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December £9, 1956*

Dear Henry*
The Paul Ballon article, to which the enclosed letter refers, doubtless «&& brought to your
attention by Mr. C&stcm &e it w&a to ain«* by Hra
Tharstoa* X deeply regret that Hr. Jtellon should so
grossly aisrepresent the facts# After discussing ta«
aatter with 16r. Thurston, it w&$ decided that it
would bo better for his rather than for w® to t&ke
this suttter up directly as he knows Mra M&Ilon
It occurred to se that you ai^kt he interested in seeing the copy of the letter enclosed
which hes gone forward to Mr* S&llosu this ex~
presses fully the sentbseots hoth of the Bo«xd
Sincerely yours,

Honorable Henry Hardenthstu, Jr.,
Secretary of the Tre&sury,
Washington* D* €«

December 2 8 , 1956,
Sir. P a u l g a l l o n ,
foodward B u i l d i n g ,
Washington, D. C.
Dear P a u l ;

Because of our many years of friendship, I feel that
I may be permitted to take you to task for that article of yours
which appeared in the Star of December £3d. lou say in this
article that the gold sterilisation plan was *not devised in the
Treasury at all*, that Federal Reserve *idea-men subtly switched
their proposed method of handling the coining boos and selected
the entirely innocent Treasury Secretary as their agent", end that
this step modifies the announced purpose of the Federal Reserve
System to deal further with the existing problem of excess reserves.
It looks as if some mischievous person—and I cannot
imagine who it would bo—-has imposed upon you and thus marred
your record for accuracy, which Dr. Goldenweiser considers very
good. Anywayf you have got this thing completely upside-down,
and starting from a one hundred percent erroneous premise, you
have arrived at an equally erroneous conclusion* The truth of
the matter is that the gold sterilisation plan origiintted wholly
and exclusively with the Treasury and was first brought to the attention of Mr. Eccles, his colleagues on the Board and the technical staff here by the Secretary of the Treasury* Therefore, the
assertion that this was somehow concocted by some designing Reserve
System people and put over on the unsuspecting Treasury is the
purest fiction and fancy. The same goes for the corollary that
this in effect is an ingenious device to escape from the dilemma
of letting sore air out of the balloon, as I think you put it.
Sow, you can confirm any or all of this by checking with anyone
on the Board or staff here or st the Treasury who is in the least
familiar with the facts.

llr. Paul Mallon -


I would not presume to take you to the woodshed in
this matter bat for the fact that quite seriously it has caused
the Chairman and all members of the Board as well as of the
staff a great deal of heartache* The imputation, naturally, is
that something was being put over on the Treasury. Aside froa
the fact that this is manifestly a reflection on the integrity
and good faith of the Reserve officials and staff, the really
important point is that it tends to poison the atmosphere and
to destroy the very essential spirit of full and frank cooperation which exists between the Treasury and the Reserve Systeau
I as sure you will agree that it is not in the public interest
to have anything occur, particularly a gross isisrepreseiitation
of the facts, which would disrupt that very necessary cooperation. I do not need to emphasise to you how Intolerable the
situation would be froa the standpoint of the public interest if
these two agencies of government, each possessing broad powers
affecting credit and monetary conditions, were to atteapt to
operate separately, without consultation and in an ataosphere of
suspicion or rivalry—in short, if they were to attempt to function without the fullest end frankest cooperative spirit. 1 can
assure you, as I know any informed person either here or at the
Treasury can, that that kind of cooperation does exist* It is
very distressing, to say the least, to have you broadcast an essay
that makes it appear that this Board and its staff are not acting
in good faith or in conformity with a proper spirit of cooperation.
I am not venturing to suggest that it is possible
now to correct this erroneous impression, but it certainly would
be such appreciated if you would give us a chance to lay the
facts before you in the future before giving circulation to definitely harmful Impressions which are, as in this case, exactly
contr&ry to the facts* In the prevailing spirit also of sweetness
and light that appears to have descended upon the country teapor&rily,
I trust that you will forgive me for bluntly bringing this aatter to
your notice. It could not properly go unchallenged. I know that
you are very busy, but if you would go to the trouble of phoning,
even if you cannot get around here once in a while In person, you
could at least check up on the fairy tales that are sometimes purveyed to trusting columnists like yourself, as I know from painful
Please consider this confidential and off the record.
X shall not attempt to temper what I have said by any gratuitous

Mr. Paul Ballon -


flattery, but I will add that the attention given here to your
cockeyed article and the grief that it has caused are not altogether unflattering. How, if it were an article by
you can fill In the names,—I would not trouble to explain the


This article is protected by copyright and has been removed.
The citation for the original is:
Mallon, Paul. “Gold Control Plan Marks Switch – Excess Reserve Boost Limited as Boom
Control.” Washington Star, December 23, 1936.