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NOMINATION OF MARRINER S. ECCLES
TO BE A MEMBER OF THE FEDERAL
RESERVE BOARD

HEARING
BEFORE A

SUBCOMMITTEE OF THE
COMMITTEE ON BANKING AND CURRENCY
UNITED STATES SENATE
SEVENTY-FOURTH CONGRESS
FIRST SESSION
ON

THE NOMINATION OF MARRINER S. ECCLES TO BE A
MEMBER OF THE FEDERAL RESERVE BOARD

APRIL 15 and 19, 1935

Printed for the use of the Committee on Banking and Currency

128350

U N I T E D STATES
GOVERNMENT P R I N T I N G O F F I C E
WASHINGTON : 1935




COMMITTEE ON BANKING AND CURRENCY
D U N C A N U. F L E T C H E R , Florida, Chairman
P E T E R N O R B E C K , South Dakota
C A R T E R CLASS, Virginia
R O B E R T F . W A G N E R , New York
J O H N G. T O W N S E N D , JR., Delaware
A L B E N W . B A R K L E Y , Kentucky
R O B E R T D . C A R E Y , Wyoming
R O B E R T J. B U L K L E Y , Ohio
J A M E S C O U Z E N S , Michigan
T H O M A S P . G O R E , Oklahoma
F R E D E R I C K S T E I W E R , Oregon
E D W A R D P . C O S T I G A N , Colorado
B R O N S O N C U T T I N G , New Mexico
R O B E R T R. R E Y N O L D S , North Carolina
J A M E S F . B Y R N E S , South Carolina
J O H N H . B A N K H E A D , Alabama
W I L L I A M G I B B S M c A D O O , California
A L V A B . A D A M S , Colorado
F R A N C I S T . M A L O N E Y , Connecticut
G E O R G E L . R A D C L I F F E , Maryland
W I L L I A M L . H I L L , Clerk

R. H . SFARXMAN, Acting Clerk
SUBCOMMITTEE

ON MONETARY POLICY, BANKING AND D E P O S I T

INSTTRANC

C A R T E R GLASS, Virginia, Chairman
R O B E R T J. B U L K L E Y , Ohio
P E T E R N O R B E C K , South Dakota
J A M E S F . B Y R N E S , South Carolina
J O H N G. T O W N S E N D , J R . , Delaware
J O H N H . B A N K H E A D Alabama
J A M E S C O U Z E N S , Michigan
W I L L I A M G I B B S M c A D O O , California




ON CONFIRMATION OF MARRINER 8. ECCLES AS GOVERNOR OF THE FEDERAL RESERVE BOARD
MONDAY, APBIL, 15, 1 9 3 5
U N I T E D STATES SENATE,
SUBCOMMITTEE OF THE COMMITTEE
ON BANKING AND CUKBENCY,

Washington, D. O.
The subcommittee met, pursuant to call, at 11 a. m., in room 301,
Senate Office Building, Senator Carter Glass presiding.
Present: Senators Glass (chairman of the subcommittee), Bulkley,
Byrnes, Bankhead, Townsend, Couzens, and Cutting.
Present also: Senator Fletcher.
Senator GLASS (chairman of the subcommittee). Governor Eccles,
to repeat the question propounded before the committee reporter was
called into the room: Your confirmation was referred to this subcommittee sometime ago, but owing to the fact that at least four members, I think, of the subcommittee are also members of the Committee
on Appropriations of the Senate, and to the fact that I, as Chairman of
the Committee on Appropriations, was engaged on the so-called
"relief and work relief bill", we have been unable to consider the
matter before this time, much to my regret and very likely to that of
other members of the subcommittee as well as yourself.
I called the subcommittee together today, which is the earliest
opportunity I have had to do it, to discuss with you the question of
your confirmation, and the subcommittee decided that they thought
the examination should be a public one and not in executive session.
Now we will proceed to hear any statement that you may care to
make. I would suggest that you first tell us something of your banking experience, whether or not you have had any connection, direct
or indirect, with the Federal Reserve Bank System, and so forth;
anything that may suggest itself to your mind that would relate to
your peculiar fitness for this position.
STATEMENT OF MARRINER S. ECCLES, GOVERNOR OF THE
FEDERAL RESERVE BOARD, WASHINGTON, D. C.
Governor ECCLES. My first connection with the banking business
was in 1913, when I became a director and vice president, as well as
member of a committee, of a small bank at Logan, Utah, a bank
whose deposits were around a million dollars.
From that time up until the time I came to Washington, a year ago
in January, I was actively engaged in the banking business, devoting
a very substantial part of my time to that business over a period of
20 years. During that period of time I had assisted in the building
up of a banking organization whose total resources were approximately $50,000,000.




2

NOMINATION OP MAKEINER S. ECCLES

To relate more fully the development of that banking organization
I n 1920, after acquiring a substantial ownership in the First National
Bank of Ogden, Utah, and in the First Savings Bank, I was made
president of those institutions. In 1922 I brought about a merger of
those institutions with an institution in Ogden in which the Browning
people were the controlling factors.
I continued to retain my interest, and that of my family, in the original institution at Logan, and also in several smaller country banks,
in which we acquired an interest at various periods from 1913 up to
1920, and
Senator COUZENS (interposing). When you refer to your family
whom do you mean?
Governor ECCLES. I mean my brothers and sisters and my mother.
Senator COUZENS. Were your brothers active in building up a n
organization of banks?
Governor E C C L E S . One of them has been very active since 1922.
Senator GLASS. Is that George Eccles?
Governor ECCLES. Yes; George Eccles. He graduated from Columbia University School of Business, and was in the Irving Trust Co
of New York for a short period as a student employee. He then
came to Ogden, and since that time has devoted his entire time to
the banking interests.
A brother older than George, and 4 years younger than I am, has
also devoted some time to the banking business, but has not devoted
his entire time. He was a director and a member of the loan committee of the Logan bank after I left there, and he remained there.
To resume my account of the development of the banking organization with which I was associated prior to my coming to Washington:
A bank was acquired in Montpelier, Idaho, at a time there was
no bank in that town. The two banks that were there had failed
I think in 1923 or 1924, and there was a committee that waited upon
the Browning people and ourselves to induce us to open a bank there
which we did. We also acquired a bank at Blackfoot, Idaho, somewhere along in that period, but I do not remember the exact date.
As a result of having these various banking connections, it occurred
to me, along in about 1926, that the responsibility of being an officer
and director of banks was such that either I had better get out of the
banking business or attempt to organize the holdings that I represented
so as to be able to give a close, organized supervision.
With that in mind the First Security Corporation, which was a bank
holding company, was organized. I think that was in the latter part
of 1926.
Senator GLASS. And that was at Ogden, Utah?
Governor ECCLES. Yes, sir.

Senator COU2ENS. That was organized under the laws of what
State?
Governor ECCLES. Under the laws of the State of Delaware. The
First Security Corporation owns only bank stocks. The stockholders
in the banks—the Browning people, my family, myself, and all other
stockholders—were given the opportunity to convert their stock
into the stock of the holding company.
Senator COUZENS. How many individual banks existed under your
domination at the time this organization was created?
Governor ECCLES. I could not tell you exactly. I t was 15 or so




N O M I N A T I O N OF MABRINEB. S. E C C L E S

3

Senator GLASS. The number now is 28.
Governor ECCLES. The number now is five, Senator Glass.
Senator GLASS. Well, there are 5 banks, but with their branches
there are 28 in all.
Governor ECCLES. That is right. We developed a branch banking
organization as soon as the Banking Act of 1933, which was passed
here, made it possible. The only reason for the holding-company
organization was, of course, the absence at that time of branch
banking. I had felt right along that branch banking was a more
desirable means of operating than through holding-company banking.
Senator TOWNSEND. Did you take in any more banks after the
organization of your holding company? I mean into the holding
company?
Governor ECCLES. Yes. We took more banks in. Some of the
people that came in came to us and said: Now, what we would like
to do is to dispose of our bank, and we will take stock in your holding
company. Or they would take so much cash, as the case might be.
It varied. Every stockholder who went into the holding company was
given the same opportunity of conversion. There was no watered
stock of any kind, no bonuses of any kind, and no commissions. It
was purely a holding-company organization, holding bank stocks for
the purpose of more efficiently and effectively carrying out the operation of the banks that we owned.
Senator COUZENS. Did all stockholders avail themselves of the
conversion privilege?
Governor ECCLES. Not all of them.
Senator COUZENS. Not all of them?
Governor ECCLES. N O ; for instance, in Salt Lake there was a
rather substantial number of stockholders in the old Deseret Bank
who did not convert. We took over that bank in order to keep it
from failing.
Senator COUZENS. Was it understood by all those stockholders at
the time when the holding company was created that they still were
responsible for the double assessment?
Governor ECCLES. In the Idaho law there is no double assessment
at all. The matter was not discussed with reference to the banks in
Utah.
Senator TOWNSEND. Were all of those State banks?
Governor ECCLES. They were both State and National banks. The
Idaho banks were, I think, all State banks. The First National of
Ogden was, of course, a national bank, and the bank at Salt Lake
was also a national bank. The bank at Logan and the bank at
Prevo were State banks and had always been State banks.
Senator COUZENS. Were the stocks of State and National banks all
fused together in one holding company?
Governor ECCLES. Yes, sir.
Senator COUZENS. And there was no understanding at that time
among the stockholders that they were still to be held to their double
liability?
Governor ECCLES. There was no understanding, no discussion of it.
Senator COUZENS. There was no discussion of it?
Governor ECCLES. No.
Senator COUZENS. Have there been any failures of any banks under
the holding company?



4

N O M I N A T I O N OF M A K E I N E B S. BCCLES

Governor ECCLES. There have been no failures of any kind whatever among banks with which I have been identified.
Senator COUZENS. And therefore there has been no double assessment of any kind?
Governor ECCLES. There has been none, of course.
Senator GLASS. Who is the manager of the First Security Corporation now?
Governor ECCLES. Mr. E. G. Bennett is the president and general
manager of that corporation.
Senator GLASS. He has been there some time, hasn't he?
Governor ECCLES. Mr. Bennett became associated with me in
1926. He and I were largely responsible for the organization of the
holding company. He became vice president and manager at that
time and has since become president and manager. My brother is
vice president and secretary.
Senator GLASS. May I ask if you have ever had any connection at
all with the Federal Reserve Bank System, or were you ever on the
board of directors of a regional bank in your particular territory?
Governor ECCLES. Never. I had never had any connection with
the Federal Reserve System, except that most of our banks were
members of it. The bank at Logan joined the Federal Reserve
System right after it was organized, although it was a State bank,
have always felt there was an advantage for a bank to be a member
of the System.
Senator GLASS. Governor, aside from these details, we very likely
can expedite the matter here before us for decision if I ask you a
question or two: As you know, the Federal Reserve Act requires that
no member of the Federal Reserve Board shall be a director or an
officer of any bank, banking institution, trust company, or Federal
Reserve bank, or hold stock in any bank, banking institution, or
trust company, and before entering upon his duties as a member of
the Federal Reserve Board shall certify under oath to that effect
May I ask if you have disposed of all of your bank stock?
Governor ECCLES. I have.
Senator GLASS. In a bona fide sale?
Governor ECCLES. I have.
Senator GLASS. Without any reservation at all?
Governor ECCLES. Without any reservation.
Senator GLASS. Do you regard the First Security Corporation of
Ogden a banking institution—the one that owns these five banks?
Governor ECCLES. I do.
Senator GLASS. D O you have any interest in the First Security
Corporation?
Governor ECCLES. I have not.
Senator GLASS. I S it or is it not owned by the Eccles estate?
Governor ECCLES. A portion of it is.
Senator COTJZENS. What portion of it?
Governor ECCLES. About 15 percent. In that connection, I have
a statement here that outlines my answers to those questions. I had
thought that you might be interested in having such a statement.
Senator BTJLKLET. I should like to get the bearing about that
Eccles estate. Have you any interest in the Eccles estate?
Governor ECCLES. I was going to give you the picture in what I
have here.



N O M I N A T I O N OF M A R B I N B B S. E C C L E S

5

Senator BTJLKLEY. All right.
Governor ECCLES. On the subject of my compliance with that
provision of the Federal Reserve Act which forbids any member of the
Federal Reserve Board to be an officer or director of any bank, banking
institution, trust company, or Federal Reserve bank, or to hold stock
in any bank, banking institution, or trust company, I desire to submit
the following statement: At the time of my appointment as a member
of the Federal Reserve Board I was not an officer or director of any
bank, banking institution, trust company, or Federal Reserve Bank,
aor did I hold any stock in any bank, banking institution, or trust
company.
I had formerly been an officer and director of a number of banks
and had owned a few shares in such banks, but I resigned as officer and
director of all such banking institutions and disposed of all my stock
in such institutions over a year ago before accepting the position of
Assistant to the Secretary of the Treasury.
I understand that that was not legally necessary, but I desired to
sever my connections in order that my position might be free from
criticism.
Before my appointment as a member of the Federal Reserve Board
I was a minority stockholder in the First Security Corporation, a holding company engaged in the business of holding stock in a group of
banks located in Utah and Idaho. And, by the way, there was one
bank in Wyoming.
I owned 4,912 shares of the stock of the First Security Corporation.
I had acquired it at a cost of $26.49 per share average cost, making the
total cost $130,166.
I felt that the ownership of that stock would not constitute a technical violation of the Federal Reserve Act and yet that I should dispose
of it in order to remove any question about my compliance with the
spirit and the purpose of the act.
The stock was not listed on any exchange, however, and in view
of the economic and banking difficulties which this country had been
experiencing for a number of years, there appeared to be no market
for bank stocks nor for the stock of corporations whose principal
assets were bank, stocks.
I might say also that I had 15 days to qtialify after my appointment, which presented a situation not as if I had a long period of time
to dispose of my holdings. In the circumstances I did the only thing
which seemed feasible, and sold all my stock in the First Security Corporation to the Eccles Investment Co. for $8 per share, which was the
price I was able to agree upon as a reasonable price under the then
present depressed banking and business conditions, although the conservative hook value of the stock, was approximately $14 per share
without considering the goodwill value of a large and well-established
banking business.
So 1 sold all my stock in the First Security Corporation to the
Eccles Investment Co. for the sum of $39,296, thus taking a net
capital loss of $90,870. And I reported this loss in my income tax
return for the year 1934, when I had a net capital gain of only $1,071.
In other words, in order to remove any doubt about my compliance
with the spirit and the purpose as well as the letter of the Federal
Reserve Act, I sold my stock in the First Security Corporation at a
loss of $90,870 in a year when my capital gains were very small and



6

NOMINATION" O F M A R B I N E K S. E C C L E S

I could offset only a very small portion of such capital loss against
capital gains for income-tax purposes.
Having taken the loss during the year 1934 I have given up any
possibility of obtaining the benefit of that loss by offsetting it against
capital gains in some future year when I might have capital gains.
The Eccles Investment Co. is a holding company which is not
principally engaged in the business of holding bank stocks, but holds
a large variety of investments, including real estate, bonds, notes
and stocks or corporations engaged in widely diversified types of
businesses.
Moreover, I am not the principal stockholder of the Eccles Investment Co., but own less than 9 percent of its capital stock. The
Eccles Investment Co. in turn owns about 15 percent of the stock of
the First Security Corporation.
Senator COUZENS. What does that amount to in dollars and cents
about?
Governor ECCLES. Weill, I don't know. That would depend upon
the market. But I would say that, figured at $8 a share, it would be
possibly, somewhere around $250,000 or $300,000 of the Eccles
Investment Co. holdings.
Senator COUZENS. I S that all the bank stock that the Eccles Investment Co. hokis? I mean is that First Security Corporation stock
the only bank stock that they own?
Governor ECCLES. That is every share that they own; that is, all
the bank stock.
Senator COUZENS. All right.
Governor ECCLES. Before accepting appointment as a member of
the Federal Reserve Board I considered this subject very carefully
and acted in entire good faith in doing everything within my power
under existing conditions to comply with the spirit and the purpose
as well as the letter of the Federal Reserve Act. After becoming a
member of the Federal Reserve Board some question was raised about
this subject, and I discussed the subject with the Board's general
counsel, who assured me that I was clearly complying with the purpose and the spirit as well as the letter of the Law.
Subsequently I asked him to give me a written opinion on the
subject, which he did, and that opinion is attached for the information of the subcommittee.
I am a nominal officer and director of the Eccles Investment Co.
But I take no active part whatever in the management of the company and leave its management entirely to my brothers. If, however,
the subcommittee considers that there is any impropriety in my
retaining this position nominally, I should be very glad to resign from it.
Senator GLASS. Governor, may I ask you this question: Does the
Eccles Investment Co. have any business transactions with the
Government of the United States?
Governor ECCLES. I t does not.
Senator GLASS. Not in any way at all?
Governor ECCLES. In no transactions of any kind. I might say
this in connection with the Eccles Investment Co.: That it was
organized about 20 years ago to hold and manage certain assets of
my father's estate for the benefit of my mother and nine children,
including myself. Seven of the nine children were then minors, and
my attorneys and business associates advised the organization of



NOMINATION OF MARBINER S. ECCLES

7

such a corporation as the best way to preserve and manage those
interests. This arrangement has been found satisfactory and has
been continued by mutual consent.
„ The thought originally was to continue it only until the minor
children became of age. Since that time the question of dissolving it
has been discussed, but by mutual consent it has been continued.
I have always had it understood that any member of the company
could withdraw if the company goes into dissolution. B u t there is no
prospect of that. The company has been, as I say, continued now for
some years beyond the period when the youngest minor became of age.
Senator BYKNES. What business is it engaged in other than that
you have named; that is, holding stock in the first Security Corporation?
Governor ECCLES. I t holds stock in various companies. I t holds
sugar stocks, substantial holdings. I t holds substantial holdmgs in a
lumber-manufacturing concern. I t holds substantial holdings in a
retail lumber concern. I t holds substantial holdings in the Mountain
States Implement Co., in an electric railroad, in the Utah Construction
C o . ^
Senator GLASS (interposing). Does the Utah Construction Co.
have any transactions with the United States Government? I ask
you that question because it has been suggested to me t h a t either the
Utah Construction Co. or the Eccles Investment Co. has some interest
in the Boulder Dam.
Governor ECCLES. The Eccles Investment Co. owns about 10
percent of the stock of the U t a h Construction Co. The U t a h Construction Co. was one of six companies that organized a syndicate to
bid upon the Boulder Dam. I was very active in the organization of
that syndicate and in the developing of the agreement between those
companies. I t called for the organization of a company to carry out
the work if they were the successful bidders. I also had a good deal
to do with the negotiation of the surety bid bond as well as the final
bond.
The Utah Construction Co.——
Senator GLASS (interposing). Why was it desirable to get a charter
in Delaware rather than in any of the States in which you operate?
Governor ECCLES. You refer to the First Security Corporation.
Well, I do not know that it was of any particular advantage. I do
not see that it would have made a particle of difference, unless possibly
from the standpoint of State income taxes, not Federal. The State
has an income-tax law, and of course many of these banks were in
other States. The company was strictly a bank-holding company,
not an operating company, and it would not be subject to State
income taxes.
Now, the income of the banks themselves would be subject to the
State income tax, but in the case of the Federal law you pay your
taxes only once. Dividends received are deductible from the standpoint of Federal income taxes. I think that under the State law they
are not deductible. So that, as I recall, the attorneys said it would be
advisable to organize as we did.
Senator BYRNES. And if you submit the question now to attorneys
they tell you to go to Delaware to get a charter, don't they?
Governor ECCLES. I think so. So far as I was concerned, we had
no other purpose or thought. I think it is the only Delaware corpora128350—36

2




8

NOMINATION" OF M A R R I N E R S. ECCLES

tion that I am connected with. All of the other companies were old
companies.
Senator BULKLEY. I should like to ask you this question, or several
questions in fact, and I am not sure how far they are pertinent as to what
is before us, and if you think any of my questions are not pertinent
I will be willing to leave the answer in suspense for future consideration, I mean as to whether it should be answered or not. Have you
any interest in the Utah Construction Co. outside of that owned by
the Eccles Investment Co.?
Governor ECCLES. I have not, none whatever.
Senator BULKLEY. Have you any in the Ogden Securities Co.?
Governor ECCLES. D O you mean in the First Security Corporation?
Senator BULKLEY. Whatever security company it is.
Governor ECCLES. No; I haven't a share.
Senator BULKLEY. Is the Eccles Estate the same thing as the
Eccles Investment Co.?
Governor ECCLES. I t is the same thing. It is a company.
Senator BYRNES. HOW many brothers have you?
Governor ECCLES. I have three. Two of them are engaged in the
banking business, and the other looks after the Eccles Investment
Co. and other interests.
Senator BYRNES. IS only one brother engaged in looking after the
Eccles Investment Co.?
Governor ECCLES. Yes. Well, he is responsible for its management, but the others work with him.
Senator BYRNES. At the time when you sold your stock did you
have any market for it at all?
Governor ECCLES. There was no market whatever for it. The
stock of course was entirely a local stock. I t was not a listed stock.
Senator BYRNES. I t was not listed on any exchange?
Governor ECCLES. No. I t was owned almost entirely locally. I
suppose it might have been possible to sell 50 or 100 shares, or something of that sort, but I had of course a very substantial block of
stock and it was necessary for me to dispose of it within a very short
period of time.
Senator COUZENS. IS the Eccles Investment Co. interested in the
lumber or the sugar tariff?
Governor ECCLES. Well, I do not know that the company as such
has ever considered the question of tariffs. I, as an individual, like
every other citizen, have my views with reference to tariff subjects.
Senator COUZENS. I asked that question because you stated the
Eccles Investment Co. was interested in sugar, lumber, and so forth.
Governor ECCLES. That is right; but
Senator GLASS (interposing). Governor Eccles, I may ask you
some questions that may not seem exactly pertinent to this examination, and if they seem so to you you are not obliged to answer them.
Do any of these industrial companies, owned either by the First
Security Corporation or the Eccles Estate, have occasion to transact
business with the United States Government?
Governor ECCLES. Well, there are no industrial companies owned
by the First Security Corporation. The First Security Corporation
owns only bank stocks. But the Eccles Investment Co. owns stocks
in various concerns.
Senator GLASS. And they own stock in the First Security Corporation?



NOMINATION OP MARRINER S. ECCLES

9

Governor ECCLES. Yes.

Senator GLASS. I have been furnished with information to the
effect that one of these companies has had occasion to borrow some
$950,000, speaking in round numbers, from the Reconstruction
Finance Corporation.
Governor ECCLES. D O you mean the First Security Corporation?
Senator GLASS. That or some other company.
Governor ECCLES. There is no company t h a t I know of in which
the Eccles Investment Co. owns stock that has done that.
Senator GLASS. I have the information here among these papers
and will look it up for you in a minute. I think it is a cattle company.
Governor ECCLES. T h a t information is not correct.
Senator GLASS. What do you say?
Governor ECCLES. That information is not correct.
Senator GLASS. Well, let me find it and see what it is. I t m a y
not be the Western Investment Co. of Ogden, Utah, b u t isn't t h a t
owned by the Ogden Security Co.?
Governor ECCLES. I t is owned by the First Security Corporation.
Senator GLASS. Well, I mean the First Security Corporation.
Governor ECCLES. Yes. I t is borrowing nothing from the Reconstruction Finance Corporation.
Senator GLASS. Not now, no. The information is t h a t it did
receive a loan of $998,172.77 from the Reconstruction Fiance Corporation. I wondered whether there had been other loans, and whether
there is likely to be other loans.
Governor ECCLES. There is no likelihood of there being any.
And the loans there were in—let me see what year
Senator GLASS (interposing). 1932.

Governor ECCLES. Yes, in 1932. Then, of course, banks were
failing throughout that territory, as they were everywhere else,
although it seemed to me that territory was getting more than its
share of them. There was a t that time some borrowing, temporarily,
from the Reconstruction Finance Corporation, in order to be prepared
to meet runs that were then very prevalent and more or less continuous. At Boise
Senator BYRNES, (interposing) At that time there was borrowing
by whom, or by what company?
Governor ECCLES. Well, I think the loan Senator Glass has reference to, although I am not sure—Mr. Bennett would be better able
to give the details of it than I am
Senator BUCKLEY (interposing). Is the Western Investment Co. a
bank holding company?
Governor ECCLES. N O . The Western Investment Co. is a company that was owned by the First Security Corporation. The
Western Investment Co. made livestock loans, and the First Security
Corporation owned the capital of that company.
Senator BULKLEY. The Western Investment Co. itself was engaged
in lending money, was it?
Governor ECCLES. During the period 1931, 1932, and 1933—and
that is a big livestock area, and the livestock business was in a very
desperate situation—the Reconstruction Finance Corporation set up
what they called regional agricultural credit corporations to assist
banks and livestock-Tending businesses throughout the entire west-




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NOMINATIOH OF MABRINEB, S. ECCLES

ern section of the country. The Western Investment Co. borrowed
from the regional agricultural credit corporation
Senator B U L K L E Y (interposing). Now, is its business that of lending money on livestock?
Governor ECCLES. I t s business was that of lending money on livestock. I t is not lending on livestock now. The loans made by the
regional agricultural credit corporation at the time were to carry
through livestock loans. Since that time, of course, conditions have
improved, and loans that were made have been liquidated so far as
the Western Investment Co. is concerned.
Senator B Y R N E S . Did you have any connection with the United
States Government at that time?
Governor E C C L E S . None whatever. M y connection with the
Government dates back to January of 1934.
Senator GLASS. Another question, Governor Eccles. The First
Security Corporation of Ogden, Utah, in which the Eccles estate is
interested and which owns these 5 banks with their 23 branches, is
now borrowing money from the Eeconstruction Finance Corporation,
is it not?
Governor ECCLES. N o ; I do not think so.
Senator GLASS. Well, the banks are?
Governor ECCLES. N o ; the banks are not borrowing any money.
B u t the banks have preferred stock.
Senator GLASS. Well, that is what I mean.
Governor ECCLES. Yes.

Senator GLASS. In other words, the First Security Bank of Utah
has preferred stock of the Reconstruction Finance Corporation in the
amount of $600,000?
Governor ECCLES. Yes; and the Idaho bank has $750,000 and the
Salt Lake Bank $250,000.
Senator GLASS. Whereas its own capital is only $400,000; and the
First National Bank of Salt Lake City has preferred stock of $250,000
and its own capital is $750,000.
Governor ECCLES. D O you have the surplus figures there?
Senator GLASS. Yes. The surplus in the first instance is $200,000
and the unaivided profits are $159,000. As to the First National
Bank of Salt Lake City, it has $250,000 of preferred stock, with the
Reconstruction Finance Corporation and it has capital of $750,000
and surplus of $250,000 and undivided profits of $289,000. And the
First Security Trust Co. of Salt Lake City has no borrowing from
the Reconstruction Finance Corporation. The First Security Bank
of Idano has preferred stock of $750,000, but its own capital is only
$500,000, with surplus of $250,000 and undivided profits of $179,000.
The First Security Bank of Rock Springs, Wyo., has preferred stock
of $150,000 with the Reconstruction Finance Corporation, and its
own capital is $10,000, and surplus $25,000, and undividea profits
$10,000. I have been a little confused, naturally, when furnished
these figures, and interested to know why a bank with a capital of
only $10,000 should find it desirable to borrow $150,000 from the
Reconstruction Finance Corporation.
Governor E C C L E S . The First Security Bank of Rock Springs is
owned about 60 percent by the First Security Corporation. The
local stockholders had chosen to hold their bank stock, representing
40 percent. There was a bank at South Superior in which the cor


NOMINATION OF MARRINER S. ECCLES

11

poration also owned about 60 percent, of which local interests had the
balance.
The situation in that p a r t of Wyoming was extremely critical.
That is a coal-mining area and a very large livestock area. The sheep
business there is particularly large. I n 1932 the values in wool and
lambs or-sheep went almost to the vanishing point. On top of that
they had a most serious drought one year, and then the most extreme
winter another year, an accumulation of conditions that was just
terrific.
The bank sustained some substantial losses from some of the
ablest livestock men in that, territory, men who up until the time the
depression started were not borrowing a dollar. Yet with the continuation of the depression, and with the conditions they had to confront, they were bankrupted.
Now, the First Security Corporation, in 1932 and 1933, put a total
of $94,000 into the banks at South Superior and Rock Springs, in
addition to $30,000 class B stock, which you do not refer to there.
The reason for that was that the 40 percent of the stockholders whom
I mentioned a moment ago put up nothing. The Reconstruction
Finance Corporation put up $150,000. The First Security Corporation put up 60 percent of $50,000 in class B stock, which was $30,000.
The local stockholders could do nothing and did do nothing.
I n other words, the First Security Corporation, owning only 60
percent, put into that banking situation the sum of $124,000, whereas
the 40 percent of minority stockholders put nothing in, were not
asked to put anything in.
At the time of the bank holiday and shortly thereafter the value
of bonds, as you all kpow, was greatly depreciated, and it was decided that in making this set-up the bonds should be written down to
the market, that the losses should be written off. The $10,000 that
you refer to is what was left.
Of course, bonds have come back substantially since that time.
But the picture that you have just read there, of the _$150,000 from
the Reconstruction Finance Corporation, overlooks the fact t h a t the
First Security Corporation owned only 60 percent and yet put in
$94,000 in addition to the $30,000 of class B stock, without asking
the common stockholders to do anything. Had the First Security
Corporation owned all the stock, the situation would have been much
easier to handle, of course.
Senator GLASS. Nevertheless it was desirable if not necessary for
those banks to get loans in the nature of preferred stock from the
Reconstruction Finance Corporation?
Governor ECCLES. I t would not have been except for one reason,
and that was the setting up of branch banks. In Idaho there were
16 banks in the First Security organization. When the bank legislation was passed by the Idaho Legislature in the spring of 1933, permitting branch banking within the State, and then the Banking Act
of 1933 was passed by the Congress, permitting branch banking in
those States where branch banking was permitted, it was desired to
p u t those 16 batiks into one bank set-up.
In order to qualify, it was necessary to have an examination made of
every bank by the Federal Reserve examiners, by the R. F . C.
examiners, and by the State bank examiners. They required, in the
case of those banks going into this one institution, that bonds be
charged down to market, whereas if the banks had continued as a going




12

NOMINATION OF MABEINEB S. ECCLES

concern without merger they would have been required to charge off
only bonds that were in default. Other bonds the examiner treats as
being at cost.
However, when it came to making this branch-banking set-up, it
was required that bonds taken in be charged down to market. T h a t
was at a time when the bond market was greatly depreciated. I t has
come back a great deal since.
Furthermore, certain loans that were permissible for the individual
unit bank to carry were not acceptable in the merged institution, and
all loans that were considered doubtful had to be taken out. Hence,
there was a very substantial amount of assets in the individual banks
that had to be held out in a liquidating company. The Reconstruction
Finance Corporation was very anxious to have banks reconstruct their
picture, and a good deal of effort was made in 1933 to induce them t o
build up and to strengthen their situation.
Senator GLASS. This was in 1934.
Governor ECCLBS. No, sir. T h a t was in 1933.
Senator GLASS. I do not judge, from the correspondence that has
been presented to me, that the R. F . C. asked these banks to issue
preferred stock. Application was made by the banks.
Governor ECCLES. Oh, yes; that was true everywhere.
Senator GLASS. The information I get is that the loans were asked
for to assist the situation as to the banks.
Senator B Y R N E S . Have you any idea what percentage of the banks
today have, in a similar way, sold preferred stock to the R. F. C ?
Governor ECCLES. A great many of them, of course, are still under
the process of doing it. There are a great many that should do it,
and an effort is being made to get them to do it.
Senator B Y R N E S . I know the statement has been made to me t h a t
the R. F . C. has been making an effort to get them to do it, in at least
two instances, and I was just wondering if you knew what percentage
of the banks have done so. If you do not, all .right.
Senator GLASS. Perhaps Mr. Jones could give us more authoritative information on that point than anybody else. The information
I get is that comparatively few banks were solicited by the R. F. C.
to take preferred stock.
Governor ECCLES. The R. F . C , Senator, does not solicit.
Senator GLASS. B u t a great many—infinitely too many—have
borrowed through the medium of preferred stock, and the day of
reckoning will come.
Senator COUZENS. The activities of the R. F . C. were rather subtle.
They did not absolutely go out and solicit, but they let it be known
t h a t they would like to strengthen the banks through the selling of
preferred stock.
Governor ECCLES. I n Salt Lake City every bank took preferred
stock. I t was not necessary to take the stock, except that, through
bank failures and so forth, there was a very great increase in deposits
among the remaining banks, and the ratio of capital and surplus to
deposits was being thrown out of line. Because of the very substantial increase in deposits, both in Salt Lake and in our other banks,
we felt that it would be desirable to increase the capital of those
banks by taking the preferred stock, inasmuch as it was available.
To sell additional stock to the stockholders would have been difficult
to do. For that reason preferred stock was taken in order to maintain a better ratio following the very substantial increase in deposits.



13

NOMINATION OP MAERINEE S. ECCLES

Senator BULKLEY. D O I understand you to say that they were
urging you to sell them the preferred stock?
Governor ECCLES. What I said was that in Salt Lake City, in
particular, the R. F . C. representative was there, and tried to get
all the banks to take preferred stock.
Senator BULKLEY. All the banks in town?
Governor ECCLES. That is right. T h a t was not only true there,
but it was true in New York also, and in the country generally.
Senator BULKLEY. You mean to sell preferred stock?
Governor ECCLES. Yes.

Senator BYRNES. I know of one instance where a banker wrote to
me to ask whether it was necessary for him to take it. He did not
want to take it.
Governor ECCLES. The First Security Trust in Salt Lake City subscribed for $100,000 of preferred stock, because of the fact that all
the rest were doing it. The First Security Trust was made to feel
that it should come in.
Senator BULKLEY. YOU mean they sold it, rather than subscribed

it-

Governor ECCLES. What I mean is that they sold i t ; yes. T h e
R. F. C. subscribed. B u t the money was not needed, and finally i t
was not taken.
Senator GLASS. The First National Bank of Salt Lake City also
had an application with the Reconstruction Finance Corporation to
purchase its debentures in the amount of $250,000.
Governor ECCLES. I do not know why it would do that. I t never
took any debentures, and, of course, being a national bank, it could
take preferred stock.
Senator GLASS. The application was signed by Elias A. Smith.
Governor ECCLES. They never took debentures at all. There was
$250,000 of the preferred stock, and they have over $1,000,000 of
capital and surplus '
Senator GLASS. The application was not approved by the R. F . C.
Therefore no debentures were taken. 1
Governor, you would like to have that letter of the counsel of t h e
Board included in the record, would you not?
Governor ECCLES. Yes; I would like to have the opinion included
in the record. I did not read it to the committee. The opinion is
rather lengthy, and I did not think it was necessary to read it.
(The matter referred to is here printed in full as follows:)
F E D E R A L R E S E R V E B O A R D , January

26,

1935.

To: Governor Eccles.
From: Mr. W y a t t , general counsel.
Subject: Eligibility as a m e m b e r of t h e Federal Reserve Board.
This will confirm t h e views which I expressed to you some t i m e ago on thequestion whether, in view of t h e facts hereinafter stated, you are complying,
with t h e following provision of section 10 of t h e Federal Reserve Act:
" N o member of t h e Federal Reserve Board shall be a n officer or directorTof
a n y bank, banking institution, t r u s t company, or Federal Reserve b a n k or hold
1
At the suggestion of Governor Eccles, his completed thought on this point is inserted to read as follows:
" I must differ with the Senator as I am sure that no application was made by the First National Bank of
Salt Lake City for the sale of capital debentures to the R. F. C. There must be some confusion in the
Senator's information as that bank did apply to the R. F. C for the sale of that same amount of preferred
stock and that application was approved. Obviously, an application for debentures was not approved
because it was not made. Furthermore, I can't understand how they could have applied for the sale of
debentures inasmuch as the law did not authorize purchase by the R. F. C. of capital debentures from
national banks." See also, additional reference to this point made on Friday, Apr. 19, to be found at the
close of the hearings.




14

NOMINATION OF MARRINER S. ECCLES

stock in any bank, banking institution, or trust company; and before entering
upon his duties as a member of the Federal Reserve Board he shall certify under
oath that he has complied with this requirement, and such certification shall
be filed with the secretary of the Board."
When the President asked you to become a member of the Federal Reserve
Board, no member of the Board was a banker and presumably he desired to
appoint as Governor of the Board a person experienced in banking. Having
been engaged for many years in the banking business, it is natural that you had
acquired some investments in that business, as all successful bankers do. I
understand, however, that you owned no bank stocks and that your investment
in the banking business consisted of a minority interest in the First Security
Corporation of Ogden, a holding company organized for the purpose of holding
the stock of a group of banks located in Utah and Idaho.
Since you owned no bank stocks, it might have been said that no action on
your part was necessary in order to comply with the requirement of the statute
that a member of the Board shall not be a stockholder of any bank; but you felt
that the ownership of stock in a corporation engaged principally in the business
of holding bank stocks might be considered inconsistent with the spirit and purpose of the law and that you should dispose of such stock. The stock of the
First Security Corporation of Ogden was not listed on any stock exchange; and
in view of the economic and banking difficulties which this country had been
experiencing for a number of years, there appeared to be no market for bank
stocks or for the stock of corporations whose principal assets were bank stocks.
In the absence of any other purchaser for your stock in the First Security
Corporation of Ogden, you sold such stock to the Eccles Investment Co. at a considerable financial sacrifice and severed all of your connections as officer, director,
or stockholder in the First Security Corporation of Ogden.
I understand that the Eccles Investment Co. was organized about 20 years ago
to hold and manage certain assets of your father's estate for the benefit of your
mother and his 9 children, including yourself; that 7 of the ,9 children were minors
and your attorneys and business associates advised that the organization of such
a corporation was the best way to preserve and manage their interests; that this
arrangement has been found satisfactory and has been continued by mutual
consent; that the assets of the Eccles Investment Co. are not principally bank
slocks, but include a large variety of investments, including real estate, bonds,
notes, and stocks of corporations engaged in widely diversified types of business; and that you are not a principal stockholder of the corporation but have
only a small minority interest therein, which amounts to less than 10 percent of
the total stock.
Since you are not an officer or director of any bank, banking institution, trust
company, or Federal Reserve bank, and hold no stock in any bank, banking
institution, or trust company, it is clear that you are complying literally with the
terms of the statute. The only question remaining is whether your ownership
of a minority interest in a corporation which owns a small minority interest in a
corporation, which in turn owns bank stocks, may be said to be inconsistent with
the spirit and purpose of the statute.
I find that this office has never passed on this precise question, but it has passed
on a somewhat analogous question. Approximately 10 years ago, this office
held that the ownership of stock in a corporation which owned stock in a bank
did not disqualify a person from serving as a class C director of a Federal Reserve
bank, notwithstanding the fact that section 4 of the Federal Reserve Act provides that a class C director of a Federal Reserve bank shall not be an officer,
director, employee, or stockholder of any bank.
Likewise, in my opinion, your ownership of a small minority interest in the
Eccles Investment Co. is not in any sense a violation of the statute and is not
inconsistent with the spirit and purpose of the law. To hold otherwise would
stretch the language of the law to an unreasonable extent and would make it
exceedingly difficult, if not practically impossible, for the President to appoint to
membership on the Federal Reserve Board persons who had gained tested banking
experience by successful participation in the business of banking, which is the
only means by which such experience can be gained.
The only such relationships which Congress has expressly forbidden members
of the Board to have are those of officers, directors, or stockholders of banking
institutions; and the question involved is whether, in order to comply with the
spirit and purpose of the law, it is necessary to construe it as forbidding by implication other relationships which are not expressly forbidden.
The language of the statute is clear and unambiguous and presumably covers
everything which Congress intended to prohibit. It is doubtful, therefore,



NOMINATION OF MAKRINBE S. ECCLES

15

whether anyone would be justified in contending that Congress intended to prevent Board members from having other and different relationships which are
not mentioned in the statute.
The obvious purpose of the statute is to guard against a member of the Board
having such an interest in a bank as would prevent him from discharging his
duties and responsibilities as a member of the Board fairly and impartially.
Congress presumably gave careful consideration to this problem and decided
that it was only necessary to prevent the members of the Board from being
directors, officers, or stockholders of banking institutions. If we inquire how
much further we must go in order to comply with the spirit and purpose of the
statute, we immediately get into the realm of speculation, and it is impossible to
know exactly where to draw the line.
Conceivably, Congress could have provided that members of the Board shall
never have been officers, directors, or stockholders of banks, lest their previous
interests in the banking business should cause them to favor their former associates and fellow stockholders. Congress apparently considered it unwise to go
to this extreme, since it was obvious that a Board charged with such vast powers
of supervision and regulation of the banking business should include one or more
members experienced in banking, and such a provision would have made it impossible to obtain such members. Congress not only did not insert such a provision in the statute; but, on the contrary, it provided in the original Federal
Reserve Act that "Of the 5 members appointed by the President, at least 2 shall
be persons experienced in banking or finance." This language has since been
dropped from the statute; but it may properly be considered in construing the
language now under consideration, because both provisions were in the original
Federal Reserve Act.
If Congress had intended that a member of the Board should not even have
an indirect or remote financial interest in any banking institution, it would seem
that it would have used language to the effect that no member of the Federal
Reserve Board shall have any financial interest, "directly or indirectly", in any
banking institution. It has used similar language in many other statutes and
recently used similar language in the Banking Act of 1933.
Congress very wisely refrained from using such language in prescribing the
qualifications of members of the Federal Reserve Board; because to have done
so might have made it impossible for the President to appoint to membership on
the Federal Reserve Board any person who had gained a familiarity with the
banking business through successful participation in that business. It knew that
practically all successful bankers acquire investments in the banking business
and that it is frequently impossible to dispose of those investments so completely
that the person in question is left without any remote or indirect interest therein.
It is desirable for the members of the Board to "lean over backwards" in complying with the spirit and purpose as well as the letter of the law; but since
Congress did not consider it necessary to forbid the members of the Board to
have any remote or indirect financial interest in any banking institution, I do not
feel that it is necessary to go to the extent of holding that it is inconsistent with
the spirit and purpose of the law for a member of the Board to have a small
minority interest in a corporation which owns a small minority interest in another
corporation which in turn owns bank stocks. Indeed, to go to this extent would
lead to absurd results.
Several illustrations of the possible absurdities resulting from such a construction of the statute have recently come to my attention in connection with the
issuance of voting permits to holding-company affiliates of member banks.
Thus, the Atlas Corporation, an investment trust holding a miscellaneous
portfolio of stocks and other investment securities, owns, among other assets, the
stock of the Pacific Eastern Corporation, which in turn owns the stock of the
American Co., which in turn owns the stock of the American Trust Co. of San
Francisco, Calif. Gimbel Bros., Inc., which owns and operates seven department
stores in New York, Philadelphia, Pittsburgh, Chicago, and Milwaukee, also
owns the stock of a bank. Armour & Co., which owns and conducts directly or
indirectly one of the largest meat-packing industries in the world, owned until
recently the majority of the stock of a bank in Fort Worth, Tex. The Ford
Motor Co. owns a small holding company, which in turn owns about 30 percent
of the stock of a member bank. It would be manifestly absurd to say that it
would be contrary to the spirit and purpose of the Federal Reserve Act for a person
to serve as a member of the Federal Reserve Board solely because he owned stock
in the Atlas Corporation, Gimbel Bros., Armour & Co., or the Ford Motor Co.




16

NOMINATION OF MARRINER S. BCCLES

Suppose that, upon becoming a member of the Board, a person owned some
stock of the United States Steel Corporation and that subsequently the United
States Steel Corporation, in order to provide banking facilities for the employees
at one of its plants, should subscribe to the stock of a newly organized member
bank. Could it be said that this would disqualify the member of the Board unless
he immediately disposed of his stock in the United States Steel Corporation?
The question is obviously " n o . "
If we desire to indulge further in speculation as to how far it is necessary to go
in order to comply with the spirit and purpose of the statute, it is also appropriate
to consider how much further Congress might have gone in safeguarding this
principle in the language of the statute. It might have considered that for a
member of the Board to have a close relative engaged in the banking business
might unduly influence his official actions. Therefore, Congress might have provided that no member of the Board should be related to any person engaged in the
banking business or financially interested therein. For obvious reasons, Congress
found it impracticable to go to this extent and no one has ever had the temerity
to suggest that it is contrary to the spirit and purpose of the law for a member of
the Board to be related to any person engaged in the banking business.
If the wife, father, or brother of a member of the Board should be an officer
or director of a member bank or have a" large investment in stock, of a member
bank, that would be much more likely to influence the actions of the Board member than a remote and indirect interest in the banking business such as you have
as a result of the relatively small amount of stock which you own in the Eccles
Investment Co., which in turn holds a small minority interest in the First Security
Corporation, which in turn owns bank stocks.
It would seem, therefore, that to say that such an indirect and remote interest
in the banking business is contrary to the spirit and purpose of the law would be
to stretch the language of the statute by construction and implication to an unreasonable extent which would lead to results which Congress very wisely avoided
in framing the language of the statute. It would be tantamount to an administrative amendment to the law, which would lead to the absurd result of making
it exceedingly difficult, if not impossible, for the President to appoint to membership on the Federal Reserve Board any person experienced in the banking business. Such a construction of the statute cannot properly be indulged in.
Accordingly, it is my opinion that your ownership of shares of stock of the
Eccles Investment Co. does not cause you to be a stockholder of any bank, banking institution, or trust company within either the letter or the spirit of the abovequoted provision of section 10 of the Federal Reserve Act, and that, under the
provisions of such section, you are duly qualified as a member of the Federal
Reserve Board.
Respectfully,
WALTER WYATT, General Counsel.

Senator GLASS. Are there any further questions?
Senator B Y R N E S . I have nothing further.
Senator COTJZENS. T h a t is all I desire.
Senator GLASS. Governor, we are very much obliged to you. We
will try to expedite the matter as much as possible.
The subcommittee will recess subject to the call of the chairman, if
that is agreeable.
(Whereupon, at 12:35 p . m., the subcommittee recessed subject to
the call of the chairman.)




ON CONFIRMATION OF MAEEINEE S. ECCLE8 AS GOTEENOE OF THE FEDEEAL EE8EEVE BOAED
FBIDAY, APRIL 19, 1 9 3 5
UNITED STATES SENATE,

SUBCOMMITTEE OF THE COMMITTEE
ON BANKING AND CURRENCY,

Washington, D. O.
The subcommittee met, pursuant to call, a t 10:30 a. m., in room 303,
Senate Office Building, Senator Carter Glass presiding.
Present: Senators Glass (chairman of the subcommittee), Bulkley,
Byrnes, Townsend, Couzens, and Cutting.
Present also: Senator Fletcher.
Senator GLASS (chairman of the subcommittee). T h e committee
will please come to order.
I have received a telegram from Salt Lake City, Utah, which it is
desired to be inserted in the record of the proceedings of the committee
in the hearing of Mr. Eccles. The telegram is dated April 17, 1935.
It is as follows (reading):
Hon. C A R T E R G L A S S ,

United States Senate, Washington, D. C:
Advised during hearing regarding Eccles confirmation y e s t e r d a y you s t a t e d
First National B a n k of Salt Lake City m a d e application t o t h e Reconstruction
Finance Corporation t o purchase its debentures in t h e a m o u n t of $250,000.
No such application ever m a d e t h r o u g h t h i s agency. However, application
made t o Corporation t o purchase $250,000 preferred stock of this b a n k which w a s
approved a n d consummated. M y letter of J a n u a r y 3, 1934, t r a n s m i t t i n g p r e liminary application was in error in using t h e word debentures instead of preferred
stock evidently accounting for t h e confusion in your information.
E L I A S A.

Manager Salt Lake Loan Agency,

Reconstruction

Finance

SMITH,

Corporation.

I want it distinctly understood that there was no confusion on m y
part. I had before me, and have here now, the application for
$250,000 for the debentures of this bank, signed by Elias A. Smith,
agency manager, which will be inserted in the record.
(The application referred to is printed in the record in full, as
follows:)
LOAN AGENCY OF THE RECONSTRUCTION F I N A N C E CORPORATION,

Salt Lake City, Utah, January
EXAMINING DIVISION, RECONSTRUCTION FINANCE

3, 1934-

CORPORATION,

Washington, D. C.
G E N T L E M E N : I t r a n s m i t herewith preliminary application of F i r s t N a t i o n a l
Bank of Salt Lake City, Salt Lake City, U t a h , for t h e p u r c h a s e of d e b e n t u r e s in
t h e a m o u n t of $250,000, together with agency examiner's r e p o r t .
I recommend t h a t t h e Corporation purchase d e b e n t u r e s in t h e a m o u n t of
$250,000.
E L I A S A. S M I T H , Agency

Manager.

Recommended b y




R A D C L I F F E Q. C A N N O N , Agency

Examiner.

17

18

NOMINATION OP MARBINEB S. ECGLES

Senator GLASS. If there was any confusion it was caused by Mr.
Elias A. Smith and not by the chairman of this subcommittee.
Senator B Y R N E S . Mr. Chairman, may I suggest that inasmuch as
the hearings of that date have not yet been printed that the statement
that the chairman has just made be printed at the end of that day.
Senator GLASS. I have given orders to that effect.
(Whereupon, at 10:45 a. m., the subcommittee recessed subject to
the call of the chairman.)