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November 17, 1937.
Dear Chairman Eceles:
I have received and want to thank you for your letter of
November 15 in reply to my letter on the problems presented by the
present business situation*
I am glad that in general our views agree Y/ith your own
conclusions about the basic problems which need to be dealt with*
I realise, however, that we do differ somewhat as to the best
method of immediate attack. True, there may be some risk in sticking to the principle of a balanced budget if private spending is
too slow in filling the gap caused by the diminution of the governments contribution*

The question which is immediately raised in

my mind, however, is whether a return to government spending might
not renew and accentuate some of the uncertainties that are holding business back, and thus further postpone the time when private
spending will supplant government spending*

Is not the question

really whether obstacles to private spending will be courageously
and quickly enough removed to justify running the risk to which
you refer?

Some temporary recession, even admitting that it might

be severe for the time being, might in the long run prove to be
the cheaper price to pay. At least it seems to us that it is
necessary to weigh against that price the risks inevitably involved
in an abandonment of the administration^ attitude about the budget



HonĀ» Marriner S. Eccles,


and an avowed return to government spending*
I am enclosing a memorandum which, in my last letter, I
said that we were working on concerning the financing of business

It may be that some of the suggestions referred to are

not, for one reason or another, possible of attainment at the moment.
We thought, however, that it might be helpful in our study of ways
and means of reopening the capital market if we made a careful and
thorough survey of the financial machinery as we see it, and the
steps which, at least, should be considered as a means of making
it run more smoothly.
Perhaps, it will be possible more fully to discuss these
matters at our meeting of the open market committee to be held the
week after next. Whether or not an immediate return to government
spending is resorted to as a means of avoiding a continuation of
the recession, as I gather you think, it is important, in any event,
to do all that we properly can, as soon as we can, to remove some
of the apparent limitations or obstacles to a free flow of private
Very truly yours,

e L. Harrison,
Hon. Marriner S. Eccles,
Chairman, Board of Governors
of the Federal Reserve System,
Washington, D. C.