Benjamin Strong Jr. to Herbert Hoover

Title

Benjamin Strong Jr. to Herbert Hoover

Creator

Strong, Benjamin, 1872-1928

Identifier

WWP18725

Date

1919 August 21

Description

Benjamin Strong Jr. writes Herbert Hoover regarding the sale of German gold.

Source

Benjamin Strong Jr. Papers, New York Federal Reserve Bank

Subject

Hoover, Herbert, 1874-1964--Correspondence

Language

English

Text

My dear Mr. Hoover
Hotel Ritz

The enclosed very rough pencil figures give an indication of the probable outcome of the advances on the German gold. The fractions are in some cases uncertain because of mutilated cable advices, but I believe that the figure of 94,000,000 is reasonably accurate and the figure of 13,000,000 is as close as can be estimated until I have cable advices from New York of the exact amount advanced.
In other words, I should estimate that about $107,000,000 will be the amount advanced on the 92 per cent. basis, on all of the gold held in Brussels, and 00,000,000 out of the 440,000,000 held in Amsterdam. If the values of the remaining 240,000,000 in Amsterdam run about as shown in previous lots the advances on the 92 per cent. basis should amount to about $t52,500,00, but the 40,000,000 marks now being roughly estimated include 1799 bars, 1,554,500 sovereigns, 1, 300,000 Austrian crowns and 5,500,000 roubles, concerning which the values would be doubtless subject to a greater variation, but, based upon all the information I now have, I certainly think that the advances to be made by the Bank on the 99 per cent. basis would amount to about $159,500,000. This would give a total value for the gold of $173,500,000, leaving a gross equity due to the Germans of $13,880,000, out of which all expenses are to be paid.
Out of the equity of eight per cent., so far as I can now forecast, the following expenses must be either paid or deducted pending the final disposition of the gold:
1. The actual out-of-pocket expenses of the Nederlandsche Bank and the Banque Nationale de Belgique for the actual handling, counting and packing of the gold, and possibly small compensation to each bank, which would be a minor matter.
2. Freight and insurance to London upon that part of the gold actually moved and, based upon the experience in that movement, an allowance for what it would cost to move the baklance to London in case it became necessary to ship it there.
3. The actual expenses incurred by the Bank of England in handling the gold and the expense of melting and assaying by the Mint, for any part or all of the gold as it may be necessary to treat.
4. The expenses of the Bank of England in attending to the shipments and handling the gold in transit and in London. As to all of the charges made by the three banks, they have expressed no desire to charge anything in the nature of a commission or compensation, but simply to be reimbursed for what it costs them to handle the gold, including the melting and refining charges in London.
5. The actual cost freight, insurance and handling, with the usual allowance for abrasion, of moving all the gold to HNew York, which will be estimated and deducted, but reimbursed to the German government in case the gold can be disposed of more economically than by moving it to New York.
6. Some slight expense, without any charge for compensation, incurred by the Federal Reserve Bank of New York.Our proposal for moving the gold covered in cables sent by the Treasury Department through the State Department to Mr. Davis, contemplated that the deductions should include every cost involved in moving the gold from its present custody to New York, including charges for reducing it to fine bars if that became necessary. It is my intention to make a complete estimate of all expenses which we will incur in such a movement, (should it be necessary) to deduct that from the amount to be paid to the Grain Corporation, and whatever saving may be affected over and above the amount of the deduction as a result of the actual disposal of the gold by some more economical method we will account for to the Grain Corporation.
Of course, as a matter of convenience, should the Grain Corporation not desire to maintain an open account for the length of time involved, I have no doubt the Federal Reserve Bank would be willing, upon direction of the Grain Corporation, to effect a direct settlement with the German government, were we furnished with the necessary authority and instructions to enable us to do so, and I will recommend that course to the Bank later on if you consider that it is the wisest procedure.
Of course all the above figures are merely estimates, the best I can give you at the present time, and in the near future I shall try to give you the figures on the exact cost of moving the gold, including the expenses above namded.
Hoping the above will prove of some assistance, I am,
Very truly yours,

(x) The movement to New York to include charges via London

Original Format

Letter

To

Hoover, Herbert, 1874-1964

Files

http://resources.presidentwilson.org/wp-content/uploads/2017/03/D08361A.pdf

Tags

Citation

Strong, Benjamin, 1872-1928, “Benjamin Strong Jr. to Herbert Hoover,” 1919 August 21, WWP18725, Benjamin Strong Jr. Papers, Woodrow Wilson Presidential Library & Museum, Staunton, Virginia.