Chicago v. New York

(See front cover)

Brilliant is the spotlight which plays about the comings and goings, the doings and infrequent sayings of Gov. Benjamin Strong of the Federal Reserve Bank of New York. All the world knows when he speeds to Europe. All the world watches for his meeting with the Grand Viziers of international finance:

Montagu Collet Norman, witty Governor of the Bank of England;

Hjalmar Schacht, stern President of the German Reichsbank;

Emile Moreau or Charles Rist of the Banque de France.

In Washington, a man named Roy A. Young presides day by day over the Federal Reserve Board, central authority of the twelve regional banks. In Chicago, Minneapolis, Atlanta, sit Governors with as much authority as clothes the Governor of New York's bank. But when Benjamin Strong, lean, nervous, enters the doors of the Bank of England, or when Benjamin Strong, ill, receives the foreign chiefs in Manhattan, no Wall Streeter thinks of the quiet, unostentatious figure in the Treasury building's spacious offices. And certainly no Streeter thinks of such an untraveled, provincial person as a banker in Minneapolis, or Atlanta, or Chicago might be supposed to be.

So compelling was the prestige of cosmopolitan Gov. Strong that it seemed almost presumptuous when Chicago bankers ventured, last fall, to' challenge the wisdom of his international money-juggling. If wise Gov. Strong, fresh from a meeting of master minds, thought Chicago should reduce its rediscount rate from 4 to 3 1/2% to aid his European comrades in finance, only bad manners or sheer contrariness could explain Chicago's dissent. Gov. Strong was cast for the hero's role in the drama of U. S. money. Obviously, all that remained for Chicago was to be the juvenile or the villain.

Last week, Gov. Strong was again in Europe. And his Manhattan supporters noted with alarm that Chicago was showing distinct signs of insubordination, was even pretending to take the lead in the intricate business of money-juggling. Boldly, the Chicago Reserve Bank recalled its warnings of last fall, pointed to diminishing credit reserves and wild speculation, jumped its rediscount rate to 5% (TIME, July 23). Manhattan, accustomed to lead, was forced to follow. Chicago's press openly flayed the absent Gov. Strong; screechingly demanded his resignation.

Puzzled, irritated, New York bankers asked questions. Who gave provincial Chicago the right to criticize internationally-minded Manhattan and its Gov. Strong? In New York papers, an anonymous banker charged the regional bankers suffered "delusions of grandeur." And, if it came to that, who were these Chicagoans, anyway?

Chicago obligingly furnished a list. It pointed to the offices of the Illinois Merchants Trust Co., where sat Minnesota-born Eugene Morgan Stevens, golfer, fisherman, bond expert, and New York-born Frederick Tudor Haskell, trained in Chicago banking for 55 years. It pointed to the "biggest" Continental & Commercial National Bank with its Brothers Reynolds, Arthur of the potent Armour meatpacking interests, and, George McClelland, who politely declined in 1909 to be Taft's Secretary of the Treasury. It pointed to big but smaller banks, to the Chicago Trust Co., from whose roster of vice presidents the U. S. Chamber of Commerce last year summoned John William O'Leary to be its chief. And Chicago pointed with particularly timely pride to the great First National Bank, to which Chairman Frank Orton Wetmore had come from Kalamazoo, Mich., and

President Melvin Alvah ("Mel") Traylor had come from the hill counties of Texas.

As every Chicagoan knows, Banker Traylor sprang from a strain of Kentucky mountaineers and matured in a two-fisted town in Texas. Psychologists, pondering heredity and environment, are not surprised to find him, at 50, ready and able to oppose Benjamin Strong, scion of a long line of publicists and bankers. Fighting is in his blood. No Kentuckian was surprised, last week, when Gov. Flem D. Sampson made "Mel" Traylor a Colonel of the National Guard, named him an aide-de-camp on his personal staff. Chicago claims Banker Traylor, but the South hasn't given him up. After 17 years of hearing the mid-western twang, the drawl of Kentucky and Texas still lingers in his speech.

He learned banking in a rough and ready school. The cashier of a small-town Texas bank in 1905 had to keep one eye on the cash, and the other on the door. It took a shrewd judge of men to handle the lanky Texans who ambled into the Citizens National Bank of Ballinger. And when this bank merged with its rival, the First National, and Melvin Traylor became president, he needed as much good banking sense to manage a capital of $200,000 as he needs today to direct a bank with resources of over $450,000,000.

From Texas, Banker Traylor moved to St. Louis, then to Chicago. He brought a thorough knowledge of battling banking, a Texan wife (Dorothy Arnold Yerby), a distaste for liquor and a profound belief in the principles of the Democratic party. Last month, he surprised Chicago and surprised himself by going to Houston as a delegate-at-large from Illinois. Hidden among the Irish cohorts of Boss Brennan, Teetotaler Traylor studied the party, Al Smith, Tammany. Last week, he explained: "The drawback to politics in this country is that business men do not take enough interest in it. ... Professional politicians are necessary. . . . The Democratic party is now in the hands of a conservative element."

Chicagoans remember that another president of the First National Bank, Lyman J. Gage, went to Washington in 1897 as Republican Secretary of the Treasury. They link Banker Traylor's name with that of New York's Owen D. Young for the Treasury post in a possible Smith cabinet. More immediately, they look to him as Chicago's spokesman in the war of banks and cities. That war, they believe, has barely started. Chicago sees no reason to give up the lead it has snatched from New York, no reason to lose confidence in its fighting champion. One man or another must rise to the job of financial spokesman. Chicago thinks Benjamin Strong has been there too long. Chicago is pushing Melvin Alvah Traylor.