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STENOGRAPHERS MINUTES -THE-RESERVE RANK ORGANIZATION COMMITTEE VZ DISTRICT OF FEDERAT, RF.RERVE BANK? A TO HEAD O F F IC E S ." A t ____ Austin, T ex a s.. T>ate_ February 9 , 1914. Law Reporting Com pany, Official Stenographers 115 BROADWAY,— NEW YORK T E L E P H O N E . 2 8 2 0 R E CTO R ------- ---— IJ 3207 A u s t in , Texas, >b. 9th, 1914. Hot pursuant to adjournment at 9 : 0 0 A.M . PRESENT: TTfiI 3BCRXTARY 03? THE TREASURY. THF SHCRTETARY 0 7 AGRICULTURE. APP*AKA^(TR3: FATHAK ADAVS, Exchange N atio nal F. L . ( D a l l a s , Tftxai) fo r the American Bank* FLIPPITT, (D a l l a s , Texas) for tho Armstrong P a c in g Company. HHJTRY D . LINDSI/RY, AL^CX S A W R , J. ( D a l l a s , T e x a s ). (D a lla s , R. BABCOCK, T e x a a ). (D a lla s , Toxaa) fo r tho D a l l a s Chamber o f Commereo. J. HOVAHD ARDRKY, N a t io n a l Bank o f D a l l a s , (D a lla s , T e x a s ), Texas, C a a h i e r , C ity for tho Cl o aring H o u s e A s s o c ia t io n o f D a l l a s . W. M. CRANK, (D a lla s , L O U IS L I P S i T Z , e at D a l l a s . T e x a s .) (T a lla s , Texas) fo r the C le a r in g 3208 A. H« MAT SO' , ( D a l l a s , Texas) 7**t ie r B r o t h e r s , General Manager of and Chairman of ths Railway Com*ni ttee of ths B a l ia s Chamber o f Commerce. W. R. XRIKGTON, (F ort W o rth , Texas) fo r the Port W orth C le a r in g House A s s o c ia t io n . jyy? X. GIBBONS, (H o u sto n , Texas) for the Houston P a c k in g i n t e r e s t s . L. T>AVIT)S0JT, ADOLPH B0L7)T, (H ousto n, (H ousto n, Texas) Texas) fo r for the National Bank. the Houston Chamber o f Csmmerse. C. HOGG, (H o u sto n , Texas) for the Chamber of Commerce and the C le a r in g House A s s o c ia t io n . J. L . County N a t io n a l R. C. BROTHS, (San A n to n io , ^ank o f Karnes C it y , R0K£RD3AU, (A u s t in , fo r the Karnes Texas. Texas) Vice- president of the American N a tio n a l Bank of A ustin. Texas) Page 3209 not in original document. 32X0 J s e c r e t a r y o f the T r e a s u r y : The w i l l come to o r d e r . he «ent lenien, the hearing I am poin'- to ask Secretary Houston, am la on h i a native h e a th now, to maVe the announcement fo r the Com m ittee. T ’ e S ecretary o f A p r ic u l t u r e : Gentlem en, t h is Committee ia charged with t h e duty immediately of d iv id in g the coun try into not d is tric ts le s s than eipjht nor more than twelve reserve and o f lo c a t in g in each d i s t r i c t a c it y in Which the F e d e r a l Reserve Fank ah all be l o c a t e d . T h ia is a b ro a d , lo o k at it n a t io n a l, from that economic problem . We must s t a n d p o in t . No community w i l l receive the best b e n e f i t s from suoh a measure as t h is un less t h is duty is performed in the broad n s tio n a l by t h e l a v . t ie n a s p ir it contemplated are compelled to d is r e g a r d mere conaiderar o f lo c a l p r id e or p r e st ig e ness in t e r e s t s o f the n s t i o n . and co n sid e r all the b u si The law s p e c i f i c a l l y re- q u ir e s that in s o lv ln r t h i s problem due regard be had for convenience and the custommry course of t r a d e . That f u r n is h e s tho Vey to the s o lu t io n of t h is problem . We s h a ll fam ish in g prob lem . ask the w itn esses to apply them selves to the of such inform ation as w i l l bear d ir e c t ly on that The time is lim it e d , and we d e s ir e to hear each 4 3211 s id e f u l l y and to knov Juet o f each cocjaunity a r e . B oth of us t h e in d u a t r ia l c o n d itio n s w a ll around the state, what the w ishes and internets arc quite fa m ilia r with in th ie S t a t e . We w i l l concede a and t h e a b il it y o f th estate to produce e v e r y th in ^ that the people n e e d 9 and aany other t h in g s o f that g e n e r a l c h a ra o te r . is wv at , in your judgm ent, U n it e d S ta te s bo fa r What we d e sir e to know as is concerned, w i l l best in t e r e s t s o f t h i s s e c t i o n . c o n s id e r a t io n : ^*here, th is serve the b u sin e ss That ou^ht to be the exclusive in your Judgm ent, B a n k ou~ht to he located that would best w estern section of the U uited S ta te s should be section o f the a f e d e r a l Reserve serve t h i s South and wh at d is t r ic t attached to that b a n k . I understand that there are three c it ie s that d esire to present p a r t ic u l a r sat t e re t e the Committee, and we s h a ll be glad to h e a r from D a l i a n . I mi 'ht add ju s t t h is word, w i l l co n fin e th absolves to presen tin g that we hope that g en tlea en any f a c t s in addit ion to whafr have been presented by those Vho precede t h e n . Ve do not care for r e p e t i t i o n s , and u n less gent lesion who are to fo l l o w the f i r s t fe w speakers hare In fo rm a tio n to p r e s e n t , o f course a d d itio n a l fa c ts or it w il l be scarcely J J W Wright n ary fo r them to M r . Moore: to the U*y I 3212 appear ask how much titie is to be allotted s ev era l c i t i e s ? The s e c r e t a r y o f Agriculture: We hare no d e f i n i t e allott- We hepe to h ea r the® a ll f u l l y b efo re the day ie over* m en t. Tve secretary o f the Treasury: We w ill hear Mr. Vrirht, of D allas. ST/ffEMKNT sec re ta ry o f Agriculture : T ^e nace, OV J . address M r. W r ir h t ; W . WRI M r. W ri- h t, fflve your f u l l and o c c u p a t io n . J . W . W r ig h t ; P r esid en t o f t>ie Commonwealth N a t io n a l B a n k , D a l l a s , T e x a s . The S ecr e ta ry of A g r ic il t u r e : Do ysu represent ay assoc iation* M r . w r ir v t : Lesicue, T ^e in I am chairman of the D a l l a s B u sin e ss m e n 's rt se i inr t h i s m atter. t Secreta ry o f A g r ic u lt u r e : W i l l you roceed, M r. W rirfit. M r. W r i r h t : I was only r'Oin* to say on b e h a lf of D a l l a s , thaft we would present M r. ^ehcock f ir s t , that T *e S e s re t a r y o f A g r ic u lt u r e : la a l l . You do not wish to sake « J . B . Babcock J 2 21 3 statement y o u r s e l f ’ M r. W r i r h t : No, sir; none at all. FT ATXMENT OF J . The S e c r e t a r y of A g r ic u lt u r e : n o n e , re sid e n c e M r. B ab co ck : Commerce, R . BABCOC7T. T o u a&ay gire your f u l l and o c c u p a t io n 9 J . R . Babcock, Secretary o f the Chscber of at 7 )a lla s , r e p r e s e n t in g the D a l l a s Chamber of Commerce. Gentlem en, I d e s ir e to present t h i s t e r r it o r y (in d ic a t in g on map h ere produced) . The t e r r it o r y c o n sis ts of all of Texas, and a l l o f Oklahoma, that part of ell ofK ev Mexico L o u i s i a n a which i s west o f the M is s i s s i p p i H i r e r , 84 per •* n t , e f the and that part o f Arkansas which i s Arkansas H i r e r , 45 south and west per cent o f A rk a n sa s. We h a r s drawn a memorandum on the side h e r e , which g ir e s you the percent ages o f the d if f e r e n t r l t a l f a c t s in that te rrito ry . It includ es 1 7 . 4 per cent o f the area of the U n ite d S t a t e s ; 8 . 2 per cent e f the p o p u la t io n ; 1 2 . 6 per sent o f the n a t io n a l b an k s; 1 0 . 2 per cent o f the st ate W ik s ; 1 3 .9 le s t you per cent o f the may t h in k that annual farm p ro d uctio n; and all the productio n in the t e r r ito r y J J . R . Babcock 3214 la farm p r o d u c t io n , I c a l l your a tten tio n to tho fact that tho fa c t o r y production lo $ 4 8 5 , 0 0 0 , 0 0 0 . T h is ment It s ectio n h as boon d esig nated by the f e d e r a l Govern as tho is west south c e n t r a l d iv i a i o n , an econoalc d i v i s i o n , c o r r e l^ lo n of its for census pur oses. and made so on account of the in d u s t r ie s , tho hoiaogenlty of its people and the lnterdepence o f i t s i n s t i t u t i o n s . tory has always b een set o f f that t e r r it o r y *by itself. T h is t e r r i Without New Mexleo is desig nated by the r a ilr o a d s and approved by the In t e r s t a t e Cobbs roe Comirlsslon as t v t Southwest S l a a s i * flo a t ion t a r i f f t e r r i t o r y . I c a ll your and the r u l f a ttentio n to the n a t u r a l b o u n d a r ie s , Mexico and tho r iv e r — The s e c re ta ry o f l#r. Dabcdok. J u s t omit M r. flabcoc c: t e rrito ry 4 1 .8 ¥o are faesiliar with that* he b o u n d a r ie s . Our greatest points in regard to t h i s aro in th ese f irures h ere on the le ft of the map; per cent states A g r ic u lt u r e : o f tho annual cotton production of the United is r a is e d in t h i s t e r r i t o r y ; 4 4 . 5 per cent o f the al oottonseed produotlon o f the U nited S t a t e s , to the amount o f $5 4 90 0 0 ,0 0 0 , greater than the en tire Wheat crop of M in n e s o t a . 9 .7 per cent o f the annual live stoek annul* J J . B . Babccclr 3215 4a .8 per cent of the a n u a l cotton experts, p r o d u c tio n ; which b r ln r s to this country 12.6 psr cent of ?h« totCL • z .fr t e of the United States, brln^infr the balance of rold of this t e r r i t o r y . in f a r o r **rom e com p etitive standpoint plsass note this lin e here (in d ic a t in g ). The points on t h is lin e bets* sn St. the t s r r ito ry nearer S t . tle L o u is and r>allas. c o m e r o f O klahom a. There is no portion of Louis than D a l l a s , except that l i t T h is lin e h ers represents the 12 hour d is t a n c e by r a i l frssa 'n a ila s , s id e can be reached f ceded that than to that is all points th is a lia s in 12 h o u r s . It w i l l bs con a ll the b a l ance of t h e country is nea rer D a lla s any o th er p o in t . p o p u la tio n is w ith in th e rs are equi-distmnt Notice that the congestio n of the a r a d iu s o f 2 0 0 b i l e s o f D a l l a s , and are more people w it h in 100 m iles of D a l l a s than there are w it h in 1 00 m ile s o f T an s as C it y , la c k in g 1 >0,000, as w ith in 100 m iles o f S t . L o u i s . s o u r s s , you a ll know we are not out h e r e . and very nearly W ith in the a ll sage brush as many » Of and cactus parcel post cons, w it h in approximately 2 0 0 m ile s rad iu s there was a po pulation o f 2 ,6 2 3 , 2 0 2 in Parcel thsrs Poet Zone 2 , arm 3 , 6 9 1 , 0 6 3 p e o p le , and w ith in 2 00 m iles of D a l l a s , which i s 4 7 . 4 per cent o f the popu- J J R B bcock 3216 1st ion of the pr posed d i s t r i c t , per cent o f the t o t a l 2 0 .3 in the sane t e r r it o r y while constitutins but The mlue of t h e f a r * lauds area. according to the last census f ig u r e s , was more than tve combined c a p it a l o f a l l 4 he banks trust and In the U n ited S t a t e s . con psn les I want to c a l l a tten tio n to the growth of the t e r r it o r y , p a r t ic You larly, are b u i l d i n ^ future. eent and the f a c i l i t i e a *he future ror fo r reaching the t e r r it o r y . and we are b u il d in r fo r the Tho average growth of the United S ta te s was 21 per in p o p u la t io n , e h lle the average growth in the t e r r i tory was 39 per c e n t . The growth In wealth annually was 8ft.9 per c ^ n t ; one b i l l i o n d o lla r s the i s $ 8 8 ,9 0 0 ,0 0 0 in o t ^e r words, on t h e b a s is of annual production o f that te rr ito ry a year. Tho number o f banks in crea sed per c e n t , and population in the last ten years 454 and the t o t a l d ep o sits o f those ban\s Increased 510 per c e n t . T hese l i n e s n t h e nap show the d is t a n c e s from the towns that h are been considered T h is is and are to be c o n sid ered . all >fith r »fe r «n c p to w a l l a s . Tou w il l please note that o f course D allas is tho oentre o f a ll tho t e r r it o r y s u rro u n d in r i t , but is it other a lonp way from Bow O r le a n s to J R ^abcdok X I Paso Hud from S t . h a l f way, • 3217 Louis to X I Paso. and o c c u p ies Dallas is about a geographical lo ca tio n there that serve that t e r r it o r y p r o p e r ly , and I t h in k we can produce the f a c t s to prove that ■nallas is the proper lo ca tio n . I would b«» <*lad to supplement th is, if there are any other q u e s t io n s . T*.« s e c r e t a r y o f A g r ic u lt u r e : Upon what theory do you In clu d e Oklahoma? M r. B ab co ck : Ve Include it < “irst on the ground that the country south o f the riv er was s ettled from Texas secreta ry of A g r is w lt u r e : The regard to the c a jr se of t r a d e . an*!— Vs are compelled to h*rre F a r e you any expressions from the b u s in e s s sen and b a ik e r s of Oklahoma that they d e s ir e to be attached to D a l l a s * Mr. ® abeock: Yes, s i r , M r . L i p s i t s h as that in f u l l d eta il. The sec re ta ry o f A g r ic u ltu r e : M r. Ths B ab co cV : And from Mew Mexico? Yes. s e c r e t a r y o f A g r io u lt u r e : To what extent is the trade in t h is d ir e c t i o n * M r. Dallas, BabcocV: We show that *e travel 657 men out o f and in trade relations sell $4 4 ,0 0 0 ,0 0 0 * that J J . R . Be 3218 te rrito ry . The S e c r e t a r y from tho se That o f A g r ic u lt u r e : st.3tes that they d e s ir e to be attached to D a lla s ? t h e i r trade i s in that d ir e c t i o n , Hr. Babcock: The You mean s e c re t a ry o f A g r ic u lt u r e : han k ers o f those I What expressions h<sre you M r. -*abcoc : and from L o u isia n a ? the ha n ks’ from From the b u sin e ss men and states. I h a r e not any e x p ressio n s from the b usiness ■en in that t e r r i t o r y , except that they do t h e ir tratiinr in T alias. > The s e c r e t a r y o f Agr i c u l t u r e : Tou h *re annexedit without c o n su ltin g them9 M r. T^e Babcock: Tes. Secret sry of A g r ic u lt u r e : And without co n sid eratio n as to Where t h e volume o f t h e ir trade goes and what t h e ir b an k in g r e l a t i o n s M r . *»abcoe>: »re? H o, w# hare t ^ e i r b u s in e s s r o e s , The considered where the roluae of and hare s t a t is t ic s on that p o in t . s e c re t a ry o f A g r ic u lt u r e : From th* ir joint of riew or yo urs9 M r. 'oabcocv: The From t h e ir point o f riew and o u r s . Secretary of Agriculture: But you have no expressions J R Babcock J 3219 fr o n them . M r. T>abcocV: Rot *Toin *he b u sin e ss mtnt except in & few is o la te d c a s e s , which w ill cover "he t e r r it o r y , ws thin The secret ary of A g r ic u lt u r e : s ev era l other p la c e s that . We had expressions in Oklahoma d esired to «ro to the north. M r. B ab co ck : A ll o f Oklahoma? Tbs s e c r e t a r y o f A g r ic u lt u r e : Pra ctica lly , and that new Ifexlco d e s ir e d to go to t h e north or w est. H r . pabcock: from the people well, we cannot show by d e f in it e expression in that t e r r it o r y that they want to be a llie d with D a l l a s , o f the way but ws can show that the greater portion state is d ir e c t l y connected with D a l l a s in a trade and is more convenient to D a l l a s . Any fa c t s you hare showing T^e s e c r e t a r y of A g r ic u lt u r e : that the current o f t h e ir trade sets southward, o f course, ws would be priad to h a v e . I M r. nabcosk : We hues t h a t , I t h in k , in very rood shape to f i l e . <*T«rFMBNT 0 * M . 1?. WOLFE. The Secretary of the Treasury: W i l l y su rive your nams, 3 220 M F Wolf* residence and occupation* Mr. W olfe: V . F . *o lfe ; I sc in the cotton export business in D allas, and also rice president of the Guranty State Bank ft Trust Company . Tho secretary o* the Treasury: Tou know the problem we hacro, of dividing the country into d istricts. Wo should be glad to hare your views. Mr. Wolfa: I want to give information specially concerning the question of cotton, beaus* that is ny business. The secretary of the Treasury: With relation tothis p&rtim cular district? Mr. Wolfs: With relation to this particular diatrict, yes, s i r . The secretary o^ the Treasury: Mr. W olfe: Proceed. Wo have in that district there as laid down within 12 hours ride of D allas, practically 49 per cent of tho total cotton area of the south. Wo hare in the south a total cotton area of 89 2,00 0 square miles and the nres in this territory laid down there is 437,794 miles, making 49 per sent. Last year our total cotton production, according to tho census of the United States and some other facts I hare here was 1 4 ,1 0 4 ,0 0 0 bales, and wo produced in this IT H Wolfe J 3221 territory 6 ,8 5 7 t000 bales, or 48 1/fe per cent of the total production. The secretary of the Treasury: Give us aomefacts with reference to the tot si production hsndled in Dallas. Mr. Wolfe: Last year the Dallas cotton buyers bought 1 #4S9 ,00 0 bales. Tha secretary of Agriculture: How does that compere with woust on* Mr. Wolfe: I bare the figures from Houston, in fact all o ' the cotton c i t i e s . ambiguous, and The Houston figures are rather I w ill c a 11 your attention The secret ary of the Treasury: at. Are they any moreso than D a lla s 9 Mr. Wolfe: Yes, sir. The « ,«scrttajgry of Agriculture: Does that coce from the 1 fact of the difference in the figures* Mr. Wolfs: No, I am t akinc* these things fron Mr. Shepperson* s book, iflio is tbs acknowledged statistician of cotton statistics of the world, he is the acknowledged suthority. The Secret arji of the Treasur : wsli as the Dallas f i b r e s ? Did he nakf the Houston as I H Volf* J Mr. W olfe: w 3222 tade the Houston figures^ and ws haTt the firures her* to 'back up the Pal lac fifu res. The Houston figures are 1 ,3 8 1 ,0 0 0 bales handled last year, but opposite thslMF Fhspperson puts a star, i*hich refers down to the foot notes, which scgre— Ths Secretary of the Treasury: Mr. Wolfe: Yes, s ir , Is it a Lone Star? a tone Star, which say a that ths Houston figures Include f . o . b . cotton; that near.s fres on board the cars passing through Houston, bourht by Dallas buyers, perhaps, and roin^ through Houston to ftalteston. is the reason I say Th they are aabipuous, because they do not represent ths purchases in Houston, but the cotton passing through Houston. Ksw r.rlsans is tl* t ext cotton centra of the south— Ths *ocretary of the Trsasury: What does he aay ab^ t Dallas9 Mr. Wolfe: Mr. Shspperson did not h sre ths facts of wallas, bscause our year «*o, Cotton Kxchsnjre was just organized a and this is the first year ww hare p t up facts. Ws ars posting our purchases last year for ths first time, and that was not put in his report at thst t i* e , bee suss J M H Wolfe 3223 it v a i not on record. The Fecretary of tho Treasury: Toll us how that crop was fin anced*' Mr. W olfe: About 1 8 0 ,0 0 0 ,0 0 0 of that 192,000,000 wan fir* m.ced directly and indirectly by Dallas banVs. The Secretary or *he Treasury: Toll us the procedure, tie method by which it vas done9 Mr. Wolfe: Tho procedure was that the buyers bourht thio cotton in Oklahoma, Arkansas, Louisiana and Texas, largely fare drafts on Dal 1 as in payment for i t . and We do that practlca ly on all of our business, except in some eases whore wa fire them Now YorV ?:xcbanre . The secretary of the Treas ry : financed? They wore re-financed here. Mr. Wolfe: largely, Wherefore those drafts Y es. sor.e in Wo sell foreign exchange in Wew York Chic afro and a little in Philadelphia, The secretary of the Treasury: Mr. Wolfo: prooeod. How, in Oklahoma wo handled from Dallas l&st year of tv>* Oklahoma crop, I want to tire you thosa figures as they mirht be interesting to show that D a lla s, really is in the centre of the cotton trade and is handling a large percentage of it , wo handled of the Oklahoma J M If Wolfe 3224 233,000 baits lrjt year. The Secretary of the Treasury: What was the total crop of Oklahoma* Mr. Wolfe: 1 ,0 5 7 ,0 0 0 total crop. T*e secrttary #f the Treasury: And you handled about 23 per cent9 Mr. Wolfe: Yss, that le free Dallas, you underat and— The Arkansas crop south and west of the Arkansas River, we h aid led last year 4 7 ,500 bales in D a llas. The Secret cry of the Treasury: Mr. Wolfe: What percental is that? Arkansas raised 505,000 bales went and so ith of the Ar Vans as River. T>iey raised about 800,000 bales tot si, but south of the river about 5 0 5 ,0 0 0 , according to the figures. The secretary of the Treasury: Tou handled about 9 per cent of that? Mr . W o lfe: Y es. In Louisiana ws handled last year 1 6 f000 bales from Dallas. T'le Secretsry of the Treasury: What was the total in Louisiana * Mr. Wolfe: 3 9 3,00 0 bales. The boll wssril has eaten then up and thsy have not raised such in three years. Of the •* . ■« f~ . =* r * - —--- V H -- — - ----- --- -r w— Volf# ~ 3226 Tsxes crop wo handled 1 ,1 6 2 ,5 0 0 bales froj B alia s. Tho Secret wry of the Tresairy: Mr. Vo l f t : Out of a total of 4 ,9 0 2 ,0 0 0 bales. The secretary of the Treasury: Mr. Volfs: About 25 per cent. T ss, a little orsr 25 per cent. fro® this district of the south. Out of a tot el of ehat? Vs export about 66 per cent of the total export crop Tou understand, ws only ralss ebout 49 per cent, but east of the river they use it in their own s i l l s . The Secretary of the Treasury: Vhat is the percentage of export fros Dalles alone ? Mr. V o lfs: *bout 90 per cent. The Secretary of the Treasury: Mr. V o lfs: The Mr. Of this district? Of this district 85 per cent is exported. Sscretsry ot the Treasury: V o lfs: Vrosi rall&s? Hot frsx Dalles, but fros; ths whole territory T ve Secretary of the Treasury: You spoke of the total and I *suld like to know what percentage of thst export is handled through Dallas* Mr. V o lfs: led through Vs export about 90 per cent of the crop hand D a lle s, end the total eyx>rt fros this district is i*bout 66 per ce n t. The secretary of the Treasury: E xa ctly . How of that 86 * . H . Wolfe 3226 per cent, how much of it Is handled through Dallas? Mr. W olfs: of 6 ,8 5 7 ,0 0 0 . Wo handled, .I t as you see, 1,459,000 bales out is a question of calculation as to the per c e n t. Tho Secretary of the Treasury: Take those figures and you can reduce it to percentages. Ur. W olfe: Yes. Now, as to our uniform needs of mouey, that is one point X supposed would be interesting, as to our beeds for financing this crop. As you know, t^e cotton crop is the one ws hare the most trouble with in financing in this country. South Texas begins their movement along in July, and by the 1st of August they are in full operation in South Texas. We handle our South Texas crop practically by ths 1st of October; it is nearly through down here, of oourse there is something do in 7, but not much after the 1st of October. Then we more our Sout>i Texas men up to Oklahoma and Arkansas. Thsy begin up tfcere about the first of October, and about the time they close up in South Texas, so * we can take the same money and the same financing and handle the South Texas crop and the Oklahoma, and Arkansas crop, asking it a uniform demand so far as the demand is concerned• / * II W Wolfs 3*27 Aside fro* the total value of the cotton produced last year in this distric t, taken froic actual figures, I took off fro * c r books 11 5,000 bales to see whet it vould averse g a bale, and it arc raged a little over $43 a bale. At tbat ratio the cotton orop in this proposed district comes to $ 4 3 1 ,9 9 1 ,0 0 0 • The ror seed is worth $€ 8,570,000 in the same territory. The Secretary of the Treasury: Then you hare about 'jC $ 5 0 0 ,0 0 0 ,0 0 0 in the value of the crop and the seed? Mr. Wolfe: seed together. Yes, a little over $ 5 0 0 ,0 0 0 ,0 0 0 in cotton and It does not include nanufactured seed, you understand, which is worth a little sore. The secretary of the Treasury: Mr. Wolfe: The secretary of the Treasury That is the raw seed? Thai ic the raw seed. How what is the extent of the period of the year over which the e tire crop has to b financed9 Mr. it, W olfe: It haa to be financed, the principal part of In about four conths. The secretary of tha Treasury: Mr. Wolfa: Beginning *hen? Beginning, you al?ht sa®r, the first of * September and endiiig with the fira t of January. That la J II H Wolfe 3228 the heaxy period When finances are needed the worst. o&id, the South As I Texes orop is being financed when the other pert o f the territory is not neediife? sny funds. The secretory of the Treasury: What other crops in this tsrritory hare to be cared for during that ssro period? Mr. Wolfe: Mot much. The fr*it and regetable crop is sarketed in thespring before this comes on. is a little ea rlier, in the su-naer tis.e. The grain crop The cotton crop is the sain crop which has to be financed during these four aonths; practically no other needs financing. The lire stock Is unifora all the year around. The secretary of the Treasur : What is t - s next biggest h crop, liwe stock or anything olss, In this territory out lined on the asp? Mr. W olfe: Wo hare the figures there that w ill be pre sented a lit tle later, that show those points. Another man has those figures and they are in a little book we hare there but I hare not it before ao. T^e pecretery of the Treasur/: That is all, Mr. Wolfe. J JH Ardrey 3229 STATKMEIiT Of J . H. AHDPJSY. The Secretary of the Treasury: Pie set state your full naae, residence and occupation. ! Mr. Ardrey: J. Howard Ardrey; Cashier of the City Kalional Bank of Dallas, and representing the Dallas Clearing House Associatlen Committee. The Secretary of the Treasury: You rg$r proceed to tell us the specific reasons, in addition to thos presented by the map It s e lf, which contains the stcftlstics, why you think this district should be created. Mr. Ardrey: Mr. Babcock has already mentioned to you the facts showing the integrity of this district, that is to ley, that it baa certain natural bou darles, and there has been-The Secretary of the Treasury: Yes, you need not go orer that cround araln. Mr. Ardrey: In the location of these regional banks, I take it for granted that the idea is to locate them according to the banking needs of the country, and primarily the service that each one of these banka is gding to render to the territory within which it is located. The law eontem- J . H . Ardrey 3230 plates end It haa elreedy been indicated by you gentlemen that in the location of these ban Vs yr spire primary con sa sideration to the district, first map out the district, and after you here sapped it out, to locate within it the eity that can best eerrs the district. The secretary of the Treasury: The law s*ys we must hare recard to the convenience and customary course of business. Mr. Ardrey: I understand that. The secretary o f the Treasary: Mr. Ardrey: In laying out the districts? Yes. The secretary of the Trsaaury: Now tell us why you select thia particular district or lay it out, with reference to that mandatory requirement of the Act. M r . Ardrey: Y es. Now, with particular reference to Texaa, you gentle men ere familiar with the fact that of the capital and surplue and deposits of the national banks of the United States Texas is seventh in cap it el end surplus and seventh la individual deposits. Within the district we have mapped out here, ae you w ill see on paste Humber 8 , there are 943 national banka with a capital and surplus ef $ 1 0 7 ,0 0 0 ,0 0 0 . It Is able to support a hnk having a J F Ardrey capital of $ 4 , 5 0 0 , 0 0 0 , 3231 and *ould hare deposit* of $ 3 1 2 ,0 0 0 ,0 0 0 . The Sacretary of the Treasury: Now wa hare those facts, but what I want you to address yourself to is the convenience and custoaary course of business in this district, as indi cat inf that tha district that is there outlined should be created and that T>aAlaa should be chosen as theheadquartera of tha bank. Let .^e aak you a few queations. In the first plaoe, upon what assumption as to tit number of reserve die* tricts to be created hare you laid out teis district? Mr. Ardrey: T^e secretary of the Treasury: Hr. Ardrsy: Tsn. There are the others? Tbs others would be located in Boston, in New York, in Chicago, in Cleveland, in St. Louis, Minneapolis, ---- ---- — « »« * i san Francisco and Atlanta. The secretary o* the Treasury: Mr. Ardrey: Yea, And Atlanta? and the location of them bein^ largely detaralned as indlcat ire of the co rsa of business, by the capital and surplus of the ban'rs. The secretary of theT reaau ry : Mow, in laying out thia district hare you aiaply arbitrarily aasumed a district in order to get the required c apit alization, or hare ycu J J H Ardrey 3232 considered it with reference to the mandatory provision of the Act thst the convenience and customary course of husinsss in the district should be the primary considera t io n . Mr. Ardrey: Unquestionably in all of Texas the course of business would be within its own borders. Oklahoma, Louisians, So far as and Hew Mexico are concerned, we hanre mapped it out on the basis that wherever this bank should be located it would be hnks. s question of service t o the member If you concede s district that is earable of beln*? self-supporting and capable of meeting the requirexet s , then it is a geographical question of the location of the bank for the service to the member bnks in point of time. Ths oecretary of the Treasury: Mexico. Let us begin with New To whst extent has New Mexico trade relations with Delias* Mr. Ardrey: As to bankin* relations, primarily ttheir business would c o to Kansas City. r ever, have s number of accounts. The ^allas beaks, how have accounts at Carslbad, Clovis, Roswell end Albuquerque. The secretary of the Treasury: accounts? Vhat size are those % %; . -• •• • • • • ' “ | \ j . J. J . Jf. Ardrey. 'Jr. Ardrey: 3233 They ere quite considerable. In doll ere and c*nts they would not be so significant, and yet— THo Secretary of Agriculture: What extent have you consulted the ffew Vexico business .*aen and bankers? •ir. Ardrey: Speaking fro* a banking standpoint, we have not consulted the Wew Mexico aarehasts9 but I do know that a nu-eber of Kew Mexico bankers .prefer a location in Balias as fir s t choice and certainly they would as acond choice. Of course, the problem ef ^ew Mexico is to locate t h i n sone territory nh*re they can be properly served, tHat can furnish capital enough to support one of the Hmrisnal Banks. T>»e secretary of the Treasury: The question of the customary course of busineas in Sew Mexico one of the aoet vital importance. i a , of course, Business and exchange ssem to have direct relation with et»cb other; tanking transactions Indicate business relationships, 'fhe testimony presented up to this time before this committee is that Kew Mexico9s trade relatione are not in this direction. Mr. Ardrey: I think in a measure that is true. Of coursa* all of the Pecos Valley of Tfaw Mexico cornea this way. The Secretary of Agriculture: We have had representatives a J J* H* Ardrsy. 3234 from tha Pecos Valley asking to be attached to Kansas City* Xhs Secretary of the Treasury: And stating that their trads is mostly in ^hat direction, front Roswell particularly. Hr. Ardrey: They mnted to go to Kansas City? The Secretary of the Treasury: lfr. Ardrey: Y es. So far as trade relations are concerned it mifrht be possible that that is true. So far as the banking relations are concerned, we are assuming that out of a Regional Bank located in Balias they can be served as well i f not better than from Kansas City* The Secretary of the i'reasury: Mr* Ardrey: In point of time* Well, why? The banks in ew Mexico, of the 45 national banks in New Mexico, are closer to Dallas in point of train service and otherwise than they are to Kansas City* The Secretary of the Treasury: Are you not mistaken about ■at? The Secretary of Agriculture: Suppose they say differently, which view must we take, yours or theirs* lfr* A u d re y : I think t h e i r s w ould be c o r r e c t * The Secretary of the Treasury: To what extent do the Naw Mexico banks carry reserves in Dallas? J. H. Ardrey. Mr. ‘rdrey: I 3235 »hink they have about 10 accounts in Balias out of Vew Mexico* The Secretary of the Treasury: What inducements do you hold out to banks for ths deposit of ressrves, the keeping of reserve balances in Balias, what rate of interest do you p«y* Mr* Ardrey: We pay th»m 2 per cent on their average daily balanees. The Secretary of the Treasury: 'fr. Ardrey: Ho, sir. B© you collect checks free? There may be soae small banks that do, but I think it is conceded by all who have accounts in Baglas that the Bellas bankers pay then on the basis of 2 psr cent and give them the bensflt of such par fa cilities as we have. The Secretary of the Treasury: I notice that the Dallas banks have reserves of other national banks amounting to $3 ,3 9 2 ,0 0 0 , total reserves of other national banks. Mr. Ardrey: Reserves of other national banks? The Secretary of the Treasury: Y es, that is according to the statement of the Comptroller of October 21st, 1913* AOtal banking capital of Balias # 3 ,4 0 0 ,0 0 0 , and surplus # 2 ,5 0 0 ,0 0 0 . That makes # 5,9 0 0 ,0 0 0 capital and surplus. J J. H* Ad ray. Vr. Adrey: 5256 Yti. TVs Secretary of the Treasury: I sse you *ave included in How taking Oklahoma, which this district, to what extent do the Oklahoma banka keep their reserves in Dallas? > tr. Ardrey: Hot largely. I think perhaps they have more bank aocounts with Forth Worth than they would with Dallas. T 'e Secretary of the Treasury: A i a matter of fact they keep very lit t l e of their reserves in Fort ^orth or Dallas, io they not? Vr. Ardrey: Hot so much as they do at Kansas City. The Secretary of the Treasury: Vr- Ardrey: And St. Louis? And fit. Louis. The Secretary of the Treasury: The normal course of their business and of their exshanges is with Kaasas City and St* Louis, Is it not? # Wrm Ardrey: Primarily, y e s, sir. Of course, you will bear in mind-The Secretary of the Treasury: Have you consulted the Oklahoma bankers at all about their desires? It . Ardrsy: *es, sir. The Secretary of the Treasury: To what extent have you J J . H. Ardrey . 3237 any indications of prsference on their parti Hr* Ardrsy: I found this, when I came to discuss the matter with them, thst there was a confusion in their minds as to just what they should say. The department at Washing ton, in preparing for these hearings, asked the Oklahoma bankers to appear at Kansas City, and they asked the Arkansas hankers to appear at St. tj o u 1 s . They appeared there, and so far as sush testimony wcs given, It was perhaps favorable to Kansas City and St. Louis. But it i s a fact that they were influenced largely by the consideration that inducements were held out to them, particularly by St. Louis, of a large district in connection with the clearing of their country checks. Vow it has been represented, and I make this state ment merely in answer to your question, that not only to the banks in that district but also in Texas, that unless they to into a district with St. Louis and have a large district, their items on points not Within the district shall be taken for collection only, and i f they have an item on a member bank in Clinton, Missouri, for Instance, unless they are in a bank with Clinton, Missouri, they cannot get immediate credit for it . They have made that representation to the J J. H. Ardrey. 3258 banks not only there but in Texas. The Secretary of the Treasury: Have you any circulars or letters which indicate that such a representation has been isadet tr. Ardrey: Yes, sir, I hare a telegram which, on the ere of this hearing, was sent to all the banks in Texas and Oklahoma. The Secretary o f tfte Treasury: ilr. Ardrey: Just read it . It is addressed to the City National Bank of Dallas: "?or successful operation Federal Reserve Banks should have first large territory with diversified crops Raking seasonable demands at different periods of the year assuring accommodations when needed. 8econd, branch banks managed by local directors conveniently located in your state to re discount furnish currency and handle your items on entire district for immediate reserve otherwise for collection. We believe territory outlined by St. Louis meets all require ments and trust you will consider favorably placing our n«ae fir st on your request for location of bank to Organization Committee. * J. H. Ardrey. The Secretary of the Treasury: Hr. Ardrey: By whom is that signed? By the 3 t . Louis Clearing House Association* The S e cre tary o f the Treasury: Mr. Ardrey: 3239 What date? February 3rd, 1914, and it was sent, there is one to Dallas (handing paper) and I have one in n hand sent jy to he City rational B nk of Whichita Falls, who were kind enough tc sent it to me, from other banks. ind I have seen dozens of them I think every banker who will testify here today, i f you will ask him, will say that he got a telegram also* The representation is that only within the district in which we are located, may our items be received for immediate credit and reserve* The Secretary o f the Treasury: I presume that all the bankers, however, hsve read the federal Reserve Act and they are not going to be guided by the interpretation which some body else puts upon that Act, but by what the Act expresses. They will he influenced more by that than by this telegram, I »<*an, w ill * . I Ardrey: they not? I think it is fair to sty that these bankers have accepted the interpretation that St. Louis has put upon i t , at all event, and have been influenced largely in the matter by that consideration* J. H. Ardray Ths Secretary of the Treasury: 3240 V e il, you have not accepted it. Vr. Ardrey: I have not, no, but I know this to be the case. The Secretary of the Treasury: How can you assume that others who have testified have accepted it? As a natter of fact, the testimony we have had from Oklahoma and these other places ante-d&tes this telegram. Vr. Ardrey: But you will rsw sbcr tha i prior he St. Louis and Kansas City hearings those gentlemen up there canvassed the. sou lowest by committee, making these same representations to the Clearking House Association. They cams to Dallas and made those representations, and I happen to know they went to other reserve cities in Texas, Oklahoma and Arkansas, making the saie representations. T*e Secretary of the Treasury: Those telegrams mi^ht be put into the record. Ths Secretary of Agriculture: Aside from that, what has h**n the bearing of the present course of trade in those j communities? The Hecretary of the Treasury: I Between Oklahoma points and ^ all as? Ths Secretary of Agriculture: To what extent do Oklahoma J J . H. Ardrey. 3241 bankers look to Dallas as the financial centre, aid to *hich their trade now trends. Mr. Ardrsy: you Wot now mo -ouch, perhaps, Mr. Secretary, but ill bear in mind that for 50 years St. Louis has been a central reserve city and only sines 1902 has any part of this section had a reserve city located within it; Muscogee City and Oklahoma City only within the laBt two or three years, and Dallas and other Texas cities since 1902. Within the 50 years naturally they have formed banking relations whi di could not have been formed anywhere in this territory on account of the reserve requirements. And I take it for granted, in the consideration of this question, it is to be supposed, instead of concentrating these reserves in the three central reserve cities as heretofore, for the purpose of that this Act is decentralization. The Secretary of Agriculture: districts under the law, We are bo u n ^to have eight so you need not discuss that. The Secretary of the Treasury: And there will be a de- centralisation to that extent. The Secretary of Agriculture: Have you any communica tions on the part of the Oklahoma people indicating their preference. J. tfr. Ardrey: r Ardrey. . 3242 Ko, but I do know it to be a fact that so far as bankers are concerned they oould be served out of Balias as well as they could from any other city, so far as the service in handling their items is concerned, and eo far as th^ir beerowing requirements are concerned. ^e Secretary of Agriculture: There again, suppose they say the contrary? Vr. Ardrey: I f they should say to the contrary, of course I could net refute their statement. But here is the fact about that. I f you have a federal Reserve Bank within a given district that is self-supporting— The Secretary of Agriculture: Yes, but the district is the main thing ju st now. The Secretary of the Treasury: The district is the chief consideration. M r- Ardrey: part of Of course, you will concede that Texas is a any district in which it is to be located. In mapping out the district which we have, Texas furnishes |76,00C ,0C0 of the capital and surplus of # 107,000,000 of the district we have mapped out. I t would be impossible in locating these districts to give every fellow what he m n ts, but certainly the aajority of the 519 banks in Texas would have J 3243 consideration ftiven to their preferences as well as the 400 hanks with only # 31,0 0 0 ,0 0 0 of capital. The secretary of the Treasury: I may zaj now, you must not draw any inference from the questions we ask* You must not construe them as indicating any opinion or bent of mind on our part. W« have to ask those questions in order to draw out the facta, so you may assume we have no preconceived notions about this matter, we simply want to get all the information possible. Mr. Ardrey: I understand. The Secretary of the Treasury: How, coming over to Arkansas, you have a large part of Arkansas ttrB Ardrey: in this district. We have taken in such part as a bank at Dallas could serve within 12 hours. The secretary of the Treasury: What is the customary course of business in that district; where does it tren4 ? Mr. Ardrey: Primarily to St. Louis* The secretary of the Treasury: Mr. Ardrey: Primarily to St. Louis? The present customary course of business. The Secretary o f the Treasury: Why do you include that in the Dallas district? Mr. Ardrey: Because we can serve them with a Ke^ional F J. H. Ardrey, 3244 "Bank under the new law better than St. Louis could s-rve them. The secretary of the Treasury: just about th•» same as Texas? I a their seasonal demand It is largely cotton product ion in that territory? Mr. Ardrey: there. Thsre is quite a great deal of diversity up They have apples and — The Secretary of the Treasury: But the principal crop is cotton? Mr. Ardrey: But the principal crop is cotton. The Secretary of the Treasury: You take all Of Louisiana exeept Mew Orleans? Mr. Ardrey: Yes, sir; we take all west of the Mississippi Hiver. 'J>e secretary of the Trsasury: Mr. Ardrey: Why we do not take New O r g a n s ? The Secretary of the Treasury: New Orleans. How do you explain that. No, why you uake all except T)on* t you think well enough of Xew Orleans to include that? Mr. Ardrey: Wall, we do not, no, sir. We take in Louisiana, of course, on the assumption there will be no J J. H. Ardrey. bank located at 'Tsw Orleans. not, of course, 3345 If there should be, ve would take in Louisiana) but we take everything west of the M ississippi River on the assumption that there will not be one at New Orleans, and Dallas can serve all of this part of Louisiana better than any other The Secretary o f the Treasury: that business in that territory, city could. What is the course of to Dallas or TTew Orleans or nor thward* lfr. Ardrey: From the northern part of Louisiana Dallas gets lots of business. The Secretary o f the Treasury: Cotton business princi pally? Mr. Ardrey: Yes. While Dallas cotton men buy a %reat deal ih the northern part, naturally in the southern part thera is not much in amount, but most of the business goes to Hew Orleans. The Secretary of the Treasury: Does the general course of business in this distriot trend toward Dallas ? Mr. Ardrey: So far as southern Louisiana is concerned it does not. The Secretary of the Treasury: ¥r. Ardrey: And northern Louisiana? Northern Louisiana more so, but perhaps J J* H. Ardrey 3246 northern Louisiana would < o nore to St. Lo|£Ls than to $ D alla s, so far as the trade is concerned. T^e Secretary of the Treasury: To what extent do these Arkansas and Louisiana banks now keep reserves in Dallas? Hr, Ardrsy : Wo have accounts in Dallas from Shreveport and Alexandria, Louisiana. Secretary of the Treasury: Ur. Ardrey: Only* The Secretary of the Treasury: Wr* Ardrey: Only? And in Arkansas? We have an account with L ittle Hock, and son* s f the banks in Texarkana and some few towns there. The Secretary of the Treasury : You have no expression of opinion from the banks or business men in this territory as to where they would lik e to so? Vr* Ardrey: I think, i f I may give an opinion, the si ana banks, from state pride and so forth, wou Id iress a pr^ferenc* for tfsw Qrlaaas. 'hs Secretary of she Treasury: fr. Ardr?y: I And Arkansas* vhirik they have already expressed a f^rence for St. Louis. The gentlemen who have been b*fore you hare been principally bankers, and their con nections have been with the 3t. Louis banks for 50 years, J J. V. Ardrey. 32 47 under tha old lav, by which it was a central reserve city. There ia no reaerve city in Aifeansas, and they have been compelled to keep their reaervea in St* Louis. Tha Secretary of the Treaaury: Tell me Where the ?)allas banka keep their reaervea? vr. Ardrey: reaerve city. Ve are required to keep them in a central 57 per cent in Few York» 23 per cent, in St. Louis and 2p per cent in Chicago. T^e Secretary of the Treaaury: Ia the bulk of your bankihg buaineae here with Wow York? Vr« Ardrey: Our aalea of counter exchange, so far as that •ai^ht be an indication, 93 par cent of the exchange ws sell to our cuatomera for payment of their bills ia on Sow York, 5 per sent on Chicago, and 2 per eent on St. Louia. ro far aa our outgoing iteme are concerned, within a given period we aent out of <*188,000,000 of outgoing itexaa out of the atate $ 8 8 ,0 0 0 ,0 0 0 to New York, which ia 47 per cent, $ 4 1 ,0 0 0 ,0 0 0 to St. Louia, or 22 per cent, # 23,0 00,0 00 to Chica<re, 12**l/2 per cent; $1 0 ,0 0 0 ,0 0 0 to New Orleans, which was 5 per eent, and $ 6 ,7 5 0 ,0 0 0 to Philadelphia, which was 4 per eent. Outside of &ew York, practically all of thoae lteaa were aant to thoae places merely for collection J J. H. Ardrey. 3248 because of coll action arrangemen to, and not for the accumu lation of reserves. The Secretary of the Treasury: Assuming that there is a parring of exchange between these different Federal Reserve banks, how is that going to affect the si tuAtion as outlined by these figures? Ur. Ardrey: We will have a necessity for keeping accounts with other cities; Just which ones, would have to be deter•nined by experience, because there is no provision here for clearing through the Regional Bank any items except on member banks. You cannot s^nd city checks, you cannot send drafts on individuals or cotton exchange, or anything except on member banks. It will be necessary in collecting cotton accounts and things of that sort to have accounts with the principal reserve cities. We will not have to have them in all of them as heretofore, because we can send them to New York and the other cities only where the volume of business run s. The secretary of the Treasury: Do you think you have correctly interpreted that provision of the Act in reference ts exchanges? Mr. Ardrey: ¥es, s ir , I know I have. J. H. Ardrey* The Secretary of the Treasury: 3249 Have you taken into con sideration the fact that the Federal Reserve Board has the right to promulgate rules and regulations which may mater ia lly alter that? 5£r. Ardrey: Yes, that might be the case, but the present language does not provide for anything except checks on member banks or other Federal Reserve banka; that is the language of the statute. The Secretary of the Treasury: Well, the language there is very broad, and w ill, of course, have to be subject to the interpretatlon of the Federal Reserve Board, subject to rerniations, so 1 do not think it is quite safe to assume that your view of it is ccurate yet. That may be a preliminary interpretation. Let me ask you about the manner of financing this crop. The bulk of your financing is done in four months of the fa ll. Mr. Ardrey: Yes, sir. The Secretary of the Treasury: Mr. Ardrey: To move the cotton? Yes, sir. The Secretary of the Treasury: And the value of that crop Is something lik e $5 00,0 0 0 ,0 0 0 within this district, as J J . IT. Ardrey. 3250 testified to? 2fr. Ardrey: Yes. The Secretary of Che Treasury: I understand the testiniony to be that about $9 2 ,0 0 0 ,0 0 0 is financial in Balias; is that right? Sir. Ardrey: The cotton buyers buy about $9 2,00 0,00 0 worth, according to their statement. As a matter of fact, the exchange arising in this territory indicated there, the foreign exchange manufactured there by reason of the sale of cotton in this territory is 4 1 8 0 ,0 0 0 ,0 0 0 . The Secretary of the Treasury: Mr. Ardrey: In the entire district. One-half of it is here, and in that connection—1 T^e Secretary of the Treasury: Did you say $1 80,0 00,0 00 in the entire district? Mr. Ardrey: Yes, foreign exchange. T^e Secretary o f the Treasury: And $ 9 0 ,0 0 0 ,0 0 0 originated in Dallas? Mr. Ardrey: No, that is Dallas I am sp-aking of. $ 1 8 0 ,0 0 0 ,0 0 0 of foreign exchange was handled in Dallas, originating in this district. The Secretary of the Treasury: Ur. Ardrey: How is that financed? The foreign exchange itself is sold, about IJ J. H. Ardrey. 3251 70 per cent in New York und 30 per cent in Chicago. The secretary of Ur. Ardrey: the Treasury: Practically none, it is negligible. The Secretary of the Treasury: Mr. Ardrey: How much in Sew Orleans? How much in St. Louis? Practically none, it is negligible. The Secretary of the Treasury: So New York and Chicago buy most of it . Mr. Ardrey: So far as the foreign exchange is concerned, yes, sir. The Secretary of the Treasury: Ye what extent do the Dallas banks re-discount in chat period, or hare to borrow money tc finance their requirements? Mr. Ardrey: borrowed money. This statement shows an analysis of the On page 8 there is a condensed report taken from the sworn report to the Comptroller on October 21st, which for this year is conceded to have been the maximum borrowing period. You will see there on October j 21st the national banks in the territory we have laid out j had re-discounts and b ills psyable of $23»OCO,OGO. The Secretary of the Treasury: Where do you re-discount, where do you get that money? Mr. Ardrey: So fa r as the reserve c itie s in iexas are J. concerned, Ardrey 3252 they would borrow their money in How York. far as the Texas cities included in this $2 3 ,0 0 0 ,0 0 0 , So they would borrow their money principally from the other Texas ci ties. The Secretary of the Treasury: To what extent did Texas receive aid from the government this last f a l l , how much of that « 2 5 ,0 0 0 ,0 0 0 was government money? 'ir. Ardrey: Loaned to banks? The Secretary of the Treasury: Yes. Have you the figures? Mr. Ardrey: *80 0,00 0. I have not the figures, but Texas got They put # 2 0 0 ,0 0 0 , I think, in Fort Worth, and v600,000 in Dallas* The Secretary of Agriculture: Would this district you j have mapped out be a dependent or independent district? Mr. Ardrey: I t would be an independent district and could finance itse lf. Ths Secretary of the Treasury: How could it be, with ths necessity for re-discount to the extent your figures indi cate? Mr. Ardrey: Look at page 9. We have there an illus- ------- ------- — J. H. Ardrey. 3253 tration of the operation of the Federal Reserve Bank* The $ 1 0 7 ,0 0 0 ,0 0 0 capital and surplus in this district would produce at six per cent, 46,421,000* The Secretary of the Treasury: You are figuring state and national banks? r* Ardrey: Ko, that is national banks. and national # 180 ,0 0 0 ,0 0 0 . capital. We have state It would produce $6 ,4 2 1 ,0 0 0 The reserves of country banks on their individual deposits as shown on page ti» and in this analysis I have taken no national banks into account, are # 2 2 6 ,0 0 0 ,0CC. the reserve city banks in the district $ 8 6 ,0 0 0 ,0 0 0 . rom The reserve under the new 1 as, after 36 raonths, on the country bank deposits would be $ 1 6 ,0 0 0 ,0 0 0 . that this reserve bank in this district would hold for country banks in Texas. T> e Hecretary of the Treasury: > pulsory. That would not be com- T^ive per cent only is compulsory. Mr. Ardrey: Yes, but I cannot conceive in the operation of it where they would keep serein their vaults than they are now required to keep under the old law. They are now re quired to keep six per cent, and if under the new law they are required to keep four— J J . H. Ardrey. The S e c r e t a r y o f th e T r e a s u r y : 3254 Is n o t y o u r s a f e a ss u m p tio n th e m inim um r e s e r v e th e y w ould have to k e e p , I mean f o r the p u rp o se o f t h is d is c u s s io n ? Mr. Ardrey: It nisht be, excepting for tha considerations of the b ill its e lf. b ill, There is no reason why, under this a ”ian should ksep in h is vaults any more than the minimum amount of cash, i f the law in its operation is going to perform the function its friends think and that the bankers think — The Secretary of the Treasury: It is better always to prepare these figures upon the mandatory requirements of the Act, because that we know we can depend on, and anything elso would be speculative, of course. Vr. Ardrey: Yes, sir. The Secretary of the Treasury: You msy proceed, however. Vo understand that. Ardrey: be £ 2 6 ,0 0 0 ,0 0 0 . The totsl deposits in the Reserve Bank would The law requires them to keep 35 per cent of that in reserve. That would give # 17,0 00,0 00 of those dfposits to be loaned; added to the capital would be # 2 3 ,8 0 2 ,0 0 0 . The maximum borrowings on October 21st, 1915, which everybody will concede was the maximum for this year, J J. H. Ardrey. 3255 was # 2 3 ,0 0 0 ,0 0 0 only — The secretary of tho Treasury: say that is the maximum. That i s Just on that point, you the maximum which you actually did, but does that represent the maximum demand? In othsr words, did you absolutely meet tho entire demand of the district? llost national banks, for instance, when they ret down to their reserves, simply stop making loans or else they begin to contract credits, under the system that now exists, except to the extent that they reluctantly riiscount. Now the extent to ^#iich you re-discount here does not indicate necessarily what the normal demand would be, doss it ? Mr* Ardrey: I think so, yes, sir. When you take into consideration the fact that of this 1 2 3 ,0 0 0 ,0 0 0 of bUbls payable and re-discounts shown here, there is quite an amount of it that is pyramided; I have no way of telling how much, but i f an Interior bank borrows money from a reserve city bank, and the reserve city bank borrows from 5ew York, the loan is counted twice, and the # 23,000,000 is the total for all the banks without any computation as to how much had been pyramided. The secretary of the Treasury: As a matter of fa c t, was J. J . H. Ardrey. 3256 not money very tight here, and was there not a considerable contraction of loane. ?ir. Ardrey: Yes, it was an abnormal period, and I think i f this analysis would stand up under that abnormal con dition, it would stand up better under a normal condition. The Secretary of the Treasury: Suppose the normal demand, not the speculative, but the normal co&nercial, agricultural and industrial demand had been fully met, would it not have required probably a ?reat deal more than $;^3,000,000 to take care of it. Mr. Ardrey: I can speak, of course, with better knowledge of the business of my own bank. I know that the burddn which was on us this year in meeting the banks of this distric t, and I am sure it *as with all the other banks, was becauee of the fact that many customers who borrow away from hone normally were, on account of the conditione* borrowers of their local banks. You take the jobbers and Merchants who sell their commercial paper, this system, are having created for and who, under them a broad market for their commercial paper, they would not have had the weight of their demands on the Texas Banka. And under this new system we are Just that much better able to take care of it , J. o• H. Ardrey, 3257 and, for that matter, under the system tha t we are now entering, the reduction of the reserves in the banks give* an excess of loanable power of # 15,0 00,0 00 in chis section alone, which would certainly have taken care of i t . I f you will look on ihat analysis, on the basis of $312,0 00,0 00 individual deposits, three per cent of country bank deposits of which we had # 2 2 6 ,0 0 0 ,0 0 0 , and ten per cent of reserve city banks, ef which wc had $ 6 6 ,0 0 0 ,0 0 0 , would $ive ♦15 ,0 0 0 ,0 0 0 lending power to the banks in this section alone iorc than formerly, and that would answer — The Secretary of the Treasury: You are including that now in your figures? .'ir. Andrey: I are including that in my figures to show here an excess of $1 5 ,0 0 C ,000. The Secretary of the Treasury: Yes, assuming that the banks put that extra three per cent into the reserve bank? Mr. Ardrey: No, I am ficuring they will have it to loan and therefore will not be required to re-discount so greatly We had 3 2 5 ,0 0 0 ,0 0 0 loanable on the reserve bank, and they borrowed $ 23 , 300, 000. The Secretary of the Treasury: S That was upon the assumpt- ioa that they put eight per c n t in the reserve bank in the ^ —1 • w “ J. J . H. Ardrey. 3258 Federal Reserve. Mr. Ardrey: Yes, but you see the final analysis shows $ 1 5 ,0 0 0 ,0 0 0 over last year*s requirements. Ths Secretary of the Treasury: bring out was this: The point I was trying to Of course, under the system as it now prevails in ihis country, the national banks stop lending when they get down to their reserves, unless they re-discount or contract loans. Hr. Ardrey: Yes. The Secretary o f the Treasury: They do not re-discount, unless thsy are forced to, as a rule? Mr. Ardrey: Yes. A few do, however. Ths Secretory of the Tressury: But to the extent they do re-discount, it is only to meet very great necessities of their customers? 'ir. Ardrey: Yes. The Secretary of the Treasury: Therefore, the figures would hardly se^m to Indicate the normal demand for capital in this district in excess of what the banks are actually able to provide, and that is the thing upon which we would lik e to have as nuch light as possible. 1 J J. H* Ardrey The Secretary of the Treaaury: 3259 To what extent was there legitimate business and good commercial paper that the banks could not handle, would you Bay? Hr. Ardley: Jtp deliberate opinion i8 that no legitimate demand was made upon the banks, in Texas at least, and I am more fam iliar with them than with the others, this past year, that was not met* T>e Secretary of Agriculture: Did you not soy awhile ago that you contracted loans? Mr. Androy: Ho, in answer to the question if it was not the practice to do i t 9 to contract or re-discount? The Secretary of Agriculture: I thought you said you did have to contract last fall? Mr* Ardrey: No, sir. TVe s cretary of the Treasury: Was there any substantial contraction of loans last fall in this distriot? Ur. Ardrey: Ho, sir. When the banks in Texas, in August and September, when there seemed to be some tendency in that direction and with the assurance that Texas banks had from your department in the August 16th statement, that the reserves of the Treasury Department, # 5 0 0 ,0 0 0 ,0 0 0 , were J J. available, H. Ardrey. 3260 the banks in Sexas and in this district went their lim it, in taking care not only of the legitimate needs of their country banks, but their wholesalers and business interests* The Secretary of the Treasury: Then you do feel that this reflects an excess oyer the normal demand of the district* Mr* Ardrey: Yes, I think every person will concede last year was a rather hard year, so far as borrowing was con cerned* The Secretary of the Treasury: And by reason of the fact that you had recourse somewhere, you w*re able to ge the lim it of your resources in taking care of business? Mr* Ardrey: Yes, and we say that under the operation of this lav with the reserves in a Regional Bank in this section, with the application of the reduced reserves of 3 and 10 per cent on individual deposits, we would be able tc take care of it by ourselves* The Secretary of the Treasury: Have you made any figures excluding the territory here whioh does not seem to be natural, o& account of the customary courses of business and general convenience of business, that would not seem to naturally atttch it s e lf te the Dallas district; excluding - —— - —■ - WB ■ 3*61 J . H. Ardrey auoh territory, for instance, as Nsw Mexico and Oklahoma and Louieiana and Arkansas, and taking Texas alone, have you ■ado any figures? Mr. Ardroy: Yes, s ir ; no ean stand that. The Seorstary of the Treaeury: Mr. Ardrey: Where are they? Right at the top of page 6 . Texas alone would have $ 7 6 ,0 0 0 ,OCX) capital and surplus, and it would havs individual deposita of $ 203 , 000,000 and it had borrowed coney of only $ 1 6 ,0 0 0 ,0 0 0 . The Secretary of Agriculture: Where do you get the $7 6,00 0,00 0? The Secretary of the Treaeury: The total of theee two itsas. Mr. Ardrey: I figured the nserve cities separately, beoauss they figure ssparately their ratioe of reserves. $ 7 6 ,0 0 0 ,0 0 0 would furnish a bank of 1 4 ,6 0 0 ,0 0 0 . The Seorstary of the Treasury: What would its reeouroee be in the way of reservee? Mr. Ardrey: About $ 1 7 ,0 0 0 ,0 0 0 . The Secretary of the Treaeury: Have you theee figures tabulated anywhere? Mr. Ardrey: Ho, beoauee we did not figure Texas eeparately. Ths Secretary of ths Treasury: Suppose you f il s that as an exhibit? Mr. Ardrey: I would be glad to do so. The Sscrstary of the Treasury: I f this district were created, there are other cities w ithin it that want to have ths reserve bank? Mr. Ardrey: Tss. Ths Secretary of the Treasury: Suppcss, for instance, as bringing out tho point I aentioned a aoaent ago with referenoe to Oklahoma, ths courss of trads and so forth frost Oklahoma, which is northward, testified to by their bankers and business sen; i f Dallas were selected it would do violence to the course of business and exchange and coapel thes to cose to Dallas, would it net? Mr. Ardrey: Mr. Secretary, I cannot see why it would. You take — The 8eoretary of the Treasury: Sup osc, on the other hand, Galveston was aads ths reserve city ; that would alter the drift of your exchangee, would it not? Mr. Ardrey: So far as the Dallas banks are concerned, it would not sake a bit cf difference to us. 95 per cent of the transactions, or a greater proportion than that with any 3363 J* H. Ardrey i w b e r bank, which it 1* going to have with the reserve bank, are going to be by mail, and the probability ie — there ie nc neoeeeity for their going there at a l l , and what difference doee it Bake to a banker in Oklahoa* or Texas, for th it Batter, when fee bundle® up theee itBBs for the Regional Bank*, whether he takee a rubber stasp for Kansas City or Dallas? The Secretary of the Treasury: That b*lng true, what is your argUBsnt in favor of Dallas? Mr. Ardrsy: The point in favor of Dallas is in train ssrvios 91m Bsorstary of the Treasury: Would not tbs saas thing apply to Fort Worth or Houston? Mr. Ardrsy: Tss, I ooncede it . Hot Houston, so far as gsographical location is conosmsd, but 1 w ill explain that sc far as Houston is concerned we contend that becauss a tsrritory within which you arc gcing to looate a bank — that the location of ths rsssrvs city therein should be geographical, so far as you can find a city that has ths fa c ilit is s for covering it* The Secretary of Agriculture: the centre? $ould not Austin be nearer wr 3*64 J . H. Ardrey Mr. Ardrey: I do not think it would, so far as a.e*ber banks are concerned. It feight be geographically. The Secretary of the Treaeury: It is not wholly * question of geography or accessibility, but it also has relation to outher functions these reeerve banks have to perfora, assusing they exercise clearing house functions and — Mr. Ardrey: V That would be a question of being csntrally located. The Secretary of the Treasury: Mr. Ardrey: Tee, in a aeasure* Tee. The Secretary of the Treasury: But, on the other hand, that you have a bearing on the queetion of exchanges and the place where the greatest nuaber of these exchangee would naturally occur would eeew to indicate to soae extent the looation of the bank. I aean not wholly, but that ie one of the consideratione. Mr. Ardrey: In this section we have tapped out here I do not think there is anybody but what would conoede that Texas is located — The Scoretary of the Treasury: Mr. Atdroy: Dallas, you itesn? Ifts, Dallas is locatsd in the centre of the wr 3365 J. H. Ardrey district as far as the Bomber banks arc concerned* The Secretary of the Treasury: You do not claim that Texas and Dallas are synonymous, do you? Mr. Ardrey: ( Yes, s ir ; very nsarly so. The Secretary of the Treasury: I asked the question be cause I noticed you were using them interchangeably. Mr. Ardrsy: So far me Dallas is concerned, I w ill say this, and so far as the Dallas banks are concerned, we believe that this action here ought to have a Regional Bank in it , and we believe it is necessary for the develop- Bent of this section. And so far as we are concerned, if you do not think Dallas is the city in which tc put it, we subait you ought to put it in Dallas or Austin or Houston or any other city located in thli district that can best serve the member banks. Ws would much rathsr sse you put it in Houston or Austin or Fort Worth or Waco than to tie us on to any city outside of this district. Ths Sscretary of the Treasury: question. (Applauss.) Lot me ask you this Looking really tc the success of this systes, which is the only thing after a ll, which must be considsrsd, regardless of local considerations, because localities theB sslves are going to be benefitted to the maxlBum degree. 3266 J* H. Ardrey providing the fundamentals of this systen are soundly laid, your figures have shown that this is a borrowing district at the time of seasonal demands* Mr. Atfdrey: Tee, Ths Secretary of the Treasury: Row would it net be better in arranging these districts to incorporate into the dis trict a lending as well as a borrowing end, so as to make them as self-containsd as possible? For instanco, is it or not wiss to have ths district altered and re-arranged in such chaps that you would gst a large surplus of lending power in one part which could be utilised in the borrowing part wheii the tiae for borrowing cores* Mr. Ardrey: district, In the first place you would locate a given that would contemplate, so far as this section of the country is concerned, a withdrawing from this section of the country for sight months of the year the ressrvs deposits which are now being employed in Texas banks, or should properly be employed through the Reserve Bank, and employ it up here outside of our district, outside cf the district from which it arises, and employ it up here for sight months of the year, because that is when we have a http://fraser.stlouisfed.org/ surplus, Federal Reserve Bank of St. Louis for the privilege of borrowing it back for four wr 3*67 J . H. Ardrey ■«Aths. The Secretary of the Treasury: wrong about that? But are you not wholly It does not eake any difference where theee reserves are deposited, according tc your testimony a accent ago. The queetion ie tc have that reserve power eo*e*here to which you eay reeort when you need it* If you do not need it for eight ncnthe it is better for every body in the district that it should be employed so&ewhere where it is needed. And one of the chief funtione of this law is to provide a fund which eay always be available for re-discounting at the time of real necessity or in case of emergency* Ur. Audrey: But you do that re-dleccunting for the aeaber banks. The Score ary of the Treasury: Mr. Ardrey: banks. Exactly. Primarily nobody borrows but ths eeaber The meeber banks ars not borrowers hers sxoept for four month* of the year, but the industries in this section are borrowers the year round, and could profitably employ tfeose funds for the eight atontbs when the suggestion is that we put them up here and lend thee to banks and other wr 3*66 J. H. Ardrey Industrie*. The Secretary of the Treaeury: Rot at a il. Suppose the reserve bank is located in soae ether city than Dallas— Mr. Ardrey: Say St. Louis, for instance. The Seorotary of the Trsasury: Let us assuee it was St, Louis, for the sake of the discussion. There is generally a surplus of loanable funds in St, Louis at a il tiaes of the year — Mr. Ardrey: Ho, s ir ; you are aistaken* Khs Secretary of the Treaaury: 1 say generally there is. according to the testimony submitted to ue, which has not bssn controverted heretofore. true, How asauning that that be if there is a 4e&and here for industrial or coK&.ercial or agricultural purposss which the local banks cannot supply, this fund, not natter whether it is located in S*. Louis or Little Rock or any other place, is one to «hlcfc you can have rsaort at any tine with the eligible paper provided under the act* Mr. Ardrey: You aear the other nember banks, The Secretary of the Treasury: Yes, if needed? the purpose of ths Act is to supply the® with that facility, and you eay you do not need it for eight Months. wr J* H. Ardrey Mr. Ardrey: The banks in this section would be borrowsrs only for four aonths* The Secretary of the Treasury: At the tiae when that four months ca.Ee, that fund, wherever it is located, is likely tc be available for that seasonal dsaand. Ot&srwiss you get this situation, otherwiee you have this to confront you, that this reserve bank then would have to do one of twe things, i f it was not a self-contained dietrict, I mean, it WGUld have to aek another ressrve bank to re discount its paper in ordsr that ths msaber banks of that district sight gst rslisf, or slss havs to apply to the Federal Reserve Board to compel some other reservs bank to ooss to the assistance of this bank. lew ws ought net to orsate deliberately a weak unit in ths systsa if ws can avoid it. It is bettsr tc maks these units self-sustaining so far as practicable, is it not? Mr. Ardrey: Tee, sir* The Secretary of the Treasury: Vow with that in vies, I aa asking you as a business can and banksr if we ought not to consider very closely in laying out theee districts and naks thsm Just as self-contained as possible under noraal conditions. 3270 J . H. Ardrey Mr, Ardrey: I think so. Ths Secretary of tkc Treasury: And would you not get really more reliefe in this section with a district sc orsated than if you creatsd one which, fros the very outset aust rely upor, sone other re serve bank tc take care of it in tine of need. : \ Mr. Ardrey: Well, this district w ill not have to rely upon s o b s other r s s s r v s bank to take care of it in time of need. It ie self-contained. This district cansustain it s s lf without borrowing a dollar, so far as the &es.ber banks ars concerned, outsids of the r e s e r v e s th e y contribute. The Secretary of the Trsasury: Well, that is upon the basic of the figures you have presented here, and they are the reeult of a system which does not reflect a ncraal condition, because thsrs is a lot of a rtificiality in the systcs as it now operates, therefore they cannot be relied upon ae conclusive. Mr. Ardrey: BCt if you reduce the figures to the new syste* and sli&inate a ll pyrsaidsd leans which ars figured in here c a d adjusted to the reserves, the banks are going to have enough. wr 3271 J. H, Addrey The Secretary of the Treasury: ligurco arc reliable, I Bay, a ss u m in g th e s e they reflect a rtific ia lity ; u n q u e s t io n ably U.ey ao reflect considerable a rtificia lity , therefore they ~re r.wt reliabj.e, I aean to rely upon thaa wholly. Mr. Ardrey: The chmge would be acre favorable* to the figures than otherwise. ?h(» Sscretary of tae Treaeury: That relates b^ck tc the question I asked in the early pert of the discussion, as to how far the demands of this district have really been met always. Mr. Ardrey: I think it is fair to state that i»ith the bcrrc«ed f.on&y th^t this section )iae always borrowed, we hive fiir ly act their deaand*. The Secretary of the Treasury: Aacuainii that in the arrangesnt cf these districts, and tLey all have to be related to each othtr, they caunot oe taken and considered absolutely independently, assuaing that Ir the organisation of this district different liras are xaia down froa. these you have indicated ani outside of the Texas cities, what wculd be your second choiee outside oX Texas cities for a reserve bank? fcr. Audrey: So far as the E^lla^ oanke are concerned. wr 3*7* J. H. Ardrey *« would p r .f e r to * ° tc 8t> Louls '•athsr than Hew Orleans, Kansas City or Denver. The Secretary of the Treasury: Vculd the bulk of your trade and exchange be with St. Louis normally? Mr. Ardrsy: lors so than with ths other citiss? The Ssoretary of the Treasury: Mr. Ardrey: with Hew York. Tee. Yes, but not at a ll of conssqusnce as compared Vs would say St. Louis merely because of our contiguity, not from preference. Ths Secretary of ths Trsasury: Considering New York, to what extent are your exchaggs rslations with He* York? That is the determining think in your Bind at the moment? Mr. Ardrey: Yes. The Secretary of the Treasury: To what extent are the necessitiss of sxchange with Hew York ths rssult of an a r t ific ia l condition under the preeent system rather than as reflecting normality? Mr. Ardrey: It is becauss Hew York exchange now passes more at par evsrywhsrs than anything elss. Khs Sscrstary of ths Treasury: Exactly, and your balances in Hew York are very largely for exchange purposss, are they not? wr 3275 J . H. Ardrey Mr. Ardroy: Taj, primarily so. The Secretary of theTrsasury: With this Act in effect# th.it will to a vary considerable measure disappear, because ths exchange of this Rcserve Bank w ill pass at par just the same as Nsw York exchange, Mr. Ardrey: Yes. Ths Sscrstary of the Treasury: With this system going, would your exchange balance in Hew York be large, do you think• Mr. Ardrey: Of couree, i f we have a Beserve Bank located somswhsre outside of Texas and ws are a member bank with St. Lcuis, we would creats ouif balances wherever our reserve bank is, we would creats our principal balances with ths items that we clear through thit medium. The only way we orsats balancee with any of our reserve cities is through ths items ws esnd thsu rather than the currsncy we ssnd '" S them. How i f Dallas is tisd on tc St. Louis, naturally ws would accumulate mors reserves there than anywhere else; that is where we would keep out reserves; St. Louis, Hew York and Chicago act now ae reserves, and our balances with any of their count. Ws ksep balances with St. Louis because wr 3*74 J. H. Ardrey they collect our eut-of-state ite&s. There ie one function in that connection that is rendered to a Re*#rvs Bank member by its parent bank that ie aest important, it ie a twelve tenths preposition, and it ie aors Important really than the natter cf borrowing aoney, and that is the Batter that we discussed in the beginning, about the clearing of these checks. If you locate one of these Regional Reserve Banke within a given district, it ou&ht to be where that facility can be available of with the greatest affifiency . lfow, overnight froa Dallas we can rsaoh every part of our section with these remittances* with thsse collection iteas that are sent in. A bank located down here at Coreioana can send its iteas to Dallas over night, and to the extent of 85 per cent of these iteas thsy can be presented the next day for payment. The Secretary of the Treasury: Yes, I know tuat point# Sup.ose, on the other hand, you have a branch in Dallas of ths Reserve Bank, wherever it may be located, exactly the sace fa c ilit y . you get The question of clearances would be through the branch bank for a particular district. Mr. Ardrey: after. That of courss, is to be determined here wr 3275 J. H. Ardrey The Secretary of the Treaeury: Yes, but I eay, assuming you had a branch, you would get all the clearance facilities and re-discounting fa c ilit ie s , for that matter, which you would get through the Reaerve Bank itself* Mr. Ardrey: You Bean if the branch at Dallas haa assigned to it a given territory? The Secretary of the Treaaury: I aav that branches are sandatory under the law, and suat be eatabll8hed. How adaittlng that the Reserve Bank were established scaewhere else with a branch at Dallas, you would get all these fa c ilit ie s . Mr. Ardrey: You would get all these fa c ilitie s , providing the itema were sent to the banka alone rather than tc the parent ban*, but if we were tied up with St. Louis and had to send our itsss through the St. to Louie bank, I would like A l l attention thit it is iBpcssible for St. Louia to aerve this territory down here in thie diatrict aa well as Dallas can. Here is a copy of the Clearing House rules — The Secretary of the Treasury: That cuts no^ figure. I aa juet going tc ask you aoae questions as to the Clearing House provisions of the Act. necessarily All that will be altered. But the branch banks s i l l be related tc any district G J. H. Ardrey 3276 whtti they are established, and if you had a branch in Dallas, certain territory nould be allotted to that branch, beoause you cannot arrange the clearance system any other way* Mr. Ardrey: I understand that. The Secretary of the Treasury: question here. Sow let m ask you a e I would li"<e to address this to t h e Dallas Clearing House, and the reporter can give you this question. Section 13 of the Act, on page 14, provides, end I w ill read the question, because I will ask It of the other Clearing Houses end then X w ill not have to repeat It to each of t h e n : "Upon the indorsement of any of its member banks, with a waiver of demand, notice and protest by euoh bank, any reserve bank may discount notes, drafts, and bills of cxohanpe arising out of actual comnercial transactions; that Is , notes, drafts, and bills of exchange Issued or drawn for agricultural. Industrial, or commercial purposes, or the proceeds of which have been used, or are to be used for such purposes, the Federal Keserve Board to have the right to determine or define the character of the paper thus eligible for dlsoount, within the meaning of this A c t." There are some further provisions, but that is the thing 1.11 III** « * w i UMii 1 1.1W I m i Y^ J. H. Ardrey 5277 to which I want to particularly direct your attention. We should like to have the Dallas Clearing House consider very carefully that question with a vie* to submitting a brief or memorandum at the very earliest possible moment, giving your v ie *8 as to what would be the proper definition of commercial paper under this Act; and in considering the question, we should li're to have you call our attention to any particular paper which is indigenous to this district, and also to suggest certain standard forms of notes, drafts, and b ills of exchange which might be adopted for uniformity by the entire Heserve Bank System. I f you can send that to us by the fir st of i*aroh, we should t e glad to have it* > Mr* Ardrey: Yes* The Secretary of the Treasury: Another point. Section 16 of the Aot, on pare 19 provides: ••The federal Reserve Board shall make and promulgate from time to tins regulations governing the transfer of funds and chargee therefor among federal reserve banks and their branches, and mey at its discretion exercise the functions of a clearing house for such federal reserve banks, or may designate a i'ederal reserve bank to exercise such ___ functions, end may also require each such bank to exercise - V : f \ H ' ' % $ J. H« Ardrey — '?•- 3278 the functions of & clearing house for its member bonks." flow we should like to hare your suggestions and ideas as to the rules and regulations that the Board may adopt relating to the transfer of and charges between the banks, the federal Reserve BankB end their branohes and also give us your views as to the clearing house functions which you think these banks ought to exerolse and as to the machinery which might om best employed for that purpose. <*r. Ardrey: I would be very glad to do so. The Seoretary of the Treasury: You might inoidentally take into consideration the preceding paragraph of the Act on page 19, which provides that: '.Sveiy i’ederal reserve bank shall receive on deposit at per from meraber banka or from federal reserve banks ohecks and drafts drawn upon any of its depositors, and when remitted by a federal reserve bank, checks and drafts drawn by any depositor in any other federal reserve bank or member bank upon funds to the credit of said depositor in said reserve bank or member bank.” That is something you referred to a moment ago — Ml. Ardrey: Yes, unless th is federal Beserve Bank is permitted to perform all the functions — R J. H. Ardrey The Secretary of Agriculture: iir. Ardrey: 3279 You rrean the branoh? So, I am speaking now of the Federal Reserve Bank and Its branches, unless they are permitted to perform a ll the funotlons which federal hanks are now permitted to — The Seoretary of Agriculture: iir. Ardrey: That is the intention, I am sure that is the intention, and any construction that has been put upon It to insure larger districts with the idfcea of influencing such consideration Is wrong* The Secretary of Agriculture: You may be sure that any extraneous consideration or suggestions of that character will heve no weight with this Committee. STAT214I2HT OF LOUIS LIPSIT3. The Secretary of Agriculture: Please state your name, residence and occupation. kr. Llpsitz: Louis i-ipsits. I em in the wholesale dry goods business in Dallas, Texas, and representing the commer cial end of the Olearlng House at Dallas. The Secretary of Agriculture: are considering? Mr. L i p s i t z : Yes. You know the prohlen we ^ - - w w - ----- r« H h r w n Louie P P B " ' ^ v L ip a it z The Secretary of Agriculture: -J -W “ MA-MHJIil * 3280 Wo w ill be glad to have your views. * r . Lips Its: I have here some maps indicating the extent that the Dallas jobbers trade, and w ill confine my remarks entirejy to jobDlng interests, showing the territory which we are covering. The secretary of Agriculture: Does that show the territory in which Dallas is dominant? Mr. Lips its: as a whole. ies, so far as 2 exas is concerned, but not These naps simply show the name of the conoem. Vs have Just selected a few of the prominent companies doing business in our city, and these maps Indicate the territoxy that they cover, and also indloate, i f you please, the per centage o f business that they have in the states described in the territory which has been previously described. The 3eoretary of Agriculture • Mr. L ip sits : You may proceed. Do you want me to leave these with you, or road from them? The Secretary of Agriculture: I f you desire to make any conoent or present anything for special consideration, you may* *r. L ip sits: I want to say that Dallas has 318 jobbers T B Louie Lip sita 3281 doing a bu8ine88 there of $ 2 1 2 ,0 0 0 ,0 0 0 , based on the 1913 figures. X want to say further that Bellas has located in her city 2200 traveling men who are traveling this entire territory, who Bake Dallas base or headquarters. Dallas has in addition 637 traveling men that cover the territory other than Texas alone, to w it. Mew ^exico, Oklahoma, and that part of Arkansas and Louisiana which we have referred to here. » e sent our inquiries to 36 jobbers asking the volume of V their businessv or rather the number of customers that thqr had in the states that we have in our territory other than Texas, and we found the answer to be 4 4 ,650 . Dallas has at thie time 26 Implement houses doing a business of $ 2 6 ,0 0 0 ,0 0 0 annually in this territory. She has 32 wholesale automobile houses doing a business In this territory o f $ 1 8 *0 0 0 ,0 0 0 , and in building material, exclusive of cement, an annual business of ^2 5 ,0 0 0 ,0 0 0 . In electrical machinery and supplies she does an annual business of # 1 5 ,0 0 0 ,0 0 0 . Dry goods, cloths, clothing, and so forth, $ 2 5 ,0 0 0 ,0 0 0 . The weekly payroll of the 2200 traveling sen who reside in Dallas le £129,000. Dallas has 42 business houses rated at over # 1 ,0 0 0 ,0 0 0 , and has 118 concerns of national consequence or importance who are i v H 4 M B iW Louis llpsltz 3288 rated at over $ l v00 0 9000, where Dallas is the headquarters for the entire southwest for these concerns to which I refer. Ajb an evidence that they have builded wisely and have selected with much care the Jobbing houses of Dallas, I w ill say there has not been a failure in Dallas of any concern with a capital of over *>50,000 for a period of ten years. I mention that simply to show the wisdom of their selection. We have a trade log there, indicating the merchants who come there and register and have a refund of fare. While we have a great many more merchants who cone during all periods of the year, there are two periods when they have a refund. And to mention the growth, I want to say that in 1901 Dallas registered 500 from this territory; in 1906, 1 5 0 0 , and in 1915, 2900. I mention that as an evidence of the immense growth of Dallas as a market. Dallas has a house trade, meaning that the customers come into the houses to make personal selection of their needs, of 45 per cent, we believe the greatest per cent shown anywhere in the entire linited States in proportion to the entire business done by any Jobbing house in the Uhited States. So far as distance goes, we know Dallas goes lust as a Louis Llp sltz 3203 far & b the ratee w ill permit, because she is gaining rapidly in the physical position, so ffer as rates are concerned. I want to say I an speaking now from a dry goods point of ▼lew. The rate from Dallas is equal to the rate from St. Louis at the northern boundary of the Oklahoma lin e. In other words, we oan go to the extreme northerly line we have indicated here before any other olty of any consequence has any advantage over us. So far as Sew Mexico Is concerned, we have a rate from #1.18 up to #1.52 to tbs middle of the state, enabling us to reach the eastern portion of the state or that portion which is fertile on a rate of $1 .18 or $ 1 .5 2 , as against St. Louis #1.82* And so far as reaching the western ptrt, our rate Is $1 .82 or the same as the St. Louis rate, whloh is our nearest competitor of consequence. In Oklahoma we go to the northern boundary line and in Arkansas and Louisiana we about split the t e r r i t o ^ , we about reach them midway. From a rate point of view we go to HI Paso at $ 1 .0 0 as against # 1.70 fros S t . Louis, and $1 .4 7 from Denver, ana as against #1*72 fro® ifew York. 9 I mention that to show the physical condition whloh makes it possible for Dallas to go out into this territory. The Secretary of Agriculture: would you say Dallas H Louis Lips its 3B84 dominates Oklahoma and Ben Mexico? Mr- ~ipsits: *io, X would not. X would say that Dellas fould secure, conservatively, 16 per cent of the business of Oklahoma and Mew Mexico. The Dallas will he able — ecretary of Agricxilture: Which cities are your prin- oipal competitors? Mr. -ipaits: Jt* Louis, Chicago and Hew /ork, are the only tfcrec t l i t arc competitors o f consequence* The aecretaxy of Agriculture: ir* ^Ip slts: Kansas City? J o , not in our line, .Censas City has only two houses in our line and only one active. The Secretary o f Agriculture: You are speaking now of the jobbing business? iir. ^ip e its: Xes, s ir , of the jobbing business. The Secretary of the Treasury: What branch of the jobbing business? i*r. i^ipsits: Dry goods. Dallas today is serving a greater portion of the dry goods to Texas than any other city in the United States, perhaps twice as much as any one city, and is growing very rapidly. Xf I may be permitted to refer to our own particular business, we hpve been In Dallas seven years and have grown S Louie Llp sitz 3265 342 per cent, and that la not peculiar to our o^tn business, but is the condition of practically all the concerns which are there* The Secretary of Agriculture: What percentage of your bus in ess do you do in these adjoining states? Mr. llp s it z : I would say we do 75 per cent in Texas, and 25 per cent scatters! in the other states. The Secretary of the Treasury: flext to Texas, in which state do you do the most business? Ur* L lp sit z: Oklahoma* Dallas sells more goods in this territory than does either of her other competitors, Kansas City or St. Louis, and particularly surpasses them in automobiles — * The Secretary of Agriculture: In which territory do you mean, Texas? Mr. Llpsitz: Yes, I speak of Texas. Automobiles, cemeAt, dry goods, electrical supplies, groceries, harness, hats, caps, machinery, millinery, paper, petroleum products, paints and o ils , saddlery and vehicles. In some of these lines no other point In the territory is equipped to handle the business, not having any one of these lines represented. We w ill say, for instance, in the mAllinery business, there B Louis Llpsltz 3286 is no other point in this entire territory that has millinery fa c ilit ie s in a wholesale way* In wholesale hats we have perhaps 300 per cant more than any other city in the terri tory* Some o f the larger concerns have recently moved to Dallas because of the accessibility to the territoiy described. The American Sash & Door Company have recently selected Dallas as their headquarters* J2very coal coooem, •very mining company in Texas, Arkansas, Louisiana, Hew Lexioo and Alabama have a selling office In Dallas, and Dallas 18 the only selling office they have in Texas, with one exception* The trend of business is becoming more localized all the time* 1 would like to say that perhaps 30 years ago 95 per cent of the groceries sold, we will say in Texas, came from St* Louis and Hew Orleans* Today I dare say the jobbers are serving the retailers to the extent of 25 per cent, and not over 5 per cent is being brought in from the other states* In a dry goods way I w ill say that 30 years ago practically all the retailors thought it their duty and that they had to po to How T o * , and did not even stop at St* Louis* Twenty years ago they began to feel that St* Louis would serve their needs* JPor the last ten years they B Louis Llp sitz 5287 hare found out it is simply a question of trading with th© point that has the best freight rate and the best facilities, anc the business is becoming more localized, and today Dellas is supreme in that her trade far exceeds any other point in this territory. The Secretary of Agrioulture: To what extent are your houses branch houses? Hr. Llpsitz: Practically none* Of the 114 concerns of national consequence I have referred to, two only are branch os of S t . Louis and one of Jtew Orleans. The Secretazy of Agriculture: You are speaking of dry goods? Hr. L lp sitz: 27ot I am speaking of all oonoerned. The Secretary of the Treasury: What are those branches, what do they represent? Hr. L lp sitz: One is a flour concern and the Hess Envelope Company, and the other is the Standard K illing Company, and the one from liew Orleans is the Southern <ood Stock Company. I mention that to show the growth of Dallas. I think the number of merchants visiting there and the fact that Dallas has more houses there shows more than anything - -” 1 B Louis L ip s itz the great convenience o f being able to trade there. 3S68 Dallas was recently favored by the government with a port of entry, which has been vith us only eight or nine months and is now doing a business larger than any other point similarly situated, and made representations to the Treasury Depart ment, showing in 1912, and this was covercd by affidavits to the treasury Department, $ 1 ,0 3 0 ,0 0 0 . It is the largest cdistributing house for Seers-Roebuek 8 Company outside of * their parent compsny. We have a house which is producing its own business, as against the Kansas City house which 3s only a branch and delivers on the orders from the parcAt house* This indicates the volume o f their business in that particular territory (producing map ). This is a map outlining the territory covered by the Butler Brothers firm* Thqy hove outlined practically the same territory we have here. This is not a branch of the parent house, hut is a separate house, and this is the way they have the territory outlined for the United States. Seers-Boebuck & Company had their expert in the field and , went over the situation very carefully from a distributing j point of view; and while perhaps Houston will show that merchandise can be brought in there at a little lesser rate. fi Louis Lipsitz 3289 yet the faot that the final coet o f final distribution to the retailer la so much greater and Dallas can serve them in so exloh less time, we believe induoed them to select Dallas as the proper placj for the branch house. In our own case, we lived in Tyler, Texas, and viewed all points in Texas with a view of finding where we could distribute to the best advantage, and after figuring on It for several years, we determined Dallas was the best place, and our growth indi cates the wisdom of our selection. The Seoretary of Agriculture: Pile that with the reporter, and also the map. Mr. Llpslts: I w ill be very glad to. I want to say, if you w ill permit me one minute more, that as compared with ths S t . Louis market, the Dallas jobbers have a decided advan tags In the matter of freights, and can reach the customers— The Secretary of the Treasury: Ur. L lp s lt z : described* In wha;t territory? All of this territory which we have Our average rate, I f you please, from Dallas I s , we will say, 50 cents per 100 pounds, and the average rate frcm the mill at Fall Elver, say, where we get our cotton floods largely. Into Dallas w u l d be $L»04, or a total cost from the time It leaves the cotton mill in l.aseaohusei s B Louis Llp sitz 5290 to the average customer in Texasv of | l .5 4 . The rate f*om Vail River into St. Louis would be 86 cents, and from St. ^ouis to the customer in ^exas it would be 02 .55. The Secretary o f Agriculture: You are speaking again of Texas only? Mr. L ip sits: .ith regard to this 50 cent rate, or a difference of 81 cents per 100 pounds in favor of the Dallas jobber* 400 The average oase of dry goods w ill weigh about pounds, and you can see we w ill reach the customer at an actual saving of $5 .0 0 for every case o f merchandise he receives by buying through the Dallas jobber as against the St. Louis or ansas Ci1y jobber. The Secretary of the Treasury: I thank you. You may file those maps and papers. (The maps and papers were filed accordingly. ) The Secretaiy of the Treasury: 11 representatives of Dallas* i r . Ardrey, I see you have How there are other cities to be heard, and unless these gentlemen can contribute someth new or additional to what has already been presented, I think it w i l d be just as well to rather limit the number who may speak. Is there anyone else here whom yon particularly desire to have heard, who can give us any new light? K. L* Flippen K Mr* Ardrey: 3 2 91 I f yon w ill permit us, we would like to have Ur* Flippen sneak. ile is a large packer* SHATr&EHT OF £. L . F L IP P Y . The ecretary of the Treasury: State your full name, residence and occupation* Mr. Flippen: E. L* Flippen, President of the Armstrong acking Corrnany, and Armstrong Refining Company, Dallas. Mr. Secretary, I am representing the manufacturers of Dallas, end I hare a resolution here from them which, if you will permit me, I will read. The Secretary of the Treasury: Mr. Armstrong: (Reading) Read it. vihereas, the Organization Committee is confronted with the problem of dividing the United States, under the Federal Reserve Act, into not less than eight nor more than twelve districts, and to locate in each district a Federal Reserve Bank; and Whereas, the United States Census Department have always classified Texas, Oklahoma, Arkansas and Louisiana as the West South central geographic division; and 3Thereas, Dallas is the logical and geographical centre of this territory; and B L. Flippan 3292 vhereas, this is practically the same territory that Dallas Is asking for to be tributary to a Regional Bank at Dallas; and tfhereas, the diversified interests of this territory are each as to make It a balanced district and the demand for money uniform during twelve months In the year; and Shereas, i f annexed to any other territoiy It would redound to the benefit of said other territory and to the detriment o f the Dallas territory; therefore be it Resolved, by the u n d ersized manufacturers of the City of D allas9 that to conserve, foster and expand the Agricultural, Financial, Commercial and Lam facturing Interests of this rapidly growing section of the United States, one of the federal Reserve Banks provided for under the Federal Preserve Act should be located at Dallas. Respectfully submitted. ( ignatures of 50 concerns added.) Tho Secretary of the Treasury: File it as an exhibit. Of course, those are expressions of opinion \*faioh would have to be backed up by some facts, which we are trying to get now. I r . Fllppen: I ?ould like to call attention to the fact R L. L . Iflippen 3293 that Texas, from the standpoint of a packin- centro, has a rate ^feioh has been in effect now about nine months on packing house products from Texas cocron points to Kansas City of 21 conte per 100 pounds* The rate froci Ejxisas City to Texas common points is 60 cente per 100 pounds, abotrt three times as great- The rate from Dallas to H # Louis is 36 cents per 100 pounds, and the rate from St. Louis to ^allas is 60 cents per 100 pounds. The Seoretary of the treasury: hat is the reason for that? l&r. Flippen: The reason for that is on account of the great movement of tonnage to the Gulf ports for export, and the necessity of the transportation company to make whatever rates are necessary to encourage the manufaotu ring indus tries of this territory so as to get tonnage northbound for their empty cars. How on a ll grades of refined cotton o il , the rate from Dallas to Kansas City is 35 cents, and to St- Louis 35 cents, and fro® St. Louis and Kansas City to Dallas it is 60 oents per 100 pounds- 90 per cent of the Texas and Oklahoma meal and oake which reaches foreign markets, is exported through Texas ports by Texas refiners. The esti R £• I . Fllppen 3294 mated prediction of erode cotton oil ie 700,000 barrels, of ski ok. Texas refiners w ill handle 88 per cent* The manu facturers o f Dallas — The Secretary o f the Treasury: How do thoee figures make Dallas the point In Texas far this Regional Reserve Bank, i f a district ie created here? Relate those figures to Dallas novr* Hr* Flippen: These figures show that so far as Texas as a whole is oonoerned, they are entitled to a bank* The Dellas Committee is working for Texas primarily and for Dallas second* hen It cranes to the location of a bank, we will be glad to set forth the claims of Dallas, but we want yon first to consider the claims of Texas. Ifow I have here as an exhibit a letter from the Secretary of the Interstate Cottonseed Crashers Association, with headquarters at Dallas, giving the lis t o f mills and people who are members of the association, and I would like to f i l e that as an exhibit* The Secretary of the Treasury: Mr* Flippen: Just let that be file d . But as showing the importance of Texas and Dallas as a centre, we have the headquarters of the association in Texas* H B* L . Flippen 3395 I also have here with your perm ission, to file as exhibits, original broker's contracts covering the sales cf poods by Dallas manufacturers to Copenhagen, Denmark, Liverpool end Manchester, in£Land, all parts of Mexico, and a s far north as Vancouver, Seattle, iilwaukee, and as far west as San Francisco. (The papers above referred to were filed accordingly.) L r . Flippen: 1 have a report here from the stockyards Company showing that Texas has over 10 per cent of all the cattle in the United States. I have maps here from the different manufacturers and jobbers o f Texas, most of which show the territory they cover and the percentage of business they do in the respect% ive states, and showing that the claim of the Dallas Regional Bank Committee is justified for the territory that they have chosen. Here is a cracker manufactnrer that is now covering in all the state o f Texas, a certain portion of Louisiana, 75 per cent of Oklahoma and about 15 per cent of the territory in lew l exloo* The Secretary of the Treasury: Are these ^aps you have pot a ll of the same character, indicating different lines R E. L . Fllppen 3296 O f bU8lH088? Mr. Fllppen: Yes, s ir . Tho Seoretary of the Treasury: Suppose yon f il e the whole book as an exhibit and we will examine it , of coarse, at the proper time. A mere reading of them now does not convey any thing* Mr* Fllppen: I w ill be glad to. (The maps above referred to were accordingly f i l e d .) M r. Fllppen: There is another question we vjould like to bring out from the standpoint of the manufacturers. They accumulate vory heavy stocks of merchandise through the spring and suxaner months for distribution to the ootton sections at the time the crop is being gathered, and at the time the financial institutions need the money to finance the crops the manufacturers are liquidating 4hd returning the money back to the banks to loan to the farmers and to the cotton buyers, and befrlnnlnp the first of January, the manufacturers are borrowing that money back again, and most of them have connections in the east where we sell our paper through note brokers, azri we pay four to six per cent interest on that paper; and the money we borrow is the money that is oarrled by Texas banks up there as reserves, on which they http://fraser.stlouisfed.org/ got Federal Reserve Bank of St. Louis two per cent; and the people who are oarrying the money E. 1 . ¥1 ippon B 3297 get the balance; and we want that money carried In 'Texas so the entire six per cent w ill stay in Texas. The Feeretaxy of the Treasury: You have to do a great deal of your borrowing outside o f the Dalles banks, then? ijr. Plippen: Well, not necessarily, but the manufacturers have bank lines usually for their accommodation, and then they borrow the money on the open narket and use their bank lines as an anchor to windward in case the paper falls due and they have not the money. The Secretary of the Treasury: your paper outside? To what extent do yon sell Take your own concern, as an illns- trat ion. Hr. Flippen: Taking our own concern, we owed the Dellas banks practically nothing during the cotton movement last year. Tho Secretary of the Treasury: Vna that because you could borrow cheaper elsewhere? Mr. Flippen- /e could borrow cheaper or Just as cheap. The Secretary of the Treasury* here you can borrow just as cheap, ?rtiere do you borrow? Mr. Flippen: have id le funds. 'w borrow fro© the local banks when they o R K* L . 7 1 ippen The Secretary of the Treasury: 3298 Do yon frequently find they have not idle funds and you have to borrow outside? l£r. Flippen: i»'o, aside from the fact our requirements are frequently in excess of the aiaount allowed by the National ank Actf we could get all our money in Texas. The Secretary of the Treasury! At the same advantageous rate? Lr. .f ’lippen: iractieally the same. The Secretary of the Treasury: Are you any more fortunately placed than most borrowers. In that respect? H r. Flippsn: I do not think so. The Secretary of Agriculture: To what extent do yon look upon this as a creditor or borrowing or lending territory? Mr. Flippen: Our experience in our business in this terri tory has been that it is the best balanced section of the United States. The Secretary of Agriculture: Is it dependent or indepen dent financially? Hr. FI ippen: I think it is Independent. The Secretary of Agriculture: Has that been your exper ience and the experience of this section, that it is inde pendent or dependent on outside districts. J * L . Flippen S i * . . Matson B Mr. Fllppen: 3299 lly experience has been that it is indepen dent • The ecretary of Agriculture: Ths Seoretary of the Treasury: That is a l l , thank yon. Have you anybody else, fcr. Ardrey? U t • Ardrey: briefly* e would like Mr* Hats on to speak very e bad asked Lr* Collier to speak* bnt he will speak about the general banking situation and can follow at any time* S TATmiHT 03? A. 11. MATS OS. The Seoretary of the Treasury: Will you state your fu ll name, residence and occupation. Mr* Matson: A. V . Matson; general nujaager of Butler Brothers, and acting as Chairman of the Railway Committee of the Dallas Chamber of Commerce* The Secretary of the Treasury: I f you have any new light that you can shed on this problem, we would be glad to have you give it to us. Mr. Matson: We thought that psrhaps the evidence I ccrald give as to Butler Brothers, locatsd In Dallas, might be of interest to you. Five years ago we had five distributing B A# la. lBt80n 3300 houses located in va ions sections of the country, and at that tine we decided to locate a house in the southwestern district of this country, a distributing house. After carofully considering this matter frsm oil sides, and inves tigating various jobbing centres in this district, we decided that for many reasons, Dallas was the proper place for us to looate our fifth distributing house. Texas was our largest Btate served by St. Louis prior to our coining here, and since coming here, in 18 months time, our business grew about 100 per cent, assuring us that re had located in the proper city to properly serve the territoiy, from a mercantile standpoint. The Secretary of Agr5culturr : /hat territory do you serve from Dellas? Mr. Batson: All of Texas principally, excepting the Gulf point8, that are served from cur Eew York house. The Secretary of Agriculture: To what extent do you serve Oklahoma, Hew Mexico and Louisiana? M r. katson : In Oklahoma we serve practically all tbat business coning to U8 south of the Canadian River, and in Hew Mexico very l it t l e excepting down the Pecos Valley on the Santa Fe Railroad. The Secretary of the Treasury: Do you serve that frctn h A* M. Matson 3301 S t. Louis or Dallas* Ur * Matson: Dallas mostly * , Ths Sscrstary of ths Trsasury: Mr. Mstson: Ths Pscas Hirer district? Ths Pscos River district, y e s,s ir* In Arkansas, not rsry much,- but perhaps mors than five par cent of our total buslnsss from Dallas goes into Arkansas* Ths Sscrstary of ths Trsasury: Mr* Matson: fhat about Louisiana? Ih s same applies there, a rsry small amount* As my map w ill showm we serve but a rsry small district right througi hsrs (indicating)* Ths Sscrstary of ths Treasury: Mr* Matson: Practically Tsxas? Y s s ,s ir , and Oklahoma and a little district off in ths northwest corner of Louisiana# Ths Sscrstary of the Treasury: That is all* Mr* Matson: Would you like to hear our report of ths railroad fa c ilit is s for rsaehing this tsrritory? Ths Sscrstary of the Treasury: Ws are familiar with it* I f you desirs to fils any data on that sub J set as an sxhibit, you may do so* Mr* Ardrsy: W would hars bsen glad to hare Mr* Nevills C Brooks, who is ths Chairman of the Fifth District cf ths Texas Banksrs Association, to prssent a rssolution whichwas h 3302 passed at their annual meeting on February 5th % The Secretary of the Treasury: Lat it be filed* (The resolution was fila d , and is as follows): WHERBAS, the provisions of the Federal Reserve Act require that tha couatry be divided into not less than eight, nor more than twelve districts, within each of which a Federal Reserve Bank shall be located! and WH5RSA3, the agricultural, commereial and financial importance, both present and prospective, of Texas and the contiguous statas in tha Southwest Bake it necessary, undar tha system to ba established, that one of tha Federal Reserve Banks ba located within this section to serva properly tha vast interests therein aid promote the development of tha won ler fu l re sources thereof; and WHEREAS, at this annual meeting on February 5, 1914, the members of the Fifth District of the Texas Bankers Association dssire to reeorl their views with respact to the location of the Federal Reserve Bank to serve the dis trict, within which there are located 405 State and National Banks, having a capital m i surplus of |36*392 ,0QQt the same being thirty per cent in number, m I thirty-one per seat of the capital and surplus of all the banks in Texas; \ thereforebe it RESOLVED, fir s t , that we hereby ratify and endorse as the logical and geographical designation of the district to be treated within which to locate the Federal Reserve Bank, the following: All of Texas, All of Ohlahoxna, All of New Mexico All that part of Arkansas sou£h of the Arkansas Riverj All that part of Louisiana west of the Mississippi Rivet; - Second, that the city within this district best qualified as the location of the Federal Reserve Bank, to serve the saae by reason of its geographical location, commercial importance and unexcelled fae ill ties, is the city of Dallas* Third, That the Chairman of this District bef and he is hereby directed to appear before the Reserve Bank Organization Committee at its hearing at Austin on February 9th an d 10th, and present thereto a copy of this resolution? I* h 3334 and give such furtte- testimony in support thereof as any ■ay be necessary* Tha Sacretary of Ap-riculture: What part of Texas does that district cover? Ur* fir dray: Tha northeastern portion, horderingon Oklahoma and Arkansas, 613 banks with $ 3 5 ,0 0 0 ,0 0 0 banking capital, an d 31 per cent of tha banks. The 3ecretary of the Treasury: Mr* Ardrey: They favor Dallas? Yes. The iecr^tary of the Treasury: Have you any copies of telegrsaa or letters which you sent thera, bearing on that subjee t? Mr* Ardrey: They were in their annual meeting. The Secretary of the Treasury: .I f so, we aight have those filed* Mr* Ardrey: I would say this, we had quite a nuabar of postal card endorsements and other things in response to letters and telegrams, but just as we were accumulating those, the Department at Washington sent out a similar inquiry to every bank in this section, and we are quite content to let Dallas1 olaia rest on the poll taken in that Banner, and consequently we have not filed the letters aad h 3305 talerracs in answar to tha 1 attars sent out# Tha Secretary of Agricultural Thay ware aant out before tha government poll was taken? Ur * Ardrey: No, aa a mat tar of fact thay were sent out afterwards. Tha Secretary of the Treasury: The gorernaent pall la certainly likely to produce untrammeled and unrestrained opinions, without influence from any one. V r # Ardrey: Y e a ,a ir , and so far as Dallas is concerned, we are content to let the matter rest on the opinion of the banks in answer to that question* The Secretary of th* Treasury: We will eall from Fort Worth now, unless there is somebody else Droa Dallas who want a to be heard* Ur* Ardrey, before we close the Dallas hearing, if you desire to call any one else, you may* Mr# Ardrey: We hare some other witnesses whom we are quite anxious tor you to hear, and I think they can give some new in fora at ion, i f you will indulge them. The Secretary of the Treasury: I f they can give any new : information, all right* Mr* Ardrey: We would like Mr* Robinson to speak* He is the preeident of one of the implement dealers in Dallas* 1 1 3306 STATEMENT OP WILLIAM U * ROB III 301: The Secretary of Agriculture: Mr, Robinson, will you state your full name, residence and occupation? Mr* Robinson: William M« Robinson, Vice Presi d»nt, Parlin k Oron dorff Implam ant Company* Tha Sacratary of Arripulture: What is the point you desire to present* Mr* Robinson: Well, sir, Dallas is the largest distributor of agricultural implements in the southwest* It is second only to Kansas City in the United States* We hare about 30 wholesale houses there* Ths Secretary cf Agriculture: What is the total volume of distribution? Mr* Robinson: About $3 5,00 0,00 0* The Secretary of Agriculture: What part of that is done in Texas? Mr* Robinson: 4bout 85 per cent of it , and the balance is d stributsd in southern Oklahoma, southern Arkansas and j lew Mexico* j The Secretary of Agriculture: Oklahoma* About what percentage in h W* M. Robinson Mr* Robinson: 3307 About 10 per cent. The Secretary of Agriculture: lir* Robinson: And in Louisiana? About 7 per cent in Louisiana* The Secretary of A£r iculture: Where does Oklahoma as a whole get most of her inplements? Mr. Robinson: Oklahoma city* All of Texas and northern Louisiana, the Pecos Valley of liew Mexico, and a lap-over into Oklahoma from the northern boundary towns in Texas, are all served from Dallas. The Secretary of Agriculture: What part of the business woull you say is done by other Texas cities, Fort Worth, Houston, Waeo and San Antonio? Mr* Robinson: There is not any Implement business or vehicle business or nachinory business in the agricultural Implanon: line done in any Texas City except throu^i Dali The Secretary of Agriculture: Have you any naps or data which you ds sire to file? Mr. Robinson: Mr* L lpsitz, I think, fil e d our map with his statenent* But the inpressive point is that all the agricultural implements in the southwestan part are dis tributed through Dallas* The Secretary of Agriculture: Thank you* I think that h Math an A lame 3308 givs us th# information. V r. Ardrey: I f you will hear U r. X a than Alama, th© Caahiar of tha American Exchange Bank, and President of the Texet Bankers Association? The Secretary of Agriculture: Yes. STATEMENT OP IATHAJJ ADAMS: The Secretary of Agriculture: Mr .Adams, will you state your name, residence an d occupation? Mr. Adams: f a than Adams, Caahiar of the American Exchange t National Bank of Dallas; P r e s iA n t of the Texas Bankers Association. Mr. Secretary, I had tha pleasure of hearing your speech in St Louia, in which you atated that theae banka were to he located more for the future development of the country than for the present naeds — The Secretary of Agriculture: I (t not recall makingjust o that etatement. Mr* Adams: V e il, something on that lin e . The Secretary of A/rrieulture: It is very important to know Just what the line was. Mr. Adams: I f I remember you correctly, yew stated that h Nathan Adams 3309 the needs of the country would not be the convincing thing at this time, but the development of the country would be taken into consideration* The Secretary of A riculture: Well, that is a different statem ent. Vr. Adams: That is the idea I meant to convey. Dallas, in 1904, h a d total b an k in g resources of $ 1 6 ,0 0 0 ,0 0 0 , with five National Banks. In 1914 they had total resources of $ 4 3 ,0 0 0 ,0 0 0 with five National Banks and fiva State Banksf In T ax a s, taking the Comptroller*s report of October 21st, as the basis, w ith assets, the total number of banks in Texas was 1362 in round figures, of $ 1 2 6 ,0 0 0 ,0 0 0 and individual deposits of $ 2 9 6 ,0 0 0 ,0 0 0 . In 1903 they hal 377 National Banks with a total capital of # 37,0 00,0 00 and total deposits of $ 8 8 ,0 0 0 ,0 0 0 , showing an increase in ten years of # 2 0 8 ,0 0 0 ,0 0 0 . The Secretary of the Treasury: Pile that as your exhibit. Mr* Adams: Yes* (The statement was accordingly f i l e d .) Ths Secretary of Agriculture: You are speaking there of National Banks? Mr. Adams: National and State. There ware no State banks h Nathan A lama 3310 in Texas in 1903* Tha State lav cane into off act after that time, an i we think that these matters should be considered* Speaking of this territory claimed for Dallas, while I am not qpeakingfor the whole association in Texas, and do not want to be undbrstood as speakingin that capacity, I believe we are better able to serve the territory we have selected than St* Louis or fcew Orleans or either one of them, with the stata divided* past 15 years will I think the feistory of the develop tha fact that we have the right to expect that the increase in Texas in the next 15 ysars will be better than th* increase in — will be better than it has ever been, and we will be amply able to take ears of our selves* We had the experience in 1907 with St .Louis of not being able to get the banks north of us to take a check loon that city* Ve do not believe they are the lenders of money that you have been le d to believe* We be lieve we are amply able to take care of the district that, ws have chosen, and that the facts will The Secretary of the Treasury: tfevelop it* We will hear the super in- ten dent of Banks, if he is here* Ur* Ardrey: He has not corae in, but he will testify for the state in general, snd can f i l l in at any time* h B . B . Paddock The Secretary of the Treasury: 3311 We will hear from Port Wortti now. VT . Lo uis J . Worthu^: l I f tiie Comsittee pla&se, I a is Chairman of the Fort Worth delegation. Is have segregated Fort Worth* s plea into several co-re^aa~dilopics, according to this inquiry, and we have the following list of gentleaen who will specialise on each one of tne ja topics, and we would be pleased if the Committee #ould call their names in that order. The Secretary of the Xreasury: Yes. 7?e will hear you Captain Paddock. 3TAT&&KKT OF B . B . PADJOCII: The Secretary of the Treasury: State your name, residence and occupation? Mr. Paddock: Tex*s, B . B . Paddock, my address is 7ort Worth, and ny friend at Fort Wortn designate my occupation as *town loafer” . The Secretary of the Treasury: I suppose we ought net to ask you if you deserve the title (laughter). Mr. Paddock: You c m ask me anything you have a nind to B* B* Paddock h 3312 and I will answer to the best of my ability* The only o ffic ia l position I occupy is that of honorary president for life of the Port Worth Chamber of Commerce, and it is without emoluments, duties or obligations* Gentlemen, the Port Worth Committee hare seen proper to assign me to the presentation of the railway and mail fa c ilitie s for Texas, haring divided up the different sub jects and assigned them to those that they thought would be competent to present them intelligibly* But I do not want to trench upon any of my associates, but for fear they might not think of it, I want to challenge the statement made by up good friend of Dallas, Mr* Babcock, that Dallas gets- all the trade from southwest Oklahoma* We get a little of it in Fort Worth, Just a trifle* If I have comprehended the intent and purpose of this Aet rightly — The Secretary of the Treasury: Will you qpeak a little louder, so the gallery can hear you* Mr* Paddock I do not care about the gallery, but I want to get it into you* The Secretary of the Treasury : I f you get it to the gallery, we will hear it* h B* B* Paddock • Paddock: 3313 I f I comprehend tha purpose of the Act correctly, it ia to provi fe a financial system which will beat serve the people and tje business and productive interests of the country, and not so much interests* w have e the banking la id out a district comprising Texas, Oklahoma and New Mexico, it being— The Secretary of the Treasury: Your argisnant relates to the same district as presented by Dallas? Mr* Paddock: Ito, sir, w do not include Arkansas or e Louisiana. The Secretary of Agriculture: Can you give us your map? Mr* Paddock: We have a little map here that I got at Dallas* I do not want this Committee to think there is nothing west of Dallas there, any railroads* Have you the map there that tfiows the truth of this thing? The Secretary of Agriculture: Do you want to f il e that? Mr* Paddock: Yes, I want to file that — no, I think I will have that framed and put in my library* We present to you this map (producing another map) as showing the other states on the paper* That map is a reproduction of the postal route map as platted by the Post Office Department, which shows every railroad in Texas, Oklahoma and Hew Mexieo* h B . B . Paddock I believe* 3314 You will observe, gentleman of the Committee, that thers are 13 miles there i n r e i which represent 13Trunk line of railway that converge at Fort Worth. I want to capitalize the word Trunk Lines for a reason which I will give you later on. This is the shortest line that w have, e it is only 233 miles, but every other line there extends entirely across the state and adjoining states to the c r 'll ere ial marts of the country. on You will observe that C u r j are three lines to Denver, to witt the Fort Vorth & Denver, the Santa Fe and the Heck Island. There are four lines to Kansas City, the Santa Fe, Hock Island, Missouri, Kan see & Texas and Frisco System. There are five lines to St. Louis, the V. X . & T ., Cotton B e lt, the the Texas & Pacific with its connection with the Iron Mountain, and two lin^s of the Frisco, one line runningnorth, lin e, a little north-of Fort Worth in a direct and the other runningon the eastern line of Oklahoma, the distance between the two lines at this point being 109 milas, covering, you will observe, quite a considerable territory. There are five lines to Houston and Galveston, the K .K . & T ., 3:uita Fe, the Houston S Texas Central, the c International & Great Northern, an3 the Trinity & Brazoe h B . B* Paddock 5315 V allay . There are two lines to tho Mexican border on the •outhweet, and New Mexico is served by three lin e* from Port Worth, there being a tri-daily service from Fort Worth over the Santa Fe lines to New Mexico, and there are two lines over the Texas & Pacific and the Orient, taking up the Pecos Valley, which is the most productive section of Mew Mexico, from an agricultural standpoint* The Secretary of the Treasury: Have you any connection with Dallas? Mr* Paddock: Y e s ,s ir ; we do not use them much (laughter). There are four, the Texas & Pacific, Cotton Belt, and the Rock IAand, and then for their convenience we built them an Interurban railway which has a h a lf hour service between the two c itie s . They are on this map as well as their interurban lines north to Denison and the southern line* The Secretary of the Treasury: Yes, I see it now that you oall my attention to it* Mr* Paddock: Yes. You will observe there are no branch lins • from Fort Worth in any direction or leading out to connect with sny other road, nd that condition dbes not prevail anywhere else in the Jnited States, that every line h B . B . Paddock 3316 entering or converging at a given point is a trunk lin e. We are dbing more railway business than any city of anywhere near our size on thi3 continent* I heard the boast made that one of our competitors handled 643 freight cars daily through their several yards in their city . The number handled daily through the yards of Fort Worth is 3052 p lus, making 955,505 freight cars handled in Port Worth during the year 1913. The Secretary of the Treasury What is the name of the competitor to which you refer? Mr. Paddock: Here it is on that little map I gave you. Tha Secretary of the Treasury: Where they handle 600 a day? Mr. Paddock: Dallas, 643. Give thsm credit for all they do. There is a reason for this which is found in the fact that not only are we the centre cf two of the greatest articles ofccommeree in this country, but that our lines are trunk lin es, and under the ruling of the Railway Commission of Texas, which is also applied by the Interstate commerce Commission to the Texas-Oklahoma points, a one-line rate is lower than it is over two or more lin as, and as the lines converging at Fort Worth are trunk linos they take the one h B . !<• Paddock 3317 lin e rata, to that Fort Worth has an advantage to about 85 per cant of tha points in Texas and Oklahoma, of the onelin e rate as against the two or three line rate, which accounts in a great measure for the large number of freight ears that are passing through Port Worth. Of these cars, 41 5,21 6 cars do no business in Port Worth except tha inter change from one road to another and the others are loaded and unloaded in Port Worth. The Secretaryof Agriculture: Which city receives the most commodities over its railroads, Fort Worth or Dallas? Mr. Paddock: Well, it would depend a little bit of whom you were making the inquiry, I think. The Secretary of Agriculture: I am asking you right now. Mr. Paddock: Port worth. The Secretary of Agriculture: Which distributes the most commodities over these railroads? Mr. Paddock: R>rt worth. The Secretary of Agriculture: It has the largest business each way? V r. Paddock: We handle through our yard* 3052 cars plus each day, their largest claim being, I believe, 643. The Secretary of the Treasury: The question is , how many h B . B* Paddock 3318 of the* originate there and indicate the business originating at Port Worth and corningin to Fort Worth and stopping there* Mr* Paddock: total Well, you would subtract 415,216 from tha and you have 540*289* The Secretary of the Treasury: Loaded and unloaded? Mr* Paddock: Loaded and unloaded* The Secretary of the Treasury: Representing local Fort Worth business? Mr* Paddock: The business coming into Fort Worth and go ing ou t * The Secretary of the Treasury: That is what I mean, exac tly * Mr* Paddock: Fort Worth being the — The Secretary of the Treasury: the What does/bulk of that business eonsist of? Mr. Paddock: Cattle, grain and cotton, and of course Merchandise in an d out, but toe larger business is in eat tie, grain and cotton* Most of the cotton goes through, all but 125,000 bales* Of something like 1 ,0 0 0 ,0 0 0 brought in Fort Worth, there are only about 125,000 actually handled there on the platform. There are 110 mail trains in and out of h B* B* Paddock Port /orth every <tey, n o 3519 trains that carry tha mails, Fort Worth being tha headquarters of tha 11th Postal Division, established in lovember, 1888* It is a coincident that it eobraces practically tha same territory that we are asking i for, for a Reserve Bank, Taxas, Oklahoma, fcew Mexico and they taka in a part of Arkansas and Louisiana, which we do not* Our reason for not doing that was that we wanted to gat a Reserve Bank and the trend of business we thought to ba an important factor, and as the anount of business transacted between Texas points and Arkansas and Louisiana points is so small, we did not add it to the territory for presentation at this time* low with the mail facilities of 110 trains in and out during the day, we reach a point 220 to 225 miles from Fort Vorth to which mail can be forwarded and an answer received within 24hours. We also give it within 36 hours and 48 hours* The Secretary of the Treasury: Is that a part of your pamphlet? Mr* Paddock: No, it is not printed in the pamphlet, but I w ill file it with you • h B . B . Paddock The Secretary of tha Treasury: 3320 I f you will fila it , please do so, because »a cannot carry those figures in our heads* Wr# Paddock: I will file it* We reach points varying from 220 to 225 miles, in which a latter can be dispatched and a reply received within 24, 36 an d 48 hours* As an evidence of the business that us being lone by the Railway Mail service, there are living in Fort Worth 257 employes of the mail service* Thare are two chief clerks and there are 156 parcel cars sent out from Fort Worth* that is a new department in recent years in the transmission of fre i^t, sending small parcels to local points* 156 of those each day leaves Fort forth loaded with small con sig*. ments to different points in the trade territory of Fort Worth* Wa have added law Mexicorcto this territory for the reason that tha principal industries in Kew Mexico are cattle, fruits and vegetables, and lining* Outside of the Pecos Valley and its tributaries, agriculture in Hem Mexico, there is very little as I understand and am adviaed* That business lar/rely comes to Fort Vorth* Most of the cattle, and I think practically all the fruits and vegetables B . B . Paddock com* thare. 3321 It is no unusual sight to see several solid trains of these refrigerator cars coming into Fort Worth within an hour or two of aach other. The California Fruit Company has ta headquarters for tha southwest at Fort Worth, whora tha so cars are inspects!, re-iced and distributed from there to the points in the north uid northeast and horthwest* Denver gets most of its fruits and vegetables through Fort Worth9 from the southern part of Texas and from southern Arizona and New Mexico. Just the day before I l e f t , one firm in Fort Worth paid a freight b i l l of $20,000 on one shipment that eame in* Fort Worth., by reaaon of its railway facilities — perhaps the personnel of Fort Worth people mi^it have had some influence in the matter, but probably largely because of its railway fa c ilitie s and convenience for the trans action of business, is the headquarters of the Texas Cattle Raisers Association* That narae is possibly a misnomer, though it originated in Texas some 40 years ago, 38 years ago, I believe, most of its membership is in Texas, but it comprises members tram Oklahoma, Hew Mexico, Kansas, Nebraska* and Old Mexico. The Secretary of the Treasury: I see you have Mr.Stafford h B • B • Paddock 3322 down hare to apeak on that. Vr* Paddock: Yes, ha will speak on that particular point, but I am spealdngof its being mads the hsadquartars, because its railroad facilities* Also it is the headquarters of the Crain Dsalers Association, the headquarters of the Farmers* Union of the Southwest, the headquarters of four of the railroads that converge in the city* The population of Fort Vorthm as you will see by looking at the census reports, shows a percentage of increase greater than that of any other city in the United States for the last decade, being 174*7 percent, and it is growing as rapidly now as it did then* The Secretary of tha Treasury: lhat was the population by the eensus of 1910? Mr* Paddock: 7 2 ,3 1 2 , an increase during the decade of 174*7 per cent* We assists that this is building for the future, and wears e j e c t i n g great things for our £ktj and our section upon the completion of the Panama Canal, when all the products destined for the Orient will pass through Fort Worth seeking an outlet through the Panama Canal* say they will go through Fort Worth for the reason that these lines of railway extend north into the Mississippi I h B . B . Paddock 3323 Valley, and they are trunk linea of road and do not have to change and gat off thair own ralla to ra?eh tha Gulf porta in Texas. I believe, Wr♦ Secretary, that what little else you say fin d in thia pamphlet upon that tub j act cosparises about what I wish to aay about it* Tha Sacratary of tha Traaaury: Wa can raly upon that printad matter, I presume* Vr • Paddock: I wrota it , H r. Sacratary, and I feel quite aura that that will ba enough for you (laughter). Tha Sacratary of tha Traaaury: Knowing tha authority I shall know what weight to give to i t . H r. Paddock: Y a a ,a ir , precisely that. Tha Sacratary of tha Traaaury: Can you give ua thrae copies of that? Mr. Paddock: Y e s ,a ir , I will aaa that you get thas. Tha Sacratary of the Traaaury: Kindly fila thraa addi tional copies. Mr. Paddock: Y e s ,s ir . If there are any additional facta or any <ju©stions you desire to ask se, I will «ry to an swar thas. Tha Sacratary of the Traaaury: I do not think of any h R* D* Gage* thing* That it a ll, 3339 thank you* We will hear ISr* Gag#* STATEMi&T OF R . D* GAGE: Tbs Secretary of tha Treasury: Will you state your full nane, residence and occupation? *r• Gage: R* D* Gage; Port Worth, Texas; Vice President of the First National Bank* The Secretary of the Treasury: Hare you a map outlining the district that you are advocating? Mr. Gage: The /in e s , Mr* Secretary, that ase entirely pleaaing to us are coincident with the lines presented by Dallas a few monents ago* The Secretary of the Treasury: You are in agreement upon that point? Mr* Gaga: Y es,sir* All of Arkansas, south of the Arkansas River, Louisiana — The Secretary of the Treasury: As to the district it s e lf, of course, we have had information* Mr* Gage: Yes* The Secretary of the Treasury: I f you will kindly advise us why, if that district should be created, Port Worth should have the bank as against any other city in the district, I h R* D. Oage 5325 we should bo pleased to get that information . Mr, Gage: To be entirely frank, Mr* Secretary, the honors are quito evenly divided, unless our large railway and sail fa c ilit ie s and our large grain business and our cotton business incline the scales in our favor* The two towns who are contesting here from North Texas, are within 30 miles of •ach other, and all that can be said about the one in a general way, can be equally truthfully said about the other* I havo listened with interest, and of course it has been very instructive, to the line of your questions* Sow, Mr* Secretary, Texascannot pretend to enter the lists with St* Louis or Chicago, or with Rew York* I f we down here unlerstand that question, and you will excuse me if I go beyond what I ought to, it is with entire deference to you gentlemen, your line of questions which I have listened to — we had the idea that the purpose of the law its e lf was to distribute and to prevent the vast sggreg ation of money — The Secretary of the Treasury: Does not that inevitably follow, no matter where you put the reserve banks, so long as you divide the country into districts which the Act require at & K* 3* Gage 3326 Kr* Gage: Not entirely so, wa think# Wa think that thia country down h e r e , that ia a developing country and a growing country, if wa can ahow you by tha figures and by the facta that w are eafely beyond the margin of the minimum required a un cbr the law, if our dbposita jU8tify i t f If our wants and our needs ae^m to warrant it , we think i f there be any doubt in the min a of you gentlemen, it certainly ought to be resolved in favor of the southwest* The Secretary of Agriculture: how you are apeaking for thia whola district? Mr. Gage: I aa qpsaking for the entire state* The Secretary of Agriculture: Only for the entire atate? Mr* Gage: Oh, no, you understand generally for the atate * We want it in the atate firat* We think theae minor differ ence a ought to be sunk right here# Of course, there ia a pleasant rivalry* We believe we have the ed^e over our other friends* We believe that Port Worth teas inclined the scales a little bit more heavily* But speaking for Texas It s e lf, you speak about the trend said current of trade* How I 3d not believe in any abrupt dislocation and disruption of these relationships, but to a certain extent that must be done* R* D# Gage 3327 The Secretary of Agr culture: His provisions of the Act in that reapect are mandatory* It says wo shall have due regard to tha convenience and customary course of business in these districts* Wr* Ga^e: I un "erstand, but I do not understand that the conditions which have prevailed possibly tor 50 years of the financial current through 3t* Louis and Chicago and &ew York, hr ide artificially so by the fact that they are the great reaerve centrea — The Secretary of the Treasury: We are not peaking wholly of exchange, but our inquiries are directed to all these business phases as well, as the lin e of questions which you heard indicate, and we are trying to ascertain what will beat aerve the customary course of business and convenience, which includes banking, but that is not the only interest, by any means* Mr* Oage: * o # I understand the agricultural and industrial interests are also considered* The Secret >ry of the Treasury: And let me say again, and addressing myself to your opening remarks, about the purpose of this Act being to decentralise reserves, and that the purport of our questions would seem to indicate the i . 3» Cago 532B purpose to oantralize th® funds, tha very Act itself craatas decen trali^ation which you o f, an 1 the organization of tha country into not less than eight nor more than taelve liatricta ia bound to bring about that result* Tha only question is what tha lines of tha 3istricts ah all bef and aa to vhara tha Reaerva Bank itsalf shall ba placed in each ona of thaaa districts* Zha lav alao contemplates, and in fast it aakea it mandatory, that thara shall ba branchas of thaaa banks throughout thaaa districts, in ordar that tha convenience and custoaary course of businass Bay ba best served in every direction. V r. Gaga: I understand* Tha Secretary of the Treasury: How that is what tha Coaaittee ia trying to ascertain, an d aa I said before, and I would like to try to repeat it hare not, tha line of our quo* tiona do * a not in any manner indicate any £*ift of our opin ion* Mr* Gage: 3d I understand* The Secretary of tha Treasury: But what wa Bust da, as you gentlecnen are advftoating a particular thing, is to aak questions which http://fraser.stlouisfed.org/purpose Federal Reserve Bank of St. Louis mty eeaa opposed to your views, for the of bringing out all the facts and developing the R . D# Gage 3329 argument* i'r. Gaga: I understand* I di i not intend to convey the idea that you gentlemen were endeavoring to impose a con dition upon us which was contrary to the drift of the financial current and trade current. The Secretary of the Treasury: &f ot at all* I only wanted to emphasise the point and make it clear again, so that there may be no mi sun cterat an ding. tfr. 0 age: Temporarily there might seem to be by the formation of this district which we aug/rest, a breaking of ties and a disruption of relationship, bfct it does seem to us that, homogeneous as we are down here, with like interests* it could be done with the very least inconvenience, and certainly to the very great convenience of these people who are in the boun iariej of the territory we suggest. The Secretary o f the Treasury: The normal relationships between depositors and the various banks in these statesare not £Oing to be disturbed, nor are the normal relationships between the banks themselves going to be disturbed. This Act creates the reserve banks for the purpose of providing a new and additional facility to those now existing. Mr. Gage: 3o I understand. h D. Gage 3330 The Secretary of the Treasury: Now ths purpose, of course, in locating these bank* and laying out the districts is to fin d out what will beat accomplish that purpose for which this Act was passed, we lad this flow attuning this district, though, same question as between St. Paul and Minneapolis; they both concurred in the district, but each wanted the bank in their respective cities. The question we had to ask them in the question we must ask you here, what prevail ing or paramount reason is there for having this bank either in Dallas or Port Worth, i f this district be assumed? Now, as representing Port Worthr if you can give us any prevailing reason why Port Worth should have it as against any other city in the district, we would like to have it . Kr. Gage: As I said before, the honors are even between these two c itie s , they are so close together that what helps one helps the other, except that we have the railroad and mail fa c ilit ie s , and we have been the headquarters for the Postal division for 25 years. The Secretary of the Treasury: You base your claimm on the large railroad and mail facilities? Mr. Gage: Yes, and the handling of cotton. The Seoretary of the Treasury: Do you handle any more h R. D. Gage 3331 cotton than Dallas? Mr. Gage: Not more, n o ,s i r . $ 1 ,0 0 0 ,0 0 0 plus * course, We financed last year That w ill be furnished you by others. Of in cattle we are the easy leader of everything in the southwest south of Kansas C ity . The Secretary of the Treasury: Supposing a district were created different from the one you have outlined, what would be your choice outside of Texas as the city for the Reserve Bank for this region? M r. Gage: Outside of Texas? Ths Secretary of the Treasury: Outside of Texas, assuming that a district other than this were organized, and there were no Texas city named. Mr* Gage: Ity personal preference would carry me to St. Louis. The Secretary of the Treasury: That would sorvo more the normal course of business and — W r. Ga^e: I think so. The Secretary of Agriculture: Is Fort Worth's business more with S t. Louis than with Kansas City? Mr* Gage: I think very largely so. The Secretary of Apriculture: Where 4>es the cattle h R. D. Gage 3332 business go? M r. Gags: Kansas city is tha second largest cattle market in the United States, Fort Worth third, and Chicago firs t* But you w ill observe that Kansas City is not a central rsserve city, an i therefore the reserve cities in Texas naturally take up the lines of least resistance and lan d in 3t • L o u is . The Secretary of Agriculture: I was speaking more of the flow of commodities and trade, rather than the banking relations* _ The Secretaryof the Treasury: Exactly, that is the point % ws are more concerned in, because when this Act goes into operstion, w il l after a short time, disappear, and so w ill these central reserve cities the reserve cities disappear, and none of them w ill keep reserves of banks* how in contemplation of that, where would you think the Reserve Bank should b e , as between St Louis and Kansas C ity , is concerned, which would best so far as this territory servo the customary course of bus iness? Hr* Gags: Hien you got down into the cloth and shoe lines and lin e s of clothing of a l l kinds, p ariso n between Kansas City then there is no com a n d S t .L o u is as to where we go, h 3333 in these lin e s of trade, but when it g ra in , comes to liv e stock and than o f course the cars trundle down from Kansas City in thia direction loafed with grain down to Port Worth, and a great many cattle go from fcew Mexico and the west and are shipped directly to Kansas City* It is useless, I presume, to t3ll you about the banking capital of Port Worth? The Secretary of the Treasury: We are familiar with that. We hare it in the comptroller's statements, of course. Mr. Gags: Yes* The Secretary of the Treasury: I would like to ask you where do you keep your reserves now, how are they dis tributed between the central reserve c i t i e s , and in what proportion? Mr* Gage: The larger amount, of course, is in Hew York* W# are bound to use New York exchange; and a very respectable amount in Chicago a n d a less amount in St. louis. We dis tribute our normal exchanges in that way. The Secretary of the Treasury: balances in New York largely You k*ep your larger for exchange purposes, I presume? M r. Gags: Y e s , there is a greater exchange, it is current everywhere. damand for New York R. h 3. Cage 3334 The Secretary of the Treasury: You heard the questions I addressed to Mr. with the Ardrey. Do you concur in h is views, that parring o f exchange between these reserve banks, the necessity for carrying such large balances in New York w ill be obviated? Ift*. Gage: Thay w ill be largely diminished. The Secretary of the Treasury: That w ill be the inevitable r e s u l t , w ill it not? V X . Gago: Y e s , largely so. The Secretary of the Treasury: You heard the question I addressed to M r. Ardrey about the d e finitio n of commercial paper and the clearing house functions to be discharged by these banks. W ill you consider those addressed to the Port Worth Clearing House Association? Mr. Gage: Yes» We should like very much to broaden the definition of commercial paper. The Secretary of the Treasury: Mr. Reporter, see that Judge Gago is furnished with a copy of this question. M r. Gage: According to our standpoint in the southwest, without roference to sectional lines, our best collateral, and a very large amount of which w ill be offered to the Reserve Bank, w il l consist of the most liq u id and the most h R. D. Gage 3335 solvent assets we think in the United States, away aid we get fro* the narrow and hidebound commercial view of what constitutes commercial paper, and I tfiould be very glad to give you our views* The Secretary of Agriculture: To what extant do you think this d istrict you have l a id out would be independent or dependent fin a n cia lly ? Wr* Gage: We would not for tha entire year, Mr .Secretary — you take it in the latter part of tha summer and the early f a l l *onths, the demand upon us to carry the cotton tremendously heavy. Sometimes we escape. is To illustrate last year the bank in which I worked did not discount at a l l . The Secretary of the Treasury: Why was that? V r . Gage: The need was not so pressing* This year we borrowed # 3 0 0 ,0 0 0 from our northern and eastern corre spondents, and £ 100,000 fro* understand it the government. But you does net perpetuate its e lf year after y e a r. The Secretary of Agriculture: But normally do you have to rediscount in the f a l l , lfr. Gage: to move the crops? Sometimes for 60 days, and rarely over 90 days. The turn of the cotton crop brings it i n . The cattle crop b rin g s it in twice a year md sometimes three times and the h R* D* Cage 3336 money turns oyer and over. The Secretary of Agriculture: One of tha things that seemed to be in the mind of Congress in passing this Act and providing for these districts was that in normal times, that i s , except in times of unusual stress, that these districts should be independent* Mr. Oa£e: That is the proper view for this Committee, and we think that wi*h our p ractically *6 ,4 2 0 ,0 0 0 , to be exactly correct, *5 0 0 ,0 0 0 , or as a capital for the bank, with the necessary and legal reserves you would h o ld, it would help out wonderfully and I think we would be able to take care of ourselves* The Secretary of Af;ricult are: You have nothing to show the attitude of the people of New Mexico and Oklahoma towards Port Worth? V r . Gage: That w ill be brought forward by oth ers. great many cattle yea have interestedthem selves A to the •x te n t of writing in their concurrence in the view that Port iorth is the most lo g ical place, by reason of the heavy cattle traffic transacted there. The Secretary of the Treasury: I the liv e #ould l ik e to ask about stock paper you take there. Is the live stock h R. D. Gage 3337 paper of Toxaa in tho form of a n *to , practically the same aa that employed in other section*, where such paper is used, like Denver and Kansas City? Mr. Oa^e: You moan tlie fora and character of the paper? The Secretary the Treasury: Yea# Mr, Gage: I think s o . The paper, of course, is mostly in the form of a chattel mortgage. Different paople resort to different methods of c e rify in g it, an d they have the cattle counted and the brandaxamin* d. The Secretary of the Treasury: But the same general method la follow ed: Mr. Gage: I think so . I mi (jit say in closing, if you w i n permit nn — Tha Secretary of the Treasury: Any exhibits you care to file with your testimony, you may so f i l e . M r. Gage: The bank clearings for Port Worth, adverting to that for a moment, and then I shall conclude, have grown in the la st ten years from $ 8 4 ,0 0 0 ,0 0 0 per year to $ 4 1 8 ,0 0 0 ,0 0 0 as shown by the statements. The Secretary of the Treasury: What do you pay on your bank balances? }/r. Ga^e: Two per cent oa daily balances. R* D. 0 tf 9 if h Tht Secretary of the Treasury: 333B The same as Dallas? I r . Gags: Y ss. Ths Secretary of the Treasury: ions? %id how a&out check collect Doss the same practice prevail in Fort Worth as in Dallas? Vr. Gags: As to the charges mads? Ths Secretary of the Treasury: Yss. Mr. Gags: Practically the same. The Secrstary of the Treasury: Dallas? Hhat were the clearings of ■ I have forgotten. Mr. Gage: Ve hare not >een able to ascertain. Mr. Ardrsy: Ws did nor submit the figures, fbr tho reason there is not a uniformity in Texas in the method of computing elearings. Dallas has newer published her clearings because their methods of computation is different from the othor Texas c itie s. Mr. Ga,~e: $ 3 1 8 ,0 0 0 r000 for 1912, andT £361,000,000 for 1913. Ths Sscretary of the Treasury: That is in and out, I suppose? Mr. Gar#: That is ths daily clearings, but it represents actual clearings, with daily settlements. h H • G a^ a 3339 Tha Secretary of tha Treasury: Do you clear on the same b asis? Mr* Oar©: On the New York basis. Tl» Secretary of tha Treasury: What is the difference in tha b asaa? Mr. Gaga: I do not know vhat his basis is, but va charge only in tha ona way. Tha Secretary of tha Treasury: Wall, those figures may be file d . Mr. Ardrey: The difference, I think between the methods of computation as between Dallas and Port Worth I think, are that we settle every day, aid cancel tha balances and I think they clear back the next day some of theirs. Mr. Gage: I do not really know what the differencea consist o f. I only know what the recorda show. Tlia Secretary of the Treasury: We will taka a recess now until 2:00 o 'clo ck. Whereupon, at 12 :00 M ., a recess was taken until 2 :0 0 o'clock P.M . C. Ousley 3340 AFT EH R2CES3 2 P.M. STATEMEKT 0? CLARENCE OUSLEY. The Sec re lary of Agricultural You may state your name, residence and occupation. V r. Oualey: Clarence Ouslay, Editor of the Fort Worth Record. The Secretary of Agriculture: You are familiar with the problem we are confronted with? Mr. Oualey: ?airly so. The Secretary of Agriculture: And we would be very glad to hare you give uayour assistance. Mr. Oualey: I want to address myself to one or two points, gentlemen. T wa* very much interssted/while ago ia the inquiries that Secretary McAdoo addressed concerning the definition and form of commercial paper. pan ling a propoaal for a banka, There is now aystem of Federal agricultural aid that ia, to aat the most al>out it , only a hopeful experiment, far in the future, and I take it that for some yaara to come the only hope of improvement in the accomoda tion of produce ia through thia Act, and that it waa wi8©ly provided that fsrm paper, or paper repreaenting staple It C# O usley a r ic u lt u r a l prod ucts, 3341 should be accepted as commercial paper and that the needs of producers in this southwestern country ought to be considered as well as the channels of commerce• how from that standpoint I am sire you w ill realize the importance of this a rea, as you w ill hear presen tly from M r. Sanson and Mr J t a ffo r 1, who w ill ducts, southwestern country, this /rreat producing t e s t ify concerning the l iv e stock pro that rural paper w ill constitute a tremendous volume of transactions o f these banks* That bein'? the case I foil that the B oard ought to consider the needs of producers in the more immediate and l i q u i d accomodation o f their th-n has been h ereto fo re r e g a r d s d b y words, h e r e a ft e r , a ^ r ic u l t u r a l paper u n ie r ths banks* desires In other the p ro v isio n s of this b i l l , w i l l be a larg er element than ever before in banking and in currency issu e* Now remember that Texas is the l iv e stock of the u n io n , qad remember it produces one th ird o f the \jBGric<m cotton crop, and that in those two a ssets alone p resen ts a problem o f natio nal importance, in the dispatch o f those products from ths fa r a to the consumer with lea st waste of it d istrib utio n through mi ddlomen. the C . Ousley h 3342 Ko* Port Worth, as you will find presently, finances a greater pi*rt of the live stock industry of this entire southwestern region. You will find it finances almost the entire grain product of this southwestern region. You will fin d tIso that it finances as much of the cotton crop, in round number a 14 ,0 0 0 ,0 0 0 bales, as any other city of this -tat*. Th^r .fore, /ort north linances the larger volume, twotiiirds or wii.ree— fourth j a the live stock and grain, and ati much of tho cotton crop as any other city in the state. Secretary houston is ^erfttctly aware cl what is new iaaedi&tsly in prospect in the economic rerolution of handling farm products through co-operative enterprise, and if he will pardon me for saying tnis, he has made the wisest suggestion which has yet be n mada on that subject concern ing the h a n d l in g offarm products by the smallest unit, and it is only a question of the assembling of the legislature jn this state and in ouher states contiguous to this suction, when these offerts will b j put into effect and this system, JV.Houaton, will not be fairly establishe I b jfore there v ill bo bulk marks ting under state acts. coi^es to pass, And whatt that lie Jbman Is upon bsnks for Uae accomodation of f rm products in the non Is or producers is going to bs h 3343 C# Oualey ▼asfcly larger than it ever haa bean. And I trust that tha Board in considering the location of theae banks, will have due regard to thia new fie ld of banking as well as to preserving the charnels of trade and commerce, as Secretary Me A doo has referred to this morning. Secretary of Agr culture: We include that as part of commerce. Sir. Oualey: You do not include that as part of commerce? The Secretary of the Treasury: Oh, yea. sOr. Oualey: That being the caae, then Texas is manifestly e section to be very seriously considered. The Secretary of Agriculture: Mr. Oualey: Yea. The truth is, you cannot put Texas into any region, either of eight banks or of twelve banks, without Texas being the largest part of that region. Kow then, with these aggregated interests, certainly it is entitled to very serious consideration as the location of this Reserve Bank, and the relation of such parts of Arkansas, Oklahoma, Sew Mexico an d Louisiana to this Federal Reserve Bank located in Texas, will not interefere with the charnels of commerce. I hope you will bear that in mind, because those local merchants and dealers will still do their local business throu^i their p j* local banks. C. Ousley 3344 It is the local member bank which will have relation to the Reserve "Rank, ond that will not interfere with any channels of commerce; I take i t that the Act means you must not interfere with %ny channels of commerce. But I wont to in sist that compelling a part of Arkansas and Louisiana to do their reserve banking through a Texss Reserve Bank would not interfere with the transportation or shipment cf commodltiesor the purchase of goods by the Arkansas or Louisiana merchant. He would simply have to have his reserve relations with Texas through correspondence and otherwise9 instead of with S t . Louis or £ew Orleans. The Secretary of the Treasury: admit that the 1 aw makes mors the Interests U r. Ousley, of course we ample provision directly in of the agricultural law, which is a very wise provision, classes than the former and we are aware of the great volume of commerce of the countiy which arises through these agricultural communities. Just what injury, i f anyr would be done to that trade i f you had a larger distric t, perhaps incorporating in the district communities that ssrs not so largely agricultural j for instance, if you had a district reaching from the edge of S t. Louis or Tansas Cityr might there not be advantages in having the greater divereity and perhaps a greater volume of lending power to meet the abnormal movements that come seasonally? Mr. Ousley: Well, that would be a matter to be — The Secretary of Agriculture: I am just asking for your opinion, V r . Ousley: Yes, that would be a matter to be calculated by the actual volume of assets that would be aggrerated, when you come to add i t up. My own impression from my casual study of the eubject is quite in line with the testimony already delivered here, that this region is self-sufficient, and thsrs would be no difficu lt whatever in financing the entire crops of this region with their extra seasonal demand; thsrs would be no difficulty in financing these crops in this region without *oin?r beyond. The Secretary o f Agriculture: another question, Mr. Ousley? within the number, I would like to ask you The Committee has discretion, to establish from eij$it to twelve districts. Mr. Ouslsy: Yes. The Secretary of Agriculture: How we of course know that the country ie developing very rapidly; we know that some ssctlons are developing rather more rapidly than other p jb C. sections. lish O u eley o546 Would i t be your advice that the Committee estab the mini:.Tum numberor a larger number thm the minimum number, with a view to allowing for the location of other districts later, to meet the demands of Vr. Oueley: developing locations? Ify opinion is in regard to that that within five years you will increase the number of reserve banks. Ths Secretary of Agriculture: You mean by Congressional action? Mr. Ousley: Y sf, by Congressional action. So my judgme&t is that the committee ought now to establish the maximum number, becauss I think the greatest satisfaction will be rendered to the count jy by having the maximum number of units. I believe in five yearsyou will increase the number of reserve banks, because I believe when they are established there will be development a£d inter-relation andcontact that will solidify thm among themselves and i t will tend mors and mo re tt create a demand for those local units. I would not say that I favor such a plan, i f it wsrs not for the fact that all the banks are to be under ths dirsotion o f a general Board which will have regard to the whole national welfare. I think the larger number of units, and ths smaller ths unit} ths greater ths satisfaction p jb C. Ousley 5547 and the more liq u id the resources and the more satisfactory to the accommodation of the whole of commerce. The Secretary of Agriculture: Your argument is primarily for the creation of such a hank in the southwestern region. F*r. Ouslsy: Yes, sir* The Secretary of Agriculture: And secondarily for Fort Vorthss the location. Ifr. Ousley: Yes, s ir . The Secretary of the Treasury: Hare you cdven any thought ful study to the problem of the la ger as against the smaller number of banks, at the outsst. Vr. Ousley: Houston. I was just answering that question to Dr. I think the larger number will give greater satisfaction to the country. The Secretary of the Treasury: But I say, have you studied the phases of that problonr or is it an offhand opinion? V r. Ouslsy: It i s not an offhand opinion; i t is based upon a fundamental conviction of my own a to the wisest m manner in the conduct of public a ffa irs , and that i s to have the largest number o f automatic units and the smallest units consistent with the handling of the buslnsss. The Secretary o f Agriculture: Vy question grew out of I' p jb C. Ousley 3348 ths experience */• had in other sections. For instance, some gentlemen in one cf the large and rapidly developing sec tions eaid very frankly that they did not think that a "bank with a district ia that particular section ought to be created at this time, but that they did think in five or s i x years such a district ought to be created, and they therefore urged the establishment of the minimum number of districts wi th a view to the segregation of that territory later. Vr. Ousley: Yes. The Secretary of the Treasury: The Federal.Reserve Board is the power to readjust these districts and create a larger numberup to twelve, if we started with the minimum, Vr. Ousley: I quite unde stand that. The Seeretary of the Treasury: Bo that the opportunity for readjustment exists, i f we begin with the smaller number, whereas if we begin with the maximum number the * difficulty of readjustment would be greater. Vr. Ousley: 0hr yes, you would have to take from one and add to the other, and I c m understand t>» twould be a d iffic u lt y . The Secretary of the Treasury: So the ($iedsion, of courser 3349 C. Ousley arises in the mindsof tha Committee as to which policy would be preferable to begin with* lfr. OuBley: I at fraa k to soy I am basing ay opinion upon a fundamental conviction that the beat interests of the count zy wllir be eerred by having the largestnumber of unite. I bell ere i t will woxfc better that way and give more satis faction. The Secret air o f Agri. culture: is that based on a very thoughtful conaideration of the functions of the brancfr bank? Mr. Ousley: Well, I quite agree that the branch bank may aerve to meet the requiremente that are in my mind for local aceoBBaodatlon. The Secretary of Agriculture: Mr. Ousleyr that the directo is at You underatand,, of course, the Regional Bank ore drawn from the entire territory. V r. Oualey: Yea, and they can establish branch banks. The Secretary of the Treasury^ the branch banka are more likely And that the di recto rsof to be local people, a larger numbe r of them. Mr. Oualey: Yea, that i s true. The Secretary o f tha Treasury: And they w ill therefore 3350 C. Ousley R . 0 . KcCormack harc * l&rger knowledge of local conditions t h a ths dlrectorsof the rsserrs b«ik itself? Vr, Ouslsy: Yes, the* is true, THe Secretary of the Treasury: That is all, thank you. iT/ffKWEHT C R. 0 . VcCOHVACK. F ’ The Secretary of the Treasury: You may state your name, residence and occcqpation, Vr. VcCozmack: R. 0 . VcCormacki Secretary o f the Chsaber of Commerce at Fort Worth. In the handling o f food products, the question cf financing and transportation is , of c o u n e , a v e r y important one. First of ths grain situation. Fort Worth is the only primary grrf. n market south or wsst o f ths VissCixi River points. I t ha sheen steadily growing for the laat ten years, and last year handled 29,106 cars of grain, about ons third o f which wsre purchased by ths Fort Worth grain dealers for local consumption end ths balance o f which was storsd and treated In ths elevators and warehouses or milled 9 In the flour mills s d afterwards shipped to the consumers for final consumption. Fort Worth at the present time has 17 grain elevatoxs and grain warehouses and 2 flour m ills. The economical R. 0 . FcCoimack 3351 method of handling grain teaches ths t the interest of the producer and the consumer can best be protected by haring this grain treated in transit* This is a problem, however, that I take it you are familiar with, because you hsre probably heard this same argument at the terminal markets is the north, such as ths Missouri River points, and likewise Chicago. It has been estimated, as near as possible, that it requires the sum o f $3 0,00 0,00 0 annually to finance and handle t*e grain crop that moves throu^i ths terminal market of Fort Worth. About 60 per cent o f the grain crop of Oklahoma is purohased by the Texas grain dealer. A large portion of that necessarily is purchased by the Tort Worth grain dealsrs, bee mss Fort Worth has probably more grSn elevators and warehouses then all the balance of the State of Texas put together. Thirty per cent of the Oklahoma grain crop approximately is purchased by the Oklahoma dealers, part o f which is fo r local consuaption, and a part of which afterwards moves to Texas. Ten per cent which comes in early moves to the northern markets, such as St. Louis and ana as City. Within the last three months the admimist ratios at Washington has semi f it to make some radical changss in R. 0 . McCormack 3352 the t ariff on grain, and a new line of lousiness hsi been created. Since the tariff was removed on com r and it was fir s t removed on com * there have been something like eight oargoeaof co m from the Argentine Republic unloaded at the 3ort o f Galveston ./hich have moft d to interior Texas points for consu&ption. This year* owing to the peculiar crop conditions in the West* we have faced a shortage in co m , I f it hid not been for the in$>o rt ation of this Argentine c o m , the price o f co m in Texas now would h&ve been in the neighborhood of -ol.OO &nd perhaps more, whereas on the other hand, the market during the time this com was moving, and there were three bo ate at onetime at the Port o f Galveston discharging c»rgo, cents. the market dropped something like 14 A majority o f the t import co m hae been handled by ths Port Worth grsin dealers, for the reason that th y are established in ths business they hcnre their Belling agencies, their organisation* and they know how to handle this c o m and know where to find the market. At the present time there ant something like 300,000 bushels of the Argentine c o m in storage at 7ort Worth, our dealers at Fort Worth who have handled this c o m advised me that up to the present time they have been obliged to buy this through selling Pjb R. 0 . VcCormaek 3353 agencies and to a certain extent finance this through New York, *11 of 'which has a tendency to hinder or encumber the business, which the consumer must pay for in the end. It has been suggested that in order to permit of the freest movement of this c o m and the greatest benefits to ths feeders and consumers, that i f the final step were taken, to permit of ths entire financing of this crop in the region where it will be handled, that it would be a long step ia getting the benefits that were first intended by reason of the removal of the tariffs on this grain. Ths Sesretary o f Agriculture: What percentage of this grain business is financed in Fort Worth? V r. VcCoxmsck: Well, I have not got the ex&ct figures, I know that some is financed in Fort Worth, but the same argument in a general way that appliesto the cotton will apply to the grain business at Fort Worth. money there i f they can, and i f not, can get i t . But you understand, They get their they must go where they In treating thlsgrain, a good portion of the grain must of necessity go through an slevator to be treated, to be dried, to be properly held. Our climate i s suoh that corn will not ke«g> in a crib as It will In ths no th; it will mildew, and therefore it requires R. 0 . )r cCo rm&ck capital to do that business. 5554 it has to be wo iked oyer every so often and to be run throu^i an elevator and dried, to get the mositure out of i t . The Secretary of Agriculture: Where ia that financed? Mr. McConaack:: I f you will pardon zae, we have a grain man from Fort Worth who ie more familiar perhaps with where he gets his operating capital than I am, I made the general statement that it is financed in 9 0 rt Worth so far as possible, and then they have to go outside when they cannot get it in Port Worth, That is a detail, however. Ths Secretary o f Agriculture: Th?-t is a rather important detail Mr, McCormSck: I f you will pardon me, I will call Vr, Voore to answer i t right atfjsy. H r. Woo re, will you answer that please? Mr, 2 # G, Moore: The money that is used to finance ths grain that i s handled in Port Worth, Mr* Secretary, is furnished by the Port Worth banks, that is , percentage o f it* Worth ths greater Ths Port Worth grain dealers and the Port millers both have borrowing accounts in the north, Chicago end Mew York, Ths Secretary o f Agriculture: W s l l , normally do you have R , 0 , McCormack 3355 to borrow to a considerable extent from outside, to aove that crop, Mr, Moore; Normally ws do not. The Secretary of Agriculture: Do you hare to do i t every year? Mr, Moors: Every year we have to borrow some outside, yes, s ir , Ths Sseretary of Agriculture: What percentage, would you say? Mr. Moors: V e i l , we have to gp outside of ?o rt Worth only when the crop movement is heaviest, during the months o f July, August end September, and then I presume that Port Worth furnishes 70 per cent of the cag>lt& that is invested in ths business. The Secretary of Agriculture: Mr, Moors: 30 per cent outside. The Secretaxy of Agriculture: The Secretary of the Treasury: $ 3 0 ,0 0 0 ,0 0 0 or $3 2,000,000? Mr, McCoimack: finance outsids? That answers the question. On a crop movement cf f Approximately $ 3 0 ,0 0 0 ,0 0 0 , Ths Secretary o f the Treasury: And 30 per cent outsids? that is annually, And 50 per cent . ou R. 0 . '^cHo im&ck Kr. ' cCormfcck: 3356 Afchough wc have the exact number of cars, on account o f the fluctuation in the market I t would he hard to tell what that Is worth. as we can. You can estimate that ae well Vow there ic a movement o f grain through Port Worth th^t our dealers do not handle themaelves, but it is handled under the system of what is called shipper's orders or b ill of lading attached to a draft. It is shipped to Fort Worth because Port Worth is the point of interchange from the fields o f production to the fields of consumption on everything that oomes into Texas from the grain producing territory, therefore a dealer or a grower, in shipping this, sometimes ships into Port Worth to h is own order, trusting to find a customer while the car is in transit, i f they do, and i t is necessary to reconslgn this, it means that that finandbl transaction must be taken care cf at Port Worth. Bade of i t , however, w}»n the grain go«* out of our elevators to the final consumers, that money oomes rigit back to the banks in Port Worth. Vow in addition to the train movement, a large traffic and movoaent is developing in the way of produce, apples and vegetables and so forth. At the present time Port Worth has a cold storage capacity cf cars. The fruit B. o« 1'cCormack 3357 and produce business is getting to be handled very much the same aa the grain business. Instead of being stored in an eleT&tor, in order to hold it until such time &s the demands of the oonsisner require, i t has to be put in a cold storage plant. Then afterwards it is reconsigned to the point < f consumption, and the through rate from the point of origin to the final destination is applied. The reason fo r the location ef the cold storage plants at Port Worth i s the same reaaoa that applies for the location o f the grain elevators at jort Worth. They are in the direct line of transit, and the point o f Interchange, and can reach any point in the etate or ia the eeuihweet after haring been stored at Port Vorth, without going out of the direct line o f traneit, which means the application of the through rate under these transit privileges, aa we call thtaar without 4 any penalty or back haul, Thle i s a new lin e of business tha* is developing as the country develops. Tne years ago Port Worth waa not known aa a grain marketr and ten years age I doubt i f they had cold storage ^capacity in Port Vorth for half a dosen cars, I mean public storage capacity. At the present time we hare 17 elevators and atorehouses for grain and our cold s to rags plante have a capacity of 482 carar E . O . McCormack and there ie a demand oyer and above that ri$it now* 3358 ire had an inqui ry — * The Secretary o f the Treasury: What is the value of that business in a year, do you suppose? lfr. VcConaack: On the produce? The Secretary o f the Treasuzy: Yes, what doeslt amount to In s year. Mr. McCormack: I hare not had ths time really to find out what ths annual outlay is . I know that one o f our storage plants was forced to pay about three weeks ago the sum of $ 2 7 r000 on freight chargee alone on apples that came into this cold storage plant to be stored and later shipped out to ths consumers. It is customary for the plant to advance ths chargss. The Secretary o f the Treasury: Have you m y other matters to qpsak o fr Wr. WcCo mack? Wr. IfcCoimack: Koy s i r , I think not. STAElfEMT OP M: SAHSOW. The secretaryof Agriculture: You may state your name, residence and occupation. Hr. Sanson: V . Sanson; I am prssident of the Cassidy p jb If. Sanson 3359 Southwestern Commisd on Company, Fort Worth, Texas. Tho secretary o f Agriculture: are confronted with. You know the problaa m W M will be the beat district for the soutliwest, and where ought the bank to be located? V r. Sanson: W ellr we think Fort Worth, and Texas. The territory embodied as stated by the gentlemen who preceded me here, would be Oklahoma, Yew Ifexico and Texas. Of course, thers i s a part of Arkansas and Louisiana that might be attached, but since their relations with Texas axe so small, and the asK>unt of o*pl tal that could be secured for banking capl tal and deposits would not help a great deal, we think probably Oklahoma and Hew Mexico should be included with Texas. i Oklahoma in many respects is pretty closely tied on to Texas. Her grain mores this way and a great deal of her lire stock mores to Fort Worth for market, especially her hogs, and a large per cent of the cattle. The Secretary of Agriculture: Bo you know what percentage, Vr. Sanson? wr, Sanson; I would not underatke to Bay, but I think the figures show that there is annually about $ 3 ,0 0 0 ,0 0 0 in hogs alone just to Oklahoma City, i beliere that is right, $ 3 ,0 0 0 ,0 0 0 I think is the exact figure — I mem sent from II. Sanson 3360 Fort Worth to the state of Okl shoma, for hogs alone. Further, Oklahoma has been largely a grazing and feeding ground for cattle, for the movement of cattle from Texas to the south and wsst. largely. These deals have b en financed in Tort Wprth 0 * course, I may sey in a way that Kansas City and S t . Louis hare something to do with the financing, for ths reason that the commission people who finance these* deals hare ofll oes in Kansas City a*d S t. Louis, and some of than in Chicago. But the people who handle this business their main ofll ce and the principal amount of business ie done in Port Worth, because people lir e here who handle thesedeala, and it runs into a very large amount of money. As has boon said probably here, we are now the third cattle market in the United States, and the only market in the United States that showed an increase in business for the year 1913, all the others showing a decrease. The Secretary of Agriculture: ware you the relative figures? Wr. Sanson: Tss, s ir , absolute figures. they will be file d here, the I want Wr. Stafford to give them to you. He follows me practically on the same proposition, and he is ths manager of the Stockyards Company, and has the actual ' V. Sanson Pjto figures, 3361 and I vill leave Lhis here, and he will read them and f i l s them with you. Vow I may say ths same for the horses and mules; we srs ths third market in mules, handling the United States for horses and 56)000 head of mules and horses, estimated to be worth about $150 a head, requiring about $9*000,000 to handle. How ths point thst we want to present to you is t h ^ in financing those propositions, Fort Wo th finances mors agricultural products today than any other city in Texas by s considerable amount of money. That is not by reason of the banks hawing the largest capital there, but the commission companies located in Port Worth, by a custom that was sstablished years ago, I may say for all time, and up to the prsssnt time, thers has not been really adequate money to handle the lir e stock business with; there has besn hardly any time when there was a plentiful to be had to finance their cattle b i l l s . supply o f money How I have got some figures **ere that are absolute for what is handled from ths Fort Worth offices alone, that does not enter into ths banking proposition* that they have nothing to do with. At a given time* the close o f buslnsss, fo r ins trace, p jb If, Sanson December 31st, 3362 the commission houses in Port Worth had at that time about $1 0 ,0 0 0 ,0 0 0 of loans on cattle, right around $ 1 0 ,0 0 0 ,0 0 0 . No < this paper is made for 60 days, 90 days, f 120 days and up to six months. There is hardly a single Instance where it runs OY&r six months time. So we figure that this $1 0,0 0 0 ,0 0 0 in the course of the annual business in one year is turned orer two and a balf to three times, making about $3 0 ,0 0 6 ,0 0 0 that we annually finance outside o f banks and tiust companies doing business in Port Worth. In order to handle this, and you understand the banks ha Ye about what they can take care of in grain and cotton and IYarious other things, ths commission man takes a mortgage on this cattle; they are being prepared for market with feed; we take a mortgage ranging in value from 50 per cent of their value up to their full v & u e in many instances, with a rood solvent man behind, who has his own feed; he prepares these cattle for market sod this is a class of collateral that we are able to sell in almost any o f the markets of the country that have money. I would say that Texas alone handles about 20 per cent of that amount, I mean the Texas banks located at various pla ce s; a great many maall banks in small towns, and then the larger towns at V . Sanson times buy ve ry lib erally of this paper. 3363 About lo per cent of it is sold probably in ransas City, about 10 per cent in S t. Louie, and the balance o f it ia eold in Chicago, Few York and other eastern c ities. Vow I want to make an assertion that I up, /ill not back with reference to the real demands and deeds, and what is being taken care of in the lire stock businsss o f this country, I mean to say in the preparation o f the cattle from the time the producer produces them until the middleman or feeder takes charge of these cattle and prepares them for the market. I think I wn perfectly safe in saying t o d ^ that there i s $1 00,0 00,0 00 of cattle paper held by the banks of the United States in the territory that we hare mentioned, Hew Mexico, Texas and Oklahoma; and of course i t does not apply so much to Arkansas and Louisiana, although w» have d very Insistent demamds to finance them since the boll weevil has hurt their cotton; they are going into live stock there now, and i t ran be worked up very readily, and lo ts of money will be needed. These loans are taken care of ia many ways by which they never show in bank statements until they are probably sold in Hew York or Chicago or some place of that kind by loan companies. A p jb ¥ . Sanson 3564 banks that does not want to shov any re-discounts and cannot afford to, will organize a loan coxapany which the stockholders of ths bank own sbsolutely outright, and they take these loans and turn them into the lo an company without recourse9 and the loan company sells this paper in the eaatr Of Course, the loan company is pretty close to the bank's correspondent, whoerer it may be in the east, and they understand pretty well that of paper* they are giving them a good class How we take ths position further that - really - I know some banks that did not take any at the money to finance the cotton crop here this year, because they did not have commercial paper to put up as collateral, what is termed conasrci al paper, and this i s the largest and best lin s of coasaercial paper that is produced in this country, i s my judgment, and there is more of it ; and again, it is pspsr that the country bank would buy as well as the larger banks in the citieat even in this stds, when they are running easy in Texas, becauss they want their money in the fa ll when the cotton crop begins to more and they hare got some au>ney at this time of the year, and they hare hardly anything they can put that Money in except cattle psper that they cm absolutely say w ill be paid in August and V . Sanson 3365 September, at tho time the cotton movement begins, and for that reason it is reasonable, when things run easy, and you would be surprised how small banks in this country hare bou^it that paper. We hare one bank with a capital of $50r000 that bought $175,000 of that line of paper last year. Of course, they had a large surplus and were a pretty strong bank and had no other use fo r their money and had done naturally no re or lsss of it , and they figured they could rely on this money so they could hare it to use whsr ths cotton commenced to more. Of course, those conditions hare not existed this year, and Texas banks hare p r a c t ic & l y taken very lit t le o f this paper and we have had a great deal of trouble to finance it outside^ fo r the reason they had all thsy could do to take care of the cotton. The Secretary of Agriculture: From ~h&t point of view, would it be better to hare a email district such as you here outlined, or a larger district? The Seeretary of ths Treasury: H r, Sanson: With more lending power. V e il, necessarily from the statement I hare made here to start wi thr the demand for this line of paper is almost unlimited, and I do sot believe, that as sons believe, a baudc located here with this amount of money would p jb V , Sanson render us any to 3366 ry great amount of a s s t s t «c e in handling it . But whet we would like to do is tbia: The product is pro diced in this section of the country, we produce it here end we sell it h e r o / Har if it could be arranged so that wo could finance it here, i t would be certainly better. The Secretary of the Treasury: Th& t is exactly the point, whether or not the bank with more power could do i t . Vr, Sanson: I am not going to say that i t would he a vu ry great improvement for handling this immense line of pa^>er — The Secretary o f Agriculture: JUst let me suggest there, o f course the theory of this law, of what the law will aoecaplich i f possible, is the creation of districts strong and diversified enough to be independent in all except very extreme time, «nd bo take care of these re-discounts. How your statement brings out the argument there or should bring out the argument very d e a r l y , how, with this district which you hars described there, can that $1 0 0 ,0 0 0 ,0 0 0 of paper which you say has to be sent all over the country and that other do per cent of your annual operations, be taken care cf in this d istric t. Vr, Sanson: answer, W ell, that brings on a great question to !Tow for instance, we will aay that you include 336? W. Hanson this territory that we are asking for here for a hank, we will say you turn that doff and attach us to Kansas Ci ty or S t . Louis as tho case may be. Kansas City, being nearer by only one ni?ht1e distance in mails and it does sot make you loss any time, would naturally nake it in my opinion a very desirable piece for a bank If we could not get one, you understand. Sow Just how much capital you could concentrate-** we are quite familiar with the condition of handling this cattle paper in K m s a s City, because ws hare an office there, ami what paper we sell in Kansas City we 8*11 to our own banks there. We find no market in Kansas City for our paper sutslde o f the besilts ws actually keep baltoees in* They buy frost ua because we keep a balance with them. As an illustration, you take the banks connected with thia industry there, there are two of them located at the yards which do a very largs business. The demand on than is so great that they organized in turn a I o n company, and I think it is probably safe to state, I do not want to be quoted as exact, but I think around $ 6 ,0 0 0 ,0 0 0 of that loan company sells, this paper originally when they ozgemised it they anly had $ 2 5 ,0 0 0 , but they hare a good deal cf surplus bow , and somebody must have a good deal o f confidence la p jb V . Sanson tha paper they sell. 3568 This paperis sold we know, because they take some of our paper and we know i t goes on east, finding an outlet. So i f you were to embrace all that territory in there, we would still hare to go on somewhere slss and find more money, becauseif we were tied on to thas it still would not make any more money to take care of i t . The Secretary o f the Treasury: Would the same argument apply to St. Louis? Hr. Sanson; Yes, I think it would, practically the same thing* The Secretary of Agriculture: there would be probably the 0f course, under this law retention of a larger sum of money and any riven territory than as heretofore obtained. Vr. Sanson: You mean to say, instead o f these banks keep ing their money all in Hew York, they would keep more o f i t here? Tim Secretary o f Agriculture: V r . Sanson; Yes. Tl* t would be a great benefit and would help a greet deal, but those are things that would hare to be figured out. The Secretary of Agriculture: And another thing9 as you know, as it has bsen suggested here, i t would make re p jb V . Sana on 3569 discounting respect-bid, **r. Sanson; Well, e think i t is now. Tfc* Secretary of Agriculture: people hare not thou^it so. Well, I know, but some There has been, as you know, s t c ry considerable irrational prejudice on the part of banks — y r . Sanson; if a bank aho^s re-discounts, or borrowed money, some fellow is ready to Criticise* The Secretary o f Agriculture: Yes* Hr* S&nson: That i s the reason they start these loan it c o ^ a n ie % p e r h a p s . I ta k e i t i s a p r o p e r f u n c t io n o f a bank, and you p r e T id e it t h i s bank to do i t w it h , and I t h in k i s proper. The Secret try of ths Treasury: This law encouragesit and makes i t desirabls. Mr. Sanson: certainly. How, of course, it looks a lit t le b i t against us here thatnwe produce — you will understand that ths Tery territory we are f iguring on here is the breeding country o f the world outside of the Bepublic of Mexico t 1 mean o f this industry, Republic. the United States and the Cattle are not bred today to any extent. You take this Tery territory in Louisian* that is one thing pjb V . Sanson they require. 3370 They do produce some cattle in Arkansas and Louisiana and v lll prodyce Bora. But i f you take that terri- toxy «id New 'exico and Texas 9 you hanre the breeding country of ths United States. The Republic of Mexico fereat deal of cattle. furnishes us a of course, these people come on and carry these cattle to the northw&st and they go to market from the northvest and from the time they buy them thay finance them in another direction. They buy our cattle and only 50 per cent o f theae cattle that go to those markets arc consumed by the packera direct. Almost all the others are bought by feeders locally and otherwise and go on to market. The Secretary o f Agriculture: Have you some data you want to f il e , Mr, Sanson? ^ - V Mr, Sanson: Yss, In the first place, hers is a telegrsi that will be explanatory to you. espeoially concerns us. It is not one that That is from Mr, J , D. Jackson, 4 from ElPaso. He wires "The National Banks at Marfa, Alpine, and For t Stockton want to be placed in eastern d istric t, either Houston, Fort Worthor Dallas and no t in the western d is t r ic t .* I suppose that is sent in answer to something. IT* Sanson The se c r e ts ^ of Agriculture: V r. Sanson* 3371 Yes. I Just received it this noon, and he asked for it to be brought to your attention. of the Cattle Raisers' Association. He is the P r e * dent You see that is right acfacent, and they are good toans, and it shows that the £1 Paso sentiment of not being tied on — The Secretary of Agriculture: £1 Paso did not object so ■sch to beinr* tied on to some place in the east or northeast, but i t wsnts to be attached to Hew Mexico and Arizona. V r. Sanson: jrow i f you will bear wi th me, I intended to start out by reading some telegrams from gentlemen who endorse Port Worth fo r this bank, and when I had finished that, then to undertake to tell you the reasons. So I hare told you the reasons I had, and now Z want to read them. These are from the Executive Committee of the Cattle Kaisers' Association, and the largest o rganisation in the world, and for fear you ask me, I w ill say we asked for these endorse ments when we sent the telegrams, and these are the replies that we received. The Secretaxy o f Agriculture: You asked for the endorse ment? V r. Sanson: Ve asked them to wire the Secretary; la other M, Sanson words, 3372 there was no opportunity for the Cottle Raisers to hold a meeting of this kind between that date and the time you were to be here, end this is whet we take it to be, a practical endorsement. The Secret sty of the Treasury: You may fil e a copy o f your telegrss to them, to which these are the responses, V r, Sanson: Yes, I will do it . But there are a few o f these I want you to pay attention to, because I think you know some of the genetlsmen. The Secretary of the Treasury: Suppose you read the inquiry first, because we can always better understand the responses then, Vr. Sanson: Gentlemen, we will f il e that with you, hare it down there at the ho tel a I I thought it was embraced here. This is from San Antonio, to Vr. E. £. Sp iller: "I heartily endorse and recommend Ft. Worth for Federal Reserve Bank. Endorse fully members of Cattle Raisers^ Association to that effect, J , V , Dobie," This is from Slaton, Texas: "Believing that the establishment of one of the Regional Banks in Texas would be of incalculable benefit V , Sanson 5373 to tho lir e at ok and agricultural Industrie* and knowing that development of all that section of country contiguous to your c ity has been greatly retarded because o f inadequate banking fa c ilit ie s I heartily endorse Ft, Worth as tha most logical place in this state fo r the establialiment of one of the Regional Banks and the great number of banks that will take stokk in same will unquestionably make i t a veiy strong institution. A, B, Robeiteon," lfr, Robertson is the ejfe-Vice-President at the Cattle Reisers' Association, This comesfroa San Angelo, Texas) *1 endorse action of Association recommending Pt, Worth for Regional Reserve Bank. R. K, H a r r is ." He is a banker and cattle man also. Here is one from Mr. H. H. Corder: "I fully eadorse P t , Worth fo rPederal Reserve Bank, You can so sign resolution," H r, Corder is at Uarfa, Texas. The Seoretary of Agriculture: Well, they are all the same tenor, are they not? }fr, Sanson: Well, no, I want to read one or two that X believe make a pretty good talk, and if you will excuse ms p jb V . Saneon 3374 I will %sk you to listen to one no re here anyway: one from R. J. Kloberg, wingSTille, I have Texas: ■Acdept my endorsement fo r ? t f Worth ae location for pederal T>eserre Bank. Here is one frost Ike T. Pryor, San Antonio: •F t . Worth being leading cattie market o f southwest and ons of the principal markets of ths United States an strongly in far or o f Ft. Worth for one o f the Federal Reserve thanks. I believe lire stock furnishes liquid collateral for more paper than any other product of the farms or ranch. Iks T. pryor." Wow I have a numberof others: •Uvalde, Texas* As Executive Committeeman cf Cattle Raisers* Assn. o f Texas 1 heartily endorse F t. Worth for Federal Reserve Bank, ■Marfa, Texas. val V . Mangum." Sign my name endorsing resolution. W. W. B o g e l.* ■Stamford, Texas. fron Reynolds Mr. ttas tings received telegram Burnett and Sanson requesting him to wire you endorssncnt to resolution for Federal Reserve Bank. V r. Has tings is absent on Tongus River Ranch inspection trip. Frank Reeves, Secy. F . S Hastings.* p jb M , Sanson. •Clarendon, Texas. 3575 Your night letter 5th Pyle Sgd. Reynold* out city till 3at, night. Hag, delivered to Mrs. P y le ** •Dalhart, texae, 1 endorse resolution recommending Pt, Worth for Heserre ^ank. •B eerills, Texas, serve Bank, A. M, James,* We endorse Pt. Worth Federal Re J . W, Cook and Son,* •Menard, Texas, Frame in your ow language my rn unqualified endorsement of Assns. action in Heserre Bank matter, Janes Call an, • •Alpine, T«*xas, You may aay that I recossnend Ft. Worth for Pederal Reserve Bask, most Houston tod^r. •D elrio , Texas, I am starting H Paso to J . B, Jackson,* I faror * t . Worth the most eui table place ia Texas for location o f a Gorernment Heserre Bank, T, B, Jones,* Wr, Sanson, wow x want to file a couple o f letters here fir in g the reasons, signed by Mr. ,j, Ogden Armour and Mr. Louis Swift, why they located a packing plant in Fort Worth. Maybe I am talking a lit t le too long, but I want to file them with you. (The letters are as follows:) K oanson ’In establishing 5S76 a live stock merket in the Southwest, the interests who mede the investment; i , e . , for yarde^e, f a c ilit ie s , prckin£ plants, railway yards and ct^er general equipment nacosuary to a live stock market selected Fort 7crth, Texes, primarily on account of the fact that it offers the easiest access to a ll sections of the state and tc the Southwest by reason cf its superior railway fa cilities. The financial requirements of the live stock business in Texas Fro second only to cotton: Fort Worth is the clearing house of the live stock business of the Southwest and a concentration o f financial power to assist in caring for this business would undaubtedly be of the greatest value to the Stateof Texas and adjacent territory i f located in Fort Forth, The central location and accessibility of Fort ^orth affords it the opportunity to be of genuine service in the commercial *nd industriald evelopment of contiguous territory nnd gives it a decided advantage over other cities asa point of concentration for the energies of trade find fin m ce of the great Southwest, (Signed) J. Ogden Armour, January 24, 1 9 1 4 ,' 3577 I! Uanscn Je w Swift and Co*pany, Chicago, ^so ruary E , 1314. ,rr . Roy C. Vance, Chairmrn 3ecionrl >Brrv? pnk Committee, Fort "orth Clear'ng r ^ous© Association, Tc.rt Worth, Texes. Dear 3ir:- ... I ■ .. In establishing a livfi stock market in the .iouthwest the interests who made the investment, i . e. for yardage fa c ilit ie s , pecking plrnts, rpilv*ay yards and other general equipment necessary to a live stock market, selected Port Tforth, Texas, primarily on account of the fact thrt it offers access to all sections of the tftate and to the southwest by reason of its railway fa c ilit ie s . Vert TTcrth has shown great progress and has grown to be a live stock center of splendid proportions; Fnd the prospects ere very encouraging; and, as the wonderful Jtate of Texas continues to develop her remarkable p o s s ib ilit ie s , the future prospects are inspiring. ?he figures below show receipts of live stock at ?ort orth for the year 191E, with approximate valuations, m d indicate the importance of the live stock m&rket to which m * IIV U w . j j . m 'w w j H u MM p p p p v M | H 4 U . '. ! P , | e P i jmw V Sanson 3378 >'ort ^crth has tcrown: -lnd liupiber of 'cad. Appro xl ete Ye luatlon Cattle 965,526 $4 2,44 8,62 5 Calves 219,61:9 2 ,8 5 6 ,1 7 7 Hogs 403,761 6 ,8 6 3 ,9 3 7 Sheep 327,527 1,310,108 £>6,724 _ 8 ,508,600 lor sea * rules $ 6£ ,9 8 6 ,4 4 7 . Yours respectfully, (Signed) Louis *'r« Snnson; . ow ift." How, gentlecen, herf* f jre the people, 1500 atr<n£, with their poat office rddresses end their signatures, and thG8e will be filed with you, who Rre acturl live stock shippers anti reisers, rnd a grent niucber of the® f re serbere of the Cattle ’ Raisers1 .‘.saociation, who were sent a card asking theE their views about where this bank should be locate , m d we asked them to si^n the card and return. .'here are £t>01 nar.es there, who are bonr fide cattle reisers in Texas, Hew ?r ico end Arisons, and probably it w ill reach e outside o f th? t territory a l it t l e , beeruse they are the people whOK we £ot o ff the l i s t , who ar* the actual shippers to that carket. e went tc file th« t with you* 3379 Jrcw K Jenson The secretary cf the Treaaury; I f you hrve the inquiry you addressee! to them, it had better be put in new to accompany the exhibit. I f you have not it here, you siay file It lrter. T r. Srnson: ' e w ill file it If ter. This resolution ri^ht here is what we s^nt cut. In *n effort to get the opinion of the live stock raisers and ieeders of the southwest, they wer asked for an opinion which bro ight forth the following resolution: "As one *ng*ged in the live stock and cattle industry, I strongly urge upon your honorable Conar.ission tha importance and necesHlty of placing one of these Regional Reserve Banks in the Jtate of Texas and earnestly recomrcen the City of Fort T^orth as the point at which this bank will best serve the cattle anc live stock industry cf the southwest. Sow that ia exactly the resolution thrt each one of these 2501 people signed. The Secretary of the Treasury: Yes, but whrt was the inquiry? v r. j * nson: 7h” t was the inquiry, ^nd they signed that, The Secretary of the Treasury: them and they signed it? ou Just sent that tc V Jpnson ’ r . * ' naon: > sr 80 Yes, s ir , and it was returned, rnd there was no other c tr unication sent tc there whatever. o .r IIow before this other p^per is file , I w ant to le? ve it for Vr, Jtaffcrd. The secretary of Agriculture: Wh^t percentage of the cattle of Texas are handled directly through Fort Worth and i hat peroentege coes to some other market. Kr. S a n s o n ^ e l l , we do not h^ve the exact figures on that, but I would say thft about 60 per cent now probably are handled through Fort ^orth. The Secretary o f Agriculture: In thft increasing? V r , ianson: Oh, yea. T , atpfford will give you the ’r firiires which w ill show you thrt that has increased greatly, Eow hen I say 60 p*r cent, of course there i s a Kovecent of cattle th? t are not &oing to markets, which Kay be going into Oklahoma out of this country, but for absolute market Btuf r, I expect I a little low on those figures. How m other t h in ; I did not refer to, the fact is we ore hpndlint probably on an average, I will say, 75 carloads a day, 2 0 0 0 or 2 6 0 0 0 cattle from the Republic of T'exico, thrt rre being sold in Fort Of that st u ff, orth d a ily , and we hm dle all The fact is we are the gateway for the Jaw J. S Jm aon A. .itpfford. 3361 •public of ’ extco for thia atuff tror. ^rownsville Rad from. 'ar.pico thres h <rlveatr.n by bo* 1 1 which comes to ua, and all the way up to 1 aao w' are the grteway, ^nd tv ry head praetlc lly of th* t stuff coxes tlMKgfc art : rth rnd is bought there. The *iecretarv of Sericulture: t of j. e th^nk you. ; . w ?he secretary o f Agriculture: You Key atste your m*~et residence end occupation? -:r. S taffo rd ; J. the Fort *. S ta ffo rd , 'aaiatan t General Manager o f orth stocky?* rd a CcK^ny. ?he secretary o f 'gricultnre: I f you w i l l , pleaae tfke up any new point a anU e*phaaixa any essential point which you deaire. l!r. Stafford: I believ * the ora?.itteo ia thoroughly x'itr.lllar with th<* eaaentlal point a of the live stock industry, enc I ahall not go into i t at a l l . The only two points I wiah to touch on ire the m turf 1 courae of the live atock bualnese rnA the trend of conditions# aa briefly aa poar,lble. raking the rap which was file£ with you thia corning, or any R*p o f thia p a r t lm la r territory, you w ill find that ^ * Stafford Jew 3582 the breeding ^rounda, as outlined previously by ‘T. -t^ffo?d 11> In th© southern p*rt of rexas *nd western part, extending A north m d west s lit t le ? bove the Texas & lacific Hallway* The an handle ground. s no longer a breeding ground, it is a feeding This being the erae, the rap w ill show you that every line o f railroad running frote south or west Texas which is in that territory move a or rims through Forth ^orth. In other words, evary err o f cattle excepting sos,e ssall w.ount on the Orient 'allway has ts ir.ove through ?ort ^orth, I or It is the » * t u m l route northern &Rrket. through ?ort Jn other words, lort orth goinc, to any orth is ;;© siturtcd for the aove??:*nt of lire stock th?*t the business rust &ove through t her?, ev n i f It is felling sotr.ewhore else. result is tlrt Ip at yeer^ In 1913, we h*n£ls& In Fort The orth e totnl of l vlt!&#QCO head of cattle and calves, as GQKp&rnd with about £i C ,OOC hand tern years ago. "his amounts in round *1 ures to ;&£,50G.G0C paid for live stock on the Fort Worth Karket. ?hat covers only edible live stock, c a t t le , calves, hogs and sheep. On the movement o f live stook, while of course the "le^ional ^«nk proposition does not yet include taxlco , we ®uat t^ke into account the F.ovcm;ent o f Kexlc n cattle. The 3383 J \ Stafford. rerr.cvrl of tho duty on ’ exlcan cattle is going to hrve a very marked e ffe ct, in fact ment of that comrodity; t is felt already in the move ast year we handled at Vert /crth market — Tile Secretary of the Treasury: Has not that a ll been covered already? !.!r, 3tafford:I do not think so. The Secretary o f the Treasury: In the statement wade by ;.'r, Sanson, r'r • Jtaf ord: I do not think so. 90,000 head of ! exiccm cattle, valued at $ £ ,8 1 1 ,0 0 0 , r p to the 81st of January, T have 1 9 1 *, we/hrndled 18,000 head of Vexicsn cattle, showing, in other words, about three ti es as many ‘ exlcan cattle thia year already aa for the a?me eriod last year. "bis showb in our opinion the fact that we must depend yo a large extent upon Mexican cattle, and all of that movement is hr r.dled in som way through a Texas bank. At the present time a great deal of it is deposited and left in Texas banks, at least it is all paid by checks on Texas banka. The He lean business in thrt connection coming from Tampico, Brownsville, Laredo and Tsgle Pass, must move through Fort ttorth, and it Is just as natural a route through ^1 Paso to 3aw 330^ j a S ta ffo rd , ?ort 7orth as any other way, ! exir.o marketed 90 per cent of the cattle from at any market were marketed at Fort ^orth. Our reason for thinking th*t Oklahoma would be an ir portent feature from the Fort orth standpoint — we do not control all of southern Oklahoma business, but in 1913 we paid from Fort Tcrth to southern and western Oklahoma shippers, o f &ogs. S ,9 00,0 00 for hogs, something over 200,000 head -he movement of sheep from Hew I-exlco ia n r in o ,- the direction o f the Fort Forth market. >e cannot fcive you the figures 0n that, because they ere brought into .exas and finished in Texas end sent to market. There was a recent movement of 6000 head into dna Angelo from 'e xica n points, The railroads fac ilitie s to Oklrhom'- probably favor Fort tforth more thrn any other market with the possible exception of Kansas City. We have another industry connected with live stock, horses and mules. *e are the third largest horse and mule market in the United states. ?he Secretary of Agriculture: That has been presented, tfr. Stafford: I did not hear that. Th* Secretary of Agriculture: To what extent do you h^ve to do with the financing of this business? 3385 Jmw J . A. 3trffo rd . l!r. Stafford: nothin*: whPtever. The Secretary of the Treasury: Thrt is a l l , thank you, v r . Jtefford: I w ill file this statement now. 7hfi Secretary o f the Treasury: xes. (The statement is as fo llo w s:) In picking the district n?»med with Fort ~crth as the central point, the idea has been kept in mind thrt each district must, in i t s e l f , be self-sust?inin , th^t i s , the corcrerce of each district aust be well b* lpneed f nd an e*ual amount of returns aade to the moneys pfid out, each district independent of the others. '.71th the immense live stock, cattle and £rflin business of the southwest, this is nearer accomplished in the city o f Fort orth, than any point in the proposed d istric t. For deteils of the live stock >nd cattle business, see ~xhibit 1 . Coincident with the live stock, m*y be mentioned the question of feed. This consisting of cotton seed products, such as cake, meal rnd hulls In the first case, r>na grain in the second. ?he moneys for the purchase of this feed oome from the cattle leans and a 1*rge part of the trans action of the purchase of such food Htruffs is at the city jew J A Stafford of Fort 5386 orth by reason o f selling rc :ancies on the ccttgn ae^d products, *nd elevators rnd warehouses on the g rain Fort 'orth is the irlmary grain market o f the -South w e s t , created by reason of itB superior trabsportation fa c ilit ie s . In the yesr 191E, 29,108 cers o f grein were received at t h i s m arket, tho value o f which was approxi e t e ly J2 0 ,000 ,000* T'ost o f t h i s g r a in goes into the elevator® for storage or treatment and is In t e r shipped to t | » con sum ers. Thus a workin, c a p ita l o f m illio n s o f d o lla r s is required to handle this one commodity, ?nd l r t e r , the retu rn s on t h is g r a in pre made d ir e c t to t h is c i t y , maintaining the w orking brlanee. thus S ost important at t h is ti e to the Southwest is the new l i n e o f in d u str y crested by the recent c a n c e lla t io n o f the import t r a f f i c on g r s l n . A lready several cargoes o f grfln have moved, to the consumers o f the Southwest through the Texas G u l f p o rt s. T his has been of immense b e n e f it to the consumers and a potent fa c to r in reducin g the price o f feed the present w in ter* Under present c o n d i t i o n s , e l l t h is import g r a in t r a f f i c is hendled and fin a n ced through Hew Y o r k , thus permitting of a m id d le m a n '8 p r o f it and much unnecessary inconvenience and d e l a y , * 1 1 c f w hich ten£s to in crea se the cost o f d e l iv e r in g ■ . £ J A S taffo rd . thiij commodity to the consumer. 3387 ith th© free movement of the grain crops thus created, should be provided the further fa c ilit ie s of , iving to the people the full benefits this and other acts of the administration intend. In the conservation rnd distribution of food stuffs, experience dictates thrt certain coorodities, such es fruit and vegetables, must be ke^t in cold storage at a central point to thus prevent deterioration, and, at the same ti e be available to the markets. The reason of tho great number of railroads entering Fort-~orth, anci the furtherfact thpt Fort Torth is the point of interchange )or Junction point)on a majority of the traffic to and from the southwest, here is located the storage and transfer point for practically all of this traffic. The capacity of the cold storage p lm t e at Fort ^orth 18 now 482 carlonds of produce. This business ie one thrt i 3 continuous fc n in the winter seas n. v The climate is s ch thrt cold storage is necessary rnd therefore requires capital the year around, with the returns always coming back to this point. Coincident with the claims of Fort Worth for the 3388 J A S taffo rd . proposed federal reserve district, we would coll attention to the fact thf t Port "orth is headquarters for the Eleventh Division of the 3filway ’"nil Service of the United 3trtes, f nd thi) leventh Division comprises the states of Texas, Arkansas, Oklahoma and I*ew Mexico, which is almost identical to the suggested reserve district. This, in itseli‘, is a strong argument of the accessibility of Fort Forth to tfce terri ory named* Of the ltncense traffic throu h the to and from the itate of Texas iouthwest, Port ’ ’orth is the print of inter change of not less th n 70 per cent of the total, as attested by the fact that 955,906 loaded cars moved through the railroad terminals in the year 1913. The pack g e , or less t h m carload shipments of freight for the proposed district is concentrrted at F ;rt orth for distribution in much the same manner as the United jtates m ail, f*nd this concentrated freight requires 165 package ours dally from Fort ~orth to the various cities in the Jouthweat. In further support of the importance of this city as a rail oad center and point of interchange, it might be pointed out that the California Fruit C o ., in the year 1913, 3389 jmw J . A , Stafford, inspected 16,000 carloads of fruit at the city of Fort 7crth, onehalf of which was re-iced at this point on its way to destination. ■ a steady deir.rnd for working capital, Fort i?crth th has 266 Jobbing and manufaetaring concerns, besides the packing house, lire stock end grain industries, lo ll tax receipts show total number for last four years — 191G - - - - 1 4 ,9 1 5 . 1 9 1 1 $ - - 1 5 ,1 7 0 , 191 2 14,902 1913 2 1 ,2 2 9 . Fro*, this it is Rhcwn that the I'oil Tax payments of 191. cocppred with 1910, show an increase of 45 per cent, KXRI^IT 1. LIV^ 3?0CJT IKI^? 3?HY, ? *t the present time the otate of Texas and the Bepublic of ’ e ico yre the principal breeding grounds of cattle of 'merloa. Largo quantities of young cattle are sold rnd shipped each year from Trx&B to stock pastures rnd feeding grounds of the Hcrth and northwest. This movement of cattle, alone, creates an enormous demand for money in this territory. The T ariff b ill of the present / dminietrotlon moving 3390 jmw J A 3tafford. the duty on l iv e stock g iv e s th is sec tio n the b enefit to a p e c u l i a r l y l rrge ext nt o f the ir mense breed ing grounds nnd ranches in llexlco , thousands upon thousands head of cattle have a lr e a d y moved from T'ejdco into the pastures and Kar ^ts o f T exa s, as w e l l as large numbers of sheep; these c a t t l e and sheep are used by the ranchmen o f Texas to breed up to thoroughbred b u l l s and re-stock t h e ir ran ches. This i n i t s e l f r e q u ir e s an enormous eiAunt o f money i n t h is terri tery. Owing to i t s w on derful advantageous lo c a t io n from a t ra n s p o r ta tio n and geo g ra p h ica l standpoint a s a f f e c t in g the liv e stock in d u s t r y , Fort Worth i s n e c r s s a r ily the centre o f the liv e stock in d u stry o f the entire southwest. From a small to ta l o f 265,000 head o f c a t t le and calves handled i n t h i s market i n 1903, i t has Jumped to th ir d plac in the h a n d lin g o f c a t t le i n the United i t r t e s , with a to ta l o f 1 ,1 8 5 ,1 6 4 head o f c a tt le and c a lv e s for the y ear 1913; Vort Worth shewing the greatest in c r e a se in c a t t l e and c a lv e s for the year 1913 o f any United states market. The total amount o f money required to handle the c a t t l e , calv es, hogs and sheep on the Fort the year 1913 amounted i n roun "orth market alone fo r fig u r e s to *1 5 5 ,5 0 0 ,0 0 0 . J A 3t/ fford 3391 every d o llr r o f w hich i s p/'id out on the cipy on which the liv e stock ia s o l d , n e c e s s it a t in g a very large amount o f monsy in thia t e r r it o r y to properly handle the b u s in e s s . : h i « movement of c a ttle included a total o f 9 0 , 0 0 0 head o f imported ?rex ican cat l a , valued at - £ , 8 1 1 , 0 0 0 . The year 1914 already promises to put Fort »crth in 8econd place aa a c a t i l e market* ?or the month o f Jr-nuary there i s an inc ease in c a tt le and calvea over previoiis J a n u a r y , o f over 2 L ,0 G 0 head, or 34 per c e n t , aa a g a in s t a heavy decrease at "i s s o u r i riv e r markets for the same p e r io d , and a s a fu r th e r in d ic a t io n o f the p o s s i b i l i t i e s o f the movement o f l iv e stock from Vexico to t h i s c e n t r e , would c a l l a ttentio n to the fact th "t d uring t>is last January we have received a to ta l o f 1 8 ,0 0 0 head o f v e i c * n c a t t l e , or o n e- fifth as many a a received for the e n t ir e year o f 1 9 1 3 , and w h i l e , cf c o u r s e , ? exico is not a party to our reserve ~ank la w , ev^ry d o l l a r o f the money prid for these M exican cat le i s handled through some Texas bank. I t i s a p e c u lia r tran po rtetio n c o n d it io n that p rovid es thrt all cattle coming from le x ic o throug h the ports o f vralvestcn, Texas C i t y , Lare o , B row nsville ?nd "a g l e lass going to any no rthern m arket, the route would n a t u r a lly be through Fort o r t h , and J k Stafford Jew on 1 Paso the route through Fort TTorth i s 3392 just as n a tu ra l from a tr n s p o r ta tio n standpoint as v ia any other fu n c t io n , the r e s u lt being that 9C per cent o f the c a ttle moving from K o x ic o d ir e c t to market comes to or through Fort rrth. r h i s , we co n sid er o f extreme s ig n ific a n c e in the lo ca tio n of a rese r v e bank i n the southwestm s s the centering o f the live stock in d u stry from I'exico on Fort 7*orth and the very fact that every re le a n in t e r e s t e d in any way in liv e stock w i l l hrve h is mind fix e d on Fort tforth as the point from which he draws his p r o f it and revenue on hi a b usin e ss end the fact that the m ajority o f these shippers sooner or I s t e r v i s i t t h is s a v k e t , it w il l in ti is on ly reasonable to s ppose th^t Fort orth e become the trade centre w it h M e x ic o , e s p e c ia lly the e n t ir e northern t i e r of I'exican s t a t e s . L I T ' iiTOBX IJ D !\ r ? Y . A nother l i v e stock in d u stry centering on Fort I orth rnd w hich should be co n sid ered in pny q uestio n o f finance i n the southw est, i s that o f horses and m u le s , ?his to rket has jumped to th ird p la ce in the e n t ir e United states, w it h a to ta l o f 6 6 ,7 2 4 head o f horse? and mules h m d l e d at t h is market d u ring the year 1 9 1 3 , w ith a value o f I t im r e a lit y requires at least 9 ,0 0 0 ,0 0 0 . '£ 0 ,0 0 0 ,0 0 0 to handle th is jow J A Staf ord 3393 business, as these horses and males oome to this market from went i-6X&8, Uev; Hexioo, Oklahoma, K a n s a s , are a i d for through the hanks here and are la te r so ld to p lanters in east T e x a s , L o u is i a n a , M i s s i s s i p p i , Alabaroa, Georgia; in f a c t , the e n t ir e Southeast. Another great argument in favor of the lo ca tio n of t h is r eserve bank: at Fort T o r th , is the enormous amount of b usin e ss oenter 1 % on t h is point from the State of Oklahoma. A glar.ee at the map will show that p r a c t ic a l l y every r a ilr o a d in Oklahoma on which l i v e stock is produoed is a natu ral rout© to th is m arket. ?he proof of th is is the fact that in a d d it io n to the la rg e nnmber of o a t t le a n ! oalves r e c e iv e d at th is raarketfrom Oklahoma, we han le d a t o ta l o f over 2Cf ,0 0 0 head o f hogs from that State during 1 9 1 3 , fo r whioh 1 6 , 9 0 0 , 0 0 0 was p a i d , dra fts being made from Fort \ orth to i p r a c t ic a l l y every bank i n Oklahoma. It ia p r a c t ic a l l y s ig n if ic a n t that the proposed t e r r i tory for the Southwest reserve bank i s a lm o s t, i f not e n tirely , Worth id e n t io a l w ith the territory sup p lyin g the Fort market with l i v e s t o c k ; that i s , Sexas, Oklahoma, w estern and southern L o u is i a n a , vestern A rk a n sa s, Old M exico, and Hew ie x io o . jnra J A Stafford 2394 in the pr paration of ca ttle for ?narket, and when bought by man who prepare them with feed and pasture to ship, it usually requires from threo to six months to get them in proper oon ition far m arketing. It has b>en and is the o us tom o f those v/ho are engaged in t h is l i n e pro uoers o f b usin e ss to buy these ca ttle from the in v ario us parts f tho co u ntry, a n i a ft e r buying them they u s u a lly seoure 1 ans from 50 per oent o f th e ir values up t o , i n some oases, t h e ir en tire v a lu e , the feed er or han 1 r of those o a t t le fu r n is h in g h is o m money for grass an I fe e d . It reouires a la rg e amount o:? money to take oare o f t h is 1 ind of b u s in e s s . The greater part o f t h is money is u s u a lly fu r n is h e d by commission merchants Tho take loans secured by mortgages on suoh o a t t l e ; i n t u r n they eadorse t h is pa er and s e l l it i n suoh parts of the country as they can secure the b est m arket, it having been demonstrated that t h is is a very d e s ir a b le olase of paper and is really about ths only la rg e l in e that of commercial paper is b a n 'l e d in th is cou ntry. I n the h a n d lin g of t h is lin o o f b usiness the oomais io n merchants of Fort -orth, T e x a s , fin a n c e a n n u a lly about \ J A Stafford tventy- five m il l io n d o lla rs of Fort I orth hand le d ir e c t . 3395 in a d d it io n to ^hat the banka I t K i l l show that Fort fo rth r e a l l y fin a n c e s more loans than any other o it y in *exas. Of the paper sol , u su ally about 20 per oent is han led by Texas banks* about 10 p er oent by Kansas O ity and 1 0 per oent by Sit. L o u ie , tho bal m oe in Ohioago, Hew York and other eastern c i t i e s . T his c la s s of paper is regarded as very desirable for banks for tha r e a s o n , f i r s t , s e o o n ', it is short time pa-er, a n d , those o a ttle when prepared for market always bring the money, it being a olass of paper that oan be depended upon to be p aid at m a turity . The l i v e stook in t e r e s t s of T exa s, a largo part of Ok ahoma and a part of Hew -lexioo, in c lu d in g some of Arkansas and L o u is ia n a , n a r ly a l l look to the Fort Worth commission people to fin a n c e th ir d e a l in g s , and it is done through them. This is one of the strong reasons ?hy a reserve bank should be looated at Fort W orth, whioh is p r a c t ic a l l y no- tho l i v e stook market of t h Southwest, and vhere a l l these deals are fin a n o e a , and v ould bo o f great a s s is t a n c e to those fin a n c in g the d eals to have a bank looated h e r e , thus fu r n is h in g it a larg e l i n e of ooctneroial J A Stafford jrjv. paper t at 3396 ia d e s ir a b le and ^ a i d promptly at m aturity* In the past it has been im possible commission deafters 1 oated a t Fort north to supply the leg itim a te demands mode upon them. For th is reason a large amount of this paper has been taken by -Kansas City and St. an louis banks en lorsed over by them without recourse to Loan Companies c o n tr o lle d by the same banks an i sold by said 1 a n companies to in v e s t in g bankers i n the e a s t . By so doing they do not show l i a b i l i t y of rc- iscounts or loans i n t h e ir statem ents, The amount h a n 3led in t h is ?.ay runs into many m illio n s of d o l l a r s , which should be hanlied in the country where pro uoed and s o l d . In c o n sid e r in g the l i v e stock in ustry i n the Southwest or a l l aa r e l a t i n g to fo r t worth is tne estaDiishm ent of permanent headouarters at thlB point of the Assocla ion most v i t a l l y in t e re s t e d i n the pro n o t io n a n l marketing o f l iv e s t o c k ; nam ely, the C attle R a isers A s s o c ia t io n , the la rg e st o r g a n is a tio n of it s k in d in th« s o r l d , in c lu d in g i n i t s membership almost every F a lser of l i v e stook i n 2exas, . exico, Oklahoma, Hew Lexioo, and a larg e number of members i Louisiana an A rkansas. The Farmers U n io n , w hioh is J A 3tafford 3397 encouraging in every way p o ss ib le the increased production of l i v e s t o c k , The headquarters of the Southwestern Boys •nvl G ir l s Hog Clubs # embraoing a l l the proposed te r r ito r y * > : or t h is j egional B ank. Headquarters for the Baby Beef Clubs o f the Southwest. The most s ig n if ic a n t faot of a l l as it a ffe c t s the establishm ent o f th is bank i n Texas, an es p e c ia lly in Fort . o r t h , is that where the l i v e stock ind ustry of other seotlons of the United States is v.aning, as shown by the reports of p r a c t ic a l l y a l l other m arkets, the Fort "^orth marl et is showing a continued inorease in receipts of a l l kinds of l i v e s t o c k , and a c a re fu l study o f l i v e stock con ditio n s in tho U n ited States w i l l oorvinoo any t h in k in g man th at the great pro uctio n of l iv e stock must come from the regio n abov o u tlin e d for ensuing years and that the g ra zin g and feed in g o> o a t t le i n the Horthweet w ith the r esu lt that is r a p id ly d e o l in in g , each year there w i l l g ra d u a lly be a narrowing of l i v e sto ck tra ing in largo q u a n t it ie s to t h i s s e c t io n , w it h a consequent inorease in the importance of the present acknowledged centre of the l i v e stock in d u str y a' the Southwest, Fort "orth. In an e ffo r t to get the o p in io n of the l i v e stock J A Stafford raisers and feeders of th 3398 Southwest, thoy vere asked for an opinion *:hioh bro ght fo rth tho foil wing resolution: *Aa one engaged in the live stook and oattle industry I strongly urge upon your Honorable Conniseion the importance and n e c e s s i t y of placing one of these Iiegional Iteserve Banks in tho 3tate of I ojzxs and earnestly reoomaend the Oity of Port orth as the point at hioh this bank will best serve the oattle an*, live stook industry of the Southwest.11 Signed by 2501 feeders ana Breeders of Cattle in the States of Arkansas, California, Idaho, Kansas, Louisiana* Oklahoma ^IsslB slppl, Hew £exloo/and Texas. The original signatures are on file and can be sub mitted if desired. Also the same resolution . as adopted by tho !?xeoutive Committee of the Cattle lalsers Association of Texas* ?he votes to this effeot are on file and can be submitted if desired. In ooaoluslon, attention is called to the fact that of the entire receipts at the >ort V7orth market, 5 3 per oent of the oattle are sol - to others than the Fort Vorth packers most of them going back to tho oountry as feeders on short loans, and again to the market when fat. Fort iorth is J A 3tafford 3399 * H Fuqua recognized aa the greate8t feeder markot in th? Treat, and w ill eventually be the only large one. STAT5L1EHT OF W H F JJA. tJ The Secretary of Agriculture: You may atate your name, residence and occupation? I( mt. uqua: 1 . H. Fuqua; I am in the banking business and 7 stook business, and I farm some. Ur. Wortham: &r. Stafford failed to bring out one point which we particularly desired to have him bring out, namely, the item of where these horaes and mules were bought and sold. That involvea a financial proposition. May he re turn to the stanA for a monefet? The Setvetary of Agriculture: Yea. PURTHat 3SAI"51 HT 01 J . A . SIAF10BD. Idr. Stafford: The horses and mule 8 coming to the Fort .Torth market are bought largely in Kanaas, Oklahoma and Hew Liaxioo, and a few from Nebraska• They are pal L for on arrival at Fort Worth ancl are a old exoluaively east of Fort £orth; in other vorda, they do not move back to the same t e r r i t o r y , as la aometimea the oaae vith cattle* Hhe J A Stafford 3400 largest sale Is In Louieiana, Arkansas* Llisaissippi, Alabama and Georgia and also Iforth and South Carolina to extent. 3ome It practically means it takes about J 10 ,000 ,000 to cover the amount of horses and mules handled in Fort Worth annually, and it practically means twice that amount of money, because they are brought in and paid for and held an sold, and the money comes fran a different direction« There is another feature I would like to bring out in that oonneotion in regard to the amount of business, whioh I do not thing has been oovered. Fort Worth is probably the largest buyer of cottonseed o il, in the southwest. They handle annually about $ 1 ,1 ^ 6 ,0 0 0 worth of cottonseed oil* jUBTEKR STA2BIOOT OF The Secretary of the Treasury; . H. FU UA. Hov , Hr. Fuqua, you rnay proceed. - :. Fu ua: j I am presi ent of the bank — The Secretary of the Treasury: Thich bank is it ? Ur. Fuoua; I am away out in the northrest portion of the state, at Amarillo; the First national Bark. The Secretary of the Treasury; Mow w ill you please give us new any/light which you can upon this problem. Jn*j * H Fa cua 3401 Mr. Fu a&: I do not know that I can give you any particular ly new l ig h t , but I would like to say that, coming from the northwest nortion of Texas, it is the great desire of the bankers and the financial men of that lstrlct that we have a bank In xoxas, fir s t. The Secretary of the Treasury: -here do you keep your reserves now . I;r. Ju ua: Hew York, Chicago, Kansas City and t . L uis. The Secretary of the Treasury; Do you keep any of it in Dallas or Fort WorthV I2r. F®|ua; t*e have never had designated a reserve bank in the state. The Seoretary of the Treasury: You have no reserve bank in this state that you use? Xr« Fuqua: No sir The Secretary of the Treasury: But your desire is to be connected with the Reserve Bank in Texas, if one if 1 cated here ? i*r. Fuqua: By a ll moans. The Secretary of the Treasury: in this same district ? Mr. Fuqua; Yes sir You want Amarillo to be H H Fuqua 3402 Tho 3eoretary of the Treasury: What weald be ^oar booond ohoiooUr. Faqua: Peroonally ilansas Oity \7ould serve us better than any other point* aside firom Texas, but we are uncom promisingly for Texas, i f it is possible to get one in this state. I am interested in about forty odd banks, and I am speaking for a ll of those, and also for a nmaker of other ban: s in the northwest part of the state. The Seoretary of the Treasury: Will you file a list of the banks you are speaking for? Mr. Faqua: Yes, I oan do it later. The Seoretary of tho Tr ae^ry: If you pleaso, so it may be an exhibit to your testimony. They all favor a reserve bank in Texas ? Mr. Faqua; Yes sir. The Secretary of the Treasury: Ux. Fucua: But ?;hioh oity? Of oours* Fort 'STorth is a lit t le nearer to us, bat we w ill be glad to get it in the state. It is for Texas f ir s t , and for the oities afterwards, according to your good judgrment. The Seoretary of Agriculture: To That extent do you think Texas roald be able to take oare of this district* 3402 3 H Fuqua T I£r. Fu ua* I notice that point was nade this morning and I believe if it were possible for Texas and the adjoining territory that would naturally go with it to be able to maintain its reserves ani its funds at home, that they would praotioal y be able to take oare of the needs of this entire diBtriot. You understani at present, while wo get a great deal of our assistance froia the east and north,y*t in ^any times 7 o are only asking for the balances that we oarry there and sometimes we may exceed that, but if it were possible for us to carry our reserves more at home, we would not be require-! to go east for the accommodation that we do now. The Seoretary of the Treasury: is it not a fact that you do not ask for aa much as your balances, even; h Fuqua: Tea, s i r , that migl t be. &r The Secretary of the Treasury: You usually have a surplus, I mean the banks of the country as a rule have a surplus always in Sew York* ilr. Fu ua: Yes, s i r , the banks of the country do, but that is not the oase in ay particular section, e are a great borrowing section up there; it is a new country and we han le a great deal of cattle there. And in fact, I may state, i f I may be permitted to ~o, that for six years ' 7 E Fuqua . 3404 Amarillo, the lit t le t v;n I come frora* enjoyed tha tinction of 7 oaring other point in th been passed :is- more oattle from the range than any vorld. That*, as for ai>years. Shat has now for 14 years, ainoe the establishment of the many railroads. That was a quarter of a century ago. when I went there. The secretary of Agriculture; You spoke of your particular section as being a bor rov ing region. To hat extent vould you regard this entire section as a borrowing region? r . Fuqua: Certain small towns at all seasons of the year are borrowing towns; at certain times they have large sums of money, but at portions of the year the smaller interior towns in the district are borrowing towns, Tfce Secretary of tho Treasur;:: At the height of the season? lir. Fuqua: Yes, at the height of the season. The Secretary of the Treasury: Do you think as a banker that it would be wiser to create a district which is wholly a borrowing one or create a larger district that vould have more lending power • Ur. Fuqua: There arc certain portions of the year that J E Fuqua th is d i s t r i c t r e fe rr e d other points it ^ o u l 3406 to has a surplus of money and at be a very heavy borrowing soot ion . the s p r i n g , say from December to A ugust, In is the heaviest borrowing tim e i n the no rthw est, and in the f a l l season we a re s h ip p in g our money. v>e have a lrea d y marketed our g ra in o rop . We r a i s e c o n sid erab le g ra in in that country, and our l i v e sto ck th en are oomli^; to m arket, and a t the time vrhen in an * around Fort l.orth, P a lla s an Houston, and a l l t h is country here they are needing th eir money, x:e w i l l say from August to J a n u a r y , we would have more money than any other t im e , onder ordinary or com on c o n d it io n s . The Secretary o f the T r e a s u r y : Jr . Fuqua: Y e s , s i r . dermal c o n d it io n s ? But that con i t l o n has not p r e v a ile d for the past twelve months. The Secretary of A g r ic u l t u r e : You xxx probably heard the statem ents made t h is m o rnin g, that a con sid erab le part of t h is t e r r it o r y w hich you have in d ic a t e d i n t h is d is t r ic t is asking to be in c lu d e d w ith c it ie s to the n o rth . 3Sr. Fuqua: Yes s i r * The Secretary o f A g r ic u lt u r e : To what extent w o u ll you s u f f e r detrim ent or disadvantage i f a la r g e r d is t r i c t were created v it h a reaerTe tank in Kansas C it y , wo r i l l s a y , fo r W H Fuqua the sa q of c i s c u s s i o n , 3406 or 3t. L o u is , w ith a branch at Fort T o rth , IJr. F uqu a: I do not know just what la going to be th© l a t it u d e or the duty of these branoh banks* The Seoretary of A g r ic u l t u r e : the function s Under the law it may have of the reserve b an k s . There are no lim it a t io n s • The Secretary of the T rea su ry : s u p e r v is io n a n Lir. F a u a : Subject to the general c o n t r o l , of c o u r s e , of the r eserve bank, oul it be improper for me to asi: here have heard th at branoh bank question iisousced— I about how many branches co u ld or would there b o , p r o b a b ly t The Secretary of tho T rea su ry : It depends e n t ir e ly upon the d is t r i c t s and what w i l l be approved by the Federal B o ard , The r eserve banks a re compelled under the law to e s t a b l is h bra ches under the ru le s a n l re g u la tio n s to be p r e sc r ib e d by tho B o a rd , and the tendency w i l l be to e s t a b l is h those b ra n c h e s , of c o u rs e , from tim e to time as the b u s in ss of the d is t r i c t s r e q u ir e them. ilr. Fuqua: Yes. W e l l , I b e l i e v e , s i r , that w it h the completion o f the Panama Canal r ig h t s o o n , it is g oing to put Tosas on th e highway of commerce, and i f that be the 1 H Fuqua 3407 case— The Secretary of A g r ic u l t u r e : have run across the Canal a l l tho way from i.ittsburgh to S e a tt le . Hr. Pa ua: I understand The Secretary of A g r ic u lt u r e ; It is going toput every o it y in the ooantry on the na p . The Seorotary o f the T rea su ry : Fu ua: Hr. I t h in k that is It began r e a lly at Boston. u it: correct. But you are g e t t in g much oloaer t o the o u tlet as you approach the S u lf and near Texas. The Secretary o f the T reasury : In every o it y we have been the la n a a a Canal is an A la d d in 's La up. Hr. Fuqua: I Relieve I w ill go a l i t t l e fu rth er and say that Texas , as perhaps the gentlemen here know hope they are not particularly a c la n n is h s e t , but they are a very lo y a l s e t , a nd I believe a bank established somewhere i n Texas w ill be not only a very s a t is fa c t o r y b a n k , but b e lie v e I it is the next thing to a n e c e s s it y .f o r the develop ment of this southwest country. I do not know , I aa not tenp ted to say there t h e se banks should be e s t a b l is h e d , but I do b e lie v e that Texas w ith its great u n lim it e d , and I may say entirely undeveloped resources , it many r e n p t o t u , ou;:ht — — -- W H Fuqua jmw 3408 to h a v e , from what it oan and T i l l be able to do for the government a n i for thio Ie p u b lio of o u rs , some co n sid eratio n as f a r as a reserve bank is concerned. As to where it is to be l o c a t e d , th at is for you two gentlemen to decide a ft e r you have heatd a l l th is or.title to i t . e t id e n e e . Bat I b eliev e Texas is I believe its great volume and great p o s s i b i l i t i e s r e a l l y e n t it le it to a reserve bank. She Seoretary of the T re a s u ry : We are here for the purpose of g iv in g h e a r in g . it c o n s id e r a t io n . That is the object of th is That is a l l , than}: you. Host Houston is r e a ly to be hear jdr. Vert ham: , I b e lie v e . This pamphlet contains a com pilation o f a l l the fa c ts w hich have been subm itted. The Secretary of the T rea su ry : That may be f i l e d as an e x h ib it• (The pamphlet was a c co rd in g ly f i l e d . ) U r. Oscar W e lls : The State Commissioner o f Banks is h e r e , and inasmuch as h is testim ony might perhaps have some weight w ith a l l the c i t i e s , we should l ik e to have him come ahead of Houston. He w i l l only take a few m inutes. The Seoretary of the T rea su ry : Tfe w i l l h ar from M m . j® • ^ W C o llier S T A T IS T 3409 CF 3 . ff. C O L L IN . The Secretary of the treasury: Sr. Collier, you. may state your name and residence and occupation. 2ar Collier; > Collier, Commissioner of Insurance v and Banking in Texas. ihe Seoretary of the treasury: You are the State Commis sioner of Banking, I believe? Mr. Collier: Yes. s ir . I assume that the reasons for the local oommittoe having asked mo to appear before this CooiBlttee was to testify as to the faots of the number of state hanks in Texas, their capital and resources> and the number eligible to beoome members of the liesorve Bank* The Secretary of the Treasury; We should like some infor mation ae to that, and also whether state banks, under your lav* are entitled to become members in this system. Mr. Collier; Yea, s i r , there is nothing in our law to prevent them beoomin# members* The Secretary of the Treasury: la there anything that authorizes them: Are they permitted to o n Mr. Collier; Yes. stock; Under the statutory provision they can o n not in excess of 10 per ccnt of the capital stock 3410 w Collier of the corp oration Id hloh they aro invest lug. The Secretary of the Treasury: Ton mean 10 per cent of their o?ra capital. Hr. C o llier: Bo. 10 per cent of the corporation in which they are Investing. The Sec etary of the Treasury: That would seem to give them aiqple power. ::r. Collier: Ample pover, yes, sir. The Socretary of the Treasury; you may submit any fact8 you have. lir. Collier: Shall IsreddL the date, or shall 1 just file i t , Mr. Secretary The Secretary of the Treasury: If it is purely statis t ic a l, it Bight be of more service to fil e it . You might give ub a summary of it . l£r. Collier state There are 349/banks in Texas with a total oapital, surplus and profits of 4 4 ,6 4 5 ,0 0 0 .. I w ill omit the odd figures. They havo total deposits of J 6 ,00' ,0C0 and total resources of $149•000*000* The Secretary of Agriculture: 7»Tiat has been the growth in the last five years? Mr. C o llie r : The growth of the banks during the fisoal 5411 W 1 C o llie r. year 1912-1913, there wite 111 now charters granted with aggr igate capital of 4 3 , 3 5 o , 5 0 0 . The growth of the deposits from the time tho f-tate 3ank la?; went into affect in 1906 was 4>8.00r ,000; 1907, t l 9 ,0 'C ,0 C 0 ; 1908, £ 2 2 , 0 0 0, 0 0 0; 1909, $ 3 9 ,0 0 0 ,0 0 0 ; 1910, ^ 48 ,0 0 0 ,0 0 0 ; 1 9 1 1 , £58,000,000* 1912, $ 7 1 ,0 0 0 ,0 0 0 ; 19 13, v9 6 .0 0 0 ,0 0 0 . The Seoretary of Agriculture That is the growth in the last sevon years. L*r. Collier: That is the growth since the system was established. The Seoretary of the Treasury: How many are eligible under the Federal r eserve i«et? lir. Collier: 377, ith an aggregate oapital and surplus of 1,31.057,600. The Seoretary of Agriculture LIr. Collier: not And deposits? I did not give tho deposits, because I sas called on until this morning for this data, and did not have time to prepare that, but it is fair to assume that the deposits of those «ould be about ^6 0 ,00 0 ,00 0 . The Seoretary of the Treasury: Have you any indication from those banks as to their purpose with regard to the Federal 'ieserve Act V http://fraser.stlouisfed.org/ Federal____ __________ Reserve Bank of St. Louis T 7 Colli or i ^r- C o llie r: 3412. I *111 say th is, I&r. Secretary. I have had, I suppose, in airiea from almost every one, and the attitude of the Department of Banking in Texas is to enoourago them to beooae members. The Secretary of the Treasury: Are they sho. ing a disposition to oome into the Federal Reserve system? Mr. Collier; I believe it is fa ir to assume that more of them would beoome members if a Federal Reserve Bank is located in Texas, than they would if it was located other wise. There is one point I want to touch one, if you w ill pardon mo. That i s , It has been suggested that having a Eeserve Bank located in Texas where it was entirely a borrowii^ country would not be advantageous or wise. I want to say that if the banks used their reserves, they would alwa.B be able to take oare of th ms elves. At the date of the last oall our state banks In Texas only had four and one-half million dollar a borrowed, and had in eastern exchange over 5 1 4,00 0,00 0. The Secretary of tho Treasury; wTiat is your law here with reference to reserves ? Ut . Collier; They are required to carry 26 por cent. jwm W W Collier > 5415 The Secretary of the T re a s u ry : 26 per cen t? Up* Collier: Yes, a ir . Hence I take i t that would be no bar to their becoming members. The Secretary of the Treasury: Hot at a l l . They are only required to carry 12 per oent. *lr. Collier: Yes. The Secretary of the Treasury: That is a pretty large reserve for the average country bank, is it not? ir. Collier: Yes. However— The Secretary of th e Treasury: Are they required to maintain that reserve strictly ? lir. Collier: Ten per oont in their vaults and the balance with reserve agents. The Secretary of the Treasury: ihat reserve oities have you for atate banks? Hr* Collier: We permit any national bank in Texas which has 46 0,000 capital to act as a reserve agent for state banks an<3 also any state bank may act as a reserve agent for any other state bank provi ing it has a capital of *50,000* The Secretary of Agriculture: You do not kno^ how many s~oh state banks there are at pres nt ? Mr. Collier: So, but I can state there aro in Texas 164 3414 W Collier. s ta te banka that oarry no out of stato reserves. ?hey keep t h e ir reserves a l l i n Texas. They are small b anks, however. T ho Secretary of the Treasury: And v;bat is the minimum oapital hioh the law alio s a state bank to have? r . Collier: £10,000. The Secretary of the Treasury; There is no limit upon the uAxImam amount, is there* 1t . Collier: £o, s i r . 3 The Secretary of the Treaopjry: That is a l l , thank you. ssasktob c r osca- je l l s . a . The Secretary of the Treaaury; Xou may state your name residence and oooup&tlon. Jr. e lls : Oscar ' e lls; Vice-President of the First national Bank of Houston, Texas. The l core tar y of the Treasury: iVhat do younrepresent ? Jr. el 1b : 1 aa chairman of the Joint Committee, acting for the Chamber of Commerce of Houston and the Clearing House Association of Houston. The Secretary of the Treasury: Are you president of the Clearing House? Mr. e l l s : So, I am not. 0 Vails 3415 The Secretary of the Treasury: But you are authorized to speak for the Clearing Hiousa* Jr. (qI I b : I am, yes, s ir , an he Clearing House who v.e have other members of ill perhaps appear before you, who are also authorized to appear. Hov. I want to say first that the plan that Houston has adoptei in presenting its claim is perhaps a little different from any applicants ;ho have appeared before you, because . have sought to condense suoh information as we thought I would bevaluable to you in a very snail compass. The Secretary of the Treasury: la this !<&p Ho. 1 , the proposed district ? Sir. Fells: Lap I p . The Secretary o 1 is the proposed district. the Treasury: You include in it Hew Orleans ? 1 r . Wells : 3e include ins- it west of the Mississippi . iver . . and it has been suggested thatif . in your wis om Hew Orleans properly belongs in this t outhwestern d istric t, it could very well be put in this listritt without any violonce to her natural 1oca ion, because the balance of power in this district 7 *ould be in Eexas, even including Louisiana and Sew Crlea s 0 Sells 3416 Tho Seoretary of the Treasury: In other words, you do not object to Now Orleans ? ^r. Welle: » • do not object to Hew Orleans. The Seoretary of tho Treasury: You may proceed. Mr. 17ell8 : In the announcement emanating from Washington there v.ere three determining factors suggested. *e have taken those factors as the outline of our argumentt the first being tho geographical oonvenie oe, involving transportation fa c ilitie s and ease and rapid communication with all parts of the proposed district. I oking towards the development of that factor we have prepared the map TIo. 1. The difference between our map and the map presented by Dallas this morning is that we un ertake to defend only the southern half of Oklahoma, being that half lyin^* south of the Cano lian River, that part of Arkansas south of the Arkansas river, that part of Louisiana west of the Mississippi river, following th« natural water boun ary around inolu ing Sew Mexico. The Secretary of t e Treasury; The \;hole of Hew -iexiooV Hr. f e l l s ; We inolude the hole of Hew llexioo on this assumption, that notwithstanding the disposition to do the least violence to the trend of business in other directions, 0 Wells that perhaps 3417 in dividing ap there will be necessary some arbitrary lines l a id , and £ew Llexico being a stock raising territory largely, and doing a great deal of business now with Fort Sorth, the live stock centre, and with rail ay fa c ilitie s running from in this district accessibility to ’1 jaso to Denver, oould be handled ith a branch at 3. iaso, because of our *1 Taso, the branch. This map w ill show, Lr. points in thia territory. Secretaries, the prinoix>al It will show the distance from Houston in hours and miles. It sho s the location of the ports along the ooast now in operation an 1 being develpped by tho expen itare of government money. He have also— The Secretary of Agriculture: \h J at are these figures on here ? L^r. Veils: The top figures are the miles, and the bottom figures are the hours distant from Houston. That includes Hew Orleans, Baton Bouge and a ll points in this district and a lit tle bit outside the district. T'e have three telegraph and cable systems, those being the Western Union, ac ay an; Postal, and two long distance telephone systems. I am speaking to So. 1 sub-topic of your outline. These reach every banking point in the pro- jmw 0 Telia. 3418 posedL diatriot. Tha Secretary of the Treasury: What ia the extreme limit of your long diatanoe serv oe from Houston. -©118; The long diatanoe service can be carried on to any part of this diatrict without any iffioulty. The Secretary of the Treasury: Outside of Texas? Bellas u© talk to EanBas Oity and St. Louis ?ith great frequuncy, and sometimes with splendid service. That dependa on climatic conditions, whon you reach that diatanoe. How the ©tatistioal data which I do not Intend to read in detail oover the lis t of railways serving Houston and reaohln Houston, there being 17 in number, with a total mileag© — The 3©cretary of the Treasury: We are familiar with it* Ir . ^ e l l s ;I Was going to point out the percentage of the total mileage in Texas which oentres in Houston, e have 79 mail trainsdally in and out of Houston, and 106 passenger trains dally in and out of Houston. That does not include any ©lectrlo interurban service. F© have water transportation fa c ilit ie s , utilizing Buffalo Bayou from the Gulf of Mexico to Houston turning basim, which is under process of completion, under contract 0 ells 3419 z\ ooifying an average depth of £5 fee; , and an average width of 100 feet at tho fease. Unit d This v>ork is being don ’ by the tates government an- the Houston Navigation District, and the contract is near completion* The Seoretary of the Treasury: 3fcen do you expect that to be opened? wr. W ells: It rill be opened some time during the coming year, this year. Then we already are raaking provision for the establishment of dockage and slips and fa cilities for shipping. Houston, as a shipping point, is 500 miles nearer tha graneries of the set than the Atlantic and Pacific ports and 300 miles nearer than iJew Orleans. Then the Intercoaetal Canal is completed from Galveston Bay to Corpus C h rist!. In this proposed district, tributary to Houston, are he f o i l ot,ing ports; Aransas Pass, Corpus Christi, Freeport, Calves on, Texas Oity, ioint Bolivar, Port Arthur, Beaumont, Orange and Morgan City. How the second point of our outline has to do with industrial and commercial development ani needs, involving the general movement of commodities an. business trans- 3420 0 i.ells . qo Ions xiitliin a proposed district and tho transfer of funds and exchanges of credit that result. In the second nap we shov> a product map, or at least sho* the predominating proloots of each section In this territory. You will notice the rice and 3 ugar belt Is along the coast, and tho yellov pine, oak and hickory timber— The Secretary of the Treasury: When is the rice crop marketed, when is the period of extreme dernand for the move ment of rlee? Hr. Wells; I was golngto suggest, we have here as a witness every one of these iniustrios re£jresnted, and "h ile we do not come here prepared '-1th a lot of statistical data to repeat the things laid are here to answor any iown in this condense! form, they uestions pertaining to their indus t rie s; anl we want to say too, that any argument that we do touch upon here and which we haveeought to condense and hioh you want elaborated, we stand ready to elaborate and verify this data at the same time* You w ill nfttloe the yellow pine, oak and hickory timber and cypress lying along the eastern part of Texas and the western p rtion of Louisiana and a portion of Arkansas include! in there. One of the greatest claims that Houston 0 Trails 2421 makes for tho 1 oation of a I.egional Bank Is the diversity of In t e r e s t s w hich she represents now. The live stock ra isin g , hile we are not a factor in ti e pro action of meats, ,e are a very strong factor in the breeding fie ld referred to by the gentlemen from Port Worth awhile ago; in fact there are more cattle pro ucsd in a territory tributary to Houston and 100 miles distant that any other point in this entire territory. Ihe cotton, corn, small grain and fe e d s t u f f s in tho xastern portion of i t , and the truck a n i cirtus fruit in the southwestern portion , in fact a l l along the southern p a r t . and the loaatlon of the oil fie ld s , which is a very material part of our commercial activity— these are all sho n as indicated These little black dots on that map represent the points of Oregon from whioh cotton was shipped last year to trco of the cotton factors located in Houston, showing the trend of that commodity towards the Houston market to be sold on a commission basis. The business of cotton faotorage is peculiar to r Houston and Galveston, a n i from all sectio ns of this country where cotton is p r o d u c e !, that cotton is shipped to the Houston market to be shipped a g a irc t advances and be sold 0 tells 3422 on a consnission basis. Following Map Ho. 2 there are statistical daia and we give to you. the square miles of the territory, the population, railr ad mileage, an 1 assessed valuation of wealth. And we take up and discuss briefly in condensed form the production of cotton. There were 7 ,1 2 5 ,0 0 0 bales in the district with a value of y 4 1 0 ,0 0 0 ,0 ^ 0 . The gross bales hanlled through Houston were 3 ,3 2 4 * 000. Those are the figures referred to by the gentleman from Dallas, this morning, in talking about cotton which passed through Houston. The net bales were 1 ,3 0 1 ,0 0 0 , including the net bales recorded at the Houston Cotton T ixchange, the f .o .b . cotton which is actually paid for and han-Vled and financed by the exporter or buyer. The Houston Cotton Exchange has 47 members, devoted to the marketing of the cotton. 223,679 bales in 1912-1913. Houston factors handled That cotton, by the way, a ll the Houston facto rs1 cotton, or practically a l l , is handled by Houston banks. . er haps one large factor $oes outside for a portion of the money, or he did this year on account of abnormal conditions, or Jierhaps three of them did, but ordinarily the large percentage is handled by the Houston 0 -Tells banks. xh re are no available statistics showing the nambor of bales exported, bat it is conservatively estimated that b5 par oent of the net volame handled by Houston ootto firaa is exported, valued at § 6 6 ,3J3,220, against ^.hioh foreign exchange ia drawn and sold from Houston through local and eastern brokers. Hexfc to the production of ootton is the production of cottonseed products. There vrere 1 ,9 3 2 ,6 2 3 tons, from the best sta tistic s, crushed valuation of 4,46,000,000. for manufacturing purposes, with a There are 1 ,6 2 7 ,2 7 7 tons used for feeding, fertilizin g and plafcfcing, of a value of h 43,00<~ ,0 0 0 , v.hich do not go to the crushers The Secretary of tho Treasury: How much is crushed at Houston? Have you large mills hero? i£r. ft'ella; Yes, we have large oil mills there, an about 7 par oent of the entire seed of this district is used for manufacturing purposes, and they turn out a greater volume of anafactured pro acts than any point in the south, the value of which is $ 1 6 ,6 0 0 ,0 0 0 . we have a number of producers of cottonseed lard products, from the ootton seed. The value of the manufactured products is $ 6 2 ,0 0 0 ,0 0 0 . 3424 |jmw 0 W ells. and they export about # 1 7 / 0 0 ,0 0 0 of i t . How tha territory consuming these by-products or the products cf the cottonseed, reaches to Arizona on the west, Kansas on the north, Porto I.ioa on the south, and the Atlantic Seaboard on the east. The Houston mills purchase and crush 7 per cent of the s e e d , and so far as I know the financing is done exclusively by Houston banks. % Then we have corn, wheat, oats, hay and other feed stuffs produced in 1912, valued at $ 1 8 3 ,0 0 0 ,0 0 0 . The Secretary of the Treasury: You mean produced in this district? Mr.tVells: Yes. The next item perhaps, LSr. Secretary, is lumber, tfe are the home of the lumber in U3try, so far as this district is concerned. The estimated stumpage of feet in this district outlined on that map is about 1 5 0 ,0 r0 ,0 0 0 ,0 0 0 f e e t . The output from that stumpage in feet T.as 6 ,3 1 3 .0 0 0 ,0 0 0 in 1913, with a value of 4 - 88,000,000. and odd. A great part of this was done by 48 lumber com panies in Houston, employing a total capitalization of •J3 1 ,8 3 5 ,0 0 0 . When I say lumber companies, I mean manu facturing anl se llin g companies. There are no consequential lumber orjaninations outside of Houston in this istrict Jraw 0 T?ells 3425 handling lumber, either manufacturing or selling* 'e xt cornea the volume of production of petroleum. "here are 12 oil fielda looated in Tessas 'Khich produced in 191*5, 1 5 ,5 0 0 ,0 0 0 barrels and 8 oil fields in Louisiana which pro uoed in 1913, 1 4 ,0 0 0 ,0 *0 barrels, that pro ueed in fexas being valued at § 1 5 ,6 0 0 ,0 0 0 , and that in Louisiana £ 1 4 ,0 0 0 ,0 0 0 , or a total pro* action of 29 ,500 ,000 barrels, or 1 ,0 0 0 barrels daily, valued at $ 2 9 ,8 0 0 ,0 0 0 . A p a r t of that financing is done in Houston, and a large portion of the capital of these companies is contributed by Houston citizens, and they horror money and the transactions are han lec through, the Houston offices and Houston banks, al though* they do not confine their borrowings to this terri tory. During 1913 it is estimated that the Gulf Ports received from Mexico 8 , 5 0 0 ,0 0 0 valued at £ 6 . 5 0 0 , 0 0 0, which barrels of cru e petroleum, as handled and financed by the companies dding business in Houston. This proposed district contains 14 oil refineries, representing an investment of $1.3,000§000, exclusive of pipa lines and stocks of o il , and manufacturing refined prodacts of a gross value of $ 8 4 ,0 0 0 ,0 0 0 , at least 40 per cent of which is exported via Port Arthur, which is located J® * 0 W elle within tho listrict, and one of the points we claim as tributary to Houston. In Houston there are 28 oil com panies incorporated a n 1 capitalized at # 8 8 ,5 2 6 ,0 0 0 , proAicing and marketing tho greater part of this output. i e are growing as a rice territory* In 1913 there were 7 7 ., 00 acres of rico land in this district vhich a produced 6 ,1 4 9 ,0 0 0 b&gr , valued at £88,000,000* This is 90 per cent of the ontiro crop of rice of the United States, of vhioh 3 .8 per oa.vt goes to foreign r.arkets, 21 per cent to Porto ; ica. and 75. - per cent is consume* at home. 1 Ve are also a sugar grcfiug territory. In 1912 there were 359,350 acres dev ted to 3*.zger raising in this district, pro ucinf? sa^a^s valued at v!5 ,0' 0 ,0 0 0 . That estimate was flrotten froro + he offices of several a ^ a r producers. The Secretary of Agriculture: Thai; S.a a repetition of vhat i.*» in hore * 5s 5t not ? *v. »olir: ; t imply ecwi&r Ini Kg here* 51m Sccr >tcii of l£ri<Hilture: ?c - T-11f : HaTC you rise roa fr I have read it already. about the exports and ii;vQ?ti and tho values re?, ate A - saGhv o The Secretary of ^ r i e u l t a r e : Yos. ^r. **ell«: I **ooIA like to call your attexr,ioa to two 3427 0 'Veils or three things as we go along, because it might develop into the asking of some questions. The Secretary of the Treasury: Touch upon the spec if io points you wish to emphasise. iir. /ells ; Yes, I will be glad to do that. In fact all these points — The Sec etary of the Treasury: You could not emphasise them better t an you have thorn in this volume. Jr . f l l a : I understand that. - The Seoretary of the Treasuryt So i f you *ant to say any thing in an explanatory way, you may do so. liIr. ‘ ifells : One of the points we would like to touch upon and emphasize is the favorable location of Houston for a Regional Bank particularly as it may pertain to tha develop ment of the foreign exchange dealings by the regional Bank. That is one of the t h n g s for which, it makes provisions, in volving exports an imports. I say that because Houston is adjacent to these ports already located and those being located, and tho volume han~lovl at .Galveston as ^ 889 ,000 ,000 and at Port Arthur ( 2 7 ,0 0 0 ,0 0 0 , and a ll these other porta are be ng developed by the expenditure of money, but lown the Ship Canal we handled in 1913, ^35,950,000# Jm v. 0 Sella The m iscellaneous data concerning- Houston I do not think i s e s p e c i a l l y p e r t in e n t. Th > S e c r e ta r y of the Treasu ry: ray. fe w i l l examine th at any Heading Afc i s o f no va lu e . Ur. .Veils: There i s only one other th in g , and that i s th t the Houston inbound f r e ig h t r a t e s are favorab le J,o the continuous b u ild in g o f Houston as a d is t r i b u t i n g p o in t, and that t i l l be touched upon by other w itn e sse s. Tho ?ecr«*tary of the Treasu ry: d istrict I no l i c e th at the proposed outlined v.oul? <rive th<* e^ional Bank a c a p i t a l o f v 5 , 32 4,0 0 0 and d ep osits of < 1 7 ,5 6 2 , 0 0 0 . In th at based upon the minimum re uirement of the A ct? Hr. ' . e l l s : Y e s , 3 per oent o f time d e p o s its , and have separated the deposits a? t.c rescive cities end member banks and the amount of 1 p o s it s as aho'^n by the ctatemen-. I cold l i k e to c a l l your attentio n t c nap No. 3 , showing the 1 c a tio n of the banks doin£ busiE&os in Houston, c a r r y in g s p o rtio n o f t h e ir re se rv e s tliere, the number c f banka at th ese p o i n t s , s.nd <he number o.. accounts c a r r i e d by those banks in Houston, as simply she i i ^ the d i s t r i b u t i o n of them over th a t a re a . i?he S e c r e ta r y or the T re a su ry : -hat i s the point you ant jm v. 0 m is 3429 to bring oat V Hr. Wells: I simply want to show that these little rings 8hor th© location of the banks nov; carrying accounts in Houston. The Seoretary of Agriculture; ^vhat rate of interest does Houston pay? Mr IVells ; Two per cent. The Seoretary of Agriculture; And the same check oolleotion arrangements as the other cities? Mr. Tells: Yes, s ir . I do not think there is any difference in th« Texas cities in doing that business. he Seoretary of tho Treasury: To what extent is Houston able to finance these operations, to what extent does it have to go outside? Mr. Sell®: During normal times the Hoaston banks borrow comparatively little money outside, and that only in the ve - extreme portion of tho movemsnt of the ootton crop. y Of oouwao, there are a great many commercial paper oianufacturere who go outside for money just as thoy . i l l go outside after the Regional Bank has been established. We do not think that that point would stand in the way of the operation of a Regional Bank in this territory as compared *■ 0 r '9lls 3430 with the opera!ion of a i.egional bank in any otheT territory, beoause there Trill he a oertain amount of supply of standard oommeroial paper, and i f we nsaimfacture it it will be found in the open market, and a oountry that is continuously developing cannot hope to find all its lending power located, at one point, ev*n if a Regional Ban^r is looated there. The Secretary of the ^ e a s U r y : Do you think a Federal reserve Pank looated in this district as you have outlined ^ it , located Houston, would preserve the Quaternary course of b r i n e s ■aad conserve the greatest conveni nee of business in southern Oklahoma, and all of Louisiana west of the ttisaiasippi liiver. J r . Veils: I fco think so, for this roason — The Seoretary of the Treasury: tShat are your trade re lations with that part of L u is ia n a and southern Arkansas? ir* S e lls : «e have very little trade r slat ions with southern Arkansas ourselves* However, there are some trade rolationo in the northern part of the state with southern Arkansas, and we have some trade relations in oklahoma* because of the fact that our crop moves earlier and we can f*e uently, in normal years, after we have begun to get re lief from the cotton crop in the southwestern territory* 3431 0 Sells loan money very rea ily to tho Horth Texas and Soath Ok ahoma banks, and do fre aently io so, before they reaoh the peak of the 1 ;ad. The Seoretary of the Treasary: To what extent woald Hoaston be a better point, considering the normal coarse of baSiness throaghoat this '.Listriot, to what extent are HoastonT s advantages saper or to those of Dallas and Fort Jorth for this partioalar parposeY LSr. S e lls : For the whole district. The Secretary of the Treasary: Yes. -Ir. i e l l s ; Ve maintain that oar advantage lie in oar f increased railway fa c ilitie s over the Horth Texas points * we think even greater than Fort Worth, and we believe greater than Dallas, so far as railway facilities are concerned. IS believe that the sarety of Hoaston*s fatare because of tha development of th i waterway system w ill make it the largest to1 n , therefore the lo ioal one no# to se eet. And it has a railway system connecting with the lower corner of Louisiana, the Southern Pacific running across to 131 Paso, and can reaoh the soathvestem corner by ra il ay. And it is 3 if;nifleant that thatecoantry \i l l be developed, reaching towards Tampico. 9 rQlle 3432 The Secretary of the Treasury; Is the ooanodity movement between Fort lorth and Dallas tov;a1rd8 Houston? Mr* flells: All export commodities naturally flow t at way, for Instance, ootton, and that is tha biggest commodity produoed in thia country, The Sooretary of the Treasury: 3at outside of that? ^r. fo ils: Outside of that the oattle would go to Fort worth. Tha Seorotary of the Treasury: Bat i f you had a Regional Bank at Houston, for instance, the matter of exchanges and various other transactions ?,ould necessitate the reversal of the normal trend, would it not? It vould be brought southward instead of trending northeastward, as it does now. L3r. Veils: I do not think so, as evidenced by the number of bank accounts and reserves carried there by banks a ll over this territory. The Secretary of the Treasury: To what extent do you have exchanges now with Fort *orth and Bellas? Hr* W ells: It would bo difficult to give you the exact figures — The Secretary of tho Treasury: Vould it be as great your way? jmw C Sells 3433 -r. *?ell8 : We sent t e as great a volume, taking it for ra 12 months in the year, as they sent to as* We bay as much exchange In covering the balances from northern points as they bay from as. The Seoretary of the Treasury; Is it not easy enough to get the exact data on that ? Ur. v/ells :Perhaps that ooald be done. The Seoretary of the Treasury; *e should like to have that submitted as an exhibit, Mr* H e l l s ; 7/hen you s a y N o rth T e x a s , we h a v e a good rziany p o i n t s — The Seer tary of the Treasury; Uo, I am speaking of Dallas and FortBorth. Wfeat are your exchanges *ith Dallas for a period of a year,and Kith Fort a year? Vorth for a period of I wouli like to have Port *orth and Balias give it too, from their end of it* You w ill please file that information. The S e c r e t a r y o f i g r i o u l t u r e ; Have y e a ta en into con s i d e r a t i o n L o u i s i a n a ’ s p r e f e r e n o e i n the matter? Ux* Veils; Ho. That would be for Eew Orleans. - did /© that upon the assumption that there mightnot be a bank established at Sew Orleans, and we do that upon the further T f 5434 jmw 0 Wells assumption that we now handle a great portion of L uislana's pro uotion, in that we handle their lumber and o il , and it v.oul not do Tiol itice to tho trend of business* Of course* you appreciate a ll tho trend of business is eastward under the present system. Southern .Arkansas vrould be an arbitrary line* so far as Houston is concerned. The Secretary of igriculture: We are not speaking so much of banking as the general trend of business. -r. e lls : 7.e do some business up there. The Secretary of Agriculture: And Southern Oklahoma V -jr. ells:.T h ey are a cotton raising territory, and it . ould do no violent* for their business to. come that way because it does to a certain extent come there now. It oomes south, act necessarily to Houston, and the cattle business comes to Tort fforth, which is what we are undertaking to dofond, so farvas the territory is concerned. The Secretary of the Treasury: able borrowing This is a very consider district at certain times of tho year, is it not? %r. wells: At certain times of the year they borrow a great deal of money, but we believe The Secretary of the Treasury: fhat co you suppose th® 3435 3** 0 ! ells • naximum demand from this district is for a year? £r. oils * I have not undertaken to malce any figures. 5he Secretary of the Treasury; I m an in tho peafc demand. Ur. Sells: I have not undertaken to make any figures. I assumed Ur« Ardray's figures, wliioh he gave this morning, were a pro er report of the amount of borrowing, as they wore from the Comptroller's report of October 31st. Tho Secretary of the Treasury; 2hat would not be a proper indication, because they would not show the entire demand — Mr. e lls: Absolutely, and there was some pyramiding, as he suggested also , so it ould be difficult to ascertain srhat would be the amount necessary to be borrowed. We believe th is, that with the release of the percentage of reserves which is to be released under the new law, and that would come to us from the sale of standardized commercial paper on the open market, because we believe this b ill w ill create a central discount market* !Phe Secretary of the ‘ hreaaary: i You mean it w ill ofeate a central discount mar et in each district i Mr. Wells: I mean a general district market; it may not bring it into each d istric t, but it w ill be 2m certain parts 0 Wells 3436 of the United States and there will be money to be had over and above the reserves carried by the reserve banks, which a re now used in other channels, and we b eliev e we v:ill get s mo re lie f from the sale of that pa er, and that in addition to the rote is s u in g poorer of the bank at the time we need it moot to move tho crop, would take care of our require monts under normal conditions* Die Secretary o f the Treasury: You mean by resorting to the Federal Reserve Board? iir. V»ells : Yea s ir . The Secretary of the Treasury: Instead of to some other bank. : r. e lls: Yes, instead of going to New York, Chicago, or St* Louis as now, because we carry our reserves there, and it . ottld be sufficient to take care of us because of this issuing power. the Secretary of the Treasury: In other words, your theory is that by resort to the issuing power, you would . “- - . - * n * ..' -' • : -s under all occasions be safe. Mr. ^ e lls : 2e believe in anything, in ©very emergency we . ould b© safe; w© believe the power of the i.egional Bank ra-ia : would be sufficient to take care of us, and our borrovring 3437 jmw 0 Wells fac ilitie s aro extonded to us now based on th© reserves carried at those points. The Secretary of tho ‘ reaaury: P Of course, the i uestion would arise from a business standpoint which was tho most advantageous thing for you to do, whether to borrow from some other reserve bank or recort to the Federal Reserve Board. Ijr. ellB : That ji ould be for tho Board to decide. The Seorotary of the Treasury: Ho, it would be for the bank to determine. Of course, the Board would have to give you ermi8Sion to deal with another reserve bank. :^r. ells : Yes. We assume t at the reserve bank will resort to this issuing power, because that is part of its earning pover. The Secretary of the Treasury: It would not, providing it could get the monny from another Federal Eeeerve Bank on better terms. I3r. r,e l l s : Lo, but in any event it would do no viol noe to the ayBtem to use the issuing power, on which we can rely. The Secretary of the Treasury: Is it your judgnent it would be b tter to create a district that is wholly a borrow ing distriot at some periods of the years or create a district which is x. more balanced, for insta ce, with one 4nA of it i v / 0 dlls 3433 a la to extenci at 3uch times as your extreme demand ca; e ~ — lir. Wells: I want to oall attention to ths condition which I spoke of a moment ago, which ia frequently done in the ) eavy movement of crops, and that is that we not can get money very rea illy from the movement of this lower country, fast enough to take care of the demands up here in the north. The Secretary of Agriculture: Ur. "ells: - do. e But do you? And if you will let me refer to a personal transaction of our own hank, in 1912 the hank deposits in the bank which I represent, struck the low ebb j on August 18th, going down to C-2,200,0C0« By the 23rd day of September, ?hich was about 33 days later, our bank deposits fromcountry banks were ,3 0 0 ,0 0 0 , or $ 3 ,1 0 0 ,0 0 0 increase, or at the rata of $100,000 daily, shov/ing the I I uidating power when the cotton begins to move. The Secretary of Agriculture: Is it not a fact that out side of the ban>: operations, there are large interests In this state that have to go to outside territory to get financed? j*. larger veils: I tiiink they w il l , if you put the bank in a territory, even. I think they il l have to do that, 0 0 . Welle 3439 I f jou oou^d oreate a district and get far enough away from our O .- district in the other direction, where the diversity T n would be unquestioned, then I would say if we could have those two elements brought together at one point, we could work to better advantage by using the surplus money in that section rchile ours is busy, but the extent to which you could do it by creating a geographical division here is negligible. The Seoretary of the Treasury: But theonly question is whether you can approximate it . Mr. ; el l a : It is desirable to the extent to which you can reach i t , but we do not believe you can reaoh it by oarving out any larger territory than we can take care of ourselves, because we can take care of it ourselves, being a smaller seotion, by being a smaller district and not so unwieldly. The Seoretary of Agriculture: That would not necessarily follow. L . Wells: Ho it does not necessarily follow. The Seoretary of Agriculture: The Seoretary of tho Treasury: That is simply an assumption. Y*hat would be your preference if you did not have a reserve ban1 in Texas, I a headquarters, what would be your choice outside of JlEW 0. ttella 3440 Texas, as the oity to whioh you should be attached. H r, ells : I b e lie v e the first choice of the Houston bankers, outside of Texas, of course, relying upon the logical location we would go to , realizing that we cannot skip a territory to go beyond, would be S t. Louis. The Secretary of tho Treasury: In other words, the normal and natural trend of business is more to St. Louis from this section? Mr. e lls : Of course, the bulk is towards Hew York. Our exchange is sold in the east. The Seoretary of the Treasury: But you are going to have a different situation under this system. lir. flells: That is the reason wo say a Regional Bank in Houston would bo a good thing, because it will have an importation and exportation trade out of the business from these ports. The Seoretary of Agriculture: What would be your a t t it u d e towards New Orleans ? Ur. se lls: 7ie can hardly r e c o n c ile ourselves to g o in g to Bew Orleans, for the reason it represents a weaker territory than we do, and we would have the balanoe of banking power of any district you might carve out. jmw 0 . rellB The Secretary of the Treasury: 3441 Your argumant as to foreign exchange would mate Hew York more logical? Ur W ells: That is true for the present, bat I am talking of the development of the ports, which are being developed. The Secretary of the Treasury: Of coarse, the question of Hew York exchange will beoome less important after this system is established, but at the same time it does not alter the fuialamantal fact that the greatest strength you oan give through natural and eoonomio causes to each one of these districts is desirable. Mr. W ells: That is true. The Secretary of tho Treaaury: To what extent do you carry reservos now in New York? U r. \ells : About 50 per cent, I should say. The Secretary of the Treasury: Where do you carry the remainder? U r. W ells: 25 per cent in Chicago, 25 per cent in St. L o uis, these b^ing the three central reserve c it ie s , and our city being a reserve city. The Secretary of the Treasury: To what extent were Houston banks compelled to re— discount last fa ll? Mr. W ells: Telit our statement made in January showed 0 . T?ell8 a 3442 about a million and half 3till carried in January# know how indicative that is . I do not I should say twice as muoh as that anyway# taking our ossn bank as an indication. The Seoretary of the Treasury; Does that represent the extreme of the discounting that ?»as done or — H r. e lls : Unquestionably we borrowed more money last fa ll than ever before. The Seoretary of the Treasury: I mean to say do you frequently re-disoount through indirect means? Ur. a lia : I cannot say as to that, because I am not familiar with the other banka. The Seoretary of the Treasury; e publish our a. That I mean is th is, frequently the banka resort to indireot methods of re discounting — Mr, e lls : I say e do not. r e borrow money and advertise It as b ills payable. Tho Seoretary of the Treasury: You put it in your statement H r. Fells i: I assume some of that is done. I think that is true in all seotions of the state The Secretary of the &Traasury: ’ hen you get down to your reserves, do you then simply stop lending money or ---- ^ ..in. m,.< „ - Je w 0 . Felle g 3443 do you re-disoount? I L*ir. a lls : ©11, iir. Seorotary, t.o Aid not stop laat summer, because we thought the normal movement of the ootton crop Y *o d soon give ua r e lie f, and we borrowed vory liber » u ally and freely to take care of that movement, and all mer cantile interests too, but we were not able to take care of all the demands* I thin] v.e took care of every reasonable demand, based upon the value of the aooount carried with us, and vre did not stop making suoh loans except those that we ! felt had no right to apply to us under those conditions, and perhaps some of them v;e vrould not have made under normal conditions. The Secretary of the Treasury: But so far as legitimate business demands are concerned, have you any idea how far each year they are seriously hampered bj lack of funds required at the extreme period. Ur. W ells: any time. 1 do not think it is seriously hampered at You understand that the network of the commercial activity of this country is built around the movement of that one dominant crop of ootton. The country merchant borro* 8 a little more money until the irrop is harvested, http://fraser.stlouisfed.org/ the of Federal Reserve Bank of St. Louis country bankers, and the merchant borrows more in ! f' **«,. i L **... S JlCW G 0 . ’"ells 3444 the reserve oity, waiting for payment, and it all goes up a l it t l e bit higher until we get relief from the movement of that or op. That is the condition with which we have to oontend, and I believe in normal conditions that the leg iti mate demands made upon a bank by its customers, and especially for the orop movement • are take^oare of by a free use of the re-discount privileges of the reserve city bank, because they realize that it comes back readily and ordinarily the loans created in Houston are paid before the first day of October. The Secretary of the Treasury: What is your opinion as to the number of banl*3 which ought to be established at the beginning? Mr. ells: As a banker my views would be for the minimum number, bat when it comes to distributing the number over the country, it seems to me li):e the best service tould be to increase that minimum perhaps to nine or ten. The Secretary of the Treasury: Have you prepared this *** i district with relation tp the division of the country? Mr. W ells: re l»ve not, only in a general way. The Secretary of the Treasury: Do you think it is very important in the laying out of any district that is a 0 . Tells 5445 should have an absolute relation to the rest of the country? I&r. e lls : Y es, I do not think there is any question, from your point of view, but I mean to say I have not taken any specific point in the southeastern country, but the only district — The Seoretary of the Treasury: That other districts i did you have in mind when this district was laid out? Sow would the rest of the oountry be apportioned? St. Wells: In the southeast country I *ould say Atlanta or Birmingham, to serve that portion of the country east of us, and to the coast, and north of that would be Hiohmond. The Seoretary of the Treasury: Would you not put Hew Orlear^s with Atlanta? Mr. W ells: Ho. I «ould put Eew Orleans with us. The Seoretary of the Treasury: tst' i You have not got it with you her a. Mr. T?ells I suggested that to you modestly. Th j Seoretary of the Treasury: Yeay you said it would not be objectionable. Mr. " e l l s : It would not be objectionable. The Seoretary of the Treasury,,: But i f it was not put here, where would you put i t , with Atlanta? _________________________________ i jew G 3446 0 . ITel IB ~:r. ” 6118: I f it did not go to aa, and in your judgement it should go the other way, making the Mississippi Biver the dividing point. The Secretary of the Treasury: Hr. ells: That is a l l . There are two or three things in the book, showing the total remittances and the currency operations Which I t h in , are indicative of the banking operations in Houston, and I should like to call your attention to them, although I do not want to take up your time. The Seorotary of the Treasury: Yes, it may be file d . (The book vaafiled accordingly.) LIr. W ells: How we have a number of witnesses, for instance, Mr. Cleveland is here as a ootton factor to substantiate the things which have been said. STiffESSSf 0 r A.S.0L3VXLAED. 2 The Secretary of the Treasury: You may state your name and residence and occupation. II Mr. Cleveland: A.r.Cleveland, of Cleveland & Sons, Houston. The Secretary of the Treasury: Mr. Cleveland: ^hat is your business? Wholesale grower and ootton factor. Je w A. 3. Cleveland. William 3447 G. Cleveland & Sons. The Secretary of the Treasury: You have some data you want to submit ? Mr. Cleveland: ^ Only in confirmation of the facts about Houston, I~r. Seoretary. Xy firm is engaged in one depart ment as oottcn factors. e receive cotton on consignment from every cotton raising county in Texas. That cotton is shlppe i to Houston to be sold there; sometimes to be held and sold later* an- sometimes to be sold on arrival. Tie advance against those shipments, perhaps on 75 per cent of our shipments ;o maize a vanoes against i t . The man owning the cotton wants his money ahead of the sale. 25 per oent is shipped us on open bills of lading, either for sale or for holding. The Seoretary of the Treasury: uhat is the percentage of the crop, would you say , which ie held in warehouses? * ^4r. Cleveland: It is right hard for me to answer that question, but this w ill give you an idea. Ve have received practically 100,000 bales of cotton this season, and we are The Seoretary of the Treasury: About 20 per cont? v! ,r v holding 20,000 bales. I 3 Cleveland T ’r. Cleveland: Yes* The Secretary of the Treasury: Kr. Cleveland: 5448 How is that financed? As respects ourselves? The Secretary of the Treasury: Yes, how do you finsnce that? r . Cleveland: Tie buy no cotton ourselves.. iT advance e on the cotton end sell it to exporters, to cotton buyers. 'e bcrrow coney from our Houston banks until they cannot lend us any more, and then we borrow elsewhere. The Secretary of the Treaaury: ’That percentage of your requirements are usunlly Ket by the Houston banks? T!r* Cleveland: In nonrel seasons we can and do meet all our requires ants at home. The Secretary o f the Treasury: Hr. Cleveland: You get thee: at hone? Under normal conditions. TheSecretary of the Treasury: But last f a l l , for instfnee, to what extent did you h^ve to go outaide? Tr. Clevrlpnd: For about h P lf. The Secretary of Agriculture: Do you have to go outside every year at poms period*: '*r. Cleveland: Uo, v r. Secretary, we oo not. But I should say we would go out of town 50 per cent of the year A. 3. Cleveland* for money. 3449 e do It oftentimes because v;e can and because we think that the banker induces us to do it occasionally, and if w# can get money on the outside generally we %J»ulu. do i t . The Secretary of Agriculture: You are speaking as a business nan? Mr. Clevelands Yea. The Secretary of Agriculture: Is it your judgment that the uiatrict woul I be better served with this district as propoaad or with a larger diatriot? Mr. Cleveland: answorthat I - not l:nov that I am competent to o uestion, Mr. Secretary: I would be disposed to aay that thia district is proper* The Seeret&ry of the Treaeury: That would be largely on aocount of the 1 cal feeling abojrt the problem, or would you be detormlnad in that by the economic conditions which should be covered. Mr. Cleveland: I think I am persuaded on that poosibly by the first influence. The Secretary of the Treasury: It is rather d ifficu lt to get away from that in the oon8lderation of problems of A this character. 3 Cleveland. 3450 There < you sell most of your foreign lc b i l l s , to the local banks or to Hew York? T'r. Cleveland: with that, We sell none at a l l . We are not concerned "’he man who buys from us* has th*t to do. The 3eeretary of the Treasury: I thought you made some direct sales. J r . Cleveland: Bo, none at e l l . The Secretary of Agriculture: Have you r>ny data you would like to flic? Mr. Cleveland: Bo. r. Valin: *11 o f our data Is in those books. T r. T?vnns Is a cotton exported, and he w ill not take up very much time. JT A T 'T P U T OF J . W. 75VAIS. The secretary of the Treasury: State your name, residence 'and occupation? Mr. Evans: J . 7* Evans, Vvens & Company, cotton e porters, Houston. Tho Secretary of the Treasury: What facts do you desire to submit in addition to those contained in this book? K r . Frans: well, I had very little to say except to con- h J* W* Svans 3451 firm that which ha* been already said, and to call your attention particularly to the fact that Houston actually and physically handlee more cotton than any torn in the United States# Now these gentlemen here today hare spoken glowingly of the amount of cotton which Is financed from different points* Houston actually handled 900,000 bales, that is, there Is that muoh brought in there, classed, wei^ied and shipped in even running lots to foreign countries* The Secretary of the Treasury: Have you figures on Dallas and Fort Worth? Mr* Brans: So, I ran only sajr what the actual receipts of cotton in those two towns averaged something around 100,000 bales each, in other words about one to nine as compared with Houston* Now the second largest town in the United States from a ootton standpoint is Memphis* They handle on an arerage each year about h a lf a million bales* Of course, this does not include the cotton which is financed In Houston and shipped through froa the country, possibly amount ing to half a million bales more, or in round figures, in a normal year, probably # 9 0,0 00,0 00 of foreign exchange* v? h J* E* Kvans 3452 The Secretary o f the Treasury: Ho* is that financed? Mr* St ana: Largely through Houston banks* I shoul i aay f to giro you some idea of how that is handled under normal conditions, we frequently hare a stock there after Christ mas of 1 5 0 t000 bales, which you may ssgr is worth from $ 9 ,0 0 0 ,0 0 0 to $ 1 0 ,0 0 0 ,0 0 0 and I venture to say under normal conditions there will not be more than $300,000 or $400,000 borrowed aovay from Houston on that cotton* The Secretary of the Treasury: The HoustoJ banks can take care of it? Mr* Brans: Yes, they do* That foreign exchange is usually sold Either to Mew York, Philadelphia or Chicago, and sometimes hew Orleans* The Secretary of the Treasury: Do you sell much of it to Hew Orleans? Mr. Svans: io , I should say from 5 to 10 per cent of the whole* Mew York and Philadelphia get most of it* The Secretary of Agriculture: Is there any other point you wish to bring out? Mr* Evans: Mo, I do not believe there is anything more* h J* 2* Me Aah an STATEMENT OP J . E. Me ASH Ah * Th# Secretary of tho Treasury: u n i| Mr• 3453 Will you state your full residence and occupation? 'cAshan: J* 8* WcAahan, Vice Pro si dint and Caahi ar of ths Southwestern Commercial Bank of Houston# The Secretary of the Treasury: Are there any facta in addition to the facts contained in this volume that you wish to present? Mr* MsAshan: I to not know aa there is anything new which I could say* I think the statistics are all well compiled* But I do wish to say perhaps a little further than that, that as this is a new system of finance, we are very anxious for Tsxas to be represented in i t y and Texas will no loubt furnish the greatest bankingpower of any other unit of any district that it may be placed in, th<*r afore we Reserve Bank to be plaoed in this state* wiah the As you knowy we have formed s group of states, parts of some states and all of some states* You will see the map in that book* The natural tendsnoy of the commerce in those states is towards the gulf ports, and our wiah is for the banking business and exchange to follow the natural tendency of the shipments. J* 3* Me A ah an s 3454 an d for that reason ws are asking th# consideration of Houston* Now th# Houston banka are very large lenders of money, ▼#ry large, and I think they hold more reaerye money for interior banka than the banka of any other tvo cities in the state, which shows the natural tendency of reserves in that direction* Ths Secretary of ths Treasury: Your inducements in that respect are not superior to any other Texas city, are they? Mr* McAahan: Not that I know o f. Is pay the same rate of interest that the others purport to pay} we pay 2 per cent* And so far as giving par fa cilities areconcerned, the bdnk with which 1 am connected does nothing that any other bank in any of the reserve cities in the state would notdo* Ths Secretary of the Treasury: I f you did not have a bank in Texas, I mean if the headquarters bank was not in Texas, where would you prefer to have it for thia region? Mr* lfcAshan: fbr this region I think our prsferencs would be St* Louis or possibly Kansas city , but I think largely St* Louis* The tendency of trade in this section is north and south, and for that reason the southern tendency of h J. 2* Me A shan 3455 trad# would bring a groat portion of this diatriet to Houa Tho Soorotajry of tho Troaaury: In view of tha fact that thia la largely a borrowing territory, as has boon testified to by numerous witnesses, vould you or not, now dismissing all looal consideration, and looking to tha strength of the ayatem itse lf and the greateat facility for thia section of the country, say that it would be better to hare a larger and stronger district# Mr* Me Ash an: I think it would be better — now you are asking my opinion an d nothiagmore? The Secretary of the Treasury: Yes, we want your opinion* Mr* MoAahan: My opinion ia thia, I would rath sr sea a bank eatablidied with Toxaa wholly as a district than to put it in any other ayatem; that ia my peraonal preference* I do not know that mX all of us coincide with those views, but here is the point; The time that we are cloaeat run for money is in the early aummer. It ia a little later than that in Korth Toxaa, but in South Toxaa we aro closest pressed for money between the first of July and the first of August* Last summer money was very close with us,although we used the borrowing privilege institution very slightly in our own and hardly ever uae it at a ll; but on the fir st J . E • McAahan 3456 of August we were very mxious to get soma of the government money that was going to ba placed in tha southern banks* While it didnot come quits as soon as we anticipated it would, when the time arrived for placing it , I do not M l i e v e any of it went to Houston* I do not think* Vs did not taka any of i t . We were relieved by the first of September* The Secretary of the Treasury: It was saved for you, but you did not take it? Mr* McAahan: Yes, we did not need i t , in other words* On the first of September the natural condition of business had eased us up* Ths Secretary of the Treasury: But in the meantime to what extant was legitimate business compelled to suffer from lack of accomodation? Mr* MeAiam: Not much* Ths Secretary of the Treasury: Mr* MeAdam: Mo, sir, not much lot much? not any more, I Should say, that it did in any other city of equal consequence in the country* The Secretary of the Treasury: Y es, but is it not desir able to eliminate all legitimate buaineas suffering of that h J . E* MeAshan 3457 kind? Mr* wcAshan: Of course, as a human 1tarlum principle, it ie very dssirable to eliminate all suffering. TheSeeretary of the Treasury: tfo, but as a good business it principle in business, is/not vise not to compel unneces sary commercial suffering or losses, i f it ean be done? Mr • MeAshan: Surely* The Secretary of the Treasury: la that aspect of the case, and looking at it from an economic standpoint, would it not be desirable to organize a district which would be selfcontained and able to meet the diman is at all seasonf of the year? lir* MeAshan: Yes* But as I understand it , there would be a power placedsomewhere which would control the eirculation and the issuing of notes of Federal Reserve Banks, and will also control the shifting of balances, the seasonal chifting of balances* The Secretary of the Treasury: But that does not mean that we ought to diliberately create unnecessarily units, weak dies it? Mr* MeAshan: But, Mr* Secretary, any one who has been engaged in the banking business knows very well that it is h J. 5* Me Ashen 3458 often good policy to re-discount in order that when the ease comae and the easy time comes, you may hare a full &ine of loans outstanding; that i,a that you should not hare a large surplus of money on hand* The Secretary of the Treasury: Exactly, but ifyou hewe not the ability here to re-discount, then you cannot take care of the demand* Now the purpose of this Act is to create as strong units as possible, so that that re-discount ing privilege may always be available* Mr* MoAahan: Yes, I say that would be an ideal condition* Mow as to commercial paper, I do not know that we have touched on that* Ve have commercial paper offered to us from all sections of Texas, and of course a great deal of the best paper that is offered to us, and the most satisfactory paper in every wayji paper that liquidates itself by the sale of the things that secure i t , is cattle paper* Ye handle a large line of eat tie paper In our city, the banks in our city. The Secretary of the Treasury: You have heard the ques tions that weaddressed to the Clearing Rouses oft Dallas and fort worth? Mr* Ms Ash an: Y e s ,s i r , I heard it , but I would lik e to h J* 2. McAahan 3459 hear it over again* The Secretary of the Treasury: I will ask the reporter to give copies which will be presented to Mr Wells as Chairman, and we should like to haye your clearing House present your views as soon as possible, say by ths first of March* Mr* McAshan: On what point is that? The Secretary of the Treasury: On the definition of commercial paper, and also on the matter of exchanges between the Pederai Reserve Banks and their branches, and the matter of exercising clearing house privileges, and functions* Mr* McAshan: I presume all those matters will be answered to their own satisfaction by the Federal Reserve Board when they come to them* Ths Secretary of the Treasury: But wears getting the views of commercial bodies and clearing house associations for ths purpose of enabling the Federal Reserve Board to consider then* Mr* McAshan: Vow in rsference to the shipment of commodi ties, it is mentioned in this little book of ours that the distances from ths great grain fields of the west to h J* 3* VoAahan 3460 Calve* ton and Houston are much shorter than they are to any other Gulf ports, and that inevitably has a tendency to bring them along tha lin js of least resistance* The Secretary of the Treasury: Do you do much grain business in Houston? Mr. MeAshan: Y es, a great deal of it , both of importing and exporting. We handle *eme very large grain interests* But I do not think we handle anythinglika the figures which weregiven for Port Worth this afternoon. Still it is a very important item. This is an undeveloped state, and practically all the wealth of the country is now cosing out of the south and westa that is , that comes out of the ground, except coal perhaps, and we would like to be in on this new deal. ■ The Secretary of the Treasury: Well, there is no way to keep you out, you are bound to get in . Mr* MeAshan: You might keep us out so far as a Reserve * Bank is concerned* The Secretary of the Treasury: You are bound to get ths benefits of this system* Mr* MeAshan: Y es, that is so* h J* E . VcAshan The Secretary of the Treaeury: 3161 And we are very eager that you should have it to the very fullest possible extent* Mr. McAahan: Thank you very much. STATEMENT OP LYKSf TAIU3Y: The Secretary of the Treasury: Will you give us your nans, residence and occupation? V r . Talley: I<ynn Talley, Cashier First National Bank, Houston. The Secretary of ths Treasury: Give us any new light you are able to on this question. Mr. Talley: I have been more personally interested in the stuty of the Federal Reserve Act from the standpoint of open market operations. It is not our desire nor would it be ay desire, to place a tax on the commerce of this section by advocating such a small district that would not adequately take care of the commerce within the lines of that district, but I realize if such a tax were placed on that commerce by an increasing interest r ate, that the increased interest rate in itself is bound to cause a flow of money into this district to eeek investment from districts h ig h rate is not obtainable* where such a fh Lynn Talloy 3462 Tho foreign axchange operationo alono would furnish a Federal Reserve bank located in Texas with an excellent opportunity for business. I might say hero that if a Regional bank is placed in Texas, from tho standpoint of tho bankerst wo aro interested in seeing it have an all the year round business, because we want to see it earn money, as we have our money invested in it , and as our discount rate would inorease, as our credit would expand, we would be bound to increase those foreign exchange operations, because gold will follow the lines of the best earningpower* It must be remembered that the district that we have outlined in the data we have la id before you is about 1000 miles square, that is 1000 miles from the extreme southern portion to the extreme northern portion, and also east and west it is safe to say it is about 1000 miles • We are bound to have within that district a sufficient sequence of climatic conditions to create a reasonable diversification* I know that, taking last year as an example, by reaaon of the excessive rainfall which set in during our harvesting season, that the City of Houston, by reason of its southern location and by reason of the number of banks scattered h 3463 Lynn Talley ovor a wile area doingbusiness with it , increased its cash holdings very considerably between the 26th of July and the 15th day of September, by no other reason or from no other cause than the fact that our cotton crop begins to move and begins to be converted into money at least 30 days before even that section which we tarm northern Texas, without going outside of the state, and Oklahoma is a lit t le bit later. Our highest point with reference to our loans to country banks is reached during the month of July and the first part of August, and as those loans begin to decline our loans on cotton increase, as you w ill notice from the tables as laid down in that chart there* The Secretary of the Treasury: Now, }&r.Talley, on the question of the strength of ths district itself, looking at the economic foundation and organization of these banks and dismissing local considerations, as we must view this from the economic standpoint, because you gentlemen yourselves are going to get the maximum benefit if we get a sound district laid out — Mr* Talley: We appreciate that. The Secretary of the Treasury: Aid we are more eager perhaps than you are yourselves, because we have no loca 1 I h Iornn Talley 3464 oonsiderations to control or influence ua, — now with that in view, is it your Judgment as a banker that it is better to lay out a district which is a borrowing district than to lay out a district which would be self-sustained and able to take care of itself, if it can be done* Mr* Talley: I rather take issue with some of the testimony that has been given here, that we are altogether a borrowing district, and I think I can have the statement confirmed, that there are times in the year, I should say from the middle of October until the latter part of March, that ws are large buyers of commercial paper in this state* The Secretary of the Treasury: Yes, but at other points of the year you are large borrowers, are you not? Mr* Talley: Y e s ,s ir , that is very true* The Secretary of the Treasury: i*ow, assuming that a dis trict could be la id out which would, except in cases of emergency or extreme need b# self-contained# would it or not be better to have that sort of adistrict than one which is at times a lending district and at other times a very large borrowing district* Mr. Talley: y s s ,s ir * Ws would prefer a district of that character* h Lynn Tallay Tha Secretary of the Treaaury: 3465 Aa a matter of economic soundness, the 8eIf-contained district would be bettery would it not? Mr .Talley: I have never la id any special importance on the expediency of the Federal Heserre Bank requiring or permitting one Federal Reaerve Bank to discount for another, becauee I do not think that that is of any expediency* The Secretary of the Treasury: vision, It is an emergency pro in any avent? Mr. Talley: Yes* I take it as such* But there has been testimony given already that that was the intent of the lew, for one regional bank to furnish another with money, and I do not take it that way. The Secretary of Agriculture: Is it your judgment that we should start out with eight or more banks? Mr* Talley: My Judgment as a banker would be that you should start out with the minimum number, simply from the standpoint of any business man who is starting a new business, he would naturally prefer to load that business with as little machinery and expense as possible when he starts out* The Secretary of the Treasury: You would rather start out \ h lynn Talley 5466 with wight of tha strongest possible units for ths success of the system? Mr. Talley: Yea, eight or nine or ten. I <o not see j f how the country can be adequately served with as few as sight banka. There is this large section up hare — The Secretary of the Treasury: the Reserve Act, You say you hays studied and in view of ths provisions for branches, which is made mandatory upon the reasrre banks district, of each do you not think this district will be well served of a headquarters bank were put up even in St .Louis, with branches in these large centres? Vr. Talley: No, sir, I do not, Just simply by what the name branch Implies. I think it would be far better to place the branches in remote districts like away out in the western part of Texas and Sew Mexico and around up in this territory in Colorado and such territory as that. I think every central reserve city and every reserve city should be directly a ffilia te d with the parent bank. The Secretary of the Treasury: Well, they wouldbe a ffilia t e d with the parent bank through a branch. You know the provision of the Act, do you not? Vr . Talley: Y e s ,s i r , I under stand what you mean. & Iynn Talley Th* Sacratary of tha Treasury: 346? Bach branch bank is officered vith seven directors possessing the same qualifi cations as the directors for the Federal Reserve Bank itself? Mr* Talley: Yss* Ths Sssrstary of tha Treasury: And the purpose of giving a looal Board of each branch bank is to bring the management of that bank as close to the community as possible. Vt» Talley: But then if the district which we have mapped a out is not/self-contained district, it could not rely very much on a branch, because it would not have tha authority — The Secretary of Agriculture: But the secretary is not asking that — yr. Talley: I unierstand what he means. But we would not havs as $uch immediate relief as if we had direct trans actions with the parent banks. The Secretary of the Treasury: Suppose this district you havs suggested is l a id out, with the headquarters bank at Dallas, for instance, do you mean un 3»r the circumstances Houston would prefer not to have a branch governed by her local people? V r. Talley: I would not hardly see the neeessity of one h Lynn Tallay 3468 at Houston with tha Regional Bank at D allas. Tha Secretary of the Treasury: 3ippose on the other hand that Hew Orleans were incorporated into this district as •uggested, would you say that New Orleans had better not hare a branch because it did not have the headquarters bank, if it were located at Dallas or Houston? Mr. Talley: Perhaps I do not altogether gather the import of branch banks, but I do not think that any reserve city would be depending primarily on the branch banks* The Secretary of the Treasury: But hero you have three reserve cities in Texas, Mr* Talley: fbur in fact* Yes* The Secretary of the Treasury: Within a comparatively short distance of each other* Mr* Talley: Well, we have six. The Secretary of tha Treasury: Y es, Galveston and San Antonio, I was overlooking than* Mr* Talley: Yee* The Secretary of the Treasury: Kow each one of them could not have a regional Reserve Bank* ICr* Talley: I am not contending for that. You brought up the subject of branch banks, an 1 my idea is that they Lynn Talley h 3469 should serve tha remote district® and not undertake to primarily serve a city Ilka Dallas or Houston* What I maan by that Is , it would ba preferrable* you understand, to have tho transactions of all reserve cities go directly to tha parent bank wherever it rasy ba located. The Secretary of the Treasury: But suppose you had the headquarters bank at Houstoh, would you say then that San Antonio would be better served without a branch than with it? Mr. Talley: Well, I should think so, y e s ,s ir . I under stand the local organization of tie branch bank too, you under stand.. The Secretary of the Treasury: Wiat would be your choice for a city outside of Texas related to this district, for the reserve bank, what wouldbe your first choice outside of Texas? Hr* Talley: Well, it is rather Hobson’ s choice; th*are is only 3t*Louis that eould,possibly serve* But not by reason of our trend of business being towards St*Louis at the present time; we only use them as a convenience to clear items through* The Secretary of Agriculture: Why of necessity would it be ot .Louis? Would not Kansas City serve? h Lynn Talley Mr* Tallay: 3470 It would be st* Louis, because if the Regional Bank would be plaoed in St# Louia* it would be a very large district and would require all th© capital obtain able* One objection I have to the large district is that I think i t would promote the expansion of credit beyond the reasonable bounds* There is that danger* The Secretary of the Treasury: Why so? The Secretary of Agriculture: Why would it? Mr* Talley: Simply because more people would be pulling on it and more demands made upon it* The Secretary of Agriculture: Your individual banks are going to deal directly with the business as before* Mr* Talley: 0 h t yes, but then if you have a larger bank, then they think it has mo re ability to re- discount* The Secretary of the Treasury: Is that all the fear, that because the larger bank would be a larger bank and would have more business, that there would be more demand upon it* Mr* Talley: Jfo, I mean it would be more frequently beset to grant credit* The Secretary of the Treasury: Ofcourse, its credit would be extended only to member banks* M r, T a lle y : Y e s , I understand that* ............................................ .. B. A. Peden. STATEMENT 0? 3471 B. A . PEDSfc. Th# Secretary of the Treasury: You may state your name, residence and occupation. Mr. Peden: E. A. Peden, President of the Peden Iron & Steel Company, Houston. IfM liVfflllB T rTTT ^ h E . A.Pe lan The Sacratary of the Treasury: 3472 Hays yon any facts in addition to those s tat ad hare which you wish to submit to tha committee? Mr* Peden: Mr* Secretary, I wanted to attempt if possible to stress this feature of the case, that Houston is the great gateway through which a most gigantic tonnagecomes from the seaboard of this country as wall as from abroad* The Secretary of the Treasury: Kaye we not got that fairly well oovered hare already in these figures? Mr* Peden: You may haye* Mr* V e ils: Ve thought as a jobber he could elaborate the advantages of an inboun d frei^it rata, on account of Houston beinglocated on a waterway* The Secretary of the Treasury: All ri^at, proceed, Mr* Pe den * Mr* Peden: There was a feature of the case which I thought might be worthy of your attention, an d I jotted down a few leading commodities that wa handle* My testimony is perhaps from a different angle from most of these gentlemen, because tha products I han lie are largely manufactured outside of tha state and brought in for developing our resources here, and a large bulk of thor. originate in the h E* A* Peden Pittsburg territory. 3473 Steot stool, for instance® enjoys a rato to Houston of 37-l/2 cants as compared with 63 eants to other jobbing points in tha state, giving us an initial advantage of 25-i / 2 cents. On wirenails we have a rate of 37-l/2 cents against Texas common points of 56 cents, giving us an in it ia l advantage of lS-l/2 cents. The Secretary of the Treasury: Is that the rail rate or water ratef Mr. Pedan: The water rate into Houston and tha rail rate to common points. The combination of the two, where the railroads meet tha water rate, which they frequently do. Wrought iron pipe, 57 cents to common points and 37-l/2 cents to Houston, or 19-l/2 cents in our rsrv&r* Loaded shells from Hew York City, 35 cents to Toxas common points and 56 cents to Houston, giving us an in itial advant^e of 29 cents. The Secretary of tha Treasury: ftow this question always arises with reference to thase statistics: To what extent are they a factor in making Houston, for instance, a superior point over Dallas or Port Worth for the location of the reserve bank of this territory you have outlinedhero. Sow h E* A . Peden 3474 that is th© kind of information we like to have* Why 3d they aake it better to have the bank in Houston because of that fact than to have itat Dallas or Port Worth? Mr* Peden: My theory was because of the immense amount of money that necessarily flows there in settlement for those commodities* The Secretary of the Treasury: But those relations and transactions a r e with the banks just as now, after th e Reserve Bank is established* The Secretary of Agriculture: Does Houston distribute to as many people in the state as Dallas, fbr instance? Mr* Peden: In these lines9 a great deal more* The Secretary of Agriculture: Mr* Peden: And to a larger population? Yes, bccause of the fact that our freight ratesare so arranged that we reach a maximum at about 245 miles fir st class, and a little nearer on the cheaper classes, and whan we go beyond that we have a blanket rate, say on fourth class, of 58 cents per 100 pounds to all points* The Secretary of the Treasury: You un cferstand, of course, after this system is established there w ill not be any h E . A* Pa don 3475 alteration of your relations with your bank. This Ressrvs Bank hide tha rsserves of all tha other banks in ths dis tric t and it is thers for ths purpose of re-discount ing whan nacessary for msmber banks# so that these facts do not hare any direct bearing upon the location of tha Kessrve bank. Mr. Psden: Of course, i f they sea Irrelevant I will not attempt to proceed further. But I presumed that the volume of business brought to a certain point Vy these advantages would havs its weight, either directly or inilrectly, and I was notbanker enough to know just how you would look at it* The Secretary of the Treasury: I f you have suznarissd thosefacts, we w uld be glad to hare them in the record. Mr. Peden: I will promise to be a short horse soon curried* I have not much more to say. But in recognition of Houston's f a c i l it ie s , as I havs attempted to suggest, I want to read you a few names of some of our very large corporations through the country who have raeognized it as such, and the establishment of whose business there is going to mean more and more volume for that territory, and naturally more and more money to pass through our banks. E* A * Peden h 3476 For example, the American Steel & Wire Association; the Texas Carnegie Steel Corporation; Company; the Pittsburg Steel the warehouse of Crane company; the Western Electric; the Southwestern General Electric; the Wcstingiouse Electric; all these have recently established large branches there* The O il Well Supply company, the Continental Supply Company, the Republic Supply Company, the Rational Supply Com pany* I refer to these because they all handle products which go to the development of our natural resources, and thqy are brought to the ultimate consumer cheaper through our gateway than any other* These four comraoditiesl mentioned awhile ago might be multiplied into the hundreds, with the corresponding advan tage in favor of the tonnage being handled that way* What I have said so far is with reference to the inbound and a similar array of figures could be brought in herewith reference to the outbound gtrafflc* In ftirther recognition of this location, one of our railroads alone spent there year before last $ 6 ,8 1 2 ,0 0 0 , *4 ,0 0 0 ,0 0 0 of which went out in pay envelopes* The Secretary of the Treasury: Thank you, Mr* Peden* h L# Davidson 3477 STATED3$T OF L . DAVIDSON: Th# Secretary of Agriculture: Will you state your name, residence and occupation* Vr. Davidson: L . Davidson, Continental Lumber Company, Houston, Texas. Ths Sacratary of Agriculture: lhat can you say that will throw any lig i t upon this, that has not already h a m pre sented? & r . Davidson: I can tell you vary little, Mr* Houston. Ths Secretary of Agriculture: We know alout tha lumber business and forests there* Mr. David© n: I just want to make onr or two remarks hare, and I cannot add vary much to tiiat is in the book there. Houston receives from all over the United States and part of Canada and Mexico and Europe annually about *1 6 ,0 0 0 ,0 0 0 from the shipment of lumber, which goes into her banks in the form of exchange iWr checks from all these sundry points,, and I think from that standpoint a Regional Bank in Houston would be of great assistance in clearing those items and that exchange, which is abig item with us in the lumber business at the present time. All the othur facts you have h L . Davidson 3478 in refscenee to lumber in this pamphlet# We havs seven lumber producing railroads leading into Houston, of which Houston forms ths hub* Ths Sscretary ofAgriculture: Are your lumber operations the year round? Mr* Davidson: Y e s,a ir, we operate the year roun <* The 3 season is mild, and we can operate practically the year round* That is about all I can add to what has been said* STATEMENT OP A* 3* OACE: The Secretary of A p ic u ltu re : Will you state your name and occupation.* Mr* Oage: A* S* Cage; I am in the rice business* The Secretary of Agriculture: Have you anything to add to what is in this book? k'r. Oage: Gentlemen, the only thing I have to add is that the rice business is in its infancy entirely, comparison with the p o ssibilities, a id I s that is by db not think that the time is far distant when we will be exporting rice very largely from this country; and Houston is the geographical centre of the rice belt, besides being the port through which the heaviest shipments would have to be financed* I A* S* Cage h 3479 Beyond that, I do not know that I have anything that I can add« Tha Secretary of Agriculture: That looks rathr to tha future, you think? Mr. Cage: Y e a ,s ir , that is in addition to the preaent* Mr* lella : Unless you care to have ua develop that queation offarorable fre i^it rates, showing the diacussione of tha merchandise from h are, we will not call on the freight rate men* Tha Secretary of the Treaaury: Submit it in the for® of a statement. Mr* Walls: It ia in the book, unleaa you want it elabor* a tod* Tha Secretary of the Treaaury: It iannot necessary. The Seeretary of Agriculture: We would like to hear flroa aome of theae other gentloisen* Mr* Delia: I wouldlike to call on Mr* Hogg* STATEMENT OP WILL C. HOGG: Tha Secretary of the Treaaury: Will you atata your name, reaidenca and occupation, Mr* Hogg* Mr Hogg: W ill C* Hogg, Houaton, Texaa* W* C • Hogg Tho Secretary of Agriculture: 3480 Will you give us some light on this problem? Mr. Hogg: Simply as a student, Mr* Secretary, whan I first b a g m to look into Texas* claims possible for a bank eentre to bo located somewhere in Texas, without going into the matter, I thought that it would ba impracticable for Taxaa to gat a bank at all unlass it was attached to St* Louis; that i s , going on the assumption that there woul&ot ba o?«* eight of those banks established in the beginning, leaving the further re-die trie ting to future development* At least that was tha intimation I got from a good many questions that I saw asked} particularly by Secretary McAdoo in soma of the hearings* I inferred that that was about thabasis on which h i s mind and maybe yours had operated* But th m lookinginto it from the standpoint of studying impartially between thealaims of any contestants in the strifa for that bank here in the state, it occurred to me that whan you get back to Washington you could not ignore the basis of production and trend of commercial coram ditties o in this souths*oat country. In other words, i f you are going to undertake to stress the one particular factor you announced whan you started# then you are going to have to W. C* Hogg h 5481 give consideration to any territory like Texas, and the incidental attractions, which produced $ 1 ,3 0 0 ,0 0 0 ,0 0 0 of raw material every year, and that is based on tha last two or three years production, necessarily the exchanges of money n d credits incidental to that production would make . '* it such as if a district cannot be outlined with Texas as the centre, which would be self-supporting, it would at least be self-supporting so much of the year and stich a large lender for sight or nine months when it is full of money, that ny the in ter-dependency of these tan or twelve districts over tha country, & e would get tha service on a much better basis than die would ever get it if she were attached to 3t« Louis* I think all of ushave perhaps made a mistake in undertaking to attach Mew Mexico to any district that Texas shoul d be in, following the idea that the trend o f commerce and commodities should be observed i f possible* 1 think lower Oklahoma south of the Canadian River and Louisiana west of the M ississippi, in fact all of Louisiana, with a dis trict around Mew Orleans and a central bank in Texas, if you put a district back to Mew Orleans, you would have to put you central bank at Dallas and your branch at HI Paso W* 0* Hogg h 3482 and a 'branch in Houston, but if you take western Louisiana and leave Row Orleans and attach it to soma eastern dis trict, perhaps Houston would e&amand the position, tho drift of its commodities to the seaboard* dce to fi Of course, the main money item in the southwest is cotton, which you heard dwelt upon interminably this afternoon, but you cannot got away fr*om the fact that the area of the eight or ten or twelTO districts you are going to establish in this country, outsidb perhaps of some of the mining sections, will not produce any more raw material each year than Texas itself originates; in fact, Texas is sufficient for a dis trict entirely to it s e l f . It will show on the basis of the reserre bank at least four and one-half million dollars capital and sbout three and a ifoction times that for its reserve, and the economic resources of the state are so tremendous an d it is so tremendously developed, that the opening of the commercial facilities by waterwaiys, coastwise, and the outlook we have to south America and Mexico, if the resolution over plays out, so I do not see how you can get away from it* Ur* Wells: Is it your intention to call on any of the bankers from the different parts of the state who are W . C « Hogg 3403 ga there dhere? Th® Seoretary of Agriculture: We wanted to hear flrom Mr Ball of San Antonio* Mr* Wall a: Wa would like to ha ve you haar from Colonel B a ll, who is hare* Tha Secretary of the Treasury: We would like to hear from Colonel B a ll. STATEMENT OF THO S. H . BALL. The Secretary of the Treasury: Will you state your name, residence and occupation. Mr. B a ll: Thornes H . B all, Vice President Bankers Trust Company, and director in the Union National Bank, and a lawyer . The Secretary of the Treasury: is would be glad to hare you give us any li&ht tou can on this problem? Mr. B a ll: I will be as brief as I can. I was glad to hear the gentlemen state that ther were here with an open mind. I knew they would be, although it was rumored that before they left they had deeided upon it , snd were coming around to satisfy us as to where would be the best place to h T . H . B all 3484 hare a branch in Texas# How, in order to meet the possible mental attitude of the committee, charged with this responsible duty, and I will try not to worry you, it occurs to me that some of the suggestions made were those that had to be made advocates of the central reserve bank* by the I have believed in this b ill from a study of this as an economic proposition, and from the standpoint of the country at large. I believe in it yet. I believe that carrying out tho purposes of this b i l l , serving the people in the best manner possible, with due regard to thisfttate, that one of these regional banks ought to be located in Texas. Mow I want to call your attention to this fact, that necessarily much of the present commercial relations hare been built up under artificial conditions and tinder a finan cial ^rstam that has beoome intolerable. I want to say that the only real injustice that has ever come to Texas has bean by the impotency of the bankers here to get their money out of the banks in money centres where they were locked up. got through the panic of 1893 with our money We locked up, and we got through the panic of 1907 fairly comfortable with our money locked up. And I want to say in my judgment, h T • K* B all 3435 with ®me knowledge of all the principal citias of this union, haying v isited them and h m ingbecome familiar in a degree while on the Rivers and Harbors committee with all their caimerce and claims, that this Committee would be amply Justifiedin making a regional Reserve Bank i f it only had in it the limits of Texas alone, and that I would be willing, so far as my opinion goes, and that is shared by a great many gentkemen whose judgment I value, that a regional bank thus established will take better car* of itself so sstsblished than any other bank, big or l it t le , that you may establish un ter this system. Now, as far as the question of lean banks is concerned, that is a relative term* It depends* A bank may hare a lot of capital, a region may have a lot of money and be bloatedLy fat without having a proper consistency of flesh. tack Texas on — And. to somethinghas been said and properly said about the wishes of the people of a part of Hew Mexico and the wishes of a part of the people of Oklahoma and the wishes of a part of the people of southwestern .Arkansas, I respect their wishes, and I would that every man could be acknowledge! in the organization of this system; wishes and their Interest and their commerce but their and their T . H . B a ll h 3486 resources are mo thing comparable with the resources, the business ability and capacity of Texas, aid certainly ought not to weigh more in the mindsof this Committee than to take this great state of ours and cause it to wag as the tail of either New Orleans or St. Louis* Now, gentlemen, we hare been the victim of a false financial cystem and a false tax system and a false money system* We do not want to Ve denied the opportunity to show ourselves in the formation of this. to be not loss I believe there ought than eleven of the so Regional Reserve Banks started to begin with. I icnow that in that I differ from a great many of my banking friends. But it must be remeibered that the bankoro as a rule who are now coming to see the great merits of this system were opposed to the passage of the b i l l at a ll, and the sentiment largely, and I think not well founded, was in favor of a central bank. There can be but one fault in this system, and that would be the failure to have a central bank. It is much easier to unscramble the eggs by creating eleven districts to begin with, and then if we fin d eleven are too many, and I answer that in deference to the suggestion made by a member of the committee, if it is found it is too many, it will be easier to redhice T . M« B all 3487 them to eiggit than to advance them to eleven. I f eight bo found too many, than four can be selactad, groat many believe, a of tha question, said than i f , as a central bank istho necessary solution it would inveitably tend to that* The commit tea will bear in mind that there was a time whan thare was no great harbor upon the Texas coast* railroads built up a rtificia l conditions The by which the gr anatriac of the wast wara compelled to saak the Atlantic Saaboard at tramendous loss and sacrifice to themselves* Than thogulf roads wara established, and deep waterat the daman d of the trans-Mississippi country was had at Galveston* Mow under tha old conditions tha grain and all went towards tho Atlantic Seaboard, therafora when these new conditions were created, that commerce had to be disturbed, and you must disturb to come extent the existing conditions which are a r t ific ia l, in the creation of this new system, which is to decentralize instead of centralize, failure: which has proved a How tha consequence was that under those changed conditions the government today has spent on tha Texas coast over $ 2 5 ,0 0 0 ,0 0 0 , but moro than that much is savod ovary year by reason of that development, to the granaries of the west in their freight rates* The consequence is that thare has T . H . B all h 3483 bdin buildad up on tha coast of Texas a great port, our sister city of Galveston, whose foreign commerce exceeds the entire foreign commerce of the entire Pacific Coast. It has outstripped New Orleans and is today the sacond port in the United Statesand rapidly gaining upon that admittedly great port, the fir s t in the union, Hew York. Now, in addition, on the Texas coast there are four or five other deep water ports. The commerce of Oklahoma said the granaries of the west is tending gulfward, it is finding its outlet there, and it has increased by leaps and bounds enormously, out of a ll proportion to that of any other port in this country. And while that is being done, gentlemen, the banks of Texas have increased their eapitaland resources in almost equal proportion, and in advance of any other section of this nation. I am not going to give you any new figures, but in 1891 the entire deposits of national banks in Texas $ 2 6 ,0 7 2 ,0 0 0 . In 1901, to | 7 4 ,8 0 5 ,0 0 0 . the next decade, they had increased In 1905, and I take that year because that is the year our state banks were created, increased to ,'101,285,000. they had Now from 1905 to 1911, national banks had increased to £ 1 56,0 00,0 00, were the and you have T* H . B a ll h 3489 the figure* here, both by Dallas and Houston as to the pres- | ent. As to that, if you will add the state bank deposits of $1 0 0 ,0 0 0 , you will fin d that within that conparatively short period of tine we hare practically trebled our banking j resources* lot only that, the question has been asked about our ability to take care of ourselves* The report of the Comptroller shows, and I may make a little blunder, but you w ill fin d me out if I do, and it will not be intentional if I do — the report of the Comptroller shows that the total borrowing of the Texas banks was somethinglike £12,000,000 at the tine of that statement, re-discounts. Mr*Ardrey: It was $ 1 6 ,0 0 0 ,0 0 0 for Texas banks, all told. Mr* B a ll: Veil, I suppose that was in this district we have proposed* Mr. Ardrey: # 12,0 0 0 ,0 0 0 for country banks, ai d ^ 4 ,0 0 0 ,0 0 0 for reserve o ities. Mr* B a l l : I only counted the national banks* Aayhow, the difference between the reserve# that are required to be kept in those would make up that difference, to say nothing of the rapid accretion of resources and the ability of the banks to take care of themselves* ( h T . H . B all 3490 Now it vas asked by th® Secretary of the Treasury awhile ago if we did not suffer by having to borrow money and being crowded* It is a good thing to be crowded some times and not have money too free* But I want to say from my knowl edge of the state and especially of our own territory, I t not know of a single business that went to the wall during that time that assigns das a reason for it that the/ were unable to obtain the proper baulking accomodations, with any degree of truth* The Secretary of the Treasury: My question was how far legitimate business had suffered for a lack of sufficient accomodations; that was the whole point I was trying to get at* Mr* B a ll: that I state* And that is my answer to the question, first, d not believe legitimate business suffered b in this I believe it is helpful to legitimate business sometimes not to always be able to borrow money cheaply; in other woris, to have a little pinch* I think it ishelpful to the individual too* TheSecretary of the Treasury: It is a good thing to pinch illegitimate business, but is it a good thing tl pinch fi and handicap the legitimate business interests? T . H . B all h Mr. Ball: 3491 My answer to that is I do not believe that they ever had bean handicapped. The Secretary of the Treasury: I hadbeen, but I a* asking did not assert that they for information* Mr. Ball: And I am answering the committee for their information, an d I do not believe they have. The Secretary of the Treasury: But what I wanted to do was to correct your interpretation of ay question- You seeaed to infer that I thought thera had be<sn some re striction. H r. B all: Ho, I as suae you are asking for information. The Secretary of the Treasury: Yes. Mr. B all: And I am sure you did not think we were any harder up here than they are anywhere else, because we were not. Ths Secretary of the Treasury: I found when I started out that most of the country was hard up and all wantedmoney . Mr. B a ll: Yss. How then, St. Louis could no aore conveniently take care of us, taking care of u s, because if the burden of assuming that we are a burden of that sort, is imposed upon her, her ability to take care of the other part of the district woul ? be correspondingly decreased T . H* B all h 3492 of course* The Secretary of tha Treasury: May I interrupt you thare* I would Just Ilka to say this, an d repeat it again. Tho questions of this committee do not represent in tho slight est degree any preconceived notions or opinions* 1 b have not any* We are simply trying to get ths facts, and it is necessary to asl these questions to bringout the argument* But when you say that if St*Tx>uis has the bur dsn she could not take care of you here, the mere location of a Reserve Bank, if it wars locatadin St*Louis, would not put tha power in the hands of 3t* Louis to deal with the situation at all, because the 1iractors of that bank undar the law are chosen by tha bank* in tha district, and naturally Texas would have a representatkn on tha Boari of that bank, Just as other parts of the district would have, and the government itself •elects three members in addition to those ohosan by the banks in the district* IfrSall: Yes, I understand* The Secretary of the Treasury: So that tha same argument mi^ht be made with reference to Dallas, if that was chosen, that you would have to depend on Dallas, but you would not* That is merely tha location of the bank* I wanted to make h T . H . B a ll 3495 that clear* &r* Ball: I Wall, I understand tha system, but what am try ing to maintain is that putting Texas and this territory in a system with St* Louis would not accomodate Tsxas as well as it would to take either the district outlined by Dallas or the district outlined by the Houston Committee* The Secretary of the Treasury: Of course, that is a very proper question to consider* Mr* B a ll: Y es, because the banks in St, Louis hare not been better able to take care of themselves than the banks of Texas have been* There is anotter thingl want to call your attention to b r ie fly , and that is this, that Texas ought to be created as a u n it. We got hold of the thing in time here through the Railroad Commission, before our state became artificially developed and but for that Commission »e wouldprcbably have 250,000 or 300,000 people in Houston today, because of the system than of giving favoa and rebates and all that to water ports, and concentration that built up so many cities along that lin e . The consequence ia #e have a lot of splendid c itie s , resourceful and v ir ile and active in every way, homogeneous and contiguous, ail we represent really a T . H 4 B all unit# 5494 Thors is no trouble about Fort Worth, Dali as, Houst n, Galveston, Beaumont and San Antonio all combining their resources and standing together on tha economic questions which w ill confront them under this new system# It seems to me under these conditions existing, of course I am not going to occupy your time, because I know that both you and Sacratary Houston are thoroughly familiar with tha tilings wa pride ourselves upon in Texas, but if a state that has I over 1400 banking institutions, that is showing tha greatest amount of progress, that has this immense amount of territory, which makes it inconvenient for them to be in vassalage to another financial centra — The Secretary of Agriculture: Does not that convey a rather incorrect assumption, to apeak of it as being in vassalage to another fin a ic ia l centre? It would be Just as right to say that any other to Texas* sac tion would be in was sal age It is a section which controls it s e lf, and I do | not see why it is necessary to sugjfst the question of i vassalage* Mr* B a ll: That is the way we feel about it* Ths Secretary of Agriculture: Ihen you have a seetion which is supposed to control itself and not be con trolled by __________________________________ _ ______ ____ h T . H* B all 3495 any other taction* Mr* B a ll: But Texas does not feel she ought to be tacked on to S t.L o u is , and I said y as sal age, meaning we were to be made an appendage or pendant to it, when I do not think our resources and ability, in Justice to Texas, authorise warrant our being attached to it* I believe Kew Orleans ought to be included in this district* can make a district or I do not think you with Mew Orleans as the centre that would be as strong a district as you could make in Texas without Mew Orleans* The Secretary of the Treasury: exactly the same argument Suppose Mew Orleans made you are making, that she did not want to be att ched as a vassal to Texas, what is this Committee to do* Thera are various sections of the country that are arguing that they ought not to be attached to any thing, they must be kept off by themselves, they io not want a reunited country on the financial question; and so i f that argument is good here, it is good in other sections of the country we have visited, so we are bound to considerthis question from the economic standpoint, having relation to these parts of the whole, and that is the only way *a can consider it* T . H . B all Mr* B all: Y sa , 3496 aid I do not expect you to do it any other way* An! if Maw Orleans put* up that kind of an argument* aha ia at parfact liberty to do ao and I will not resent it, t and I do not resent these people comingin from St •Louis and trying to make representations and do the beat they could to gat us in with them* After a l l , the respondibility will come back to you gentlemen who are chargelwtth i t , and you will give such attention to our representations and viewa and figures aa you think they are worthy cf • And thou^i you alay us, we w ill still aerve thia adminiatration (applause). Ife gave up the tariff on our raw material against the Judgment of a great many without a murmur, and we are trying to do what ia right and we want to help you in your great task; but we certainly think with a atate of thia magnitude and thia showing which must appei. to you as reflecting some degree of credit upon our people and their reaource8, vary deeply in earneat about thisroatter, we do feel and we think that with the Pacific Coast, conceding it to San Francisco — I do not wnnt to be in the attitude of hostility towarda 3t. Louia and I had her on the H a t of the eleven citlea that I thought ought to be given regional Reserve Banka, but I T . H . Ball h 3497 do think that Texas with her position, her great geographical area, h^r tremendous resources, the manner in stiich she is forging to the front in every line, and the confidence of her own people that tie ean take ca»e of the situation, that these points which have been suggested by our committee and by the Dallas committee will not be any more bitterly opposed certainly to being attached to Texas, than Texas will be to being attached to these other points, and I was Just suggesting that because while we are amiable, we want to do all ws can, we want you to consider as far as you can con sistently, with your enormous responsibility, the desires an I wishes of this great state of ours* The Secretary of the Treasury: That is what we came here for, te get your views, an 3 we are gAn^ to give faur con sideration to every argument that has b*en presented* But I should like to say Just this in answer to your remarks that thought we slay you, you will still be loyal to the administration, Colonel — Iflr* B a ll: Well, I mean the government. Ths Secretary of the Treasury: I want to say that in th at connection of course I assume you are speaking facetiously, but somebody may not understand you, and therefore h T . H . Ball 3498 I do wish to say that it is impossible, of course, in the laying out of these districts as required by law, to slay any section of this country or injure any section, whatever these districts may be* This new system is bound to be more beneficial than what you have got today, so that while the desire or every local community will be impossible to meet, and if we allowed every community to lay out its own district we would never get the country divided into these districts, the purpose of the committee in having these hearings throughout the country has been solely to give the people of this country the largast end amplest opportunity to present the views as they see them for our consideration; aid we are going to give those views fair and impartial consideration and our decision will be rendered llfrom that standpoint and no other# Mr* B a ll: Ye know that, Mr.Secretary. (Applause) The Secretary of the Treasury: Have you something else to add? Mr* B a ll: So* You were talking about the points* I gave you the number, eleven, but did not suggest the points* The Secretary of the Treasury: Y e s , you didnot give us the points* T . H* B a ll Mr* B a ll: Washington, 3499 Houston, Atlanta, Baltimore or possibly I do not think it is very material batm an Baltimore and Washington — Tha Secretary of the Treasury: You mean Baltimore or Washington? Mr* B a ll: Baltimore or Washington; fcew York, Boston, Chicago, Cincinnati or Louisville, Minneapolis, San Francisco St* Louis and Denvar* I f the three were left off, I vould omit I>enver, Minneapolis and Cincinnati or Louisville* Th# Secretary of the Treasury: We thank you very much, Colonel B all* Mr* Wells: That is a l l , &r* Secretary* We have some letters which wedesire to file* The Secretary of the Treasury: Submit whatever corre spondence you have as exhibits* U r9 Wells: I will be glad to 3o so, with a copy of the letter we wrot#* Th# Secretary of the Treasury: Is there anybody her© from San Antonio who desires to be heard? closes, & Before the hearing desire to give an opportunity to anybody who can shed any light on this problem to come forward and speak now or forever hereafter hold your peac#* 3500 Mr* Wells: There are a number of interior bankers present* The 3ecretarynof the Treasury: from anybody who le should be glad to hear dbsires to volunteer. I f not, the hearing will now be adjourned* Whereupon, at 5*30 o'clock P*M*, above entitledmatter was adjourned* the hearing in the