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. PERSONAL AND CONFIDENTIAL ' . ' • •» December 17, 19k7« Dear Randy: As I have been -very busy t h e s e days, I have not had an opp o r t u n i t y u n t i l now t o acknowledge your l e t t e r of December 5 . A c t u a l l y , 1 thought I was most r e s t r a i n e d i n commenting on t h e a t t i tude of some of t h e bankers, f o r t u n a t e l y n o t a l l of them, they a l l hare t o s u f f e r , however, f o r the mistakes of bad l e a d e r s h i p . I d i d n o t a t t a c k t h e i r motives but went out of my way t o i n d i c a t e t h a t they were not t o be blamed f o r t h e i n f l a t i o n which has taken p l a c e s o f a r . they were w i l l i n g v i c t i m s , however, of t h e expansion of bank c r e d i t but I r e f r a i n e d from saying s o . there i s plenty of room f o r h o n e s t d i f f e r e n c e s of opinion over the Board's proposal. To stigmatize i t as socialisation of banking comes about as close to demagoguery as anything X can think of. I was sorry t o see that sort of thing in the Council's s t a t e ment* I t was a l l the more ridiculous in view of the fact that the Council had unanimously joined in the Special Report to Congress a t the end of 19^0 which recommended doubling what were then the maximum reserve requirements permitted by law; that i s , 26, 20 and llj. per cent on demand deposits of the respective classes of banks. That was far stronger medicine than the Board's proposal, as I think would be clear to anyone who examined i t unemotionally and without the innuendoes which were introduced into the discussion. The weasel words in the Council*s statement hardly dispose me to f e e l very kindly. For instance, the statement suggested "that the System and the Treasury already have large powers without new l e g i s l a t i o n to place credit under broad r e s t r a i n t s , 0 and then l i s t e d the relatively innocuous discount rate, r^aerre requirements at central reserve c i t i e s , coupled with the statement that "by open market operations the System can control the reserves of the member banks and limit their lending power." If that means anything, i t means that the Open Market Committee should abandon market support. When he t e s t i f i e d , Wed Brown was careful to say that he did not favor any such course. That sort of double-talk in the statement goes against ay grain* I t i s a l l a piece with the increased gold reserve requirements which somebody sold to Mr. Wolcott. If i t had survived in Congress i t might have embarrassed the Ifo&erre Banks somewhat in their day t o day operations. Otherwise i t was meaningless or, as Collins of the lew York Times put i t , "a hoax, pure and simple. * I t did help to muddy the waters and add to the confusion. - 2 - It had all the earmarks of an attempt to do by indirection what its proponents were afraid to cone out openly and advocate, the more so because it was put forward in the House in such an extraordinary manner, without any prior notice to the System or any opportunity to be heard* I disagree one hundred per cent with Stewart Baker, but at least he was frank enough to say he wanted the Reserve System to stop support of the market. There is nothing devious about that. I am not so naive as to expect that the opposition will always be open and aboveboard, and I am not so simple as to be entirely unaware as to what is going on behind the scenes. While I am on this subject, I want to say that I was sorry that your bank descended from its usual high level of discussion to a paragraph in the December Letter that appears under the sub-heading, "A Dangerous Principle," and tries to make it appear that the Board's proposal would place "the citizens of the country under legal compulsion to buy its (the Government's) bonds." That kind of thing is hardly worthy of comment. You have known me long enough to know that I do not bear grudges, but I would not be entirely frank if I did not say that three members of the Board, after the discussion with the Council, spoke with a great deal of resentment about your supercilious attitude, particularly towards me. In view of your all too apparent contempt for the Board*s proposal and what I had to say about it at the meeting, and in view of some of the testimony by Council members, it is gratuitous, to say the least, for you to write that you think my "attack on the motives of the people who oppose (me) was quite uncalled for." Considering the provocation, my prepared statements and my testimony under questioning have been very restrained indeed. Having gotten this off my chest, I feel better. Perhaps it's the approaching Chris-baas spirit. In any case, I am looking ahead, not backwards, to a new and better year for all of us* Sincerely yours, Mr. W. Randolph Burgess, 55 Wall Street, Hew York 15, Hew York.
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