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Appeftdfo, Congressional Record t Marcfr
®lxtension of Remarks of Hon# Paul if. Sh&fer of Michigan i n the House of
Representatives, Wednesday, March 8, 1950.
Mr. Speaker, since my speech i n t h i s House on February
which I called attention to the un-American and immoral packing of the Fed**
e r a l Reserve Board I have been deluged with l e t t e r s , telephone calls* personal v i s i t * , and telegrams from bankers, businessmen, lawyers, and other
citizens from a l l parts of the United States, suggesting that X further explore the subject* I have received many l e t t e r s on the subject} a t r u l y
amazing number i n view of the very limited publicity given to my remarks.
®iey reveal a state of mind — a fear of the powers and autocratic conduct
of the Federal Reserve Board — on the part of bankers, bank customers, and
business people generally that i s quite different from any situation 1 have
ever before noted i n t h i s R#public| and I think I am well advised to go into
the matter more thoroughly and carefully.
* I was very much surprised that no communication was sent to me by Mr.
Thomas B. McCabe, Chairman of the Board, but I did note a rather impassioned
one by the former chairman, Mr. Marriner Socles# t h i s indicated a weird s i t uation of the Board wherein a former Chairman was mysteriously bounced from
his job by President fruman, i n a situation which has never been explained.
Was i t that the White House was aware of this packing procedure while Mr.
Xccles was Governor, and i n i t s soft-peddling way removed him from his position of one-man r u l e , surrounded by his tooges and now still* another stooge
i s yet i n the person of the Chairman of the Board? X assume the communication
i s intended as a defense of his successful campaign t o set up the Board as an
obedient and submissive group who would do bidding without question or public
remark* But, as a matter of f a c t , Mr. Icciee 1 l e t t e r openly confirms the most
important criticism I have madej t o w i t , that the l e t t e r and s p i r i t of the
law has been violated i n the selection of the Governors by f a i l u r e to regard
that provision intended to insure equitable geographical representation on
the Board. Mr. ®ccles does not deny that Governor Ivans, a native-born, l i f e long citizen of Iowa, a man who even to t h i s day considers himself and refers
to himself as an Xowsn because of his large farming and business interests
i n that State, was, nevertheless, appointed from the grand Old Dominion State
of Virginia, although he was only a temporary resident of t h a t State because
of his importation here to the agricultural Department by Henry Agard Hall&ce,
as Wallace 9 s personal aid and protege, as a corn-hog plower-under.
*Mr. Iccles does not deny that the l a t e Governor Clayton, a native-born,
l i f e - l o n g citisen of Utah, Bccles1 personal protege and clerk for more than
20 years, always, l i k e Iccles and several members of his s t a f f , a l o y a l Utah
citlsen, was appointed from, of a l l places, the Commonwealth of Massachusetts
and Boston. What an unkind and undeihkided blow t o the $*osts of the sturdy
New laglanders those high principles of honesty and f a i r play have played such
an important part i n building the moral f i b e r of t h i s Mation. I n my previous
t a l k cm t h i s subject I explained why the l a t e Mr. Clayton was said to have
moved to Boston shortly before his appointment to the Board.


"Mr* Sccles did not deny that Governor Sgymczak was reappointed at his*
Mr* locles 1 insistence* i n 1948 for a f a l l term of 14 years, i n spite of the
fact that he had been serving continuously and without interruption as a member of the Board f o r more than 14 years; and that by his reappointment he
nould (and there seems no reason for his throwing up the 1 cushy1 Job) — i f
he serves out his t e i ® — he w i l l have been a member of the Board continuously and without interruption for more than 29 years* t h i s * i n the face of
positive provision written into the law by t h i s Congress that no member of the
Board would be e l i g i b l e for reappointment i f he had served a continuous term
of 14 yoars* I am not interested i n the devious evasions indulged i n by
Mr* Socles* his s t a f f of lawyers* and others* i n accomplishing t h i s continuance
i n o f f i c e of one of Mr* Bccles* most l o y a l henchmen* tfeat I am interested i n
i s c a l l i n g attention of t h i s Congress to the brazen disregard of the l e t t e r
and s p i r i t of i t s laws* by these bureaucrats who* apparently and by t h e i r
higjh-handed* star-chamber methods* regard themselves as untouchable and above
the law and t h i s Congress*
"Mr* Iccles does not deny that i n his own personal case as a member of the
Board* the s p i r i t o£* the law has been violated so that he* by having himself
juggled and shifted ^from one term t o another* w i l l be permitted to serve a far
greater number of years than the I4*»y*ar maximum which t h i s Congress thought
i t was f i x i n g when the Federal fteserve Act of 193$ was enacted* I f Mr* Sccles
serves out his present term he w i l l have served as a member of the Board continuously and without interruption more than 24 years*
"Stripped of a l l nonessential t a l k and consideration* the cold fact i s that
the great northeastern* southeastern* Southern* and southwestern sections of
the United States are represented on the seven-man Federal Heserve Board by
only one single bona f i d e resident of any of those vast areas* and that man i s
fhomas Bayard McCabe* a Mew Seal* Fair Deal* ^epublico Oemocrato* h a i l i n g from
Chester* Pa*
Mr* McCabe i s a pleasant* wellnaeaning m d agreeable sales
gentleman* with a limited knowledge and experience i n Federal Keserve matters*
the administrative a b i l i t y as a public o f f i c i a l of t h i s delightful and successful sales manager of a t o i l e t paper concern was thoroughly and painfully
brought t o l i $ i t during the 4 months of hearings by the Senate committee which
was considering his appointment 2 years ago* His a b i l i t y as a private business
executive i s best i l l u s t r a t e d by the fact that his paper company has progressed more i n the few short years he has been away from i t than i t did during the entire period of his long career as i t s active president*
T h e r e i s nominally one other representative of the Bast em H a t e s on the
Board* a r e t i r e d businessman named Draper* whose 10-year term on the Board
expired on February 1 of this year* and he i s serving I n the embarrassing
capacity of a "hang-over* awaiting the appointment of his successor* Governor Draper9 s service has been marked by routine and unquestioning obedienc*
to Mr* Sccles* and I doubt that the minutes of the Board w U l reveal more than
two instances during the entire 10 years th<xt he voted contrary t o Mr* Sccles 1
present there are only f i v e members of t h i s seven-man board serving
proper terms* Messrs* McCabe* Iccles* Saymcsak* Svans* and V^x daman — with

Mr* Draper occupying a sixth place because of f a i l u r e of the President t o
name his successor* Governor %ans i s absent from the Board most of the time,
and has been f o r the past year or more* so four active members are conducting
the Board1 s business i n ttashington, with Mr* Draper steeling by f on suffer*
ance 9 , as i t were* t h i s i s not a healthy situation, especially i n view of the
casual attitude of tfr* McCabe as an administrator and leader* i t i s a situat i o n much t o the l i k i n g , I presume, of Mr* ^ccles and his hand-picked s t a f f ,
because i t gives them continued and practically undisputed sway i n **oard
*Jad my prediction i s that unless t h i s Congress puts some pressure i n the
proper place the two vacancies on the Board w i U not be f i l l e d , but the s i t u a t i o n w i l l be allowed t o drag on indefinitely*
* I note i n the Iccles 9 l e t t e r no hint of the custom&ry declaration that he
was speaking as an individual and not for the Board* Of course, 1 thought ~~
and so* did the public, I believe — that Mr* ^ccles had been repudiated and
removed as head of the Board when Mr* McCabe was appointed ^hairaan i n 194&«
But a f t e r looking into the matter and asking many questions of people who should
know, I don f t seem t o f i n d any evidence that Mr* McCabe has done much else than
to physically occupy toe Chaiman 9 s o f f i c e i n the federal Reserve Building*
and causing Mr* Eccles the slight inconvenience of moving a few doors down the
h a l l on the same floor*
"As t o Governor Vardaman, he i s one of the closest personal friends of President Truman i n Washington o f f i c i a l l i f e and there i s less said about i t than
of any other man* 1 found out from long-time employees of the Federal Reserve
Board, who are very uncomfortable about the one-man rule there, that Mr*
Vardaman i s regarded as the great dissenter i n many of the Board1s policies
and X assume that his dissents r e f l e c t a very uncomfortable feeling of the man
i n the Hhite House who sees a bureaucrat remaining as the r e a l Chairman of the
Board even a f t e r he has been displaced*
^Certainly there has been no change i n policy, or i n basic thinking, or i n
arbitrary and bureaucratic conduct by the majority of the Board and S t a f f *
I t i s true that the statements of the Board and i t s communications with the
various committees of the Congress h&ve become more verbose and longer and a l most wholly inocuous and 9 straddling 9 i n t h e i r content* *>ut the old s t a f f i s
s t i l l on the job* e f f i c i e n t , i n t a c t , and impregnable* Mr* McCabe has been
allowed t o bring i n one economist, an excellent man, so X am t o l d , by the name
of M e f l e r * t o t r y and teach McCabe the ABC9* of national economics, f i s c a l
finance, and otherwise guide him* This man has done a good Job, i t i s said,
but i s apparently getting discouraged over his pupil, and i t i s rumored that
he i s considering becoming a member of the President 9 s Iconomic Council
that new-thou^htist body headed by Mr* Leon Keyserling*
» l am further informed tnat Mr* McCabe also brought along with him an able
young assistant ifao up u n t i l a few months ago acted as his personal secretary*
But l a t e l a s t year he too became discouraged, i t i s said, over the impregnabili t y of t h e Becles selected s t a f f , and resigned h i s position with the Board and
went back home to Chestar, Pa*, and the paper company*

*As things now stand, Mr* McCabe i s the nominal head of the Bo*rd, but he
has not made one single major change i n personnel or policy during his 2 years
of administration* Since he has, presumably, the backing of the administrat i o n , he could make almost any change he desired} so, X am bound t o conclude,
i n view of his acquiescence and f a i l u r e to act, that he, l i k e some of his colleagues, i s s a t i s f i e d t o be and function i n a l l things as m Sccles s a t e l l i t e ,
or at l e a s t , as a messenger boy for Sccles 1 hand-picked board, and for Iccles 1
more thoroughly hand-picked staff«
" I t should be borne i n mind that t h i s Board i s , theoretically, a direct agent
of t h i s Congress* I t operates without any supervision whatsoever as t o p o l i cies, personnel, or expenditures, except those broad provisions of congressional enactments d i r e c t l y applicable to the Board* I t i s not subject to the
Bureau of the Budget* I t i s not subject t o the Comptroller General* I t derives i t s money from assessments on Federal feeserve ban*cs made by the £oard
i t s e l f , and without recourse on the part of the banks* I t spends i t s moneys
thus derived without supervision or l i m i t a t i o n or examination from any other
Federal agency* I t can employ as many people as i t desires, and uhoever i t
desires, without reference to any other person or Federal agency* And i t can
spend as much money as i t wants f o r tfiatever l e g a l purpose i t wants, with l i t t l e or no r e s t r i c t i o n , and with no accountability except t o the Congress i t s e l f *
"The only report of i t s a c t i v i t i e s and expenditures required by the Congress
i s the Board9 a long and laborious and boring annual report* t h i s report covers
the high l i m i t s of policy, a c t i v i t i e s , and expenditures, but i s limited as t o
d e t a i l , and i s i n no sense a detailed financial report* There i s also a policy
record kept and f i l e d with the Congress, I believe, but that relates solely to
the o f f i c i a l voting record of the Board m e t e r s , and has nothing t o do with
other a c t i v i t i e s or expenditures*
* I am not prepared to say at t h i s moment that I am opposed to so much authori t y being given the Board; nor am 1 prepared t o say that the Board has unduly
abused i t s powers or made expenditures ihich were not j u s t i f i e d * But one point
I do want to make, and i t i s the one *hich i s uppermost i n my mind at the
moment* And that i s , that a Board such as t h i s , with so much power for good
or e v i l , for economy or extravagance, should be well above suspicion as t o
quality, qualifications, manner of selection, and l e g a l qualifications of i t s
membership* The selection of men to serve on such a Board should carefully
follow the intent as well as the l e t t e r of the law* there should be no s h i f t y
skullduggery, or questionable procedure, such as fake residency claims, techn i c a l avoidance of the law's l e t t e r as t o length of service, or other technic a l i t i e s * Above a l l , men of independent judgment, men of banking or business
experience i n t h e i r own r i g h t , and men above question as t o t h e i r impersonal
and objective approach to those questions properly coming before the Board
should be selected* Any appearance of packing or of one«man control or domina*~
tionf or over-balancing i n favor of one p o l i t i c a l party or one school of
thought — a l l of these weaknesses should be avoided*
•And I submit that they have not only not been avoided i n the case of the
present Board) but I charge that many of the f a u l t s mentioned are present i n
the incumbent Board* And I think t h i s Congress should look into the situation

carefully and see just itoat this hand-picked Board and s t a f f are doing with
the tremendous and potentially dangerous authority i t possesses, and just
what i s being done with the vast sums of money i&ich the Board has at i t s
command, imd, too, I think the Congress should inquire into the quest ion of
Board membership to see i f fraud was perpetrated i n the appointment of Governors Ivans and Clayton and i n the reappointment of Governors Iccles and
Ssymczak* And the Congress mi$*t also inquire to see whether or not i t i s the
intention of the administration t o l e t the two present vacancies stand and
allow the continuance of the present out-of-balance Iccles-dominated Board;
or w i l l the administration carry out the intent of the law and appoint two
qualified men to f i l l these vacancies who shall give the Board something i n
the nature of the l e g a l l y intended balance geographically* economically,
p o l i t i c a l l y , and otherwise?*