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December 10, Dear John: I enclose a copy of a statement which I read before the Joint Committee on the Economic Report this morning to clarify the erroneous newspaper reports of serious cleavage between John Snyder and the Reserve Board. I had a talk last night with John and we agreed upon this statement. I think it should clear the way and felt you might be interested in seeing it. I an sending a copy to Clark Clifford for his information also. Sincerely yours, Mr. John R. Steelman, Assistant to the President, TheffihiteHouse. Enclosure December 10, Dear Clark: As the result of a very satisfactory talk I had last night with John Snyder, we agreed upon a statement, copy of which X enclose and which I read today before the Joint Committee on the Economic Report. Exaggerated newspaper accounts of a cleavage between John and myself disturbed us both, and I think that this should go a long way toward putting an end to that kind of interpretation of our views. I am sending a copy to John Steelman for his information as well* Sincerely yours. Mr. Clark M. Clifford, Special Counsel to the President, the White House. Enclosure ET:b STATEMENT BY CHAIRMAN ECCLES AS RESULT OF CONFERENCE WITH SECRETARY SNYDER December 10, 19l+7« In view of the fact that some of the press has emphasized a difference in viewpoint between Secretary Snyder and myself in regard to the Board's so-called special reserve proposal, I would like to take this opportunity to clarify the record. I have discussed the matter with the Secretary. The fact is bhat the area of agreement between us is much more complete than has been represented* Such difference as exists is in evaluating the degree of restraint on inflationary expansion of bank credit that would be exerted by the special reserve requirement. He has expressed to this Committee some doubt as to its effectiveness. I am more sanguine about it. We both feel that whether the special reserve is needed at all or whether some stronger measure of restraint may be neoded next year depends on factors "which cannot be determined in advance with certainty at this time. We arc in full agreement: 1. That the most effective anti-inflationary measure has been and should continue to be a vigorous fiscal program to insure the largest possible budgetary surplus consistent with the Government's obligations at home and abroad. 2m That coupled with an intensified savings bond campaign, the program accomplishes two vital purposes. To the extent that savings of the public are invested in savings bonds, spendable funds are taken out of the market place at this time of excessive demand and insufficient supply and can be used to pay off maturing debt held by the banking system. Likewise, a budgetary surplus can be used to reduce bank-held debt. Both measures reverse the process by which the money supply was increased during the war and are effective anti-inflationary influences. 3» That the program which the Treasury and the Open Market Committee have been pursuing during the year has been effective and will continue to exert restraint during the next few months, when the Treasury will continue to have a substantial cash balance that can be used to reduce bankheld public debt. U« That some additional restraint may be expected as a result of the joint statement of Federal and State bank supervisory authorities cautioning banks against overextension and inflationary lending. 5» That the problem will present a different phase when current debt-payment operations are no lorger available. If it appears that other restrictive steps are needed, increased reserve requirements or possibly some stronger measure may be necessary* 6. That this will depend on the course of events and in part upon self-imposed restraint by the banking community, which has gained a broader understanding of the problem as a result of discussions before Congress and in the press. 7. That the Board's proposal is not in any sense a substitute for but a supplement to the fiscal program and direct action on other fronts where inflationary forces are generated but cannot be corrected by monetary and fiscal policy alone. - 2 - 8. That under present and prospective conditions i t is essential to maintain the established 2-l/Z per cent rate on long-term marketable Government securities, 9» That restraints should be reinstated on instalment credit* The area of disagreement, therefore, narrows down to whether the special reserve would be appropriate i f additional measures prove necessary to limit the now unrestricted access of the banking system to reserves upon which a multiple expansion of bank credit can be built.