Benjamin Strong Jr. to Elihu Root

Benjamin Strong Jr. to Elihu Root

Strong, Benjamin, 1872-1928

WWP18424

1913 December 11

Benjamin Strong Jr. writes Elihu Root concerning American securities in Europe.

Benjamin Strong Jr. Papers, New York Federal Reserve Bank

English

C O P Y

Hon. Elihu Root
Washington, DC

My dear Senator Root:

Mr. Kent, of our office, expects to be in Washington tomorrow and I have asked him to hand to you certain information which I believe will be of value in answering the inquiry that you made by telephone yesterday. Complete replies to all of these questions I believe will be handed to you, therefore, tomorrow. In the meantime, through various channels I have been making inquiries along independent lines with the following results:

First. “Articles by Sir George Paish in the London Statist of June 19, 1909, and December 24, 1910: He uses the returns of the excise Commissioners of England as a basis for his estimates, which were at that time that the total investment of British capital in the United States and Canada were $5,000,000,000. In view of the fact that large holdings of American securities by British investors are kept in this country, the statistics of which are not available, it is safe to assume that these holdings are very much larger. This does not take into consideration the investments of France, Germany, Holland or other European countries, which in the aggregate probably are nearly as great as those of Great Britain.”

The above is a quotation from a report made to me by good authority in New York. Personally I believe that all of the estimates in regard to American securities held in Europe are high. The maximum estimate is that of Roger W. Babson. His estimate is $7,000,000,000. I would use that figure with some conservatism.

Second. The enclosed copy of the Journal of Commerce of November 19th last contains an incomplete resume of the amount of short term notes of railroad and industrial corporations due within the next three years. This estimate is unquestionably low. Friends of ours who have made rather careful compilations of figures for the calendar year 1914 inform me that about $650,000,000 of maturities occur in that year alone. I am obliged to ask for the return of this copy of the Journal of Commerce as it was taken from files that will be left incomplete.

Third. The amount spent by American travelers in Europe is one of the most difficult of determination. The National City Bank advises me that about five years ago they made a study of this subject and their estimate was placed as high as $400,000,000. I do not personally believe it is as high as this. Following is extract from Mr. Talbert’s letter on that subject, but my preference would be to use the figures which Mr. Kent will submit to you, and which I believe are more nearly accurate:

“About five years ago, after careful estimates based upon payments made under travelers' letters of credit by the principal banks abroad, the amount spent by American tourists was placed at £ 80,000,000 annually. Since that time American travel has increased perhaps fifty per-cent, owing to faster steamers and better accomodations. But it would be perfectly safe to place this estimate now at an annual expenditure of $500,000,000. This is exclusive of the incomes of many wealthy American families who live permanently abroad, and of the incomes of wealthy American girls who have married abroad. Concerning this there can be no accurate or authoritative data procured except eventually by the Government when the income tax is in operation. These figures do not include remittances made by foreigners laboring here, which in the aggregate are very large. In 1911 the Post Office Department records showed that remittances in small amounts of, say, less than $100, showed the aggregate to be above $70,000,000 of international post office money-orders.”

Fourth: The amount paid by Americans for the freight on imports and exports has never to my knowledge, and so far as I have been able to ascertain through my own inquiries, been accurately estimated. Mr. Kent will have some figures that you may feel willing to use. The in and out yearly commerce of the United States, however, is nearly $3,000,000,000. If freight payments on account of these shipments only account to 5% of their value, which, of course, is simply a basis and a very hazardous basis of estimate, the freight bills will amount to $150,000,000. My belief is that 5% would be a low, rather than a high estimate of the percentage paid for freights. Of cousrse a negligible proportion of this is paid to American ship owners.

I have not mentioned anything in regard to direct credit transactions between the credit institutions of this country and Europe. This represents a vast fluctuating credit. Mr. Kent will be well prepared to supplement the information from data which he has accessible in Washington, and I trust that you will feel entirely free to ask him for anything that will be of any service to you.

With personal regards, believe me,

Very truly yours,

S-W
[Strong.]

Letter

Root, Elihu, 1845-1937