Full text of Marriner S. Eccles Papers : Telegram to Marriner Eccles, Box 41, Folder 9, Item 1

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fan* U , 1949,1 P.M.

0

r

K l l l e * aun Mich, <i<om<*rjr Lk, 1949

Reserve &o*rd
I aii* ju«aviiig todty for Hilt Cost B i l l l »aat*!&*t stunned &o r e s u l t
of asy conwrMtioii with ^ou.

I t ' b h^rti bo Deiieve ^ u actually think a

i& a i o m i ^ f And th*& so :mich hu^an Guxx^i'lng aauit b© cx'^^ted.

Li hela otfjt| tbi K>FM liill be the suffering, i t MM ay |

<»,

k&mrieuR j>»opl« t<? aadatniii bL^h sfitployai^it and Kl^k

d«temia*iioa

th«t lacfftt»d prodaoilcd mill lov»r
pric^a.

ttt lo taiak, la our oUL«Ctt9«ioi2i an E^gul^tion W credit

It s

*, trii-t ^ou did not se^a to understMid that

la
fat

p

you ^
l

y

^

oi production in4 MplojVMBt in t h e aur&bie goodo ;.

You know

korti inti»*t»ly UIM 1 Uutt lni«ppr*t«tlon« of

of c^^ngr^aa wrt

apofi tne tiitentioa^ of Q agrt;Qof iod tne i

wftd oOj©otiv@s

forgive M Tor r*it«rfctlag oo mahy tia.es in oar t6i©phoae oa&vMn
and now «*gaiii—ta*t

w

::;ngrt

-cxfic&ll,/ OAotion#4 you •fftlnat

credit poiirt to pXun/je m into (i »plr«l of aw•Myloyafat.
Mdt dtpa'Milon.

Otfliilloo ind

$ioply b^ pr&etlcln^ the ^liexibls ^IQ MnaitiTt

..ciea11 which Congress reco^:..ended fgr adjusting regvilations, i t



t o ma i t l i your duty fjmtdiatftly to axtand the praaant l i •onth ,>&<p».ent
period for autos to *.4 or 30 Booths•

that DM act Mould r&stors tht

right to buy c&ra to countless faiklilM of

EBCKUU

to Ineoaaa sad woaXd do

Much to ehaek the daaaga that a d u l a t i o n ft i t epre&ding throughout tha
e n t i r e aatemotiv* industry, which aupplia* jobs to on* out of
ptrsont in tht United $t&ta#«

sawtt

B«Ciiuae th« Federal iUs»rr« Board

seemea even to h»T« tw?,en Oognll«no« of the ^Xigr

I

Lntmt

i bb« SofcHi1* duty to nvold cr»«tio« of • d«prd90ioot 1 M quotl
herewith the r«cc«aiu*adiktlcsi :i th« *«BAt« «OJSRmittM on dft&klof ana Curren
of A ^ u s t 6» 1943, &a folowt
Committee, la i t s htMtrln^a ,jid dtlaousstotui en tiie ^ntmitT
Credit GontroX pro^ltiocia of the r&soiution, h»s at »JJL tift#t
Tifed o v r tho effects of tht O0at4Ojpl*t«4 rogai&tlon oa ttJ
product' :m anci wylojwant In the affoetod dupabl»-^oo<U Industries«

li

ItoofBlso the probability that a l l .if the&e wixi bo tnfluoncod uri
by «n,y a£Tect,ive r«guXatl0Oa

^Boftavex*, i t l i Bot the UOJ-:./itte

t o rocoasiatKi i K;uid^te to une i urd of tioT«ruor« of trie F#d«r*i. Ue^^rve Bo»rd for
the r«—ifl«t*t •aunt of tha idaeticmi taraj lahich pr»r*tiad through -• ost
Q£ tha war period ^nder ^^

id c ^»3 atiaa t h s ttvowttd tntaot at Hogui&tj

ama to thrvttla the datuaad for dhir*bJa goods,

ihe Co»£Ditta« wishes t o La^Tt

th# cue&tloii of uQ«a pa>|fSMBta tnd t-^r.^ aiGeluaivady to tht ditcjration of the
BoiArd but vlahoa t o a4rioa the &

>X Ita aajraaat Latareat ia taauring

that regiiiation brings about the La^at

bia dttaloomtioo of industry*

I t i^ t o be hoped tn^t tha Board * i l i adopt fXaxibla aad aaaaltiva ^olielaa w4.i.ch




**H1 naint.ain the hl£he*t potftibie level of production and emp
la the dur.ib~.e good* iid.ustri.es, on which so moh of the nation's stand&rd

jrea dlacusi the cri&is created by the I8~,:ionth pejnMab period on
&utos vtitn your fello

rs ? 1 an; sure %h9J wiXX wmt to t^k$

iiito •ott«id«r&ti«a the C .

tor/ iind fOOBmiKUtleaa preceding

passage of this legisl^ti a.

I Jiope your action wili be In time to

KtMkd oft furtne2v h&rdsalps to th

!•«

farougho-it last n!4it i t was

ifipo«*ibl« fcr ee to ftal that you could fay fou -Rare vilxlnf to nave
li d«pr&**ljn Jriti? I

-

wsjployftmt, closed faotorl*s 9 inrottliiig

of product!:n, bltnkrupt btt»la««»«l snd all the Hardships »| th© people*
Ke&ily, Mftrriner| tt w - <ntt of a lit&ff h»art and • A—p bopa for you to
open your a&iztd that *L s^id,

w

God forgive j:mf for yuu tenon not flbat fcm do.M

I coulori't I*av« without telling you th#»e i




Henr J. Kaiser*

c
0

p
Y

January LS, 1949*

Mr,
Kaieep-Prtser Corpora tlonf
19^4 Broadway,
Oakland 12, California*
De&r Henry:
I h&ve been sympathetic toward you and your companies and
have followed your progress with great interest since you entered the
automobile field* I have always opposed Monopoly* whether in the field
of industry or finance, because the public welfare is best served by
adequate

3*

Many thousands of your cars have b&m sold for $2,300 to
each, and your assets have grown to $95*000,000.

But, Henry, if you want to help the average *«erican, i*hy
don't you offer him a car* &.t & price he can afford to pay? Thi-.t •ouid
be far better than your suggested iJMndMfcOk to Regulation Ift by %nich
you would Mlfht him down with a lot of extr^, debt in order to sell him
your car at your present prices.
If you choose to spend year time issuing at&testate eg&inst
me, or afain«t the Board of Miich I happen to be a aMfeer, that i s your
privilege. But i t is siost taddeoing to think of Hoary K&ioer, the gr^at
production genius* devoting hisseif to irsuch side lines in&tsad of f i t t i n g
down to the business of offering toe people of t n i s country A car at a
price they can afford to pay.
You kaon that the broad questions to which you refer in your
four-pa^e telegram of the 12th coula not De adequately covered in a
brief l i t t e r * However, I feel that I sriould <it least try to correct
soiae of th© misconstructions you seem determined to place on my views*
Thos© vi©?*6 are outlined i s an interview published in the "U.S. liews
It World Report11 for January 7> 19U9, and I am enclosing a reprint.
For the sore than fifteen yec,rs that I have bean in public
service one of ay chief concerns hae been to pravex.it another depression—
or to aoder&ts i t s ri^vages as much at possible If i t ahould unfortunately
be forced on us M <* result of mMBt-mkdm inflationary excesses. That
is what the fight afain«t inflation i t a l l about*




Mr. Henry U. KaUer

You have your opinion &s to the present status of inflation.
Others wm$ feel differently. As I said in the interview:
*A lot of scattered evidence h&s been piling up receatiy
ladlo&tlng inflation Is oo; !n,-r to &n end bxxi downward adjustments ure developing in certain ar*a*. Of course, whether you
think inflation is over depends upon the weight you place on
this evidencefcndwhether you believe the basic forces that
have caused inflation bav* worked themselves out. Naturally,
tiny conclusion can be upset by Government action.R
Henry, I am sorry you refuse to recognize the amount of
inflation M h&ve already had, and th*t you deliberately close* your
eyes to the further damage th&t c«n be? caused—to the country generally,
though perhaps not to loM Individuals—by unsound efforts to hold
present inflated levels. You iff* undoubtedly familiar %ith tho f&cts.
But, of course, wKo oae is so blind M he who Bill not see." To quote
again from the interview:
a

Consuner prices are uc an average of 75 per cent sine©
1939, V&A since tne end of thf *ar they h^ve risen about 3$
per cent. Prices of housing, ost foods, led tlif other
consumer as well M OApital ..;ood® have inereased amch aor*.
An inflation of this siiie brings with it serious dislocati ns
which Mdlt for future trouble. Tha longer It is allowed to
continue th© sort difficult the ultimate &djustment«
w

In order to nfcifttain prtseot Lofict^d levels, we must

not use the props which are appropriate for depression. That
is, «e should not, &t present Inflated prices, employ the
cushions that should be available to «&se off a recession.....
w

(some of the cusiont are) tne hug© baciclogs of
needs for all kinds of public works,.....the needs for private
homes <ind many kiads of durable goodgj as well &a e&jiing of
credit ter^s,.....I believe that a defiationary adjustment
comix^g' turn would not be of long duration or too severe and
could be very salutary, ishoreas, if we now waste our elements
of strength to sttatain .inflationary dialocfctions, the poitponed defl&tiun would be iauch more serious and of longer duration.*
Let M repeat. If the country achieves & teniuorary stability
the existing level of prices by the prop of & further iisablt credit
whether bank or otherwise, than Lt i» storing up re&l trouble.




J.

Henry, you c&n reat 4>eaur<?d tn&t trris shurd carries out the
instruction* oX Congress* You will pardon me if I remind you that the
directives of CfcgreftSHid trie Ideas of Baitry Kaiser ere not necess&rily
the &^m. This Board continuously reviews the SOftditiofk oi business—
e l l IdLnds of business. I t Coastitttly IS SliliilSi credit policies in trie
light of cfraagtni; conditions* Bo«.rd poliels* ejre both flexible and
sensitive. They are ai»o ciesignod to serve the general welfare of SIX inota6.d ©i' apeei&l Interests of a few—-« feature that SSSM aif b© Inelined
to overlook.
ZxoeealYe Instsl—nti credit for eat ^mobiles si tills time
^ive SB epparsot but temporary at&bility to M M soapADie*1 proi'ita by
further infifeting a dS«SA4t ihsA io ^ire&dy generally in excess* of supply.
But i t fcould raise future problems that would ,;:.*cce i t hSJTder far the
country to la^iutain ;ii^h prodaetioB and employment. Would ycu KSBI this
Board to encourage such excessiTS eredlt now st the cost of future trouble
for UkS country?
& sedd that too ^aich should not b© expected of
Kegulation fc* I t i s , of course, only natural th&t i t should h&vs saM
®ff#ct, eftd the Board should endeavor to see that :,t has such effect as i s
appropriate in the ytmsmstmints* Only In thst «By could the C
oe carried out.
You tcao* ©v€iii better than I that there are i nweber c?f other
factors ialluencii.^ the sutooobils situation si the present ti»e« i will
•SAelco a d | a fe?». Thi& i i the off season* There IMMI been raucn unfavorable publicity regarding gouging pr&cticaa of some autorsobil© j i i l n r i .
M&ny prospective «isto»ers are svaitinf a "look-see'1 at ne* Models, lad
ycu ctnnot get i-^ay froei the fact that present prices ^re k real deterrent,
except perhaps In the loeisr prised Lines vshare there is s t i l l a substantial

shortafe*

I t seems cltejpj therefore| that wn&t your eo*paay needs to
i t s cars Is not longer credit terms but Lower prices.
The reports of Congressional oooftittetei are indeed of great
sifnlfloance in shoving the purposes of legislation. You ^re •ietsfcsn in
isipiying that the language in quotes in your teiagr&m i& from & report of
August 6, 19U&9 of tno Senate Banfring and Currency Coj^r.ittee on consumer
credit legielatlon. However, the Senate ttmsing mid Currency Coau:ii* tee
did stats the objective* of Itegalatlon W very ci©,-.rly In itss report




Mr. Henry J, Raiser
g enactment of tne present legislation. That report shows
th&t Regulation 1 Is of Special benefit to the pertGQ of noder&te or low
income. I t shows that by £u.t.rd'
it excessive debt, KoguiEtion i»
helps to protect tne pocket bouk end the job of the average citizen.
I vast to call that statement of the Coaodttee to your attantion, Henry, tnd I hope you Will fiad i t In your heart to recognise the
evils of excessive debt that tne Congress and this Bo-turd are trying to
w&rd off but v.-hich you—unwittingly, I trust—have been trying to force
era the average ^raft

*Oaiy harr.. could result fr oxa iiiduoixu LLiion s of
iiito debt Oi'i tOO 6
for
fe*ooda
Qt
terras
at the prese. hijen level of prcie
The exceR-oivfi cr^d. t built up in that v*ay %ouid not only
incre&ae pr«t»ent inflationary ^rewtuireej i t would h^v© to
be i.ic«uidcted i.e-ter out of curi-ent iaco^e should & aown
twing cccur, thue necesLc-rlly diverting tn&t Lncofit fro*
the channel* of consumer expenditures Ifl the ensuing period...
can f ujnili-^ e to KO hets-v

w

...excesses in the field...(of consumer credit) C*n
be harmful aot only to the people directly involved, but al*o
to millions of othere 1^0 are penalisecl by the inflationary
effeetfi of auch excesses. Trio person JS bma.il Inooae is the
on* hit hardest When inflation pushes prioee bey r;.d hia re^ch,
and the one nho suffers ost Waen the resulting del.aticn
throws hi* out of a job. The legislation should tend to
result in directing competition along the line yZ decreeslag
pxlces rather them extaiidiii/; oxce3sive credit ter.es> By making
some contribution toward preventing furtner inflation at this
time, and thus toward Boderating any enstti&g deflati n$ consumer inst&loent credit controls ccai espeoiali; & rve the
interests of the person of loi income in addition to eenrii
the interests o£ all other consumers affected by our rjational
econoray." (Imphasis added;
You will realize, of course, Henry, that the opinions in this
l e t t e r art; ajf own psraonej, rieiis andi not necessarily tao^e of tne B;-ard of
Governors of the Federal




M.JS, X c c i e s ,