View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

I assume you received the letters I recently sent you written
by 0. P. Cordill, Vice President at our Oklahoma City Branch, and
Lyle C. Hague, one of our Class C directors. They should not have
gone astray.




April 1 ? , 1947

Mr. Marriner S. Eccles, Chairman
Board of Governors of the
Federal Reserve System
Washington 2j>, D. C.
Dear Marriner:
In line with your suggestion, I hand you herewith
memoranda which reflect the composite recollection of myself
and all Vice Presidents at our head office concerning the
remarks made by Mr. Vardaman at the meeting of our Board of
Directors here on November 27, 1946, and at a luncheon meeting
the same day at the bank at which the principal officers of
our member banks here and in Kansas City, Kansas, were present , as well as a few representatives of investment firms and
other businesses who had been invited as a result of a suggestion made by Mr. Vardaman1s secretary. Specifically, the
officers of the bank who have collaborated with me in the
preparation of these memoranda are H. 0. Koppang, First Vice
President, D. V». Woolley, Vice President and Cashier, D. C.
Johns, Vice President and General Counsel, and John Phillips,
Jr., Vice President.
There is also herewith sent you memorandum reporting
briefly on Mr. Vardaman1s visit to our Denver Branch on
November 26, 1946, and containing reference to some of his
remarks at a meeting of the branch board there which he
attended and a luncheon meeting which followed, attended by
representatives of our Denver member banks. This memorandum
was prepared by George H. Pipkin, Vice President in charge
of the Denver 3ranch, and Frank E. Larson, Cashier of the
I also hand you herewith a page out of the December 1,5,
1946, issue of "Bank News", which is published in Kansas City.
The editor, Lloyd Riggs, was present at the luncheon here at
which Mr. Vardaman spoke, although he had not been invited.
The "banking official" to whom reference is made in the
second paragraph on the enclosed sheet is Mr. Vardaman. The
statements attributed to him in the second paragraph were
made in an interview, but those in the third paragraph were
made at the luncheon meeting.
Sincerely yours,


E K O R A N D U L I

Regarding remarks of Governor J, K. Vardaman at a
meeting of the Board of Directors of the Federal
Reserve Bank of Kansas City on November 27, 1946•

Governor J, K. Vardaman attended a meeting of the Board of Directors of the Federal Reserve Bank of Kansas City at the head office on the
morning of November 27, 194-6. All members of the Board of Directors were
in attendance, and the senior officers of the bank at the head office were
also present. Following the transaction of the board*s business, Chairman
Caldwell introduced Governor Vardaman and asked him to address the meeting.
The following is a summary of some of Mr. Vardaman1s remarks. No attempt
v/ill be made to quote his remarks verbatim, but the sense of what he said
is summarized according to the best recollection of the officers who were
present at the meeting.
Governor Vardaman opened his remarks by saying that he was returning from a trip to the west coast, which he had made for the purpose of
calling on Federal Reserve banks and their branches. He said that he had
made plans to spend approximately one third of his time in traveling and
visiting Federal Reserve bank offices and clearly implied that he believed
the members of the Board of Governors had heretofore kept too close to
Washington and had not traveled about the country enough to keep in touch
with the current thoughts of bankers and businessmen. He said that since
taking office he had visited all of the Reserve banks and their branches
except the Omaha Branch of this bank and several Reserve bank offices in
the South, and stated that he intended to visit the remaining offices on
a trip which he would commence before the end of the year.
Governor Vardaman expressed the view that the Boards of Directors
of the several Reserve banks should run the affairs of the banks and that
the members of the Board of Governors should concern themselves only with
major matters of policy, particularly policy matters affecting the national
economy as a whole. He did feel, however, that whenever it appeared that
any Reserve bank was failing to live up to its responsibilities, the
Board of Governors should see that corrective measures were taken. By
way of illustration he said that to his own personal knowledge some of
the Reserve banks in past years had been sweat shops and that the treatment accorded to junior officers was completely degrading to them.
He said that the Board of Governors concerns itself too much with
matters of detail, including matters which he considered as properly
falling within the province of the Reserve banks. He said, for example,
that if this bank should desire to increase the salary of a $125 stenographer, it would be necessary for the matter to pass across the desk of
each member of the Board of Governors. Another illustration he gave was
the repair of a driveway at the Federal Reserve Bank of New York, which
he said required the consideration of each member of the Board of Governors
before the work could be undertaken.

-2He stated that he was of the opinion that not only should the
Boards of Directors of the Federal Reserve banks have greater autonomy,
but the branch boards as well should have increased authority. Among
other things he said that the branch boards should pass on all loans
and discounts (which he was advised was the case in so far as the
branches of this bank are concerned), and that they should determine
the amount of currency which should be kept on hand at their branches.
He urged that the bank and its branches be prepared to meet all emergencies. He stated that in his opinion the branch directors were in a
wholly untenable position; that in the eyes of the public they had responsibility for the direction of the affairs of their branches, while
in fact they have no authority at all commensurate with their apparent
responsibility. He thought that the head office board could and should
delegate commensurate authority to the branch boards. In this connection
he said that he had learned to his amazement that a president of one of
the Federal Reserve banks, recently elected, had been named without the
matter having been discussed with any of the branch boards of the bank,
and expressed objection to the selection of the principal officers of
the Federal Reserve banks in this manner.
Governor Vardaman expressed himself as feeling that our Government
has drifted far from the concept of its founders. He stated that Congress
is the medium through which the people exercise their will, and that Congress should reassert itself and again take over the lawmaking function
which is now being performed to a considerable extent by boards, bureaus,
administrators, and other agencies. He said that these boards, bureaus,
and administrators are not elected by the people, that many of them could
never be elected to any public office by a vote of the people, and that
they are in no way responsive to the will of the electorate. He thought
that this situation and the extent to which it has developed create a
grave danger to our Government. The remedy, he said, is in the hands of
the people, and that businessmen, bankers, and all other thinking members
of the public should make their concern known by communicating directly
with members of Congress who represent them and by urging their elected
representatives to bring about a correction of the situation he described,
This theme v/as elaborated at some length.
He stated it to be a well-known fact that the great bulk of the
work of governmental boards, bureaus, administrators, and agencies is
done at staff level, and expressed the opinion that if the situation to
which he had directed attention is to be corrected, it will be necessary
to begin at staff level and make a clean sweep. He expressed himself as
having a low opinion of the staff of the Board of Governors, and said
that if he had his way there would be a general housecleaning. He also
questioned the value of the Board1s research department and said he felt
that the Board, and the Government generally, for that matter, would be
better off with fewer "long-haired" economists.

-3In a brief discussion period which followed, Chairman Caldwell
observed that it appeared that Mr. Vardaman had taken over the role
which Governor UcKee had occupied on the Board of Governors. Mr. Vardaman
replied that he had not, because Governor McKee had only talked about things
which needed to be done, while he (Mr. Vardaman) proposed to do something
about them.

M E M O R A N D U M

Regarding remarks made by Governor J. K. Vardaman at
a luncheon in the dining room at the Federal Reserve
Bank of Kansas City on November 27, 1?46.

At noon on November 27, 1?46, following a meeting of the Board
of Directors of the Federal Reserve Bank of Kansas City which Governor
Vardaman attended, a luncheon was given at the bank in honor of Mr.
Vardaman. In addition to the directors and officers of the bank there
were present, pursuant to the bankTs invitation, the presidents (or
designated representatives) of all member banks in Kansas City, Missouri,
and Kansas City, Kansas, and several investment bankers and businessmen.
After luncheon Chairman Caldwell introduced Governor Vardaman and asked
him to address the group. The following is a summary of portions of
Governor Vardaman's remarks. No attempt will be made to quote Governor
Vardaman^ remarks verbatim, but the sense of what he said is summarized
according to the best recollection of the senior officers of this bank
who were present.
Governor Vardaman referred to the fact that he had but recently
completed five or six years of service in the Navy, and said that he had
gone into the Navy because he considered he had a job to do. He said
that upon his return to this country he was appalled at the extent to
which our economy has been regimented and the extent to which the country
is being governed by boards, bureaus, administrators, and other agencies.
He enumerated some of the bureaus and agencies for which he expressed
dislike, naming them by their alphabetical titles, and in doing so included, apparently unintentionally, the FDIC. Immediately he corrected
himself and said that he v/ould not include the FDIC with the others because it is one agency which "is a damned good outfit".
Governor Vardaman stated that as a member of the Board of Governors
he is one of the "untouchables". By that he said he meant that he had
been appointed and confirmed for a term of fourteen years and was not subject to removal. He said, however, that he had no intention of holding
the office anything like that long. He stated he had not sought the
office; that the position had been offered him before the war; and that
without any suggestion on his part he had again been asked to accept
He expressed satisfaction at the outcome of the November-1946
elections. The results, he said, were wholesome, in that they evidenced
the dissatisfaction of the people with the kind of government to which
they are being subjected. He said that this attitude was not a new
thing with him because he had long been preaching constitutional government, and observed that he has been subjected to violent and personal
attack by left wingers, but that it did not worry him a bit because he
didn't "give a damn" what they said about him.

-2He said that Chairman Eccles is a brilliant man and that he deserves great credit for the Banking Act of 193.5 > for which he said Mr.
Eccles ?/as almost v/holly responsible. He remarked that the other members of the Board of Governors are hard-working and conscientious men.
Governor Vardaman repeated in substance what he had said at the
meeting of the Board of Directors of the bank that morning with respect
to legislative authority being exercised by boards, bureaus, administrators, and other agencies, and the need for Congress again to assume its
legislative function. By plain implication he allied himself on one
side of this issue and Mr. Eccles on the other, with the other members
of the Board going along under the Chairman^ domination. He reiterated
that the will of the people is given effect through the Congress and
stressed the necessity for all citizens to let members of Congress know
what is expected and wanted of them.
He stated that the legislative functions of Congress are being
exercised by other governmental bodies in three ways: (l) through a
delegation of authority by Congress, which he felt had been mistakenly
made, and, accordingly, should be revoked; (2) through exceeding limited
authority delegated by Congress; and (3) through a usurpation of authority,
He said that two regulations issued by the Board of Governors were good
examples, although he did not specify in which of the three above classes
they fall. The first, he said, is Regulation i", which he stated was
obscurely based upon an xict of Congress passed in 1917 during the first
World Wax. Under it he said there is complete regimentation of consumer
credit, which is regimentation of the very type the people have shown
they are seeking to throw off. He said it was never intended that the
Board of Governors should have power to regulate the way in which individual citizens spend their money.
The other example, he said, was Regulation T (although he made
no mention of Regulation U, his references to Regulation T were clearly
applicable also to Regulation U ) . He said that under Regulation T the
Board of Governors was undertaking to regulate the stock market, and
that it was never intended that the Board should have such power. He
said he had carefully examined the statutes underlying the regulation
and found in them only the power to regulate and nothing which would
authorize the Board to "strangulate" the stock markets, which he said
was being done with the 100 per cent margin requirement.
At the conclusion of Mr. Yardaman's talk, one of the bankers
present, Mr. R. Crosby Kemper, President of City National Bank and
Trust Company of Kansas City, referred to a talk made by Chairman
Eccles a few months earlier before a similar luncheon in Kansas City,
and stated if he correctly understood Mr. Eccles that he (Mr. Eccles)
considers that the Federal Open Market Committee can control the

-3Goverrunent bond market, and that the Committee should control it for an
indefinite period into the future. He observed that from Mr. Vardaman's
remarks he assumed that he (Mr. Vardaman) was not in agreement with Mr.
Secies on that subject. Mr. Vardaman replied that the assumption was
correct; that, in the first place, he felt that neither the Open Market
Committee nor any other instrumentality or group had the power to control
the Government bond market, but that if the Committee did have such power
Congress should remove it because it is too much power for any group of
men to have.

Denver - November 2^-26, 1?46
Within a fevr minutes after I met Governor Vardaman at the station, he
made the statement that to his amazement he had discovered the Federal Reserve
System and i t s operations were in a deplorable condition and that, unless corrected, the System could not e x i s t another ten years.
He stated i t -was his
definite aim to oorrect such existing conditions and that was his main purpose
in v i s i t i n g each home office and branoh.
He met at the branoh with the branoh directors and -we invited to the
meeting Mr. T. A. Dines and l o c a l ex-directors - Mr. John Evans, Mr, Henry Swan,
Mr. J. B* Grant and Mr. H. W. F a rr.
At this meeting Mr. Vardaman offered certain
criticisms of methods of operation, -which follow.
(a) That i t -was ridiculous for the branoh board not to be permitted to
pass on rediscounts but to have the paper forwarded to the head office for final
(I explain** that at the branches in the Tenth Federal Reserve Dist r i c t the branoh direotors did give final approval to rediscounts and that the
paper was held at the branch.)
(b) That the branch board should determine the amount of money(Agent•3
oash) that should be held in the branch vault.
(I explained that i t had been
the practice at this branch to have on hand not to exceed approximately fifteen
million d o l l a r s , whioh was an arbitrary figure determined by our head offioe
based on past experience.
You may reoall that at the time of the banking holiday
Mr. John Evans attempted to withdraw from this branoh the amount of the reserve
balance of his bank as he did not want to close along with other banks. Mr. Swan
was a member of the Discount Committee at that time and he and Mr. Olson refused
to make delivery of the money to Mr. Evans1 bank, and since that time Mr. Svans
has been rather c r i t i c a l of the fact that the branoh board did not determine the
amount of money to be held here.)
(c) That the branoh board should be given more authority and should be
taken into oonsideration to a greater extent by the home o f f i o e .
His exact
statement cannot be recalled but i t gave the impression that the branch should be
practically independent of the home offioe and i t s operations directed by the
branoh board*
(d) That there should be more Federal Reserve banks and branches. He
stated i t was s i l l y to think the San Franoisoo bank could service such a large
area and made mention of the New Orleans branch being as big, if not larger, than
i t s home offioe at Atlanta.
(e) Comment regarding the Board of Governors was to the effeot that the
Board members were so engrossed in d e t a i l s that e n t i r e l y too many policy matters
were determined at staff l e v e l .
He mentioned the fact that i f t h i s branoh board
wished to grant a $10 a month salary increase for one of the employes, the recommendation must neoessarily go over the desk of each Board member in Washington for
approval or disapproval.
(I made no attempt to correct t h i s statement at the time
but l a t e r did inform our direotors that his statement was not correot as salary
inoreases are approved or disapproved by the branoh board within Form A brackets
and exceptions thereto*)
At the time Governor Vardaman also made mention of the
approval of a $7,000 paving b i l l for the driveway of the Federal Reserve Bank of
New York and stated suoh matters should not be presented to the Board of Governors*
(f) He stated that only recently one Federal Reserve Bank had eleoted a
President and had done so without submitting the matter to a single branoh board
member of i t s d i s t r i o t *
He indioated this should not have been done as the Presi
dent eleoted might have been objectionable or undesirable to a branoh board or
member thereof*
Federal Reserve Bank of St. Louis

-2(g) At the noonday luncheon attended by the branoh board, Mr. Dines and
ex-board members, together with, local bankers, Mr. Vardaman made the statement
that while he and Mr, Socles did not always see eye to eye, he was a great admirer
of Mr* Eooles, that they were close friends and he loved him very much*
He also
stated that while he was a friend of President Truman, he was not a poker player
and had never been swimming in the White House pool,
(h) He stated he was on a swing around the country to get firsthand
knowledge of the Federal Reserve banks and branches and to obtain the opinions of
their officers and directors,
( i ) At the meeting at the branoh with directors and ex-directors and
also at the luncheon he kept reiterating the fact that those present should keep
in close touch with their senators and congressmen, and that Washington was so
bogged down with bureauoraoy and "shiny pants economists," i t was in a t e r r i b l e
e stated that the only way anything oan be aooomplished is to l e t the
senators and congressmen know, and that we should get baok to the original conoept of the executive, judicial and l e g i s l a t i v e in our government.

Y/ritten by G-eorge H. Pipkin, Vice President in charge of Denver Branch,
(in collaboration with Frank H. Larson, Cashier) t o H. G. Leedy, President
of Federal Reserve Bank of Kansas City.

These articles are protected by copyright and have been removed.
The citations for the original articles are:
Bank News, “What Bankers Tell Me,” December 15, 1946.
Bank News, “Gale Johnston to Head Mercantile-Commerce,” December 15, 1946.
Bank News, “The Bankers Who Participated in Bank News’ Survey on the 1947 Outlook,”
December 15, 1946.




April 21, 19U7«


Dear Gavin:
Through an oversight, probably on my part, you
did not previously receive an acknowledgment of the
letters of Mr* Cordill and Mr. Hague. They arrived safely
and the Chairman very much appreciated having them*
As you know, he is visiting the San Francisco
Bank and will not be back until May 10. Meantime, let
me thank you for your April 19 letter to him which he had
advised me he expected.
With best regards.
Sincerely yours.


Mr. H. G. Leedy, President,
Federal Reserve Bank of Kansas City,
Kansas City, Missouri.