t h e establishment
o f a
Federal baniting system, a n c y o u woule. f i n e t h e whols thing
generate i n t o a
political proposition, officers
the banir would either b e political hacks o r b e people
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Federal Reserve Bank of St. Louis
with axes t o grind. I
may s a y also that t h e survey I
have made o f the situation, certainly.
a s f a r a s the Senate
goss, leads m e t o believe t h a t i n 3}
have r e c e i v e c
f r o m conservative §
Now, a s
°
is concernec.,
i t i s w e t t y hard t o form a n
Tae
two Senators, a n d Nevada h a s e
e
a o
Ww r i h aa s 4 5 members,r
s o i
New
member i n the
i s p oBs s i b l e t h a t
=
my racical legislation might b e cefeated i n the House.
{Informal discussion followec, w h i c h a t cirection o f the
Chairman w a s n o t reported).
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Federal Reserve Bank of St. Louis
Governor Strong. T h e r e h a s b e e
m e Giscussion a t
this mecting o f whet i f anything shoulc b e cone i n the w a y
of specisl measures f o r the relicf o f this cattle situation.
of Senators, w i t h
whom w e h e c a
meetingS here before o n this subject, a n d with
mom members o f t h e Fecerrl h o s e B S o a r c . hac a mecting,
hich m e e n e n p p e n e d ‘ t t e n c . , a n d certesin plans--noth-
stortling--heve been discussec, which I think will
cooperction b e t w e e n t h e h e s e r v e
war F i n e n c e C o r p o r e t i o n .
it b e e
o f the fact that I think i t just
recora m a c e - - a r o p o r t
o n t h a t subject.
"4fficulties reported b y Mr. Meyer was
misunccrstancing, which h e thought e x in t h e m i n d s
o f member benks
a s t o whether
i n obd=
teining loans f r o m t h e Finence Corporation f o r t h e assiste
ence o f the cattle industry, m i g h t n o t result i n a core
responding recuction i n the line o f borrowings f r o m t h e
serve Bonks.
T h e t h a s b e e n discussed
serve Banizs i n t h a t section.
b y the Fed-
o f t h e country,
a n d they
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Federal Reserve Bank of St. Louis
OG
t h e t there. w i l l
impression
wherevor
hey C
i
t cu
e t ty i n o v e r c o m i n g t h a t :
i t cos
proposea circular relating
Lite ruling
B
P
o
k b y t h e Kecerel
he
Reserve “oord, fixing maximum
by momber banics f o r c o l l e c t i n g
favorable v i e w o f >
sencing o u t
circuler, subject t o i t being approved b y the counare no": repress
n g t h e kessrve system i n the lite
eed:
effect o f t h e circular might
ane t h e G o v e r n o r s
whe F a s t ~
x
S
e c a n
JS a 8 gooe plen t o m e t e s u r e
stooc b y the
e
f e that
tie t h s t w a s
o
l
f e7
i
e
h
h atts
etsOoe r v e S y s t e m ,
under=-
n
orecbice
i t would
e “oF
mn
n o w i n force
o f h e n c l i n g c a s h items, s h a l l b e
lest i t would h e v e
e
é
n
t
i
n
e
n
t Cure
the r e p o r t t h e t y o u
in-line w i t h w h a t y o u wish.
aid upon t h e fact-that i t wes important
sentence i n s e r t e c
i n case t h e t ceme u p f o r
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Federal Reserve Bank of St. Louis
Confercnes
h a s recom=
with t h e r e -
eusst-
to
ane. thet
Governor
Governor strong. 1
thin: t h e y prefer t o leave i t t o
the: B o e r s .
Govornor
T
n Aue
to r e p o r t
committee--you
u
p
e
h
e
l
i
r Confcorence?
Go,crnor Strong.
u w
Goyernor Mcvougel.e
T o thé
e w e r e unanimous
w
iew o n t h e p o i n t o f 4
grouping, whicl
LGOrt:
b o ae.
3oerd 2
Governor Hercing.
h e Boarc W i k a t a e
Serly d a c e .
Governor Strong.
N o w t h e r e i s e n o t h e r mat’
have
work
o f the Con
—
ANIL
overnors
o f
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Federal Reserve Bank of St. Louis
Might b e more effective,
veloping © e c o n o m y
i n improving efficiency a n d de-
i n operation
o f t h e Federal Reserve Banks.
progrems f o r this Conference h a v e usually been
prepared
i n New York e n a :
t i s p l a y e c . o n e charactcriste
ic, a n d t h a t i s t h e desire, e v i c e n c c d
mitted,
t o develop a
b y the topics s u b -
greet ceal o f uniformity o f i actice.
It relates t o detail more t h a n i t Coes t o policies, y e t i t
relates t o some Cistincet policies.
gestion.
course
w
i y
s u p ject
t o its
That each Reserve Bank appoint a
of them, I
e maize this sug-
comnittee--and most
find, d i d h a v e such committees elready,-=-but
those that have n o t would appoint s u c h committees t o
Geal with matters o f procedure, D o t h routine a n c otherwise.
We h a v e o n e ,
a s you mow,
n o w i n t h e b a n k i n N e w York.
each banis s s l e c t o n e m e m b e r
o f that committee
L e t
t o represent
® meeting o f representatives from ell tirelve
of t h e banks.
T h o s e w i l l b e operating m e n w i t h special
competence t o Geal with t h s questions o f routine,
ciency a n d economy,
a n d t h a t t h e y prepare recommendations
for uniformity o f procedure a n c f o r uniform forms; f o r
more s c o n o m i c a l f o r m s ;
f o r l e s s read t a p e i f w e a r e d e v e l o p -
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Federal Reserve Bank of St. Louis
for short-cut methods, a n c s o on.
report baci: t o the respective banks a n
their reports b e submitted t o meetings o f the Govornors, a n c that t h e representative o f each Dank serving i n
that c a p a c i t y s h o u l d b e c h a r g e d w i t h t h e r e s p o n s i b i l i t y
of
seeing t h e t t h e s e u n i f o r m p r a c t i c e s a r e s t r i c t l y observed.
It i s also t h e thought o f the meeting
tion, w h i c h w e regard a s essential t o the economic a n c efficient operation o f the System, b e brought immecicately i n
contact w i t h t h e comzittee w h i
Reserve 1
Boare,
w e unoerstend t h e
:
g s of t w o members
o f the
o n e o f t h e Reserve
Now, Governor Harding, vyhat w e neec s r e t w o things-ané i t i s p e r f e c t l y o b v i o u s t h a t t h e m e e t i n g i s u n a n i m o u s
on this suoject--one i s the cevelopment o f system a n c
for uniform, e c o n o m i c o p e r a t i o n ;
follow-up,
the
h e r is a
system o f
t o see t h a t i t i s acdoptea a n d carriedcout
i
we c a n s e c u r e t h e coopésretion o f t h e
posing t o a s s i g n o u r v e r y b e s t m o n a t t h e
daly c a y
r
a a n c
o
r ,
E
N f n ~ them meet
a n d stay
i n4 meeting
as g
e n e £
B a e a o r n t r + e
a s i s Anecessary
t o
accomplish t h e r e s u l t s t h a t w e a r s
Governor Harcing.
n
o Board has a
i
y appointed
f
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Federal Reserve Bank of St. Louis
Me. M i l l e r a n d i!
M ya
stancing c o m m i t t e e
o n effi~
ciency a n c economy, e n c i t i s also proposec informally-it h a s not been ectec upon e s yet, b u t
be acopted--to sppoint o n e Feceral Reserve
two o f t h e Governors, m a t i n g t h e m a
mission u n c e r t h i s committee.
sort o f
T h e r e will b e
five t h e n r e p r e s e n t i n g t h e i n t e r e s t s i n v o l v e d ,
a n c a s soon
we w i l l t a k e u p t h e r e c o m m e n c a t i o n s
suoject then.
Governor Strong. G o v e r n o r Harding,
of t h i s progrsem,
a s a necessary part
w e feel t h a t i t will b e imoortant
t o have
one o r two meetings o f the Governors sooner t h e n w e otherwise woulc.
d J y s t when these matters c a n b e reported b a c k
~
nel sacontion c e p e n c s
o f course u p o n
with w h i c h t h e o r g a n i z a t i o n i s c r e a t e d e n c t h e s p e e d
1 which t h e y c a n perform t h e worl.
woulc p r o b a b l y asix t h e m t o t a k e u p e
“ now being mace within
1
¢ first thing which
whole s u d j e c t
i e s e r v e B a n k s t o each
to the Federal Reserve Boarc a n a t o the Treasury.
The multiplicity o f reports i s a source o f great cxpense
now t o the whole Reserve system, s n c w e think that a
very
lerge a m o u n t o f m o n e y o n c l e b o r c a n b e s a v e d b y h a v i n g s o m e
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Federal Reserve Bank of St. Louis
more u n i f o r m a n c b e t t e r d e s i g n e d s y s t e m o f reporting.
ve want t o g e t a t i t a s soon a s possible.
Governor Harding.
T h e Board will a c t promptly o n
selection o f this commission.
then w i l l
b e rsferrsd
Governor Strong. Y e s .
amounts
t o this:
‘
M y understanding i s that
t o that
c o m m i s s i.
n
o
T h e Gesign o r plan really
t w e p l a c e t h e v r e s e n t p r o g r e m o r send:
technical a n c r o u t i n e m a t t e r s
t o t h e Govern-
ors a month i n acvence o f the Conference, a n d then having
each c o m e t o t h e C o n f e r e n c e w i t h t h e s e p a r a t e r e p o r t s f r o m
each o f his operating men.
T h e y woulc g o automatically
to the orgenizsation f o r stucy, with t h e idea that when
the Governors m c e
e
s go oe 2
DER ;
:€finite,
thoroughly worlec. o u t p r o p o s e l s u o m i c
criticism a n d final eetion,. ~ * ~ ;
for discussion,
w a s acteé upon i t
woulc. t h e n g o back t o the tvelve bani
each bani: w h o hec. tal:
report a n c recommencetion, c h a r g e d w i t h t h e r e s p o n s i b i l i t y
It W L L L r e i t e v e t h e
Governors
o f the Ciscussion
of a
mass o f cetail
nicel m a t t e r s w h i c h w e e r e n o l o n g e r a s
1s w e w e r e i n t h e e a r l y c a y s o f t h e System, b e c a u s e
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Federal Reserve Bank of St. Louis
these a r e cuties t h a t a r e being celcgated t o specialists
in the organization.
I simply express w h e t I understand
p
e t h e unani-=-
mous v i e w o f the meeting.
o u r prograr
The last matter, o n e thet appeared
rather cryptic f o r m a n d was r e t
a C
U
y oes. t a e cae
§ relation t o this whole subject o f sold foreign ex-~
chenge.
I believe there i s evidence o f ea more o r less growing
must
iemanc., which m a y become insistent, t h e t something/ve c o n e
about this @isordor, i f you could cell it that, i n the
forcign exchenge.
I t is one o f the greatestc eterrents
to the reestablishment o f trede t h a t
a p e “is A
great
vari: ty o f proposals h a v e b e e n mace a n d rejectec, I
jmagine b y more o r less common consent, f o r cesling with
apid f l u c t u a t i o n s
i n exchange.
sudject o f some Giscussion when Gov.Norman
since h a s b e e n c i s c u s s e c
b y Mr.Jay o n his
lergely m y own views, a n d
of Gevelopment.
T o preface
thet a great responsithat matter, a n d that t h e
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Federal Reserve Bank of St. Louis
responsibility s p e c i f i c a l l y w i l l b e r e g e r c e a
i n this c o u n t r y
ana i n t h e r e s t o f t h e w o r l d a s r e s t i n g u p o n t h e F e d e r a l
Reserve System. I
thin': the timc h a s come w h e n w e have t o
begin t o try t o study t h e matter a n d t r y t o c o something
with i t i f i t i s #¢apable o f being cone.
Disorcers
i n exchange p a r t i c u l a r l y arise, a c c o r c i n g
to
the common view o f students, throughout t h e world, f r o m a
number of causes.
O n e is the sudden increased inflations
of currencies o f various countries, brought about primarily
by the fact that Goyernment revenues will n o t mect Goyernment expenditures.
B e y o n d that, a
o f t h e reparation
the l a s t y e a r h e s b e e n t h e i m p o s i t i o n
payments u p o n Germany, w h i c h a p p e a r s
t o b e requiring Germany
to maize pryments i n excess o f what Germeny normally i s able
to pay out o f the netion's 1 i
a n c trade. Thée:third
result f r o m insistence b y our
couse t h a t m a y arise WwW i
Government u p o n t h e payment o f interest o r principal o f
is Government b y foreign governments
ey a r e c a p a b l e
o f paying under
orcinary processes o f trace.
I believe, a n c I thint: many others belicve,--I i m o w
Goycrnor N o r m a n ¢ o e s - - t h e t
i n t h e f a c e o f those t h r e e great
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Federal Reserve Bank of St. Louis
212
underlying csuses, t h e r e i s n o possibility o f dealing with
the exchanges o f those nations t h a t a r e directly subject t o
those influences. F u n d a m e n t a l s h e v e t o b e dealt with first.
Government budgets h e v e t o b e brought into balence.
Cur-
rency expansion has got t o stop, anc the arrangement o f
this settlement o f old indebtecness h a s t o b e brought i n t o
control.
I f that i s a
,
then whatever
we
can d o will b e limited t o the exchenge o f those n a t
which are n o t subject t o those influences.
certain countries whose bucgessare i n halance, whose t r a
iS reasonably i n balance, w h o e r e n o t inflactingtheir cur2
sound system o f banking
5 a n d currency,
rencieés; t h a t have a
solc. reserve w h i c h c o u l d b e usec.
T h o s e countries
which particalarly at the moment appear to be capable of
being cealt with are Hollanc, t h e three
countries, t h a t is,
Unitec. States,
Mr. Platt.
P a .
s w e d e i n c . Norway, Japan, t h e
a n d p o s s i b l y G r e a t Britain.
H o w about Spain?
Goyernor Strong.
T h e reason f o r not cealing with Spain
is not because t h s conditions c o not conform t o the formula,
but because o f certain things i n connection w i t h banking
in S p a i n a n i t h e chareactcr o f t h e people
in m y o p i n i o n m a k e s
i t impossible,
8
0
a t t h e outset,
O N S Does
t o ac~
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Federal Reserve Bank of St. Louis
complish anything.
T h e seme t h i n g woulc apply t o Argentina
moment, 3a>l t h o u g h S l a t e r t h e s c o p e o f a n y a r r a n g e m e n t
might b e enlerged.
I c o n o t went
all, b u t certainly a s a
t o advance t h i s e s a
mature p l a n a t
basis o f Ciscussion a n c a s 2 suggested
s of continuing t h e Ciscussion, e n d i n the first place
n attempting t o stabilize exchange,
lely o n t h e basis
i f i t i s possible,
o f credit, e x p o s e s t h o s e w h o
underteke i t t o the possibilty o f such great loss t h e t y o u
¢an get them t o undertake i t unless i n some w a y they are
protectec ageinst t h a 2
protection t h a t I
guarentee
lmow of.
2
i
O n e is 2
w
o means o f
a Government
t o t h e b a n k s t h r o u g h o u t t h e country,
a n c the
lac ar
FLOP?
8 recently written.
The cifficilty o f the issuing o f « special type o f
currency lies i n this fact, t h a t i f i t i s usec t o make
international p a y m e n t s , t h o s e p a y m e n t s c a n o n l y
per, e n d that currency will only remain a t per
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Federal Reserve Bank of St. Louis
capable
of
d ér
immediately r e c e a m e d
i n gold.
ediately redeemec i n gold,
iid ote tis
n
e
at o n c e d e c l i n e
ts.
I n o t h e r words,
i t w o u l c s i m p l y p r o v e e a mea
further facilitating sold shipments, which are now generally
preventec
b y G o v e r n m e n t manceate.
S o thet i n m y minc I
come
beck t o the days o f our experience Curing t h e war, w h e n
this situation erose with ell of the e x
S
, anc more or
less s e r i o u s l y when t h e B r i t i s h G o y e r n m e n t t o o k sterling,
anc G i c s o very successfully, o u t o f the credits received i n
this country; w h e n t h e Bank o f France, w i t h consicerable sust h i n g , leaving the Italians without a n y
protection, e n c i n orcer t o protect their
Rene submittec a
proposal whore h e claimed
2 82
em
ployment o f #10,000,000,00 capitel h e sould immensely c u t
Gown the Giscount o n the lira.
H e was given the opportunity
to co it, enc his transactions, which were lergely conducted
7 York w i t h t h e o r c a n i z e t i o n w h i c h w e h a c f o r him,
recell, a b o u t %50,000,000 l i r a
about i n helf, a n d e s I recall,
h e never used
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Federal Reserve Bank of St. Louis
a dod lar O f t h e capital,
Now, w h a t i s the need o f this exchange o f free gold
shipment i s the influence o f some fund, s o m e orgenization
to trade i n exchange.
T a k e o f f the t o p when there i s a
etemeserce
top a n c f¢411
t h e drift h a s a
Crift cevelops, because a f t e r
all these conéitions a r e a l l o f comparatively small amount i f
we have a n organizetion introcucec t o deal i n the differences
when w e a r e going t o incuce greater stability.
T h e question
s how y o u c a n g e t e n orgenization t o deal i n cifferences
furnish s u c h stability without tal:ing the risk. o f exchange
ané without inevitable government guerentees.
T h e only
n see possible i s t o take, a s I first
institutions-~-those
f issue i n those countries
bankso
n
e have all
thet conform t o the concitions I have c e s e r i b e c , d
the officers o f the banks t h e t I have referrec to, t h a t is,
h
e great b a n k o f Netherlends, t h e
the Bani: o f i n g l a n d , t
National R a n k o f Switzerlanc, a n a s o on, a l l contained i n
a common u n d e r t a k i n g w i t h e a c h o t h e r - ~ - t h e f o r m
tn
o f it
have t o be discussed and each enter into a gold obligetion-~
in the case o f inglana s a y for 20,000,000 sterling, o r
whatever emount t h e y Gesire;
i n the esse o f Switzerland a n
ecual proportion i n proportion t o their capacity, e n c s o o n
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Federal Reserve Bank of St. Louis
erounc thse table, f o r t h e p u r p o s e
o f creating 4
organization t o insure i t again
is comaitted.
Now I have b e e n meling some stucics i n the bank t o see
what that would involve, thet is, stucies b
trace
o f t h.
u p o n the
e x p e r i e n c e i n golc movements,
end s o on, a n c I have t h e impression,
a s the result o f these
a func o f about .f00,000,000.00 woulc. b e ree
Yhaet i s 2
very L e r g
of p a s t year, b u t i f i t i s
woulc b e effective t o have
an arrangement w i t h e a c h o t h e r t o f u r n i s h o n t h e r a r t o f t h e
seven foreign banks $250,000,000.00 o r .500,000,000.00 gold
t h e n w e might a g r e e t o
ultimately t o cover engagements,
oe
emount i n this country.
T h e t like amount
would not be furnished i n solc. for export, because w e d o
not e n t i c i p a t e t h a t t h e nation.
rest f o r @ good while.
c o u l c export gold like t h e
W h a t w e would furnish would b e credit.
In other words, t h e i r engegement would b e ultimately,
if
the account ever hanpened t o b e ultimately split, t o ship-
e us 250,000,000 o r 500,000,000 gold. ‘ i e woulc. say "Do
e
old; w e will hl o a n y o u that amount
t
curing t h e
2)
fee.
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Federal Reserve Bank of St. Louis
BLT
operetion o f ti f u n d a "
en orgenizstion
T h e n i t would b e necessary t o heve
t h i s country,
I t woule
senction.
b e non-political,
non-
nentsl, whose function i t voulé b e simply t o operate
FE
he exchenge decause t h e golc i s plecged t o b e shippec.
woulc. not issue a n y currency.
They
T h e y woule n o t appear e s a
reguletor o f exchange, except a s the exchenge always is,
They woulc. not s h i p u s golic a t all.
this accoun
COllars, t h a t must
b eL
a v e s u s short o f
W w e are ell i n a joint a c c o u n t
tO a n O F Loses
Governor Herding.
stcrling eightecn months ago.
Mir. Platt. I
thini: there might b e something cone along
thet line, b u t I ¢o not thint: there c a n b e anything cone t o
prevent s h i p s i n g gold. I
obligations. P e r s o n a l l y I
hrown off. I
co not refer
woul
t o these government
b e glzd t o
think ultimetely w e have g o t t o lose a
part o f them enyway.
good
B u t i t i s not t h e proper policy t o
start i n n o w a n d s a y t h a t iio w o u l c s h a r e i n t h e l o s s e s o f
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Federal Reserve Bank of St. Louis
218
englenc a n ¢ F r a n c e
i n their loans
t o Russia a n e other
countrie, t h a t they h e v e g o t t o lose,
them a
W e may just p u t
gcother o n c lose t h e m all.
Governor Strong, w h a t has elwegs Gisturbed m e about
the exchange situction h e s bsen this, t h a t
I have s e e n n o plar
that coulé
HO you s e e
not b e Cisastrous i f i t failed.
a
n
? D i s a s t r o u s i n losses.
scheme c e n b e ecoptec,
I f this
i t cannot b e Cisastrous t o the ex~
people lose golc. N o w , l e t u s suppose t h a t
efter a year o r t o years! wort: elong this
line w e fine that
the n e t r e s u l t o f i t h a d b e e n t h a t t h e y
G r a w n :,300,000,000.00
anc. they oved the Federal R e s e r v e Bent o f New
Yorls »500,000,0¢
Therefore t h e y woulc have. t o scot le--~4xchange h i d
golc, f o r t h i s reeson;
t h e t u n c e r t h o s e conc.itions
éntcr into e n arrangement t o continue t h e account
by buying bills i n those countries,
o r even that those i n -
stitutions might effect e n arrangement with their governments t o place some securitie,-~long-time securitics-~and
licuicete
ties.
t h e account
b y using t h e proceeds
o f those securi-
I n other words, t h e y might t h e n get government
help,
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Federal Reserve Bank of St. Louis
219
but f r o m a strictly banking standooint, t h e merit o f the
olan, t o m y mind, i s that w e deal with the exchange market
in the usual w a y a n d that i t i s possible t o t r y it, a n d
even i f i t fails n o one i s going t o b e disastrously hurt.
As t o any progress towerds t h e develepment o f this
plan, G o v e r n o r N o r m a n a n d I
spent a
good d e a l c f t i m e i n
discussing, s i m o l y i n a general way, h o w the banks o f issue
could b e more effectively brought together f o r some purpose o f cooperation, a n d exchange o f information e n d better
under standing o f esch other's policies, a n d s o on; a n d i t
is a subject that I
had already discussed w i t h London,
Peric, Brussels, Amsterdam, o n d i n Japan, a n d Mr. J a y con~ “
~
tinued that discussion, a n d i t has b e e n talked o v e r n o w wit!
Dr. Vessering, a n d I have a l s o h e d @ talk with t h e presiMra.
dent o f the National B a n k o f Switzerland, D r . Hevenstein,
who w a s i n L o n d o n o n l y t h i s w e e k a n d a t a t u i e e s m a t t e r s alon;
this line.
H e stopped i n Amsterdam t o continue t h e dis-
cussion with Dr. Vessering, a n d I
a concrete p r o p o s a l
therewould
a m hopeful thet e v e n i f
o f t h i s k i n d c e n n o t b e adopted,
b a cwbjection r e i s e d
and
t o it, w e c a n a t l e e s t b r i n g
abouta b e t t e r r e l a t i o n s h i p b e t w e e n t h e s e e i g h t i n s t i t u t i o n s
England
than n o w existe. I
a m surprised
t o find t h a t t h e B a n k o f /
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Federal Reserve Bank of St. Louis
contact with t h e Scandanavian Bank a t
2x11, T h e y a r e n o w ready t o depart f r o m their o l d policy o f
isolation a n d hook u p with t h e m a little bit.
I would lite t o get the reaction o f the members o f the
Boaré t o this v e r y rough outline t h a t I have suggested,
tie. Platt.
J u s t w h a t reason i s there w h y there should
not be established i n Englanc, a n d possibly France, a n absolutely f r e e g o l d m a r k e t ?
w
e l m e w e x a c t l y w h a t o u r cepre-
ciation was, because w e dic not send a
f F our gold out.
I t
. may k n o w e x a c t l y wheat t h e i r c e p r e c i a t i o n i s .
not k n o w w h e t h e r t h e p r e s e n t g o l c m a r k e t
o f England c a n b e
considered a free gold merket o r not. I
am afraic i t cennot.
It cannot b e exported uxcept under certain concitions.
Goyernor Strong.
in London.
T h e r e ere
c
i
n
d
s o f gold
O n e i s t h e gvulé r e s e r v e o f t h e B a n k o f mngland,
enother i s the gold which i s still hele b y the joint stock
banks, a n c they have some.
t h i r d i s n e w gold that i s
constantly arriving from the gold mines of the British
AP Lre.
A
3
s t o t h e g o l d i n t h e B a n k o f Englanc, t h e r e i s
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Federal Reserve Bank of St. Louis
an O r c e r - i n - C o u n c i l w h i c h p r e v e n t s i t s b e i n g exportec,
even
though t h e holcer o f a Bank o f xEngland note might g o t o the
4s t o the gold i n the joint stock companies, t h a t cannot
be e x p o r t e c e x c e p t b y l i c e n s e u n c e r t h e t e r m s o f a n Or¢cr-in=
Council, b%u t i t c a n b e paid o u t i f they want t o pay i t out.
PMiere i s n o o b j e c t i o n £0734.
Gold t h a t c o m e s f r o m S o u t h A f r i c e i s f r e e f o r e x p o r t t o
anyone w h o buys i t a t auction.
will grant a
T h a t is, t h s
license t o anyone, u n c e r special orcer o f the
British Goy,yernment, b u t i t i s put u p a t auction every veel:,
carrying o u t t h e ol¢c practice o f the London g o l d market,
enc i s a l m o s t i n v e r i a d l y p u r c h a s e c
b y Kothschilds, w h o a r e
a
the agents o f the South African miners, uncer/contract t h e
embraces wractically a l l o f them .
with Kuhn-Loeb ¢
T h e y ere joint agents
Co. o f New Yori, anc. they export i t just
28 you woulG o n the e>change.
T h e Netional C i t y ienk h a
purchased some o f that gold a t auction once o r twicc,
others have, a n c t h e y invéiriably g e t a n export licensc.
But, i f the regulation as-to exports generally should b e re-
imglend would uncuestionabdly lose all
It w o u l d
a l l c o m e here.
W
e woulc have
n o
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Federal Reserve Bank of St. Louis
as
reserve, because t h e profit o n exporting i t would b e the
éifference between 35.85 per pound a n c 4.8665, l e s s t h e cost
of shipping.
The point o f this discussion, Governor Harding,
really t o this, i f anything i s t o b e done along
it h e s t o b e t e e n
u p r i g h t sway.
I f it-proves
feasible t o co something and the Federal Reserve System uncer-~
teaizes t o c o it, there will appeer ultimately i n our a c w u n t s
a new item o f some kind,which will probably b e i n the form
of a foreign balance o r s t h
how i t will work out.
l
e that. I don't lmow just
‘ T h e question i s whether t h e object
to b e attai
Governor Harcing.
I t i s a very interesting proposition
that y o u h a v e m a d e a n c i t s e e m s
t o m e t h a t i t would b e worthy
of consiceretion, b u t I Go not think: thet this shoulda be
sprung o n t h e p u b l i c w i t h o u t s o m e p r e v i o u s notice.
» o n ' t you
thin’: thet a very gooc way t o bring the matter u p would b e i n
me ennuel report o f the Board a n d refer
By thet time, i f i t has been cetermined,
Feceral R e s e r v e B a n k s e
a2 plan i n h a n c a n d
are o p e n t o a p p r o v e a n y r e a s o n a b l e plen t h e t m a y b e worked.
out along this line? J u s t incorporate i t i n the body o f
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Federal Reserve Bank of St. Louis
the report.
Governor Strong.
T h c difficulty about doing enything i n
the shape o f publicity i s this:
I n the first place, w i t h t h e
exception o f t w o o r t h r e e o f t h e b a n k e r s o v e r there, t h e y c o net
S e a n c g e n e v i a n banks have n o t
know anything about this.
peen
Governor Harding.
‘ 43
you not g o ahead with your con-
ference w i t h these banis, e n d i f i t i s advanced f a r enough b y
the time t h e Roard's report i s transmitted t o Congress,
might j u s t make a
we
do not
reference t o i t i n the report. I
meen t o give i t any particular publicity a t all, b u t I think
that t h e smerican public ought t o b e some formal notice o f
tine o f action before w e finally p u t i t i n t o
eration, o t h e r t h a n b y r e a d i n g i t i n t h e newspapers.
(An informal discussion ensued, w h i c h a t the direction
of Governor Herding wes n o t reported).
Governor Strong. U n i e s s
mecting t h i s afternoon, I
Conference
i s concerned
Governor Harding.
M E O 5
e
need f o r a
thini t h a t a s f a r a s G o v e r n o r s
w e have concluded w i t h a
o f the pro-
I s there e a second t o that motion t o
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Federal Reserve Bank of St. Louis
ac.journ?
Governor N o r r i s . I
e motion,
ssconc
t h e motion.
7
boing
T
w a s unanimously
(
carried)
s h SqG u l y secondec,
whereupon, a t 12:50 pm, t h e Conference acjourncd.
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Federal Reserve Bank of St. Louis