William P. G. Harding to Woodrow Wilson

Title

William P. G. Harding to Woodrow Wilson

Creator

William P. G. Harding

Identifier

WWP22006

Date

1917 October 9

Source

Library of Congress, Woodrow Wilson Papers, 1786-1957

Text

Dear Mr. President

There are now imposed upon the financial system of the United States responsibilities of the most serious kind. The flotation contemplated within twelve months of loans aggregating $14,000,000,000 is a stupendous undertaking, although there can be no doubt that the American people and the banks of the country will meet the demands upon them. But the magnitude of the task may best be appraised when we bear in mind that during three years of war the aggregate amount of loans raised by Great Britain was about $19,000,000,000, by Germany about $14,000,000,000, and by France about $14,000,000,000. We are undertaking therefore, to do in one year what was done in these countries in three years. England and France, in raising their loans, found substantial support in neutral countries, where they could realize on their foreign securities or contract for loans, the United States alone contributing over $4,000,000,000 in this way; while Germany, although dependent mainly upon her own resources, has had the advantage of almost exclusive expenditures within her own borders of the sums raised. With us conditions are entirely different. We have no foreign markets for our loans or securities, and in addition to providing for our own requirements we are making large loans to other countries which are associated with us in the war. The amounts so advanced are not expended entirely with us, but a considerable proportion is used in payment of allied purchases in various parts of the world. The ability of the American people to provide the Government with the vast sums required will depend chiefly upon:(1) Intensive economy made applicable to all elements of the population, individuals, corporations, and municipalities; and(2) Upon a scientific and economic use of the country's gold.

The Federal Reserve system is proving its value in these abnormal times. It has grown in strength and broadened in scope to such a degree that it is now recognized as the backbone of our entire financial fabric. Through consistent and persistent efforts, the Federal Reserve banks have increased their gold reserves to approximately $1,500,000,000. The recent amendments to the Federal Reserve Act have contributed largely to this result and also have removed objections hitherto raised by state banks to membership in the system; so that there is now developing a strong tendency on the part of the larger state banks and trust companies to become members. While the number of state bank members is still small ninety-four it includes in almost all cities the strongest banking institutions, as shown by reference to the fact that these ninety-four banks and trust have a combined capital of $91,380,700; surplus of $88,571,965; and aggregate resources of $1,894,975,368. There are however, probably 8,000 or 9,000 state banks and trust companies eligible for membership which have not united with the system. These institutions have it in their power to increase to more than $2,000,000,000 the gold holdings of the Federal Reserve banks and to bring the reserve deposits up to probably $2,500,000,000. The Board has reason to believe that during the next month a large number of applications for membership will be received. The directors of many of these non-member banks are beginning to show signs of uneasiness over their lack of cooperation, a feeling that they are not doing their full duty to the country; and in the opinion of the Board the psychological moment is at hand when this growing movement of state banks into the system may be accelerated into a real stampede.

It is the purpose of the Board to bring this question of membership to the attention of the president and directors of each eligible state bank and trust company, and I take the liberty of enclosing a tentative draft of a letter which it is proposed to send.

The Board feels that while, in the present circumstances, it might without impropriety, address a communication of this kind to the state banks and trust companies which are not yet under its control, an appeal to be most impressive must be based upon patriotic motives. A call to financial colors would ring throughout the land with a clearer note and would be far more effective, if made by the Commander-in-Chief, the President of the United States. Therefore, the Board has instructed me, in laying this letter before you, to suggest that a statement from you, addressed either to the Federal Reserve Board or to the non-member state banking institutions of the country, would be most opportune and of the greatest advantage in securing additional support to our financial structure.

Trusting that you will pardon this infringement upon your time, I am, Sir,

Respectfully,
WPG Harding.


The President,
The White House.

To

Wilson, Woodrow, 1856-1924

Files

http://resources.presidentwilson.org/wp-content/uploads/2017/06/WWI0758.pdf

Collection

Citation

William P. G. Harding, “William P. G. Harding to Woodrow Wilson,” 1917 October 9, WWP22006, World War I Letters, Woodrow Wilson Presidential Library & Museum, Staunton, Virginia.