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May 30, 19k7
Personal and Confidential

16% Marriner S # Eccles
Board of Governors of the
Federal Reserve System
Washington, D# C.

Dear Governor Eccles:
In response to your letter of March 20, I am enclos­
ing a memorandum which summarizes the statements and comments
made by Governor Yardaman at luncheons given in his honor in
El Paso, San Antonio, and Houston during the early part of
January, 19h7* The memorandum is based upon the recollections
of the various officers of the branches and others #ho attended
the luncheons, and incorporates the substance of the more im­
portant comments made by Governor Yardaman at the meetings«
As indicated in my letter of March 29, his so-called
^off-the-record11 talks at El Paso, San Antonio, and Houston were
along the same general lines as those he made elsewhere• I
apologize for the delay in submitting this memorandum and hope
that it has caused you no inconvenience♦
With warm personal regards and all good wishes, I

Sincerely yours,

R. R. Gilbert

Memorandum of statements and comments made by Governor
Vardaman at luncheons in El Paso, San Antonio, and
Houston during the early part of January, 19U7«

Prior to Governor Vardaman!s visit to this district last January, his
secretary advised us of his contemplated trip and stated that the Governor
would like for us to arrange luncheons for him so he would have an opportunity
to meet and talk to some of the leading bankers and businessmen in Texas#
Luncheons were arranged in his honor at each of our branch cities, and bankers
and other business leaders were invited to attend them*

The number present

at the luncheons ranged from 2$ in El Paso to lj.0 in Houston*
Governor Vardaman stated that the purpose of his tour of the country
was to attempt to feel the pulse of the businessmen in different sections,
which would enable him to represent them better in his capacity as a member of
the Board of Governors* He stated that the greatest danger to this country is
not the spread of communism but the development of government bureaucracies in

He said that most bureaus are unduly influenced by staff members and

that the situation in the office of the Board of Governors is no exception to
the rule*

He advised that many members of the Board's staff have a greatly

exaggerated idea of their own importance, have a closed mind on a great many
subjects, and do not want to receive information or facts which would tend to
disturb or disprove their own pet theories* He stated that many members of the
Board1s staff are incompetent or have already served their period of usefulness
and that as far as it was in his power to do so,he expected to replace them as
quickly as possible. Although professing great admiration for Chairman Eccles,
he stated that the Board of Governors is a one-^nan board and that the other
members are completeDy dominated by the Chairman*

He stated that as is customary

in most Washington bureaus, the Board is constantly seeking more power for itself,


with the result that the importance of the Reserve banks and their boards of
directors is rapidly diminishing*

He stated that the Chairman is in favor of

a unified banking system and that he is bitterly opposed to it, because he does
not believe it is desirable to centralize too much power in any one agency,
whether in the Board of Governors or some other body#

He expressed the view

that the dual banking system of the chartered banks should be preserved at all
costs because it is the foundation o f our system of free enterprise and is a
great protection against the government ever taking over the banking system of
the country*
He criticized the executive order authorizing the control of consumer
credit, stating that in his opinion Congress should have been asked to pass
legislation in that regard since it was in session at the tiaie the executive
order was issued#

He stated that even if there had been some justification for

the control of consumer credit as a war-time measure, the need for such control
had passed and that he thought the control provisions of Regulation W should be
terminated or substantially relaxed without delay*

He suggested that it might

be helpful if bankers and businessmen would express their views on the subject to
their representatives in Congress*
He also stated that while the Federal Reserve Act provided for the regu­
lation of loans secured by listed stocks and bonds, that neither the law nor the
discussions which occurred during consideration of the legislation contemplated
the strangulation of the stock market*

He criticized the action of the Board in

fixing a 100$ margin requirement, saying that such action clearly went beyond the
intent of the law and that the margin requirement should be reduced immediately*
He also suggested to those present that they might register protests with their
senators and congressmen if they agreed with his views*

-3He stated that there is considerable difference between a public ser­
vant and a Government official, explaining that a Government official is
usually more interested in keeping his job and retaining his influence and
power than in serving the public as an official of the Government. He stated
that this tendency caused these officials to inject themselves into the busi­
ness life of the country to a degree far beyond any necessity that might
actually exist. He suggested that it would be advisable for his listeners to
consult their representatives in Congress with the view of trying to eliminate
unnecessary bureaus so that business would have an opportunity to operate under
the system of free enterprise without being unduly hampered by government con­
trols. He asked those in attendance to consider him as a public servant and
urged them to. consult him at any time with reference to matters over which the
Board of Governors has jurisdiction.
It was quite obvious that his remarks were designed to appeal to the
passions and prejudices of his listeners, and I am advised that Mr. Jesse Jones,
who attended the luncheon in Houston, seemed very much pleased with Governor
Vardamanfs remarks and took occasion to so express himself at the conclusion
of his talk. However, several who attended the luncheons expressed some dis­
gust over Governor Vardamanfs remarks, one remarking that he should be run out
of town for making such a talk. He made that statement on what he termed the
insincerity of his comments when compared m t h his past business and political
history. One of the guests who attended a luncheon stated that he got the dis­
tinct impression from what he heard, that what Chairman Eccles is for, Governor
Vardaman is against.
I did not attend the luncheons at El Paso or Houston, but did. attend the
one at San Antonio. Chairman Parten attended the one at Houston. This memo­
randum is based upon the composite views of officers of the branches and others
who attended

the luncheons.