The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
Form No. 131 Office Correspondence To. Governor Kccles From Lnnchlin Gurrie FEDERAL RESERVE BOARD Subject: p r i l 20, 1935* Report of the Committee f o r Economic Recovery. • r « 16—852 Thie document i s another i l l u s t r a t i o n of the i n t e l l e c t u a l bankruptcy and the poverty i n constructive suggestions of the business leaders* What seven-eighths of t h i s report says i n effect i s that since 1929 there has been an enormous shrinkage i n the output of goods of a l l kinds and i n employment • The authors apparently believe that a l l tha^_ i s necessary to achieve recovery i s to make corporate and mortgage financing easier. They b e l i t t l e Governmental spending and even imply that i t i s deflationary i n i t s e f f e c t . EMORANDUBI To: Governor Eccles Prom: A p r i l 15, 1955. Mr. Edmiston "RECOVERY OR RADICALISM"— A Report by the Committee for Economic Recovery This i s an elaborately prepared report discussing the problems involved i n business recovery. Apparently a great deal of careful work was involved i n compiling the data and i n analyzing the major factors i n the present depressed business situation. General Thesis of Report 1. Real danger of radicals taking over the government as long as depression persists and introducing p o l i c i e s that w i l l eventually lead to destruction. 2. Business recovery alone can k i l l e f f e c t i v e l y t h i s threat of radicalism. 5. Therefore recovery should be the paramount objective of the government and a l l p o l i c i e s and measures should be formulated and executed with primary regard to t h e i r effect upon recovery. The Problem of Recovery 1. Reemployment and increase i n production must come i n the durable goods and service industries. 2. Public r e l i e f w i l l not revive these industries. upon restoring balance and reopening the c a p i t a l markets. Revival depends S t a t i s t i c a l Analysis 1. Great volume of s t a t i s t i c s (industry by industry) analyzing the large deferred demand for new construction of plant and equipment, and showing Memorandum to Governor Eceles - Z . the large potential demand for durable consumer's goods and housing. past. Z. Large volume of s t a t i s t i c s on capital issues i n the My Appraisal of Report On the whole , the fundamental conclusions of the report seem to be quite sound. Certainly recovery depends largely upon revival of the heavy goods and construction industries* The great weakness i s that the report i s mainly only a diagnosis of the d i f f i c u l t i e s confronting a r e v i v a l of business a c t i v i t y . When the report comes to s p e c i f i c recommendations to promote recovery, i t i s not very helpf u l . For instance, the suggestions designed to promote an increase i n new c a p i t a l f l o t a t i o n s are confined mainly to modifying the Securit i e s Act, whereas the r e a l d i f f i c u l t y i s the lack of incentive for business borrowing i n view of the large volume of unutilized capacity and the small prospect of profitable operation of new equipment and plant capacity. The suggestions with regard to reopening the mortgage market are not clear. The report states that the authors have some s p e c i f i c proposals 1ft t h i s regard that they would be glad to discuss with you l a t e r . I t may be, however, that the authors purposely have avoided s p e c i f i c recommendations. Mr. Freed, i n his l e t t e r transmitting the report, stated that he would c a l l upon the persons to whom the report was addressed and i t may be that he i s prepared to offer more concrete proposals as to how revival i n the durable goods and construction industires may be furthered by governmental p o l i c i e s . Form No. 131 FEDERAL RESERVE Office Correspondence r"1BkSr To Governor Eccles From Mr. GoldenweiserA Date A p r i l 22, 1935 Subject: I return herewith the pamphlet on "Recovery or Radicalism?" ty the Committee f o r Economic Recovery, together with a memorandum from Mr. Garfield on the subject. Form No. 131 Office Correspondence To llr+ Qoldsawelser From Mfi FEDERAL RESERVE BOARD Date_AprlllIt1935 Subject rJ'Recevesy or Radical lawT A lew C i v i l i s a t i o n l a theTIakiiig," by The Committee Qarfl«l< 16—852 The directors o f the Oow»ittee f o r leoaomlc Recovery include representatives of a wide v a r i e t y of industries, of the Standard S t a t i s t i c s Company, sad of the Harvard School of Business Administration* Aa e d i t o r i a l bgr Raymond Holey i s quoted oa the f i r s t page bat he Is aot l i s t e d as a sponsor of t h i s report* She a p p l i e a t l o a f o r membership indicates "The Oeamittee i s e n t i r e l y n o n - p o l i t i c a l , open-aindsd aad unbiased* I t i s interested s o l e l y l a the sound Iconomic Recovery of the l a t l o a * " jttMWnr g£ ryport The general d r i f t of the argument i s that maiateaaace of the entire economic, p o l i t i c a l 9 and s o c i a l structure o f the aatloa d§~ pends upon recovery l a the durable goods industries, that t h i s f t o U d be accomplished through private enterprise, that the p r i n c i p a l obstacles to such recovery are too ouch Government regulation of security issues and too l i t t l e Qeverianeat beneficence i a opening up the mortgage market, as w e l l as too great ftevernaental expenditures* fiftsg^sfra The f i r s t part of the section l a b e l l e d "Siscussioa* r e l a t e s to lather Coughlla, Upton S i n c l a i r , Br* Towasend, aad Basy Long aad to the p e l i t i c a l seWiq> i a 1936* " L i t us aot f i d d l e l h l l e Bom i s burning.11 The secoad part of t h i s seetiea i s devoted to the diseuseiea o f the ^Opening of Capital Markets and the Release of Deferred 2* Purchasing Fewer*"- fhe basic method used to estimate the t o t a l volume of deferred purchasing power i s to compute the average f o r the years 1929*1929 or 1926»193G and then te subtract actual performance i a re- cent years from the t o t a l that might have been expected cm the basis of these new era averages* fhe annual f i s c a l requirements, projected i a a plan f o r the next tea years, are figered l a a variety of ways* fhe t o t a l deferred demand for locomotives i s to he met l a one year*how t h i s i s possible i a view of the technical requirements of Industry I don f t understand—uhlle the requirements for housing are te be met over a tea-year period* fhe f i n a l table l a t h i s plan i s as fellows: Sunmary of Deferred Purchasing Power and Annual M seal Requirements (Ia millions of dollars) Total lQ-y®ar program Bousing lisetllaaaew —graii CrOMi&fS, hi^Mjrii sewers Obsolescent* la Industrial plants XLeetrical energy on farms and homes Auto* mobiles Electrical equipment BailroadL equipment Agricultural chinsry 49.2?5 24,350 6,400 5*000 4,375 4,000 2,500 1,950 700 1935 8,148 2.S70 640 1,000 ¥38 1.333 500 1,017 350 1936 7.597 2,870 640 1,000 1.333 500 467 350 1937 1,2b* 2»«7<> 640 1,000 1.333 500 467 — 193« 5.447 2,870 640 1,000 — 500 — - 2,870 640 1,000 438 — 500 - — 10,000 3.200 2,188 — «»«• —. — 1939 1940*1944 15.3«7 * 7"""* - >3« fhe t h i r d part of t h i s section i s a discussion of the extent to which the Securities Exchange Act of 193*1 and the Baaklag Act of 1933 hare interfered with aew f l o t a t i o n s t aad also of some of the factors a f f e c t i n g the mortgage situation. Their recommendations with respect to the sort gage situation are as follows: *1 - The establishment of a national mortgage discount system that would act depend upon either the format ioa of the mortgage associations by private capital or the f l o t a t i o n of debentures of doubtful investor acceptance* f t byre symf very d e f i n i t e thoujftts 1ft t h l f farf<?tlgn ufaich we w i l l be glad to discuss at the e a r l i e s t possible sssg&t* "2 - Some prevision should be made so that there w i l l be an established procedure whenever interest rates are to be changed* Arrangements should be made so that t h i s would net be deae by executive order without proper hear lags aad argument* "3 - Study should be mads of interest rates i a the various areas* I f i t should be detenined that i t i s impossible to loosen c a p i t a l i a certaia zones on the present rate of interest, provision should be made f o r proper variance* "M- - A statement should be Issued by the President that would thoroughly c l a r i f y the separation between the various housing programs* At no point should there be any compe- t i t i o n between governmental projects aad the type which the govemmeat i s t r y i a g to encourage oa the part of private capital* * t 5* B s a a f faaSa. Che general story l a t h i s section i s that there has been a da~ c l l a e since 1929 i a the nynber of uaderwriters, as well as l a the volume of aew security issues, while the gross debt of the federal Government has iacreased* ftjwfffowwirt She chart oa the f i r s t pag» of t h i s seetioa shows unemployment i a the b u i l d i n g industries, afoerdurable industries* consumption goods iadustries, aad services industries, as reported by the Cleve* land Crust Company* fturghMlfrg pgwpr Shis seetioa shows i a chart form the tables preseated l a the sectlea oa "Sisimesiea?? certain charts from the Real Property In- ventory; a chart of b n i l d i a g construction i a XagLaad fc&d the ffoited States, attributed to the federal Reserve Bank of lew York; a chart based oa the federal Reserve Board1 s indexes of Industrial pro due* t l o a aad coastructloa contracts awarded; aad a chart showing the course of reats* construction costs, aad r e s i d s a t i a l construction.
@FedFRASER