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W. J . O ' C O N N O R






C 1 T Y



April 4, 1942,

Mr. Marriner Eccles,
Governor, Federal Reserve Bank,
Washington, D. C.
Dear Marriner:
I suppose you have received several letters from Utah already
about your recent statements on the silver legislation that is now
in effect.
Personally I never did agree with Senator Pittman's idea of
trying to buy up all of the silver in the world, and I thought this was
folly at the time that he put over this program. However, I think there
is some justification for the purchase of domestic silver at the fixed
price of 71 cents an ounce, particularly at this time when the government
wants to get out all of the lead and zinc that it possibly can.
I can tell you, without any exaggeration, that such mines as
the Silver King Coalition and the Tintic Standard would have to close down
if the price of silver were reduced to the world figure. I don't believe
that most people realize what has been happening to the mining industry
in the State of Utah during the past several years. All of the mines exclusive, of course, of Utah Copper - are having a very difficult time.
Labor costs are now considerably in excess of 1929, and these costs,
burdened with unemployment insurance and Social Security taxes, make it
almost impossible for silver, lead and zinc mines to be operated at a
profit. While I know the government has set premium prices on extra
production of metals, this is not going to be of much benefit to the
mining industry here, because of the 40-hour week, and the overtime that
would have to be paid to work additional shifts to produce any premium metal.
In smelting copper, we require large tonnages of silicious ores,
and most of the value in these ores is gold and silver, as they carry
very little of the base metals. On 36-cent silver I know that a great
many of these mines would also have to shut down, and this would seriously
affect our operations at Garfield, where we are smelting the Utah Copper
output, which is about 28 per cent of the United States production of copper.
Last year there were produced in the United States 67,052,469
fine ounces of silver, and assuming that the government is paying a bonus
of 36.2 cents an ounce on this silver,in 1941 they put out approximately
$24,000,000 in premiums or bonuses, or whatever you and Mr. Morgenthau
want to call it, above the world price. The farmers have recently put
over a parity program in Congress, on which I have seen figures that
indicate that this will make the cost of foodstuffs $1,000,000,000 more
to the American people this year than it would have been otherwise.
This was as fine a piece of high-pressure highjacking as I have ever seen
put over.




The labor unions, from all the reports that I have read, will
receive about $3,000,000,000 in overtime on war contracts that have
been let, and this is another example of governmental benefits that
runs into real money*
I agree that fundamentally a bonus on farm products or to labor
or to silver is unsound, but certainly if the administration sees fit
to support and tolerate such bonuses to large pressure groups of voters
such as the farmers and labor, I cannot see any reason why there should
be such an attack on the bonus to the mining industry, that amounts to
only some $25,000,000 a year* This $25,000,000 ordinarily I would consider
as probably a tip for the hat check boy in the language of the President
and Congress when it comes to spending money.
The production of metal is one of the most vital ones for the
war program, and I can assure you that much of the lead and zinc in this
district would not come out if it were not for the government price on
silver; if this were reduced to 35 cents I know that the largest silverlead mines here would be forced to close, and this is a conservative
appraisal of the situation*
1 think that the Pittman program of world buying of silver weakened
the silver cause, but on the present basis of buying the domestic output
at a premium I cannot see why, in this war situation, this is not justified
in order to permit the miners to get out the lead and zinc that are so
I think that if you were in the West, and could spend a couple of
hours with me going over several years1 ore purchase reports here, I could
show you conclusively that our mines, exclusive of Utah Copper, could not
operate without the present government price of silver.
From the standpoint of sound economics I am opposed to bonuses
and premiums, but I believe that if you were fully aware of the benefits
to the nation from the small expenditure that the government is making
on silver, you would not be making it tough for us here in Utah by advocating
repeal of the legislation.
Aside from this, how are you getting on? I am glad to see that
you are agile enough to stay on the job without getting into the jam that
Jess Jones and some of the other boys seem to get into. I know it must
be exciting and interesting down in all of the hurly-burly of Washington,
but I imagine that at times you would like to be out here in the sticks
again* However, I can tell you that with all of the OPM's, WPBfs and SOB's
and so forth, our lives are not a bed of roses either. However, I believe
that out of the welter and confusion there are some constructive things
being done, and that eventually the administration will realize that
winning the war is of more importance than political advantages*

Kind regards

April 8, 191*2,
Mr* W* J. O'Connor, Manager,
American Smelting and Refining Company,
Utah Department,
Salt Lake City, Dtah.
Dear Bill:
It was a relief to get your well reasoned letter of April
I. wfaioh is in sharp contrast to some of the uncomplimentary com-*
munioationa that I brought down on my head as a result of reiterating
the views I have expressed for a long time about the purchase of ail*
ver* I think you make the most persuasive case that can be made for
a subsidy to domestic producers, and I am glad to see that you agree
with me about the Pittman program for buying foreign silver.
If the Government feels that it is in the public interest to
continue to pay a subsidy for domestic production, then perhaps it is
justifiable so long as it is frankly recognized as a subsidy* In wartime, however, I cannot see the justification* I would prefer, if
necessary, to pay a higher price or a subsidy for the production of
copper, zinc, lead, etc*, which are needed in the war effort rather
than to go on paying a subsidy on silver in order indirectly to procure the needed metals*

I think you will agree that we do not need any more silver
and that it does not make sense to keep on buying it and burying it at
West Point* However, if we are going to do that, then I think we
should release the silver for industrial uses at the commercial price
and let the Government take the loss, that is, the difference between
that price and the subsidy* I could justify this as a war measure*
It does not seem to me that there is a real analogy between paying
what in effect are bonusea for the production of foodstuffs or to labor
sinoe the products sought are essential to the prosecution of the war
and are not, or certainly should not be, stored away, except possibly
on the ground of the so-called ever-normal granary principle* It must be
remembered that the bonuses paid for agricultural production required
curtailment of acreage* In other words, there was an effort to gear
the production to demand, whereas the silver bonus serves only to call
forth an increasing production for which there is no market*
Let me put it this ways The Government cannot continue to
buy and store silver for which there is no present or prospective use*
The subsidy begets a production that is not necessary now or in the
future* Whereas, there is something to be said for encouraging agri-

Mr* W. J* OfConnor


April 8, 19U2


cultural production for present or future needs*
As I have said before, I am relieved to have your realistic
and reasoned approach to this always difficult problem*
Washington is, of course, a good deal of a hurly-burly, as
you say, and I perhaps have been fortunate in avoiding some of the pitfalls that ny friends and associates get themselves into from time to
time* The democratic process is slow, complicated and often discouraging, but somehow we manage to muddle through* As has been said
before, the difference between us and the British is that they plan to
muddle and ve just muddle*

With kindest personal regards,

Sincerely yours,