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December 24, 1947

Honorable Marriner S. Eccles
Board of Governors
Federal Reserve System
Washington 25, D. C.
My dear Mr* Chairman:
I am transmitting herewith a
clipping from the December 3, 1947
edition of the Hew York Journal American
containing the text of a column written
by Mr» Leslie Gould who is apparently
Financial Editor of that newspaper®
A good friend of mine in Arizona
has asked me to inform him as to whether
the statements made by Mr. Gould are
factual• I shall be much obliged if you
will let me have the benefit of any
advice with respect to Mr. Gould's comments that will be helpful to me in
preparing a responsive reply to my



December 31* 19l*7*
the Honorable Carl Hayden,
United States Senate,
Washington, D. C.
Dear Senator Hayden:
As Chairman Eccles is spending the holidays in Utah* let me
acknowledge your letter of December 2U transmitting one of Hr« Leslie
Gould's typical columns attacking Mr. Eccles. This has been going on
for a good many years, but has been renewed with particular virulence
coincident with Wall Street campaigning to try to induce the Board to
reduce margin requirements covering the purchase of listed stocks*
The so-called cheap money policy was neither initiated nor
perpetuated by the Beserve System. Most informed people no doubt would
agree that reduced interest rates on mortgages and other loans were
eminently desirable after the collapse of 1929* The gold policy, however, which was subsequently adopted, led to an enormous inflow of gold
which flooded the banking system with excess reserves and drove interest
rates down to unprecedented low levels.
Mr* Eccles sought in the Banking Act of 1935 to obtain sufficient authority for the Beserve System to absorb the excess reserves —
sufficient, at least, so that the System would be restored to the position
that it had traditionally occupied where it would be able primarily
through open market operations to influence the volume and hence the oost
of bank credit. Such powers as he was able to obtain from the Congress
were exhausted in absorbing part of the excess, but enough was left over
to make for continued low levels of interest rates.
Gould1 s charge that the System is responsible for the cheap
money policy is as far from the truth as his irresponsible innuendoes
with respect to Mr. Eccles. It would have made no appreciable difference
so far as inflation is concerned whether the war had been financed at the
relatively higjti rates prevailing in World War I or at the lower rates prevailing in World War II. As you know, the enormous expansion of the money
supply was the direct result of war financing and is a basic source of
inflationary pressures. The money supply would scarcely have been any
less if interest rates had been higher.
As for the slanderous personal allusions to Mr. Eccles, Mr.
Gould appears to be oblivious to faots. For instanoe, the Utah Con*

The Honorable Carl Hayden



December Jl, 19U7

struct!on Company, which was one of the companies that built Boulder
Bam, obtained wartime contracts, as did other bidders, on a competitive
basis* The innuendo that Gould has repeatedly thrown out in his column
and it is always innuendo because he dare not make the direct charge —
is that somehow Mr* Eccles influenced the awarding of those contracts*
That X know to be an outrageous falsehood*
She matter of Mr* Ecclesf business and banking connections was
thoroughly gone into by the Senate Banking and Currency Committee when
he was first nominated for the Keserve Board, and I enclose a copy of
the healings which refute completely 6ould,s inference that Mr. Eccles
violates the Federal Reserve Act* Certainly the Senate Committee did
not think so at the time nor subsequently on the three additional occasions when his nomination was confirmed without a dissenting vote*
Your correspondent in Arizona might also be interested in
taking note of a letter which Mr* Eccles sent to Chairman Tobey of the
Senate Banking and Currency Committee last June, a copy of which I enclose* TOiile this relates to the Bank Holding Company Bill, it sets
forth the facts as to his family investment company*
I am venturing to send this inforaation to you in Mr. Eccles1
absence, but in case you desire any further information I am certain he
will be glad to furnish it upon his return*
Sincerely yours,

Elliott Shurston,
Assistant to the Chairman.

Enclosures 3



June 13, 1947

Honorable Charles W. Tobey, Chairman,
Senate Banking and Currency Committee,
Washington, D. C.
Dear Senator Tobey:
It is clear from their telegram to you of June 11th that A. P.
and L. M. Giannini mean to do all in their power to defeat regulation of
bank holding companies just as they have openly and covertly fought off
public regulation of their giant Transamerica holding company for many
years. The Transamerica banking empire consists of some 4-1 banks operating 619 banking offices with aggregate deposits exceeding 6-1/2 billion
dollars. This is the vast, uncurbed enterprise which since 1934 has acquired 126 banks and 74 new branches spreading over the five-State area of
California, Arizona, Nevada, Oregon and Washington, into 379 cities and
towns, while at the same time controlling a variety of industrial and other
businesses with aggregate resources of more than 275 million dollars.
It is not at all surprising, therefore, that the Gianninis, unlike the other major bank holding companies in the country, should now come
out openly once more against any legislation designed, as is S. 829, to
curb monopolistic development and prevent other abuses by subjecting the
now ineffectively regulated holding companies to the same public regulation
that applies to all State and national banks in this country. It is easy
to understand why the Gianninis1 telegram to you states that "the Eccles
program is not in the public interest" and why it attempts to muddy the
waters by a characteristic Giannini personal attack cn me, none of which
is germane to the real issue before the Congress, namely, the urgent need
in the public interest to prevent the holding company device being used not
only to create banking monopolies but to reach out into wholly unrelated
fields, as individual banks are prevented from doing, to control all sorts
of business enterprises.
It is ironic, but irrelevant, that A. P. Giannini alludes to me
as "a bureaucratic despot" who, according to him, is trying "to suppress
free institutions through the exercise of dictatorial powers masquerading
as administrative discretion." These resounding generalities conveniently
overlook the fact that the proposed legislation, far from being an "Eccles
program", conforms tc recommendations made in reports by the Federal Advisory
Council of the Federal Reserve System, composed of a leading banker from each

Honorable Charles W. Tobey


of the twelve Federal Reserve districts, and by the Association of Reserve
City Bankers, representative of a large number of the leading banks of the
country. They ignore the fact that the bill has the support of the two
independent bankers associations, including that of the Twelfth Federal Reserve District which embraces the States where the Giannini empire continues
to spread. They ignore the fact that the great majority of the major bank
holding companies support this bill. It is odd that all of these responsible banking groups consider the legislation to be in the public interest,
but the Gianninis do not. Their telegram would warrant no comment from me
but for the fact that to ignore it might seem to give assent in its attempts
to impugn my good faith and motives in seeking this regulatory legislation.
By innuendo their telegram makes two charges which, if stated
bluntly, would be:
1. That, under the capital structure of the First Security Corporation of Ogden, Utah, a bank holding company in which the members of my
family own in the aggregate between 15 and 20 per cent interest, voting
rights are limited to less than one-eleventh of the total outstanding shares,
while at the same time the voting shares receive over 3 per cent of all of
the dividends paid. The Gianninis* telegram states that perhaps I "can explain why the bill is silent" in not requiring that every stockholder should
have equal voting rights. While none of these assertions is germane to the
problem now before the Committee, thoy may be shortly and simply explained.
First as to the facts. The First Security Corporation is a bank
holding company. As such it now holds a voting permit under the provisions
of the present bank holding company statute for each of the banks which it
controls. This may be contrasted with the fact that, while Transamerica
holds a majority stock interest in 2U member banks, it has obtained voting
permits covering only 2 of such banks. If S. 829 becomes law, First Security
will be subject to each and all of its regulatory provisions, the same as
any other holding company*
The capital structure of First Security is divided into voting and
non-voting shares. The non-voting shares represent those which have been
issued over the years in exchange or payment for the stock of various banks
which First Security has acquired. Contrary to the statement in the
Gianninis* telegram, dividend rights as to each class of stock are identical.
In addition — a subject not mentioned in the telegrajn — non-voting shares
have a preferential right in liquidation to receive a stated amount before
the voting shareholders receive anything.
So far as the silence of S. 829 on the subject of voting and nonvoting shares of a bank holding company is concerned, it should be noted
that neither the present law nor any previously proposed draft of new

Honorable Charles W. Tobey


legislation contains any such provision. The reason for this is to be
found in that part of Section 2 which defines the purpose of S. 829 to be
"to subject the business and affairs of bank holding companies to the same
type of examination and regulation as the banks which they control,11 In
the light of this purpose and inasmuch as there is no requirement that the
capital structure of a national bank conform to any fixed legislative
formula respecting voting, it was not felt that such a requirement should
be provided respecting bank holding companies. Let me add, however, that I
have no objection to the inclusion of such a requirement should the Committee and the Congress deem it appropriate. Furthermore, even if such a
provision were added, I doubt that the bill would gain favor in the eyes of
the Gianninis or that such a provision would evoke their support of the
bill. It may be assumed that if such had been their attitude, it would have
been so stated in their telegram. As stated above, this entire subject was
injected merely to cast an innuendo to the effect that there is something
improper so far as my family interests are concerned, and this leads me to
a consideration of their next charge:
2. This seems to be to tho effect that my family and,I, either
directly or through a family investment company, control the First Security
Corporation, and that the various interests which the family investment company owns would be affected by the bill were it not for certain changes which
have been made in the definition cf a bank holding company since the first
holding company bill was introduced in 194-5> or if the full definition contained in the Utility Act had been followed in S. 829. The plain implication
of the Gianninis* telegram is that I caused these changes to be made in order
to protect the interests of the Eccles family investment company in its holdings of various non-banking interests.
This is a deliberate and malicious falsehood. In the first place,
the Eccles family does not control First Security, either directly or through
any company. There is a family investment company, called the Eccles Investment Company, which was organized more than 32 years ago upon my father's
death for .the purpose of holding and managing certain assets of his estate for
the benefit of my mother and nine children, seven of whom were then minors. I
was advised at that time by attorneys and business associates to form this
company, and it has since continued to hold real estate, bonds, notes and
stocks of various business corporations. Included in the assets of the Eccles
Investment Company is the ownership of a little over U per cent of the outstanding shares of First Security, consisting of one-half of 1 per cent of
the non-voting and UU per cent of the voting shares. A similar number of its
voting shares are owned by another family investment company, the J. M. &
M. S* Browning Company, a corporation in which neither myself, the members of
my family, nor the Eccles Investment Company have any interest whatsoever.
Nor does the Browning Company have any interest in the Eccles Company. In
recent years the shares of First Security which are owned by the Eccles

Honorable Charles W. Tobey -2Investment Company, together with those owned by the Browning Company
(aggregating in excess of 80 per cent of the voting shares), have been
deposited in an agreement of trust under the management of four trustees,
two of whom are my brothers and two of whom are members of the Browning
family, I sold my stock in and severed all connections with First Security when I took my present office. Such interest as I have in that company is only by reason of my one-ninth interest in the Eccles Investment
It is obvious from the above that the Eccles Company has neither
the power to nor does it in fact control First Security. Even if it did,
however, the matter would still be irrelevant because under the plain terms
of S. 829 that company would then also be a bank holding company and as
such would be subject to all the regulatory provisions of the bill.
There is a difference between the definition of a bank holding
company contained in S. 829 and that contained in the first draft of the
proposed bank holding company legislation submitted to Congress by the
Board — as indeed there are other differences of a much more fundamental
and important character. The difference in the definition is that under
the first bill a group of individuals could be declared to be bank holding
companies (under the Utility Act an individual can also be held to be a
holding comparer) whereas under S, 829 the definition is limited solely to
companies. The reason for the change in definition was the attack upon
the bill, instantly made try bankers throughout the country upon the ground,
among others, that the definition was too all-inclusive and offended against
the traditional concept of individual enterprise in banking. Consequently,
when Congress failed even to hold hearings on the original bill, the Board
reconsidered the entire subject in the light of all objections to the first
bill and attempted to devise legislation which would accomplish what the
Board considered necessary for effective regulation but without being carried to the extremes stated in its first bill and which gave promise of
sufficient public support to secure its ultimate enactment. As the Committee is aware, there have been a number of suggested refinements and
amendments to S. 829 since its introduction at the present session, all of
which have been recommended as a result of the continuing effort of the
Board to overcome legitimate objections to the bill without sacrificing
any of its essential objectives.
Finally, I should like to point out that all of my family, business, and former banking connections were exhaustively investigated and
considered by the Senate Banking and Currency Committee at hearings on
April 15 and 19 > 1935, when I was first nominated to the Reserve Board.
After this thorough inquiry I was confirmed by the Senate with only one

Honorable Charles W. Tobey


dissenting vote, and subsequently I have been confirmed on three additional occasions without any dissenting votes. In view of these facts,
of which you may be sure the Gianninis are fully advised, their evident
purpose is to becloud the real issue by the time-worn, defensive tactic
of trying to create a diversion.

Sincerely yours,
(Signed) M. S. Eccles
M. 5* Eccles,