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Alan
Greenspan
June 13, 1989
Mr. & Mrs. Martin:
Thought you might like to have
a copy of this.
Catherine Mallardi
2
The Legacy of Former Chairman Martin
Chairman William McChesney Martin's
rise in the financial community was meteoric. After graduating from Yale in 1928 he
took a job at the Federal Reserve Bank of
St. Louis in the bank examination department. Two years later, he went to work for
A.G. Edwards & Sons of St.
Louis, heading their statistical
department. He so impressed his
bosses that they made him a
partner after two years. Seven
years later, he was elected President of the New York Stock
Exchange.
But the start of the Second
World War interrupted his career. Martin entered the army as
a private, and emerged from the
war a colonel. He received the
Legion of Merit in 1945.
His Washington experience
started with his appointment to
the Board of Directors of the
Export-Import Bank in 1945. He
held the chairmanship and
served as president until 1949.
He was Assistant Secretary of
the Treasury from 1949 to 1951.
In this role, he helped negotiate
an accord between the Department of the Treasury and the
Board over a long-standing dispute over the "pegging" of interest rates on
Treasury securities.
President Truman and members of his
administration were trying to finance the
Korean War by issuing long-term bonds
sold by the Treasury Department at low interest rates. The Fed was supporting the
bond market at lower rates than thought
normal. Without such support, the bond
sale would create inflationary pressure. Respect for the dollar and American prestige
would falter.
The Fed's job was to correct any imbalance in the economy, but the job was
tougher because of this "peg" on interest
rates. Finally, the Treasury and the Fed
came to agreement with a renewed commitment to the independence of the Fed.
Martin was subsequently appointed
chairman of the Federal Reserve Board of
Governors. He was 44 years old. He spent
the next 19 years transforming the agency
A Lifetime of Flexibility and Consensus-Building
into one of the most respected and powerful forces in the government.
Throughout his chairmanship, Bill Martin was known as a consensus builder who
was flexible toward the economy and the
Board's many constituents. "Martin is not
At the Federal Reserve System's
75th anniversary
it seems appropriate to honor
the tenure of former Chairman
William McChesney Martin, Jr.;
the longest tenure served
by any chairman of the Fed.
His distinguished record
of public service will long be
remembered for integrity,
independence, and strength.
Fed Phrases Attributed
to Chairman Martin
"Our purpose is
to lean against the winds
of deflation or infaltion
whichever way
they are blowing."
"The Fed is always the one
who takes away the punch
when the party's getting good."
"Credit is like a rubber band.
A rubber band is there to be stretched.
But if you stretch it too far, it snaps."
a crusader eager to do battle on issues in
or out of his province. He does not invite
controversy—even on monetary matters . . .," according to Business Week ("A
Five-Year Balancing Act," February 18,
1956). "This does not mean that he is unwilling to take a position, but
that he prefers workable compromises to deadlocks."
However, he often disagreed
with Congress on issues of
policy independence. His adversary was Wright Patman (DTex.). Patman believed, as did
many other Congressmen, that
the Federal Reserve Board
should maintain the proper supply of money to foster economic
growth. In other words, keep
interest rates down. In March
1952, Patman led a Joint Economic Committee investigation
to determine the meaning of
Federal Reserve independence.
He questioned the Fed's policy
moves at every turn.
Chairman Martin, however,
championed the full independence of his organization. A
master of ambiguity, he said that
the Fed's purpose was to insure
that the money supply was "neither so large as to induce destructive inflationary forces nor so small as to stifle our
great and growing economy." Indeed, Martin was so adept at turning a phrase that
many classic statements about the nature
of the Fed come from "Martinisms" (see
sidebar).
During his 19-year tenure (he served under Presidents Truman, Eisenhower,
Kennedy, Johnson and Nixon), the Federal
Reserve weathered many storms, both economic and political. Perhaps his toughest
times were dealing with the monetary
responses to Johnson's Great Society and
the ensuing buildup of the Vietnam War.
His term ended in 1970, and President
Nixon appointed Arthur Burns to be
Chairman of the Board.
U p o n leaving the Board, Martin
launched a successful consulting business
in Washington, D.C. Now 82, he still lives
in the area with his wife Cynthia. •
@FedFRASER