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TELEGBAM Marriner S. Eccles, Chairman Board of Governors Federal Reserve System. Win, lose, or draw, X admire your courage. W. Randolph Burgess. W. RANDOLPH BUEGESS 55 Wall Street Hew York 15, H. Y. December 5* 19^7 Dear Marriner: Shanks for yours of December 3- Sony I missed you a t lunch, but I was working on our memorandum* Ho one can object to your driving hard for your proposal, but I did think that your attack on the motives of ihe people who oppose you was quite uncalled f or* TShat I hope i s that after the shooting dies down on this we can a l l keep hammering on some of the other things that must be done i f we really are to make a dent on this inflation. I n the meantime I am not sure you realize how great a change has taken place i n the money situation. By even relatively modest action a great deal has already been done to change the trend* i f i t i s yet enough, but i t a t least is a good s t a r t . Sincerely yours, (Signed) Honorable Marriner S. Eccles Chai man, Board of Governors of the Federal Beserve System Washington, D. C. Randolph. I doubt PERSONAL AND CONFIDENTIAL December 17, 19U7- Dear Handy: As I have been very busy these days, I have n o t 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 o f December 5* A c t u a l l y , I 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 o f some of t h e bankers, f o r t u n a t e l y n o t a l l o f them. They a l l have t o s u f f e r , however, f o r t h e mistakes o f 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 b u t went out o f my way t o i n d i c a t e t h a t they were n o t t o be blamed f o r t h e i n f l a t i o n which has t a k e n p l a c e so f a r . They were w i l l i n g v i c t i m s , however, o f the expansion o f bank c r e d i t b u t I r e f r a i n e d f r o m saying s o . There i s p l e n t y o f room f o r honest d i f f e r e n c e s o f o p i n i o n over t h e Board f s p r o p o s a l . To s t i g m a t i z e i t as s o c i a l i s a t i o n o f banking comes about as close t o demagoguery as a n y t h i n g I can t h i n k o f . X was s o r r y t o see t h a t s o r t o f t h i n g i n t h e C o u n c i l ' s s t a t e ment. I t was a l l t h e more r i d i c u l o u s i n view o f t h e f a c t t h a t t h e Council had unanimously j o i n e d i n t h e S p e c i a l Heport t o Congress a t t h e end o f 19h0 which recommended d o u b l i n g what were t h e n t h e maximum reserve requirements p e r m i t t e d by l a w ; t h a t i s , 26, 20 and l i * p e r c e n t on demand deposits o f the r e s p e c t i v e classes o f banks. That was f a r s t r o n g e r medicine t h a n t h e Board's p r o p o s a l , as I t h i n k would be c l e a r t o anyone who examined i t unemotionally and w i t h o u t t h e innuendoes which were i n t r o d u c e d i n t o the d i s c u s s i o n . ยป The weasel words i n t h e C o u n c i l ' s statement h a r d l y dispose me t o f e e l very k i n d l y . For i n s t a n c e , t h e statement suggested n t h a t t h e System and t h e Treasury a l r e a d y have l a r g e powers w i t h o u t new l e g i s l a t i o n t o place c r e d i t tinder broad r e s t r a i n t s , 1 1 and then l i s t e d t h e r e l a t i v e l y innocuous d i s c o u n t r a t e , reserve requirements a t c e n t r a l reserve c i t i e s , coupled w i t h t h e statement t h a t "by open market operations t h e System can c o n t r o l t h e reserves o f the member banks and l i m i t t h e i r l e n d i n g power. w I f t h a t means a n y t h i n g , i t means t h a t the Open Market Committee should abandon market s u p p o r t . When he t e s t i f i e d , Hed Brown was c a r e f u l t o say t h a t he d i d n o t f a v o r any such course. That s o r t o f d o u b l e - t a l k i n t h e statement goes a g a i n s t my g r a i n . I t i s a l l a p i e c e w i t h t h e increased g o l d reserve requirements which somebody s o l d t o Mr. W o l o o t t . I f i t had s u r v i v e d i n Congress i t might have embarrassed t h e Reserve Banks somewhat i n t h e i r day t o day o p e r a t i o n s . Otherwise i t was meaningless o r , as C o l l i n s o f t h e Hew York Times p u t i t , hoax, pure and s i m p l e . " I t d i d h e l p t o muddy t h e waters and add t o t h e c o n f u s i o n . - 2 - I t had a l l the earmarks o f aa attempt t o do by i n d i r e c t i o n what i t s proponents were a f r a i d t o oome out openly and advocate, t h e more so because i t was put forward i n t h e House i n such an e x t r a ordinary manner, w i t h o u t any p r i o r n o t i c e t o the System or any opport u n i t y t o be heard. I disagree one hundred per cent w i t h Stewart Baker, b u t a t l e a s t he was f r a n k enough t o say he wanted the Reserve System t o stop support of the market. There i s nothing devious about t h a t . I am n o t so naive as t o expect t h a t the opposition w i l l always be open and aboveboard, and I am not so simple as t o be e n t i r e l y tinaware as t o what i s going on behind the scenes. M i i l e 1 am on t h i s s u b j e c t , I want t o say t h a t I was s o r r y t h a t your bank descended from i t s usual high l e v e l of discussion t o a paragraph i n the December L e t t e r t h a t appears under the sub-heading, n A Dangerous P r i n c i p l e , 1 ' and t r i e s t o make i t appear t h a t the Board*s proposal would place "the c i t i z e n s of the country under l e g a l comp u l s i o n t o buy i t s ( t h e Governments) bonds." t h a t k i n d of t h i n g i s h a r d l y worthy o f comment. You have known me long enough t o know t h a t I do not bear grudges, but I would not be e n t i r e l y f r a n k i f I d i d n o t say t h a t t h r e e members of the Board, a f t e r the discussion w i t h the Council, spoke w i t h a g r e a t deal of resentment about your s u p e r c i l i o u s a t t i tude, p a r t i c u l a r l y towards me. I n view of your a l l too apparent contempt f o r t h e Board's proposal and what I had t o say about i t a t the meeting, and i n view of some of t h e testimony by Council members, i t i s g r a t u i t o u s , t o say t h e l e a s t , f o r you t o w r i t e t h a t you t h i n k iny " a t t a c k on t h e motives o f the people who oppose (me) was q u i t e unc a l l e d f o r . " Considering the provocation, my prepared statements and icy testimony under questioning have been very r e s t r a i n e d indeed. Having gotten t h i s o f f xqy chest, I f e e l b e t t e r . Perhaps i t f s t h e approaching Christmas s p i r i t . I n any case, I am l o o k i n g ahead, not backwards, t o a new and b e t t e r year f o r a l l o f us* Sincerely yours 9 (Signed) Mr. W. Randolph Burgess, 55 Wall Street, Hew York 15, Hew York. Marriner.
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