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March 12,1947

Dear Mr* Eccles:
I am enclosing a memorandum on the subject
of Governor Vardaman1s visit to the Atlanta Reserve
Bank. So far as any of us here can recall this memorandum seems to cover about what was said by Mr *
Vardaman at the several meetings in Atlanta but the
reading of the memorandum will not leave one with the
same reactions as one would have from actually hearing
the remarks for the manner of speaking, the tones, and
sarcastic implications made by a speaker cannot be put
down on paper.
I was disappointed about the little that could
be put in the memorandum so I had a person who was present
at two of the meetings and talked with Governor Vardaman
give me his recollections and I am also enclosing statement of his reactions to the memorandum and the impressions
he gained from the talks.
If I can be of any further service in this connection please call upon me.
Very truly yours,


Mr - Marriner S. Eccles
Care - Board of Governors of the
Federal Reserve System
Washington 25, D. C.


It is extremely difficult to recall the exact statements
made "by a person several weeks after he spoke, particularly if it
was the speakerfs request that he wanted his remarks to "be off record
and no notes or memorandum were prepared on the subject*
As I reflect upon Governor Vardaman's three talks, one "before our Board, one at the Capital City Club, after the luncheon, and
one at the informal luncheon in our dining room on the second day of
his visit, my recollection of the substance of what he said is as follows:
At the Directors1 Meeting
Governor Vardaman "began his remarks "by stating that his appointment on the Board was not of his choosing; he said he accepted
the appointment in order to keep a promise he had made to President
Truman. He said it was with some reluctance that he accepted the appointment for the reason he knew his thinking and his ideas of democracy and his
dislike for "bureaucratic control would clash with certain members of the
Board of Governors, particularly Chairman Secies*
Mr. Vardaman said that Chairman Secies was to be commended for
some good work that he had done at the Board; he said that the Chairman
wrote almost single-handed the Banking Act of 1935» &»& it was largely
due to his hard work and maneuvering that the Act was passed "by Congress.
He said, however, that he felt the Chairman had held his office too long;


that he felt the fourteen-year terms were too long; that no one person
should be permitted to remain on the Board longer than 10 years*


referred to the fact that it is possible under the existing act for the
present Chairman to continue in office until he has served approximately 22 years*

He referred to the members of the Board as Muntouchablesw

and stated that they cannot be removed from office except for cause*
The Governor said that bureaucracy, rather than communism, is
the great danger facing the country today,
He stated that the Board's policies are developed on the basis
of theory and that any facts presented in conflict with the theory are

He said that certain theories held by the Board are in-

compatible with a privately owned banking system, on which the democratic
form of government depends*
Governor Vardaman stated that promptly after he assumed his
duties at the Board he began to ask a good many questions about the twelve
Banks and their Branches*

He said he discovered that the Board members

had little or no knowledge of what was going on in the twelve Districts;
that they depended almost exclusively upon reports from the Banks, assembled
by the staff*

She Governor stated that the Board's office is operated on

about 30 Per cent thinking by the Board members and on about 70 per cent of
the influence from the staff*
Governor Vardaman stressed the point that the fundamental difference between him and the Chairman was that he believed in democracy and
more autonomy for the Reserve Banks and Branches but that the Chairman be-

-3lieved that efficiency could best be had by centralization of authority
in Washington. He said that because of this idea of the Chairman's, the
Reserve System had developed into a bureaucratic agency, a one-man Board;
that the Board is Eccles.
Governor Yardaman stated he thought that in all matters affecting
the economy in general there should be hearings at which the public should
be invited to present its views; for example, he said that he insisted
that the stock exchange people should be permitted to sit around the table
and express their views regarding margin requirements. He said that at
the time the margin requirements were increased to a no-loaiWTalue basis,
he asked the Director of the Security Loans Division if he had gathered
Information showing views contrary to those entertained by the Board. He
stated that he was surprised to learn that this was not done and, to his
further surprise, the Director stated that his Division worked up information to support the views of the Chairman after the Chairman had decided
what he wished to do*
Mr* Vardaman emphasized his belief that the directors of the
Beserve Banks should be more articulate regarding the operation of the
Banks and System policy.

At the Capital City Club luncheon?

Attached is a list of those present at the Capital City
Club luncheon*
Governor Vardaman repeated to some extent what he had said
"before the directors hut went into detail regarding his objections to
Government by regulation rather than by congressional enactment. He
referred particularly to Regulations "T", "U", and "W". He said there
was considerable doubt as to whether it was intended that the Board
should have as much power as it had assumed in the promulgation of
fiegulation W.

HB said he felt that Congress should be asked to review

many such subjects and be more specific regarding the authority to issue
JsS^f The Govern©!? said that, in his opinion, the Board had no
authority to promulgate 100 per cent margin requirements. He said the
Board could "regulate" the business, but not "strangulate" it.
He advocated the repeal of Regulation W as an unwarranted
assumption of bureaucratic control.
He recommended direct contact with representatives in Congress
as the way to combat bureaucracy.
The Governor spoke rather freely of the bureaucratic attitude
on the part of the Board of Governors and other governmental agencies in
Washington. He repeated the statement he had made at the Board of


Directors1 meeting that the Board of Governors had developed into
a one-man Board, and that he was doing everything within his power
to get the Board to function as a full Board and act only after it
had received the views from as many groups as possible interested in
the subject or subjects under consideration, and the advice and
recommendations of the officefs and directors of the Eeserve Banks
prior to the issuance of rules and regulations by the Board.

Capital City Club, Atlanta, Georgia ,
Thursday, January 16, 19^7. 1*00 p*m*
Atlanta (Head Office) Directors:
Mr * W * D * Cook

First National Bank in Meridian
Meridian, Mississippi

Mr* George J * White

The First National Bank of Mount Dora
Mount Dora, Florida

Mr * Ernest T. George

Seaboard Refining Company, Ltd * ,
New Orleans, Louisiana

Mr. J. A* McCrary

Vice President and Treasurer
J * B. McCrary Company, Inc*
Atlanta, Georgia

Mr * Frank H. Neely

Executive Yice President and Secretary
Rich f s, Inc*
Atlanta, Georgia

Mr * J * F * Porter

President and General Manager
Tennessee Farm Bureau Federation
Columbia, Tennessee*

Branch Directors.
Mr * ? • Bratten Evans

Tennessee Enamel Manufacturing Company
Nashville, Tennessee

Mr* Joel B * Fortt Jr # t

Vice President and Manager
Branch - Federal Reserve Bank
Nashville, Tennessee


Branch Directors - Continued:
Mr * H. G. Ghalkley, Jr.

Sweet Lake Land & Oil Co., Inc.
Lake Charles, Louisiana

Mr. H. S. Moo4y

Executive Vice President
Manatee Rirer Bank & frust Company
Bradenton, Florida

Mr. Gordon D. Palmer

The first National Bank of Tuskaloosa
Tuskaloosa, Alabama

Atlantans and others:
Mr. Hayses McPadden

Publisher, Southern Banker

Colonel Blake R. Tan Leer

Georgia School of Technology

Mr. Clarence Haverty

Chairman of the Board,
Fulton National Bank

Mr. Brie Cocke

Talton National Bank

Mr. H. Lane Young

Vice Chairman of the Board,
Citizens & Southern National Bank

Mr. Mills S. Lane, Jr.

Citizens & Southern National Bank

Mr. Joseph E. Birnle

The Bank of Georgia

Mr. John A. Sibley

Trust Company of Georgia

Mr. R. E. Coraley
(President, Georgia
Bankers1 Association)

Vice President
Georgia Savings Bank & Trust Company


Atlantans and others - continued
Mr* J * f• Brown
(Member, federal
Advisory Comifcil)-

Capital National Bank
Jackson, Mississippi

Mr* G* W. Patty

Executive Vice President
First National Bank in Meridian
Meridian, Mississippi

Dr * Raymond R. Paty

Chancellor, University System of Georgia,
Athens, Georgia*

General Edward H * Brooks

Commanding General
fourth Service Command
Tort McPhorson, Georgia*

Mr* George C« Biggers

The Atlanta Journal

Major Clark Howell

President and Publisher
The Atlanta Constitution

Mr * Freeman Strickland

Vice President
first National Bank of Atlanta

Mr. William A. Parker,

Beck & Gregg Hardware Company

Mr * James J * Selvage

General Mills, Inc

Mr * Richard W. Courts
Mr* Malon Courts
Mr. W * S * McLarin, Jr.

Courts & Company (stocks and bonds)
Courts & Company (stocks and bonds)

Mr. Pollard Turman

Federal Reserve Bank of Atlanta
first Vice President
federal Reserve Bank of Atlanta
General Counsel
federal Reserve Bank of Atlanta

Mr* J * R* McCravey, Jr *

Secretary to the Board,
federal Reserve Bank of Atlanta

Mr. L. M. Clark

Atlantans and others - continued
Mr. L. W. (Chip) Robert, Jr.

Robert & Company, Inc.
Architects and Engineers

Mr. I. Carl Milner
(Member, Industrial
Advisory Committee)

Vice President and General Manager
Gate City Cotton Mills
last Point, Georgia

Mr. Luther H. Randall
(Memb er, Industrial
Advisoiy Committee)

Randall Brothers, Ina#

Mr. Heed Dolan

Chief National Bank: Examiner
Sixth federal Reserve District

*r. Malcolm Bryan

Vice Chairman of the Board
Trust Company of Georgia

Mr. Henry Toombs

Toombs A Creighton, Architects,
Ilk Marietta Street, H. W.

At the Informal Luncheon In the
Dining Boom at the
Federal Reserve Bank
Attached Is a list of those attending the luncheon in the
officers1 dining room at the Federal Reserve Bank on January 1J,
After the luncheon, Governor Vardaman talked informally repeating to some extent what he had said at the directors1 meeting and
at the luncheon at the Capital City Club*

He did, however, refer more

particularly to the Research and Statistical Division at the Board's
office and similar departments attached to other governmental agencies*
He said he thought the governmental agencies could very well do away
with independent research divisions and rely upon a central research

He stated that there is so much waste of time and money

through the duplication of reaearch and statistics departments; that
they are operated with a view of proving or justifying the action of
the agencies rather than the presenting of information from all angles of
the subject and without color for political considerations. He said he
thought the research and statistical work done by the Banks in the field
was good and should he encouraged, hut that the compiling and coordinating
of the work in Washington should be confined to one department or division*
The Governor again referred to the one-man Board, rather than a
seven-man Board, as provided for in the Federal Reserve Act*

He stated

that our Government has been run too much by executive fiat rather than by
legislative enactment*

In response to a query from a visitor at the luncheon

as to what he, Governor Vardaman, would suggest as a remedy for the situation


of which he complained, the Governor stated that interested individuals could express their views to their Senators in the hope that
Congress would clarify the Act, so as to eliminate any necessity of
executive orders or regulations not clearly provided for by congressional acts*
Governor Vardaman emphasized the fact that he stood in the
position of a lone wolf in his relationship with the Board. He
stated Governor Bccles and Governor Evans are both advocates of centralization;

that Governor Draper follows the Chairman: that he

repeats continuously the words "inflationary spiraln learned from the
Chairman; that Vice Chairman Hansom has "been ill for some time and
may he unable to resume his duties; that Governor •Szymczak is abroad;
and he again referred to the vacancy on the Board which existed at
that time.
He stated that he told Chairman Secies he was going to visit
the Banks and Branches so that he might see and learn what was going
on. He said he told Mr. Bccles he would do some talking and he would
be glad to reduce to writing what he proposed to say for approval by
the Board if the Chairman would do the same. He said that the Chairman
refused to agree to that, and he stated he felt that there was no obligation on his part to submit his talks for review prior to their delivery. He stated that after his talk at the dinner in Cleveland, at
the National Association of State Supervisors' meeting, and his speech
in Virginia, before the Morris Plan Bankers' group, Mr. Bccles was critical
of what he had said in each instance.


January 17,

Governor James £ • Vardaman, Jr.,
President W. S. McLarin, Jr » , President of the Bank,
Mr * L. M. Clark,

First Vice President

Mr. Malcolm Bryan,

Vice Chairman,
Trust Company of Georgia

Mr. H. Lane Young

Vice Chairman,
Citizens & Southern National Bank

Mr. Freeman Strickland

Vice President,
First National Bank of Atlanta

Admiral Sidney Sowers
Mr. Richard W, Courts

Courts & Company

The memorandum of recollections regarding Governor Vardeman's
visit to Atlanta seems to me to be accurate. It coincides with my own
recollections, though, of course, I was not present at the meeting of the
Directors of the Federal Reserve Bank.
The point that impressed me especially and that I would emphasize
was not so much what was said as the spirit and tone and way in which it was
said. The statements made, while accompanied by protestations of regard for
Mr. Eccles, were sharp in tone and, to me at least, evidently malevolent in
character and self-seeking in inspiration. It seemed to me that the impression sought to be conveyed was of a dictatorial Chairman engaged in the
vigorous pursuit of highly dangerous policies, refusing a hearing to opponents
and critics, and followed by the rest of the Board of Governors in a spirit of
childlike acquiescence. The tone of the meeting was to build up the speaker
as the white hope of decent, solid Americanism and to reduce the other members
of the Board to the status of scoundrels and boneheads.y )(*f
That my impression was not my own exclusively is illustrated by a
conversation with a close associate as we left the Capital City Club after
Ithe luncheon there. I said to him, fWell, what did you think of the Governorfs
\speech?1 He replied, 'Mr. Eccles must either shut that man up or the Governor
w i H run Mfr.lEccles clear out of Washington - which he fully intends to dolf
The foregoing impressions, which were clear enough to me at the
luncheon at the Capital City Club, were strongly reenforced the following
day at the small luncheon at the Federal Reserve Bank's dining room. The
Governor there continued in his same v*kM* but he seemed to be in a great
itch to get telegrams and letters of protest written to the Senators and
to the White Hous*. He continually affirmed and urged such procedure and
came forward with what I regarded, as you recall, as a very vicious attach
on the Research Department of the Board of Governors and of the other
governmental agenciesf
In leaving the bank, the Governor stopped (fif) a few feet from the
front door to say good by. His parting remarks were, fNow, we111 just get
the letters and telegrams started. lou boys out in the field must get the
ball rolling.1