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l 'orm 1'VR. 131
BOARD OF GOVERNORS
OF THE

FEDERAL RESERVE SYSTEM

Office Correspondence
Tn

MP« Eccles

Date Dcm e 29,,_1868_
ee br
Subject- ? e ?sp?^l Jtemorand'op_

From __ J* M. Daiger
«ro

Ihen you recently discussed with me the bearing
that housing and mortgage legislation and administrative
policies still have on fiscal, credit, and recovery problems,
and then brought up the question of whether my own arrangements were such that I could continue to work on housing
and mortgage matters here a few months longer, I was somewhat uncertain as to just what it was advisable for me to
do in the circumstances, even though, as I told you at the
time, aiy natural inclination and desire was to see through
the program that was frustrated during the first half of
the present year*
It was because of this uncertainty on my part
that I suggested your not proposing to the Board a continuance of my appointment for any definite period of months
and that I later said I should like to write a personal
memorandum to you* Your alternative suggestion of a
month-to-month arrangement, which might be terminated at
any time, seemed to me on reflection to remove the apprehensions that I felt, and accordingly, when you called me
on the telephone yesterday and said that you were ready to
take the matter up with the Board, I told you that I was
quite willing to conform to any monthly arrangement Irhich
you proposed and that I would welcome the opportunity to
do whatever I could to further the legislative and administrative changes which we had discussed*
There are two or three personal matters that I
should like to relate to you briefly, however, in order that
you may be informed of them at this time*




In the first place, I want you to know that, although the arrangement for terminating my appointment as of
December 31 was made verbally on August 1, just before you
left on your vacation, and was confirmed by a formal exchange
of correspondence after your return in October, I purposely
refrained until the early part of this month from making any

16—852




- 2 effort to further the plans that I had long previously mentioned to you, and also to lir# Broderick, for my getting
back into the mortgage-financing field through one of the
larger banking institutions in New York.
My reason for this postponement was twofold.
First, I felt that the plans which I had in mind would be
far more likely to receive unprejudiced and favorable consideration in New York in December or January than would be
the case if I broached them prior to or immediately following
the election. You will recall my telling you, when we discussed the matter on August 1, that, having been identified
with New Deal measures for three years, I particularly did
not want to leave Washington until after the election•
The election did very much clarify the political
atmosphere, of course, even beyond your expectations and
mine, and the result was greatly to my advantage where my
New York plans were concerned. But with the political
atmosphere cleared another consideration impressed itself
on me the more I thought of it. It was that, because of
the importance and prestige of your office, I should not
give to any New York banking institution even the appearance
of trading on my position as one of your assistants. I
therefore did not ask your help in furthering my plans and
did not initiate any correspondence or conversations until
the time set for my leaving Washington was close at hand.
Furthermore, I so arranged matters that no definite
discussion or proposal with regard to a New York connection
would take place before the last week in December or the
early part of January. I had made some engagements in New
York for Monday and Tuesday of this week, and had also said
that I expected to be in New York again next week. Following
my last conversation with you, I arranged to postpone these yearend engagements, but this will require my being in New York for
a few days within the next week or two.
Another thing that I want to know is that, in
such preliminary steps as I have taken thus far toward getting into the mortgage-financing field in New York, I have
made it quite clear that I am greatly interested in certain
legislation which is likely to be proposed during the forthcoming session of Congress, and that, if the opportunity
should be offered for me to give some assistance to the




- 5 persons with whom I have worked here in furthering these
measures, I should want to be free to spend as much time
in Washington as the cireumstances might call for.
None of these considerations that I have mentioned
can be called unselfish, for I do not regard them as putting
me under any disadvantage* On the contrary* Nevertheless,
they will indicate to you the direction of my thinking and
the nature of the course I have taken in order to avoid any
misinterpretation of my actions or any possible embarrassment
to you and others, as well as to myself.
I should also like you to know my personal attitude
toward the FHA, particularly because of your suggestion that
it would be desirable if I could be put into a position to
work out some of the administrative and policy problems there
from the inside. It is my candid opinion that the centraloffice personnel of the FHA, with very few, but important,
exceptions, compares most favorably with that of any other
governmental agency or department that I have come into
contact with during the past six or seven years. It is my
equally candid opinion that the essential solution of the
FHA problems which you have chiefly in mind must in the
long run—or preferably, of course, in the short run—come
from the White House.
In fact, I think that the housing mess, to use
the epithet that the President himself used at a press conference some months ago, is beyond solution by any of the
agencies concerned until the President is fully informed
of what the mess really is. I think that the FHA is
accountable for only a relatively small part of the wmess!f
in housing, and that where the factors involved are not
political your influence will carry more weight with
McDonald during the next few weeks than anyonefs else.
Where the factors are political—and it must be remembered
that McDonald did not create them and that he has made
notable progress in spite of them—the release from the
obligations which they represent must come from political
sources, or else from the President.




- 4 As for myself, I feel that I may say without taking
undue credit that McDonald and most of his principal associates
have during the past year and a half continually sought my
advice and assistance, have to a very considerable extent
relied on it, and have acted in accordance with it in a great
many particulars. I would go as far as to say that the altered
conception of the Housing Act which McDonald and his staff have
plainly acquired during this period is in large part due to
the fact that when Moffett went out officially as Administrator
I came in unofficially in an advisory capacity*
You probably do not know that, when I was acting as
Frank Walkerfs financial assistant while the Housing Act was
in the making, I deliberately avoided making any bid for
place or preferment in the FHA set-up. I was in a position
to witness at close hand the frantic scramble of a good
many persons who I had thought would have more sense and
more breeding than they then exhibited, and I was disgusted
with the whole performance. There was only one condition
on which I had any desire to go with the FHA} it was that,
if Mr. Mortimer N. Buckner, with whom I had carried on the
preliminary conversations for Mr. Walker, agreed to take
charge of the mortgage-insurance program and organize the
banking community in support of it, I should like to become his assistant if he asked me to do so. But Moffett
bungled the negotiations with Buckner, and the latter told
me frankly and confidentially why he changed his mind and
refused the appointment.
At that time, as I learned subsequently, Walker
told Moffett that I had shown a more practical grasp of the
mortgage problems dealt with in the Housing Act than anyone
else who was available to him as a financial adviser. You
will perhaps recall that I had proposed and arranged the
series of financial conferences which Walker called prior
to the introduction of the Housing Bill, and also that
Walker had me discuss the measure privately with a number
of bankers in New York, Philadelphia, and elsewhere. In
addition, he had me arrange the schedule of witnesses for
the committee hearings and maintain various contacts on
the Hill in connection with the bill.




All this accounts for Walkerfs suggestion to
Moffett. But Moffett had much more ambitious notions as
to who his financial adviser should be, though what he
wound up with after numerous refusals was Howard Ardrey,
whose conception of the Housing Act was as different from
yours and mine as day from night. Win Riefler and I
attended the first private meeting of industrial bigwigs
called by Moffett shortly after his appointment, and when
the meeting was over Win and I threw up our hands in dismay at the policies it foreshadowed. I did not go near
the FHA afterward until I was invited by McDonald (whom
I had never met) to join him and Riefler at luncheon at
the time Riefler was making a confidential report on FHA
for Secretary Morgenthau.
In my subsequent contacts with McDonald, a point
I have always had to keep in mind is that he is one of
Moffettfs personal friends of long standing, and that
Moffett was primarily responsible for McDonaldfs becoming
his successor as Administrator. The relationship between
the two men is one of great intimacy and cordiality. You
will thus see one reason why I have never entertained the
thought of going into the FHA as McDonald1 s assistant.
This does not mean, however, that I do not fully concur in
your view that McDonald needs a financial adviser who has
a firmer and broader grasp of the mortgage-financing problem
as a whole than anyone in his present organization has*
Now there is one more personal matter that I
should like to mention, though I do it with some hesitancy,
because I do not wish to risk being misunderstood. It has
to do with my salary if the Board should adopt your suggestion to have me remain here a while longer* For the
relatively short time that would be involved, an increase
in my present salary, though by no means unimportant to
me even for a short period, would not represent a great
addition to my income. Nor would I put the question of
an increase on the ground that a brief month-to-month
arrangement ordinarily warrants a larger compensation than
a longer arrangement; for the monthly arrangement is one
that in the existing circumstances I greatly prefer.

- 6 On the other hand, though the Board as a whole
naturally does not realize it, I have been doing a task
that very few others in Washington would know how to do
at all and that one person could not ordinarily, or as a
matter of permanent occupation, do more or less singlehandedly* At periods when Congress was in session, and
at others when it was not, the work has occupied most of
my nights as well as days, and nearly all my week-ends as
well* Regardless of the barrenness of the legislative
results thus far from the efforts of the present year, I
went through a pretty severe ordeal both downtown and on
the Hill until almost the very last day of the 1956 session;
and it was from sheer physical exhaustion that my time subsequently dragged on the campaign speeches* As for my work
last year on the Banking Bill, I think you would say that
I did my full share while at the same time keeping up ay
other work on housing and mortgage matters*
If I were expecting to remain with the Board
through the coming year, I should feel fully justified in
asking that consideration be given to an increase in my
salary to $12,000, and as a reason for it I should relate in
some detail the nature of the work I have been doing and the
evidence of its results apart from legislation* However,
the principal reason for my asking you to consider whether
an increase might be made at this time is, frankly, that such
a recognition and recommendation to the Board on your part
would be extremely valuable to me both now and in the future*
I of course leave the matter of putting the question
to the Board entirely to your wishes and discretion, except
that if you do put it I should want it to be solely on the
ground of merit and not as a personal favor. On the other
hand, if the Board should be unwilling to grant an increase,
I should have no reason to proceed any differently in what
I have undertaken to do either here or in New York than if
the increase were granted*
In other words, my willingness and desire to work
with you on the impending housing and mortgage matters is
in no way conditioned on the salary question* An increase







- 7 would not cause me to prolong my stay longer than the
matters which you and I have discussed call for, nor would
the refusal of an increase hasten my departure for New York,
I am as much interested in seeing this housing and mortgage
situation worked out as you are*