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-25

September 1, 19U3•

Dear Judge Vlnson;
Thinking you may be interested, X am enclosing for
your confidential information a mimeographed copy of the
statement on Controlling the Inflation of Capital Values
which I read at the conference called by you on August 26»
This memorandum has been supplemented by the comments I
made at that meeting*
Sincerely yours.

Honorable Prod M. Vinson, Director,
Office of Economic Stabilisation,
Federal Reserve Building,
Washington 25, D. C,

Enclosure

MSE:b




-25

September 1,

Dear Dans
In accordance with our telephone conversation
of last week, I am enclosing for your confidential information a mimeographed Gopy of the statement on Con~
trolling the Inflation of Capital Values which I read
at i:he conference Wiled! by Judge Vinson on August 26.
This memorandum has been supplemented by the comments
I made at that meeting.
I am also enclosing memoranda prepared by
members of the Board's staff on the war housing program.
Sincerely yours,

Honorable B. W. Bell,
Under Secretary of the Treasury,
Washington, P. C.

Enclosures

MSE;b




-25

September

Dear Harold:
In accordance with our telephone conversation of
last Friday, I am enclosing for your confidential information a mimeographed copy of the statement on Controlling
the Inflation of Capital Taluea which I read at the conference called by Judge Vinson on August 26. this memorandum has been supplemented by th© comments I sade at
that meeting.
I am also enclosing memoranda prepared by members of the Board's staff on the war housing program.
Sincerely yours.

Honorable Harold !>• Smith, Director,
Bureau of the Budget,
Washington 25, B. C.
Enclosures

MSE:b




-25
September 1, 1943*

Dear Mr, Blanfords
Thinking you aiay be Interested, I a® enclosing for
/our confidential information a folfteographed copy of tbe
statement O R Controlling tfa# Inflation of Capital Values
which I read at the conference called by Judge Vinsoa on
August 26, This m®mr&n&im

has been supplemented by the

I m&de at that m#etittg*
Sincerely yours>

1ion,Jfoha B. Blanforci, Jr.,
, i&tioaal
, D,
Enclosure
Identical letter sent to the folio-wing:
Jaetgo Vincon
George C. Haas
Dnni nT" WIL DrrTl
Ganson Pure ell
James F. Brownley
Ilait»M -Dw Omith
Ben Cohen
James Twohy
Leo T. Crowley
Claude u . Wickard




FEDERAL-HOME LOAN BANK ADMINISTRATION
WASHINGTON

September 2,
OFFICE OF THE GOVERNOR
FEDERAL HOME LOAN BANK SYSTEM

PERSONAL
Honorable Marriner S. Eccles
Chairman, Board of Governors
Federal Reserve System
Washington, D. C.
Dear Marriner:
Many thanks for the copy of your statement on "Controlling the
Inflation of Capital Values". A reading of it confirms and even
heightens the opinion I formed of its thoughtful balance when I
heard you read it at Judge Vinson's conference on the twenty-sixth.
I said nothing at that meeting because the assembled minds seemed
to converge so rapidly into agreement that I thought any expression
of mine would be a waste of words and time. Otherwise, I might have
added, in extension of Mr. Blandford's remarks, that we in the Home
Loan Bank System, among our membership, find in a lesser degree the
same anxieties which alarmed Secretary Wickard, - I mean the natural
tendency to follow appraisals upward in urban real estate trading,
with the consequent signs of an inflationary spiral. So far, the
problem in our own System is a kind of low-grade infection which we
are struggling to control with Mr. Blandford's excellent help, by
collaboration with the FHA through the supervisory medium. We recognize, of course, that the infection might flair up and become acute
because of the enormous distortion of the national economy inherent
in L40 billions of annual income. I don't wish to minimize the dangers, therefore, in expressing the opinion that the proposed Executive Order should not be issued.
I agreed then, and do now, with you and Leo Crowley (of itself something of a phenomenon, if not a record1) that the issuance of the
proposed Executive Order by the President at this time would be a
mistake. My reasons are:



- 2 -

1, As your statement so wisely pointed out, the powers which
the Order would impose upon the Federal Reserve Board would probably
be inadequate to accomplish the end sought without an accompanying
tax program which would reach the inflationary profits accruing from
speculation in farm or urban real estate. The Order, therefore> would
not be the "long-barrelled squirrel-gun" which Judge Vinson is properly
seeking, but rather a kind of "bow-and-arrow" which would of itself
be ineffective, and very likely might be embarrassing to your Board in
its employment.
2. I agree with Leo that the sudden issuance of this Order, with
the country so unconditioned for it, so unaware of any real need and
so thoroughly skeptical, if not hostile, to government by decree, would
be a psychological shock with bad consequences. This fact, as you
remarked, should not deter us if the Order were provably necessary and
effective. With the present doubt surrounding both points, however, it
would seem to me a gratuitous invitation to trouble. While I, like
Leo, disclaim any authority as an economist, I am something of a
specialist, I believe, in public psychology and I think I know how the
mind of the people throughout the country is running. Entirely outside that class of whom Judge Vinson spoke, who are so "ag 1 ^ 111 the
Administration that they will condemn anything and everything it does,
the great mass of our people are very honestly and anxiously dubious,
as you know, about the trend toward what they broadly and indiscriminately call bureaucvs.cy. These people are the salt of the Republic,
and they are going to determine its long-range policies. It is no
part of reprehensible politics, so-called, but rather of wise statesmanship to follow the slower and more patient Democratic process of
enlightened discussion and debate before "popping-off" with sweeping
orders for which they are unprepared. Broadly speaking, these folks
by the million, I believe, are persuaded that the President is a wise,
patriotic and providential leader, raised up at a critical time to
head the country. They are equally convinced, however rightly or
wrongly, that he is surrounded and frequently victimized by"totalitarians"of one kind or another, who are eager to use the emergency for
destroying their traditions and their rights. I don!t argue for or
against this belief as here loosely put, but state it as a fact to be
reckoned with. Certainly should such an order as this be promulgated,
it would exasperate the public temper and invoke a very lively resentment among the quiet millions who will be very vigorously heard from
before long.




- 33. I am wondering whether this order, even if the arguments
against it, numbers one and two as above, were resolved, would go
to the heart of the trouble. As Secretary Wickard said, and as we
know in our shop, these speculative and inflationary tendencies are
not arising so much in credit as in cash, and even if you could lay
an iron hand of control on credit, you might miss most of the abuses
as your own memorandum, of course, points out.
The whole matter needs further study, as you said.




As ever yours

James Twohy
Governor

FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON
OFFICE OF THE CHAIRMAN

25

September 6, 1943

% dear Marriner:
I appreciate your thoughtfulness in sending me a
copy of your statement on Control,l\np the Inflation of Capital
Values which you presented at the recent conference called by
Judge Vinson.
incerely yours,

, CROWLEI,
Cnairman.

The Honorable Marriner S. Eccles, Chairman
Board of Governors of the Federal Reserve System
Washington 25, D. C.