Benjamin Strong Jr. to William G. McAdoo
Title
Benjamin Strong Jr. to William G. McAdoo
Creator
Strong, Benjamin, 1872-1928
Identifier
WWP18464
Date
1914 September 19
Description
Benjamin Strong Jr. and others write William G. McAdoo regarding the international exchange.
Source
Benjamin Strong Jr. Papers, New York Federal Reserve Bank
Contributor
Federal Reserve Board
Language
English
Text
Gentlemen:-
Referring to the recommendations contained in our communication of September fourth:
We have, in compliance with your suggestion, given further consideration to the present international exchange situation, taking into account rthe changed conditions arising from the completion of plans for meeting the obligations of the City of New York payable in Europe.
This Committee is of the opinion that the continuance of the high credit of this country abroad will be demonstrated, and that normal conditions of the foreign exchange market will best be re-established, by the prompt creation of a large gold fund for export if necessary as suggested in our former report. We, therefore, recommend that the Central Reserve and Reserve City Banks of the United States (both National and State institutions) be requested to contribute to a gold fund of $100,000,000 instead of $150,000,000, as originally proposed. Of this amount, $25,000,000 should be made immediately available. The administration of the fund should be conducted in the City of New York, by a resident committee, where the principal foreign exchange transactions of the country take place, and we suggest that the recommendation of the Clearing House Association of the City of New York for the appointment of the following gentlemen as such Committee be approved, namely:
Alber H. Wiggin, Chairman
William Woodward
JS Alexander
Francis L. Hine
Benjamin Strong Jr.
FA Vanderlip.
We propose to arrange the details of the plan of administration with the New York Committee so that the requirements of all parts of the United States for foreign exchange will be fairly and impartially dealt with, and we suggest, in the event of any complaint on the part of any contributor to the fund in connection with the distribution or use thereof, your Board shall appoint a committee of bankers to pass upon any such question, whose decision, under such rules and regulations as you may prescribe, shall be final.
We further recommend that the National and State banking institutions in the Central Reserve and Reserve Cities of the United States be requested by you to contribute to this fund, due regard being given to their present holdings of gold as recently ascertained by your direction.
As recommended in our report of September fourth, we believe that a committee representing the Clearing House Association of each Central Reserve and Reserve City should apportion in its district the amounts and supervise the payments of gold or gold certificates for the creation of this fund; and we, therefore, suggest that you address a letter to the chairman of the Clearing House Committee in each of these cities recommending the appointment of such a committee, urging prompt cooperation in this plan and stating the amount of gold which you may consider to be the proper quota to be furnished by that city.
In order to facilitate the transfer of gold or gold certificates to New York by the contributing banks, it is recommended that they be permitted to deposit their contributions with the nearest Sub-Treasury of the United States, and that all expenses incident to transfesrs, whether made through Sub-Treasuries or otherwise, shall be an expense of the fund and shall not be borne by the respective contributors.
The Committee representing the New York Clearing House Association should have authority to call upon the contributors for gold or gold certificates from time to time in instalments as required (provided, that the contributors shall not be called upon to pay any portion of an instalment which may make their investment in the fund at any one time exceed twenty-five per cent. of their original contribution) to arrange for shipments of gold to other countries, to sell exchange and cable transfers against such shipments at such prices as they may fix, to determine to whom and under what conditions foreign exchange may be sold, to distribute the proceeds of such sales among the contributing banks in New York funds, and to fix a date for the termination and final settlement of the fund. We, therefore, recommend that the gold or gold certificates be deposited in trust for the contributors in the vaults of the Clearing House Association of the City of New York, subject to the control of the New York Committee, and that such Committee issue to each contributing bank a certificate evidencing its contribution. The proceeds of sales of exchange may then be distributed by the Committee among the contributing banks in New York funds and the amount of such repayment endorsed upon each certificate.
We have recommended that contributors to the fund be confined to the banks and trust companies in the Central Reserve and Reserve Cities so that institutions which are members of the Federal Reserve System may make their payments at the time of the organization of the Federal Reserve Banks out of their own cash.
We attach forms of pledges to be signed by contributing institutions and certified resolutions to be passed by their Boards of Directors or Trustees. In case the plan should meet with your approval we respectfully suggest that you enclose copies of these forms in your letter to be addressed to the Presidents of the Clearing House Associations.
Respectfully submitted:
(signe)
Jas. B. Forgan..Chicago
Levi L. Rue, Philadelphia
Benjamin Strong Jr., New York
Thomas P. Beal, Boston
Sol Wexler, New Orleans
Referring to the recommendations contained in our communication of September fourth:
We have, in compliance with your suggestion, given further consideration to the present international exchange situation, taking into account rthe changed conditions arising from the completion of plans for meeting the obligations of the City of New York payable in Europe.
This Committee is of the opinion that the continuance of the high credit of this country abroad will be demonstrated, and that normal conditions of the foreign exchange market will best be re-established, by the prompt creation of a large gold fund for export if necessary as suggested in our former report. We, therefore, recommend that the Central Reserve and Reserve City Banks of the United States (both National and State institutions) be requested to contribute to a gold fund of $100,000,000 instead of $150,000,000, as originally proposed. Of this amount, $25,000,000 should be made immediately available. The administration of the fund should be conducted in the City of New York, by a resident committee, where the principal foreign exchange transactions of the country take place, and we suggest that the recommendation of the Clearing House Association of the City of New York for the appointment of the following gentlemen as such Committee be approved, namely:
Alber H. Wiggin, Chairman
William Woodward
JS Alexander
Francis L. Hine
Benjamin Strong Jr.
FA Vanderlip.
We propose to arrange the details of the plan of administration with the New York Committee so that the requirements of all parts of the United States for foreign exchange will be fairly and impartially dealt with, and we suggest, in the event of any complaint on the part of any contributor to the fund in connection with the distribution or use thereof, your Board shall appoint a committee of bankers to pass upon any such question, whose decision, under such rules and regulations as you may prescribe, shall be final.
We further recommend that the National and State banking institutions in the Central Reserve and Reserve Cities of the United States be requested by you to contribute to this fund, due regard being given to their present holdings of gold as recently ascertained by your direction.
As recommended in our report of September fourth, we believe that a committee representing the Clearing House Association of each Central Reserve and Reserve City should apportion in its district the amounts and supervise the payments of gold or gold certificates for the creation of this fund; and we, therefore, suggest that you address a letter to the chairman of the Clearing House Committee in each of these cities recommending the appointment of such a committee, urging prompt cooperation in this plan and stating the amount of gold which you may consider to be the proper quota to be furnished by that city.
In order to facilitate the transfer of gold or gold certificates to New York by the contributing banks, it is recommended that they be permitted to deposit their contributions with the nearest Sub-Treasury of the United States, and that all expenses incident to transfesrs, whether made through Sub-Treasuries or otherwise, shall be an expense of the fund and shall not be borne by the respective contributors.
The Committee representing the New York Clearing House Association should have authority to call upon the contributors for gold or gold certificates from time to time in instalments as required (provided, that the contributors shall not be called upon to pay any portion of an instalment which may make their investment in the fund at any one time exceed twenty-five per cent. of their original contribution) to arrange for shipments of gold to other countries, to sell exchange and cable transfers against such shipments at such prices as they may fix, to determine to whom and under what conditions foreign exchange may be sold, to distribute the proceeds of such sales among the contributing banks in New York funds, and to fix a date for the termination and final settlement of the fund. We, therefore, recommend that the gold or gold certificates be deposited in trust for the contributors in the vaults of the Clearing House Association of the City of New York, subject to the control of the New York Committee, and that such Committee issue to each contributing bank a certificate evidencing its contribution. The proceeds of sales of exchange may then be distributed by the Committee among the contributing banks in New York funds and the amount of such repayment endorsed upon each certificate.
We have recommended that contributors to the fund be confined to the banks and trust companies in the Central Reserve and Reserve Cities so that institutions which are members of the Federal Reserve System may make their payments at the time of the organization of the Federal Reserve Banks out of their own cash.
We attach forms of pledges to be signed by contributing institutions and certified resolutions to be passed by their Boards of Directors or Trustees. In case the plan should meet with your approval we respectfully suggest that you enclose copies of these forms in your letter to be addressed to the Presidents of the Clearing House Associations.
Respectfully submitted:
(signe)
Jas. B. Forgan..Chicago
Levi L. Rue, Philadelphia
Benjamin Strong Jr., New York
Thomas P. Beal, Boston
Sol Wexler, New Orleans
Original Format
Letter
To
McAdoo, W. G. (William Gibbs), 1863-1941
Files
Collection
Citation
Strong, Benjamin, 1872-1928, “Benjamin Strong Jr. to William G. McAdoo,” 1914 September 19, WWP18464, Benjamin Strong Jr. Papers, Woodrow Wilson Presidential Library & Museum, Staunton, Virginia.