The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
J. L. DRISCOLL P. O . B O X 830 BOISE, IDAHO A p r i l ? , 1951 Mr. Marriner S.Eccles Board of Governors Federal Reserve System Washington, D.C. Dear Marriner: I certainly enjoyed the t r i p to Lewiston, Pullman and Spokane with you and your talks. They were very educational and thought inspiring,Marriner. On my return home yesterday I telephoned Harry Emerson to express to him on your behalf and my own our appreciation of his hospitality and many courtesies. I n the process of doing so I made inquiry of what happened to him in Pullman. I t seems that T r i p l e t t with whom we rode to Spokane had three fellows hanging on to him that he asked Harry to take over to another cocktail party i n one of the dormitories as T r i p l e t t for some reason didn*t want them to go to Dr, Compton^ home* Harry did that and when he f i n a l l y succeeded i n getting loose, i t was too late to come down to Dr. Gomptonfs so much to his regret he f a i l e d to see us again. As per our discussion I enclose herewith copy of l e t t e r that I sent to Senator Welker last week i n answer to a telegram that I had received from him stating that he "would appreciate my views on the continuance of RFC.» COPY V i l 3, 1951 H o n o r a b l e German W e l k e r United. S t a t e s S e n a t e Senate O f f i c e B u i l d i n g Washington, D.C. Dear German: A f t e r my r a t h e r s t r e n u o u s W a s h i n g t o n v i s i t , I h a v e r e t u r n e d t o my c esk t o t r y t o c a t c h up on some o f t h e a c c u m u l a t i o n so f i r s t o f a l l I want t o a d d r e s s you on t h e s u b j e c t o f t h e RFC. As you know t h e RFC was o r i g i n a l l y c r e a t e d by M r . H o o v e r as an emergency o r g a n i z a t i o n t o a s s i s t i n h a n d l i n g t h e c o n d i t i o n s r e s u l t i n g i n t h e 1932 d e p r e s s i o n . I n my o p i n i o n i t s f o r m a t i o n and a c t i v i t i e s I n c i d e n t t o i t s purposes were e n t i r e l y J u s t i f i e d . At t h a t t i m e c o n d i t i o n s had so d e v e l o p e d t h a t b u s i n e s s i n A m e r i c a had o r a c t i c a l l y come t o a s t a n d s t i l l w i t h t h e r e s u l t t h a t t h e r e was no m o n e t a r y v a l u e t o a n y t h i n g s i m p l y "because no one had any money w i t h w h i c h t o buy t h i n g s . W h i l e t h e p u b l i c has never g e n e r a l l y r e a l i z e d i t , the immediate reason f o r M r . R o o s e v e l t d e c l a r i n g the bank h o l i d a y was t h e f e e t t h a t t h e p u b l i c and i n t h a t I i n c l u d e b i g b u s i n e s s as w e l l as l i t t l e , had become so f r i g h t e n e d t h a t t h e y had w i t h d r a w n money f r o m t h e T r e a s u r y , S u b - t r e a s u r i e s and t h e b a n k s o f A m e r i c a and I mean c a s h , n o t c h e c k s , a t such a r a p i d r a t e t h a t t h e r e was no l o n g e r any c u r r e n c y a v a i l a b l e anywhere t o p a y w i t h d r a w a l s . I haven't forgotten t h a t when t h e h o l i d a y was a b o u t t o end I t e l e p h o n e d t h e F e d e r a l R e s e r v e Bank i n S a l t Lake t o a s k them t o c h a r g e o u r a c c o u n t , w h e r e we had w e l l o v e r a m i l l i o n d o l l a r b a l a n c e , t o s h i p us a h a l f m i l l i o n i n c u r r e n c y and was a d v i s e d by t h e F e d e r a l R e s e r v e Bank t h a t t h e y had no c u r r e n c y , t h a t they expected a shipment from the T r e a s u r y Department f r e s h o f f the p r i n t i n g p r e s s w i t h i n the next t w e n t y - f o u r h o u r s a t w h i c h t i m e t h e y hoped t o be a b l e t o s h i p us t h e a c t u a l y c u r r e n c y . N e i t h e r h a v e I f o r g o t t e n t h e h o u r and a h a l f t e l e p h o n e c o n v e r s a t i o n I had w i t h a l l t h e members o f t h e Soa^rd o f t h e .RFC on e x t e n s i o n l i n e s i n W a s h i n g t o n d e b a t i n g wh'at.we c o u l d l o a n on l i v e s t o c k t h r o u g h t h e R e g i o n a l - Honorable Herman Welker 2 - • A p r i l 3, 1951 i h e Congressional Act A g r i c u l t u r a l O f f i c e I n Boise. r e q u i r e d that we loan on good and adequate s e c u r i t y . I was i n s i s t e n t at that time that t h i s o f f i c e make loans of $4,00 per head on sheep, t h a t nothing else would accomp l i s h the desired purpose. The members of the board c a l l e d my a t t e n t i o n to the fact t h a t the sheep c o u l d n ' t be sold at $4.00 per head and debated whether making such loans was securing good and adequate s e c u r i t y . Of course, the sheep c o u l d n ' t be sold at S4.00 a head; they couldn t be sold at a l l under the e x i s t i n g c o n d i t i o n s so we proceeded to make those loans to good o u t f i t s such as Andy L i t t l e , Archabal and other e q u a l l y s u b s t a n t i a l layouts n o t w i t h standing the p r o t e s t of some members of the RFC Board. The f i n a l outcome of that tyDe of l e n d i n g was that t h i s o f f i c e of the RACC returned to the Treasury a f t e r paying i n t e r e s t on the money used and a f t e r paying a l l expenses and absorbing a l l losses a net p r o f i t of over h a l f m i l l i o n dollars. Such was the background of the country at the time the RFC was e s t a b l i s h e d to o f f s e t i t . The i n c i d e n t s I have o u t l i n e d above were Just one phase of the whole economic problem e x i s t i n g . They are t y p i c a l of what was going on i n a l l l i n e s of endeavor throughout the c o u n t r y . I t h i n k I t goes without saying that I thoroughly approved the formation of the RFC and t h i n k the r e s u l t s accomplished f u l l y J u s t i f i e d the Government's sponsorship under such emergency c o n d i t i o n s . Since then, however, the RFC l i k e a l l 3-overnment agencies once they are created, has t r i e d to J u s t i f y i t s continued existence with the r e s u l t that i t has spread out i n t o a l o t of f i e l d s of a c t i v i t y t h a t were never contemplated at the time of I t s c r e a t i o n . That i t has gone f a r a s t r a y I n i t s o p e r a t i o n and management has , I t h i n k , been amply demonstrated w i t h i n the l a s t few months and c o n t i n u a t i o n of i t s present a c t i v i t i e s and methods i s wholly U n j u s t i f i e d . At the present time we are f a c i n g an e n t i r e l y d i f f e r e n t set of circumstances from what existed at the time the RFC was formed. Now we have an I n f l a t e d economy as compared to a t o t a l l y d e f l a t e d economy at the time of i t s formation. We a l s o at t h i s time have a war s i t u a t i o n f a c i n g us and i t Is i n connection with that a c t i v i t y that c o n t i n u a t i o n of the RFC i n some form i s J u s t i f i e d i f i t i s J u s t i f i e d at a l l . At the present time there are some businesses which t u r n to the RFC f o r c a p i t a l loans which commercial banks cannot handle to advantage. Some of n onorable 3 - A p r i l 3, Herman W e l k e r 1951 t h e s e a r e s m a l l , some o f them a r e l a r g e and t o t h e e x t e n t t h a t t h e s e are of Importance i n c o n n e c t i o n w i t h the development of our defense e f f o r t , probably the c o n t i n u a t i o n o f t h e RFC i n some f o r m may have some j u s t i f i c a t i o n . On t h e o t h e r hand i n my o p i n i o n making easy government c r e d i t f o r c a p i t a l investment a v a i l a b l e to businesses or e n t e r p r i s e s which a r e not o f importance i n c o n n e c t i o n w i t h our d e f e n s e e f f o r t i s s i m p l y a d d i n g f u e l t o t h e i n flationary fire. I f a b u s i n e s s or e n t e r p r i s e cannot u n d e r p r e s e n t monetary c o n d i t i o n s secure adequate c a p i t a l from p r i v a t e sources to f i n a n c e i t s o p e r a t i o n s o r i f i t has such p o o r management t h a t I t h a s n ' t o f i t s e l f b u i l t up t h e necessary c a p i t a l to s u c c e s s f u l l y run i t s business, t h e n w h a t j u s t i f i c a t i o n i s t h e r e f o r t h e Government t o f u r n i s h the c a p i t a l . Such f i n a n c i n g , as I see i t , s i m p l y i n c r e a s e s t h e i n f l a t i o n a r y p r e s s u r e s as s t a t e d a b o v e . W h e t h e r o r n o t t h e r e i s a s u f f i c i e n t amount o f demand f o r c a p i t a l l o a n s t o b u s i n e s s e s from government a g e n c i e s t h a t c a n n o t o t h e r w i s e be a d v a n c e d f o r t h e p u r p o s e o f f i n a n c i n g t h e d e f e n s e e f f o r t , I am n o t i n a p o s i t i o n t o say b e c a u s e I do n o t have t h e n e c e s s a r y i n f o r m a t i o n on t h e o v e r a l l p i c t u r e , b u t i n my o p i n i o n t h a t i s t h e o n l y j u s t i f i c a t i o n f o r t h e c o n t i n u a t i o n o f t h e RFC. My t h i n k i n g i s , Herman, t h a t i t w i l l be c o n t i n u e d r e g a r d l e s s b e c a u s e I t h i n k t h e S o u t h e r n e r s and t h e A d m i n i s t r a t i o n want i t c o n t i n u e d so I b e l i e v e t h e r e a r e s u f f i c i e n t v o t e s t o keep i t g o i n g b u t i f i t i s c o n t i n u e d , c e r t a i n l y i t s h o u l d be e n t i r e l y revamped and r e - o r i e n t e d in i t s operations. Yours v e r y truly, J. L.Dri scoll JLD/c May 3, 1951. De«r Lynn: I returned to V.shington on Thursday, April 12, to find your letter of April 7, enclosing copy of l e t t - r *o Senator Velker, rrrived at my office shortly before my return. I have been so busy that I have not h d an opportunity to reply before no*. I think your letter to Senator Velker, relative to the R.F.C., is a very gooi short analysis of the history of the R.F.C. snd the reasons why i t should be liquidated. I Sfiw Velker the other night and hs siid he had received your lett r and was in t>vor of liquid t ton of the R.F.C. He said he had 'lso received a letter from Harry iSmerson favoring its continuance — he was surprised find could not understand why Il&rry would take that position In viev of your attitude end mine. You know by now that I had an opportunity last Friday to appear before the Senate Banking & Currency Coranittee and jive my re*, sons why the R.F.C. should be abolished at this time. I sent you a copy of my prepared statement. I got a v-:ry good press covering my testimony. I agree with you that the Administration, politic l l y , will keep the R.F.C. alive in some fora. However, they are not much dl^^erent from the Republicans in that regard because the l i f e of the R.F.C. expired in 1943 during the Republican Congress and they had an opportunity to abolish i t just by not taking positive action to extend its l i f e until 1954.. The way things looked in 194^ they expected to win the election that f a l l and no doubt thought i t desirable to have the R.F.C. in existence. I t seems that both political parties have certain similarities, which is unfortunate for the country. With kind regards, Sincerely yours, H. S. Eccles. Mr. Lynn Prlscoll, President, First Security Bank of Idaho, N.A., Boise, Idaho. J. L. DRISCOLL P. O . B O X 830 BOISE, IDAHO May 31, 1951 Mr. M. S.Eccles Board of Governors Federal Reserve System Washington, D.C. Dear Marriner: On my return to the office after some weeks1 absence on a t r i p to Honolulu, I found your l e t t e r of May 3 and copy of your statement made before the Senate Banking and Currency Committee on RFC l e g i s l a tion. I have read both with a great deal of interest* I note with a smile the comments i n the l a t t e r part of your l e t t e r that unfortunately the Democratic and Republican parties have too much i n common. I n that statement I certainly concur. As I see i t that has been one of the troubles of the Republican party. The Republican p o l i t i c i a n s haven't been w i l l i n g as a whole to take a stand based on principles. They spend most of the time trying to figure out minor p o l i t i c a l questions that get a few votes or avoid losing a few votes rather than taking a proper stand on what i s fundamentally sound and what i s good government. JLD/c
@FedFRASER