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My dear Mr* President:
As you will doubtless recall, at the time of Jake Vardaman's nomination
you remarked to me that he had assured you that he would cooperate fully in the
work of the Reserve Board and that if this did not turn out to be the case you
wished me to let you know*

Subsequently it became imperative in the interest

of the proper functioning of the Board to talk with John Snyder and then to you
about the increasing ┬žJnount of confusion which Jake was causing by public speeches
and statements highly critical of Board policy, past and prospective, and also
extremely critical of Administration policy generally*
Specifically, he publicly challenged the legal authority of the
Board to apply the 100 per cent margin rule in the stock market, although
counsel for the Board, who had thoroughly studied the matter, advised that the
Act justified the rule* He has publicly disagreed with all of the rest of the
Board in recommending that Congress consider favorably extension of regulation
over instalment credit which, as you know, is a widely fluctuating, unstabilizing
factor in the economy*

He has completely disagreed likewise with the Board's

carefully and long-considered viewpoint, expressed at length in its annual report of 1938* that the banking laws urgently need revision to minimize the
overlapping and conflicting jurisdictions that make for what the late Senator
Glass called "competition in laxity*"
Jake has stoutly defended the status quo and pictured the "crazy
quilt" of banking laws and regulations as a blessing*

He has publicly

extolled the Reserve System as a wholly independent, privately-owned institution*

This has been seriously embarrassing to us in labor relations and in

meeting formidable charges that private banker interests dominate our credit
and monetary system*

He has publicly denounced all Government administrative rulings,

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declaring that Congress should specify in detail what regulatory measures, if
any, should apply.

This is manifestly a wholly impractical, unrealistic atti-

tude contrary to any established procedure.

In these and other respects, his

criticisms have "created plenty of confusion", as stated in the November i.
issue of Time magazine.
After my visit with you I talked to Jake about the embarrassment he
was causing all of the Board as well as the staff, reminded him that he had
agreed with me before his appointment that he wanted to do what he could to
bring about a sensible coordination of Federal banking agencies, and tried to
make clear to him that it was one thing to disagree w r e policy was beinjk; coniin
sidered but a very different and disruptive thing to go out publicly airing
these disagreements.

Jake remained belligerent and apparently impervious to

my appeals for the kind of teamwork that has always heretofore prevailed on
the Board. However violently some members may have disagreed in the past with
specific policy actions, they have not gone to the housetops to promote dissension and discord.
As a final resort, it seems to me that a letter from you might
possibly have some beneficial effect and inasmuch as you indicated that you
were disposed to take up with Jake the importance of appropriate conduct as
a member of the Board, I am taking the liberty of enclosing a suggested draft
of a personal note that you might wish to consider sending to him.

Respectfully yours,

Dear Jake:
I was very much distressed to learn in talking recently with Marriner
Eccles and also John Snyder that you had been making so many public speeches
and statements taking issue with Reserve Board policy and adtions as well as
with other governmental policies. You had assured me when I nominated you
that you would undertake to work cooperatively and without such public dissension.
I am writing this note in the hope that you will follow a simple rule
or two, both in your own interest and that of the Federal Reserve System. You
are, I am sure, aware of the confusion that results when members of Federal
agencies air differing viewpoints publicly in the press and otherwise. Public
servants should follow their best judgment and convictions. That goes without
saying. Cooperative work on a Government board does not, of course, mean agreeing necessarily with policy or other decisions. Ho good public servant is a
mere rubber stamp, but he does have some obligation, as a matter of ordinary
teamwork, to make his differences known and to argue his convictions pending
the making of decisions. Once they are made in the democratic process of
majority rule, it is not becoming for the dissenter publicly to challenge,
repudiate or disparage the majority decision.
confusion and dissension.

To do so makes for intolerable

It encourages pressure groxaps to add to the ad-

ministrative problems. It actually defeats the purpose of a sincere dissenter,
who must in the end prevail by his reason and logic leading up to the making or
changing of decisions.

In the long run you will, I am confident, add to your own

prestige and that of the Board of which you are one member only by discharging
your public responsibilities in the manner outlined.

Sincerely yours,