Full text of Marriner S. Eccles Papers : Letter to Mr. Eccles, Box 1, Folder 6, Item 1

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Dallas, Texas, July 17, 1939•
PERSONAL,
Mr* Marriner S. Eccles,
Board of Governors,
Federal Reserve System,
Washington, D.C.
Dear Mr. Eccles:
Enclosed is the memorandum about which you talked with
me the day before I'left Washington. The language of Section 10
of the Federal Reserve Act is such as to make it impossible to
give a dogmatic ans?/er to the specific question. It provides
for appointment of members of the Board by the President, by and
with the advice and consent of the Senate for terms of 14 years;
for the designation by the President of a chairman and vice
chairman for terms of 4 years; and for members of the Board to
hold over after the expiration of their terms of office until
their successors have been appointed and qualified* The hold-over
provision may be read either way* Under one construction it may
be read to apply also to the terms of office of the chairman and
vice chairman* Under this construction a member acting as chair-*
man whose term of office expired would hold over as a member and
as chairman. Under the other construction such a member would hold
over as a member, but the office of chairman would become vacant*
Dealing with the practical aspects of the question, it
may be noted that neither the chairman nor vice chairman perform
any acts as such which would give rise to cause for complaint on
the part of any private individual* Therefore, if an administrative interpretation is put upon the provision to the effect that
it does apply also to the chairman and vice chairman until the
President has designated their successors, it is hard to see whq
if anyone, could complain* Furthermore, an administrative interpretation is, in itself, sometimes persuasive to a court*
Because of the points made in the enclosed memorandum,
as well as the common sense of the matter, I am persuaded that
the chairman and vice chairman hold over, and I believe that a
court (assuming that the question could ever get before a court)
would hold to that effect. At the same time, however, it must
be stated that there is ample room in the language of the statute
for differences of opinion as to its meaning and effect, and it
is entirely possible for reasonable minds to come to the other
conclusion*




You will observe that the memorandum does not discuss
the possibility of the President designating as chairman a member
?/hose term has expired but who is holding over under the provisions of the statute*
Technically this would appear to be
possible under the law, the reasons therefor being as follows:
The Federal Reserve Act, section 10, paragraph 2, says the President shall designate chairman flto serve as such for a term of
four years." However, this must necessarily mean that he is
designated to serve for four years or such shorter period as he
remains a member of the Board. Otherwise, there would be the
anomalous situation that a member would be disqualified for the
chairmanship, no matter how great his qualifications, merely because of the technical, - or mechanical, - fact that he did not
have a ftill four years more to serve on the Board. Such a result
is so unreasonable that it cannot be imputed to Congress, certainly without the clearest and most inescapable language*
If a
member can be designated with, say, two years to serve, there is
no reason why a mere hold-over member may not be designated.
I did not include the foregoing in the memorandum because
upon reflection it seemed to me to have practical weaknesses which
would eliminate it from consideration. Y/hile I am not sufficiently versed in such matters to appraise the possible consequences, it seems to me that claims might be made that the
President was evading at least the spirit of the law or that there
was fear that confirmation by the Senate would not be forthcoming
and that the real reason for the action would be misinterpreted*
As I say, however, that is a matter about which my opinion is of
little value.
One possibility has occurred to me which seems to me to
be worth considering. A personal letter from the President to
you in which it was stated that he understood you were undecided
whether or not you would accept reappointment and that in the
interim he would appreciate your holding over and continuing to
serve as chairmas as contemplated under the law might serve the
double purpose of being an administrative interpretation of the
law, and, if necessary, of being in fact a designation of you as
chairman in line with his authority to designate as chairman a
member whose term had expired but who was holding over under the
law* If you think there is any merit in this suggestion I believe
that a very good letter along those lines could be drafted without much difficulty*
I expect to be back on Monday, the 31st, but if you desire
anything additional done before that time I can be reached at
4611 Nakoma Drive, Dallas, Texas.
Yours very truly,

JPD: b



^?-~f^fc*^^

State Courts have rather generally held that a state officer, after the expiration of the term for which he was elected
or appointed, continues to hold office until his successor has
been appointed or elected and qualified• However, the few
authorities dealing with federal officials make it plain that, in
the absence of statutory authority, a federal official whose term
has expired does not hold over. It would follow, therefore, that,
except for the provision contained in Sec. 10 of the Federal Reserve
Act, the office of a member of the Board, including the chairmanship
and vice chairmanship, would become vacant at the expiration of the
term of office of the incumbent* Such was the case prior to the
enactment of the Banking Act of 1935> but that Act amended Section
10 of the Federal Reserve Act, and it now contains the following
provision:
"Upon the expiration of their terms of office, members
of the Board shall continue to serve until their successors
are appointed and have qualified.H
It is clear, therefore, that members of the Board now hold over, and
it remains to determine whether this applies also to the offices
of chairman and vice chairman.
Members of the Board are appointed by the President, by
and with the advice and consent of the Senate, but the chairman
and vice chairman are merely designated by the President to serve
as such for a term of four years. Prior to the enactment of the
Banking Act of 1935 the Act provided that of the persons appointed
members of the Board, one should be designated by the President as
governor (now chairman), and one as vice governor (now vice chairman). There was no provision with respect to the term of office
of such governor and vice governor, but the provision was consistently interpreted as meaning that they served at the pleasure
of the President. The practice was for the President to designate
the governor each year, and that practice remained the custom until
the time Governor Myer was appointed.
The Banking Act of 1935 also amended Section 10 of the
Federal Reserve Act with respect to the appointment of chairman
and vice chairman by changing the name of governor and vice governor
to chairman and vice chairman respectively, and by adding language
providing for the chairman and vice chairman to serve as such for a




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term of four years. The purposes of the latter provision were
to clarify the existing law and to make more plain its purpose
of enabling the administration in office to maintain a liaison
and responsive"relationship with the Board.
Under the Act the chairman, and the vice chairman in his
absence, performs no statutory duties different from any other
member of the Board except to act as the Boardfs executive officer. The offices are but incidents to membership upon the
Board# The Act specifically provides that members of the Board
shall continue to serve until their successors are appointed and
have qualified* This means that a member of the Board, whose
term has expired, would continue to serve and perform all of his
duties as a member until his successor had been appointed and
qualified, and it follows that a member of the Board acting also
as chairman would continue to perform all of the duties of his
office, including his duties as chairman, until his successor
had been appointed and qualified*
In a recent case involving the question of immunity fiom
suit by a Regional Agricultural Credit Corporation, the Supreme
Court said:
"Congress naturally assumed that the general corporate
powers to which it had given particularity in the original
statute establishing Reconstruction would flow automatically
to the Regionals from the source of their being;11
and, again,
"Congress had a right to assume that the characteristic
indulgence for corporate enterprise with which, a few months
previously, it had endowed Reconstruction would now radiate
through Reconstruction to Regional.fl (Keifer & Keifer v.
Reconstruction Finance Corporation, 59 Sup. Ct. Rep. 5l6*)
While there is no similarity between the question with
which the court was there dealing and the question of whether the
chairman as a member of the Board also holds over as chairman,
under the logic of the statement,it may be argued that Congress
has a right to assume that the characteristics of the office of
a member of the Board with respect to holdover radiates through
the member to the office of chairman.
Furthermore, it should not be assumed that the holdover
provision applies exclusively to membership upon the Board, and
not to the offices of chairman and vice chairman. To the con-




trary, the holdover provision refers to "terms of office", and
it will "be observed that the chairman and vice chairman are
appointed for a "term". Moreover the holdover provision is but
a part of a general paragraph and follows provisions dealing
with the appointment of members of the Board and the appointment
of a chairman and vice chairman, thus indicating its general
application.