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January 9, 1941

(Record of press interview with the Secretary of the Treasury)

Do you have any explanation for the continued decline in Government
Well, I think all you have got to do is to look at
date that Mr. Eccles made his statement.
Do you attribute the decline to the proposals advanced by the Federal
Reserve Board?
I do entirely.
What specifically, in Reserve Board statement would do that?
Their proposals had that effect. I am just talking
facts. I am not prepared to interpret them.
Do you think the decline was warranted?
Do I?
Yes, Sir?
Absolutely not.
They have been saying that we have experienced inflation in highgrade Government bonds, with yields almost
..., well, they
are infinitesimal, so you are disturbed by their decline, are
I am not disturbed but there is no reason that I know
of for interest rates to harden at this time unless
it is a proposal like the Federal Reserve System,
and if Congress should put it into effect — why
it might become permanent.
Do you think in view of large financing Treasury must undertake in
near future these proposals were ill-timed?

I am not prepared yet to make a statement. I take
it that if Banking and Currency Committees of
the Senate and House seriously consider these
proposals, I will be called and, if I am called,
at that time I will be prepared to state my

-2Mr. Secretary — I take It you do not want these Interest rates to
I wouldn't say that* I have always felt It Is a
question of supply and demand and here In the
Treasury we donft know of any demand which
should cause such a sharp rise In Interest
rates as that which has taken place since the
first of January. That not only goes for the
Treasury but everybody else, whether he wants
to borrow $100 - or $1000 - or a billion dollars.
It affects everybody the same.
You say, Mr. Secretary, that you see no reason at all for the
hardening and yet you In that same statement do not say ?vrhether
you oppose that hardening of Interest rates?
Well, I don1t believe in taking any artificial means
at this time to increase such rates.
In view of that hardening of interest rates and the increase in
yields, do you anticipate that you will have to pay a little
more for your $500 million dollars in financing?
It looks that way now.
In view of the development In the Government bond market plus your
comments in connection math that development, can we correctly
assime that you are not wholeheartedly in accord with Mr. Secies
when these proposals were made?
I would rather wait until I have to testify on
the whole thing up there. I repeat if Congress
takes these proposals seriously and they have
hearings, at that time I will be ready to go
into the whole matter.
Are you speculating that they will not take them seriously?
Well, I just said i f thev take them seriously.
Mr. Taft has already taken them seriously.

I said Congress
I have never been
in favor of forcing Interest rates down nor
up artificially.

-3Well, your policy of deficit financing in one way has been responsible
for so-called artificially low interest rates.
The point I have always made here, I have never
believed in taking legislative means of either
forcing money down or forcing it up. As the
result of general conditions both within the
United States and without, we have had very
cheat) money. Now naturally here in the Treasury
it has been advantageous to us to have it. It
has enabled us to borrow at very reasonable rates
plus the fact that the public has had confidence
in United States securities. Now I know the argument that it is artificially cheap money ?/hich
has enabled us to borrow, but I have
TJhen I came here in November 1933 the conditions
were for cheap money and I couldn't borrow more
than I think, 2 1/2 per cent or 2 3/4 per cent
for eleven months
so unless the public
has the confidence in the Government as before
and its fiscal policy
it is not necessarily
a result that you can borrow at a lower rate.
Has this decline warranted any open-market operations to stern the fall?
If it has I have not heard of it. (There was a
little horseplay). I mean I can't imagine
the Federal Reserve stepping it but they might.
On this question of supply and demand would you consider it fictitious
for the Federal Reserve Board to step in?
?"ell, I have always been in favor of having what I
call a natural bond market and the only excuse
for the Federal Reserve or ourselves to sten in
would be to act as a cushion so as to kee: from
there being any air pockets.
Of course, this present decline has been orderly, has it not?
I consider it such.

It has been rather sharp but

Do you consider the Eccles proposal an artificial impetus?

V'ell, I ?ould rather wait
there are a lot
of things in this so-called Eccles plan besides
excess reserves and if I am called upon the Hill
I propose to have something to say on each recommendation.
Have you talked to the President about this plan?
That is his business, if you don't mind.
The charge has been m d e that this Eccles plan will return the money
market back to the New York bankers and take control away from the

It is an interesting idea (there was some horseplay) .
I mean that question raises an interesting thought.