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Background information on key gures involved in the historic agreement between the
Treasury Department and the Federal Reserve

Marriner Stoddard Eccles
Chairman and Member of the Board of Governors (1934-1951)
Eccles was selected as Chairman (then called "governor") of the Board of Governors by
Roosevelt in 1934 and served until 1948. He sponsored the Banking Act of 1935, which
restructured the Federal Reserve System to be the centralized monetary authority that it is

Ralph Leach
Chief of the Government Finance Section of the Research Division at the Board of Governors
As a sta economist at the Board of Governors, Leach was consulted by leading members of
the FOMC during the Fed's con ict with the Treasury. His rsthand account of those events
provides the basis for two unique articles in the Economic Quarterly.

William McChesney Martin Jr.
Chairman of the Board of Governors (1951-1970)
Martin's tenure as Chairman is the longest in history. Prior to his term at the Fed, Martin was
an assistant secretary of the Treasury and served as the key negotiator of the Accord for that
institution. He then became Chairman of the Board of Governors and worked to solidify the
Fed's independence.

Thomas Bayard McCabe
Chairman of the Board of Governors (1948-1951)
McCabe was the Chairman of the Federal Reserve when the Accord was achieved. His
leadership was instrumental in establishing a rm opposition to the restrictive rate pegging
policies that were being imposed on the Fed by the Treasury.

Win eld Rie er
Assistant to Chairman McCabe and Chairman Martin (1948-1959)
Rie er was one of the key negotiators of the Accord for the Federal Reserve. He was a highly
valued adviser to both Chairman McCabe and Chairman Martin.

John Wesley Snyder
Secretary of the Treasury (1945-1953)
Snyder was a crucial ally to his lifelong friend Truman during the administration's con ict
with the Federal Reserve. He was also instrumental in implementing the Truman Doctrine
and the Marshall Plan after World War II.

Allan Sproul
President of the Federal Reserve Bank of New York (1941-1956)
As the president of the in uential New York Fed, Sproul was a highly respected member of
the FOMC. His advocacy of Fed independence was essential to the establishment of the

Harry Truman
33rd President of the United States (1945-1953)
Truman led the opposition to Federal Reserve independence. Truman viewed the Fed's
support of the bond market as critical to his administration's e orts to manage the
reconstruction of Europe and U.S. involvement in the Korean War.

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Marriner Stoddard Eccles (1890-1977)
Chairman and Member of the Board of Governors (1934-1951)
Eccles's bank management won him recognition in the West, but he was unknown in the
East. At the same time, his experience spurred him to develop an ideology pertaining to the
steps and measures that he felt should be taken in order to end the Great Depression, and
he became what was known as a scalist. He believed that the government needed to take
an active role in reestablishing order in the economy. His views were aligned to those of John
Maynard Keynes, though he claimed that he had reached the same conclusions as Keynes on
his own and that he knew of Keynes's work only what he learned from reading a few
abstracts.2 Fundamentally, Eccles believed that the economic system did not necessarily
correct itself.
In February 1933, during a series of speeches he made in Utah, he caught the attention of
Stuart Chase, a well-connected national publicist. Chase suggested to Eccles that he meet
with Rex Tugwell, a man close to then President-elect Franklin Roosevelt. Upon meeting
Eccles in February, Tugwell was intrigued by the banker's liberal philosophy.3 By November
of that same year, Eccles found himself in Washington in a young administration with ideas
similar to his own. He joined the Treasury as assistant secretary for monetary and credit
a airs.
A few months later, however, a vacancy on the Board of Governors opened up, and the
Roosevelt Administration o ered Marriner Eccles the position. It was at this time that Eccles
began to work to carry out his ideas regarding the structure of the Federal Reserve System.
He practically made it a condition for his acceptance of the Board job o er that the structure
of the Fed be changed. Subsequently, Eccles sponsored the Banking Act of 1935.4 It
centralized control of the Federal Reserve within the Board of Governors, which had been
previously called the Federal Reserve Board. Many in the Senate were upset by the Act
because they were against the establishment of a centralized monetary authority. It also
upset several in the banking industry, including some people within the Federal Reserve
System itself. 5 Because of the changes installed by the Banking Act of 1935, the Federal
Reserve Bank of New York and the Board of Governors in Washington D.C. would end up
vying for control of the System's policy initiatives almost two decades later.

Another important change that Eccles imposed through the Banking Act was a change in
membership of the Board of Governors. Previously, the Secretary of the Treasury and the
Comptroller of the Currency had been allocated ex o cio seats on the Board. Eccles pushed
successfully to have those seats eliminated. The new structure that emerged was the same
as that of the Board of Governors today. Although adamant about carrying out a scalist
philosophy of government spending, the Roosevelt Administration was willing to go along
with the changes requested by Eccles knowing that he was going to be Chairman of the
Board.6 Because Eccles shared the administration's views regarding government's active role
in the economy, Roosevelt did not fear that losing seats on the Board would lead to a loss of
in uence within the Fed.
Eccles endorsed de cit spending by the government as a way out of the depression. With
U.S. entry into World War II becoming a certainty, the objectives of the economic
policymakers within the government had to change. Eccles started to advocate a balanced
budget, believing that the war would be better nanced through tax increases coupled with
price and wage controls. His goal was to suppress private consumption in order to avoid
in ationary pressure.7 But Eccles did not succeed. Instead he found himself in an
arrangement by which the Fed would support the Treasury in its placement of debt on the
government securities market. Although Eccles would have preferred not to put the Fed in
such a position, like the other governors he recognized that winning the war was a primary
concern. Providing the government with cheap nancing was the most e ective way for the
Fed to contribute towards that e ort; therefore, he supported the measure.
For the next ten years, the Federal Reserve played a subordinate role in the economic a airs
of the nation. It injected and retracted liquidity from the government securities market in
support of the Treasury's predetermined peg. Once the war ended, however, from the Fed's
perspective the priority switched from fundraising to restricting in ation. Between 1946 and
1948 tensions between Eccles and Harry Truman increased, for they opposed one another's
views on policies. Harry Truman did not reappoint Eccles to the chairmanship when his term
expired in 1948; traditionally someone in Eccles's circumstances would then resign from the
Board, but he remained on the Board as a regular member. This was permitted because the
term limit for membership is longer than the term limit for Chairman.8 Eccles supported the
new Chairman, Thomas McCabe, as the Fed continued its struggle to release itself from the
Although Eccles had been removed from the most powerful position at the Fed, he still
played a signi cant role during the Accord. On January 31, 1951, Truman summoned all the
members of the Federal Open Market Committee to the White House in an e ort to convince
them to change their views; however, the committee refused to publicly support the interest
rate peg that was being imposed on the Fed. Nonetheless, after the meeting, Truman
released a statement to the press saying that the committee in fact had made such an
agreement. The press called Eccles to con rm the accuracy of the statement. Eccles had to
make a decision, either to wait for the following Monday to rally a formal rebuttal by the

committee or to deny the statement on behalf of the committee by himself. The former
action would have allowed time for the public's acceptance of the false statement out of the
White House, whereas the latter action was a risk to his own credibility. Eccles made a bold
decision and immediately released the minutes of the meeting to the press even though
they were considered to be con dential.9 The minutes showed that the committee had in
fact made no agreement with the White House. The FOMC did not immediately praise or
criticize Eccles's actions. It was not until years later that the signi cance of his action in
saving the Fed's side of the struggle was truly appreciated.
Eccles proved to be an e ective adversary to Harry Truman even though he was no longer
Chairman. Soon after the Accord was in e ect, Eccles resigned his membership, having seen
his battle through to the end. He returned to Utah to continue his banking business, and he
died in Salt Lake City on December 18, 1977.

William J. Barber. 1992. "Marriner Stoddard Eccles," in Biographical Dictionary of the Board of

Governors of the Federal Reserve, ed. Bernard S. Katz, p. 83
2 Barber (1992, 82).

Barber (1992, 84).


Peter K. Pfabe, "Leaders & Success: FDR Fed Chief Marriner Eccles: He Developed Mortgage

and Banking Systems of Today," Investors Business Daily. 20 December 1994.
5 For further details see Barber (1992) and Selected Papers of Allan Sproul, Lawrence S. Ritter,
ed. (New York: Federal Reserve Bank of New York, 1980).

Richard H. Timberlake, "Tale of Another Chairman," Federal Reserve Bank of Minneapolis

The Region (June 1999).
7 Barber (1992, 83).

Board governors are appointed to nonrenewable 14-year terms by the President and
con rmed by the Senate. Once con rmed, a governor cannot be involuntarily removed from
the Board. If a governor resigns, then a new governor can be appointed to complete the
term, after which he or she can be reappointed to a full term by the President.
The Chairman is also a member of the Board of Governors; the Chairman's term as
Chairman is 4 years long and can be renewed as long as he or she remains on the Board.
The term of a Chairman coincides with the term of the President. See A Primer on the Fed by
Alfred Broaddus (Richmond, VA: Federal Reserve Bank of Richmond, 1988) for further details.
See Selected Papers of Allan Sproul (1980) and Robert L. Hetzel and Ralph F. Leach, "The
Treasury-Fed Accord: A New Narrative Account," Federal Reserve Bank of Richmond
Economic Quarterly 87 (Winter 2001): 33-55.

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Ralph Leach (1917- )
Chief of the Government Finance Section of the Research Division at the Board of Governors in
Washington D.C. (1950-1953)
Ralph Leach was born in Elgin, Illinois, on June 24, 1917, to Harry A. Leach and Edith Sanders
Leach. He received his A.B. from the University of Chicago in 1938. After graduation, Leach
served in the United States Marine Corps in the South Paci c from 1940 to 1945. After World
War II, he managed Treasury portfolios for Harris Trust & Savings Bank in Chicago and later
for Valley National Bank in Phoenix; in the process, he developed acquaintances with many
of the major Treasury dealers in the country. Because of his experience, Leach was invited to
join the Federal Reserve Board as chief of the Government Finance Section in the spring of
1950. By accepting such a position, Leach placed himself on the front line of the dispute
between the Treasury and the Federal Reserve.
After his career with the Fed, Leach went to work at the Guaranty Trust Company and retired
as the chairman of the Executive Committee at the Morgan Guaranty Trust Company in
1977. He is a member of Phi Kappa Psi and the Coral Ridge Country Club. Ralph Leach
currently resides in Fort Lauderdale, Florida.

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William McChesney Martin Jr. (1906-1998)
Chairman of the Board of Governors (1951-1970)
William McChesney Martin Jr. was born on December 17, 1906, to William McChesney Martin
and Rebecca Woods. Martin's connection to the Federal Reserve was forged through his
family heritage. In 1913, Martin's father was summoned by President Woodrow Wilson and
Senator Carter Glass to help design the Federal Reserve Act that would establish the Federal
Reserve System on December 23 that same year. His father later served as governor and
then president of the Federal Reserve Bank of St. Louis.
Martin was a graduate of Yale University, where his formal education was in English and
Latin rather than economics.1 However, he still maintained an intense interest in the subject
through his father. His rst job after graduation was at the St. Louis brokerage rm of A.G.
Edwards & Sons, where he became a full partner after only two years.2 From there Martin's
rapid rise in the nancial world landed him a seat on the New York Stock Exchange in 1931,
just two years after the stock market crash at the start of the Great Depression. During the
early part of that decade, Martin's work toward reforming the institutional aws of the stock
market led to his election to the exchange's board of governors in 1935. There he worked
with the SEC to reestablish con dence in the stock market and prevent future crashes. He
eventually became president of the New York Stock Exchange at age 31, leading newspapers
to label him the "boy wonder of Wall Street."3 Like his tenure as governor on the exchange,
Martin's presidency focused on cooperating with the SEC to reform the stock exchange so it
would serve more as a public institution than as a club for the wealthy.
During World War II, Martin was drafted from the exchange into the U.S. Army. There he
supervised the disposal of raw materials on the Munitions Allocation Board. He was also a
liaison between the Army and Congress and the supervisor of the lend-lease program with
the Russians.
Martin's return to civilian life was also a return to the nancial world, but this time it was on
the side of the federal government. Harry Truman, a fellow Democrat, appointed Martin as
head of the Export-Import Bank, which he operated for three years. It was at this institution
that he was publicly viewed as a "hard banker." He insisted that loans be sound, secure

investments; on that principle he opposed the State Department on multiple occasions for
making loans that he saw as being motivated purely by politics. On those grounds he would
not permit the Export-Import bank to be used as a fund for international relief.
Martin nished his career with the Export-Import bank when he was called to the Treasury to
be the assistant secretary for monetary a airs. Martin had been with the Treasury for about
two years when its con ict with the Federal Reserve reached its climax. During the period
immediately preceding the nal negotiations with the Fed, Secretary of the Treasury John
Snyder went into the hospital. Under these circumstances, Martin became the head
negotiator for the Treasury. From the Treasury's perspective, Martin was a valuable
representative. He had a thorough understanding of the Federal Reserve System and of
nancial markets; furthermore, he was viewed as an ally of Truman, who strongly opposed
Fed independence. During negotiations, Martin reestablished contact between the Treasury
and Fed, which had been forbidden under Snyder.4
With Robert Rouse, Woodlief Thomas, and Win eld Rie er of the Fed, Martin negotiated the
Accord. The FOMC and Secretary Snyder accepted the Accord and its compromises, and it
was approved by both institutions. The Chairman of the Board of Governors at the time of
rati cation was Thomas McCabe, who would o cially resign from his position just six days
after the statement of the Accord was released. The Truman Administration saw the
resignation of McCabe as the perfect opportunity to recapture the Fed almost immediately
after it had supposedly broken away. Truman selected Martin to be the next Chairman of the
Board of Governors, and the Senate approved his appointment on March 21, 1951.5
Contrary to Truman's expectations, however, Martin guarded the Fed's independence, not
just through Truman's administration but also through the four administrations that would
follow. To the present day, his term as Chairman is the longest term the Board of Governors
has seen. Over nearly two decades, Martin would achieve global recognition as a central
banker. He was able to pursue independent monetary policies while still paying heed to the
desires of various administrations. Although the objectives of Martin's monetary policy were
low in ation and economic stability, he rejected the idea that the Fed could pursue its
policies through the targeting of a single indicator and instead made policy decisions by
examining a wide array of economic information. As Chairman, he institutionalized this
approach within the proceedings of the FOMC, gathering the opinions of all governors and
presidents within the System before making decisions.6 As a result, his decisions were often
supported by unanimous votes on the FOMC.
Externally, Martin was perceived as being the dominant decisionmaker at the Fed.
Throughout his tenure, he defended the right of the Fed to take actions that would
sometimes con ict with what the President wanted. He regularly asserted that the Fed was
responsible to Congress and not to the White House.7

William McChesney Martin Jr. ended his term as Chairman of the Board of Governors on
January 30, 1970. On that day, his career in public service ended, but he continued to work,
holding a variety of directorships for a group of nearly 24 rms and nonpro t institutions for
almost 30 more years. On July 28, 1998, at the age of 91, he died at his home in Washington,

S. Katz, ed. Biographical Dictionary of the Board of Governors of the Federal Reserve

(Westport, CT: Greenwood Press, 1992), p. 193.

Barnes, "Longtime Fed Chairman William Martin Jr. Dies," The Washington Post, 29 July


Robert L. Hetzel and Ralph F. Leach, "The Treasury-Fed Accord: A New Narrative

Account," Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001): 50.

and Leach (2001, 50).
and Leach (2001, 52).

(1992, 201).

further reading on Martin's tenure, see Katz (1992) and Robert L. Hetzel and Ralph F.

Leach, "After the Accord: Reminiscences on the Birth of the Modern Fed," Federal Reserve
Bank of Richmond Economic Quarterly 87 (Winter 2001).

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Thomas Bayard McCabe (1893-1982)
Chairman of the Board of Governors (1948-1951)
In early 1948, President Harry Truman appointed Thomas Bayard McCabe Chairman of the
Board of Governors of the Federal Reserve System. McCabe remained at the Federal Reserve
only until March 1951, but as head of the Fed, he was a pivotal player in the negotiations
leading to the Treasury-Fed Accord.
Thomas Bayard McCabe was born on July 11, 1893, in Whaleyville, Maryland, to William
Robins McCabe and Beulah Whaley McCabe.
Upon graduating from Swarthmore College with an A.B. degree in economics in 1915,
McCabe chose to return to his hometown of Selbyville, Delaware, to work with his father in
banking. But soon thereafter, he received a letter from his adviser at Swarthmore telling him
that his decision to return home was a mistake. McCabe was inspired by the letter to
reconsider his decision. After following up a contact from college, McCabe moved to the
town of Chester, Pennsylvania, and began work with a small one-mill paper company. His
service to that paper company would last a lifetime, helping it to become the multinational
Scott Paper Company. McCabe temporarily left to follow his country into World War I. He
enlisted as a private in 1917 and advanced to captain by 1919.
At the age of 26, McCabe returned to civilian life and to the Scott Paper Company. He
advanced rapidly, moving up from assistant sales manager to become the president and
CEO by age 34. Thomas McCabe's association with the Federal Reserve began in 1937 when
he was appointed to be a director of the Board of the Philadelphia Fed. He also served as a
member and chairman of the Business Advisory Council for the Department of Commerce.
When the United States entered World War II, McCabe directed his public service toward the
war e ort. Some of the positions he held included executive assistant to Edward Stettinius
on the Advisory Commission of the Council for National Defense, deputy director of the
Division of Priorities, and deputy lend-lease administrator.1

Prior to his appointment to the Board of Governors, McCabe had served Truman as the
Liquidation Commissioner for the federal government. In that position, he was responsible
for managing the disposal and sale of excess war materials. During the war, the Fed
cooperated with the Treasury by pegging the interest rates on government securities.
Although wary of the economic implications of that policy, the Board of Governors and the
regional bank presidents supported it because of the high priority placed on winning the
war. The day after the attack on Pearl Harbor, that solidarity was expressed in the issued
The System is prepared to use its powers to assure that an ample supply of funds is
available at all times for nancing of the war e ort and to exert its in uence toward
maintaining conditions in the United States Government security market that are
satisfactory from the standpoint of the Government's requirements. 2
After the war ended, the policy of supporting the price of government securities remained in
The death of Board governor Ronald Ransom in 1947 gave Truman the opportunity to make
a new appointment.3 Truman chose Thomas McCabe to ll that position, and furthermore
signaled his intention to make him the next Chairman eventually. McCabe took o ce as
Chairman in April of 1948 and inherited a Federal Reserve System that was unable to
conduct independent open market operations. The Treasury still insisted that the peg be
maintained. Initially, McCabe's actions as Chairman did not receive any resistance from the
Treasury. Soon after his appointment, the economy slipped into a recession in early 1949.
The recession called for a loosening of credit restrictions and meant that the most favorable
policy was to lower interest rates. On June 28, 1949, the FOMC asserting this policy, stating:
The Federal Open Market Committee, after consultation with the Treasury, announced
today that with a view to increasing the supply of funds available in the market to meet
the needs of commerce, business, and agriculture it will be the policy of the Committee
to direct purchases, sales, and exchanges of Government securities by the Federal
Reserve Banks with primary regard to the general business and credit situation. The
policy of maintaining orderly conditions in the Government security market, and the
con dence of investors in the Government bonds will be continued. Under present
conditions the maintenance of a relatively xed pattern of rates has the undesirable
e ect of absorbing reserves from the market at a time when the availability of credit
should be increased.4
The Treasury was pleased with this statement as the Fed subsequently reduced reserve
requirements. Those reductions led to an increase in the demand for bonds by commercial
banks. Bond prices rose, resulting in cheaper debt nancing for the Treasury.

But the economic rationale for expanding credit soon faded as the economy began to
accelerate again in late 1949. Hostilities broke out in Korea in June of 1950, providing
additional stimulus. War made it likely that the Treasury would need to raise more debt. The
mix of economic expansion, arti cially low interest rates, and a new round of debt nancing
was destined to generate serious in ationary pressures on the economy. In response, the
Fed raised the discount rate in August 1950.5 The intention of this increase was to
discourage banks from borrowing money from the Fed, but the move led Secretary of the
Treasury John Snyder to publicly criticize the FOMC.
Con ict between the FOMC and the administration ensued. Thomas McCabe, Marriner
Eccles, and Allan Sproul, who was president of the New York Fed, pressed for a relaxation of
the interest rate peg. They argued that the in ationary pressure generated by the peg would
undermine war nancing by creating in ation. After months of intense sparring in the public
eye, the Treasury backed down and settled its argument with the Fed through the Accord.6
However, the chairmanship of Thomas McCabe was a casuality of the con ict. Snyder told
Truman that he could not work with McCabe any longer.7 McCabe resigned e ective March
9. McCabe's three-year tenure as Chairman of the Board of Governors was short, but it
forever changed the Federal Reserve. His removal could have been seen as a last ditch e ort
by the Truman Administration to regain control of the Fed after it was liberated by the
Accord. The President appointed William McChesney Martin, Jr., then assistant secretary of
the Treasury, to replace McCabe, but Martin proved to be just as stalwart a defender of the
Fed's independence. McCabe left the o ce on March 31, 1951, and Martin took over on April
2. Thomas McCabe returned to his home in Swarthmore, where he continued his service as
president of the Scott Paper Company until 1962. He then served as chairman of the board
until he was 75. McCabe died on May 27, 1982, at the age of 88.

Barnard S. Katz, ed., Biographical Dictionary of the Board of Governors of the Federal
Reserve (Westport, CT: Greenwood Press, 1992), p. 168.
See Clay J. Anderson, A Half Century of Federal Reserve Policymaking 1914-1964 (Philadelphia:
Federal Reserve Bank of Philadelphia, 1965), particularly chapter 7, "World War II: Pegged
3Katz (1992, 169).
4 Thomas B. McCabe, Reply of the Chairman of the Board of Governors of the Federal Reserve
System (Washington D.C.: Board of Governors of the Federal Reserve System, November
1949), p. 34.
Katz (1992, 170).
For a detailed account of the events surrounding the Treasury-Fed Accord, see Robert L.
Hetzel and Ralph F. Leach, "The Treasury-Fed Accord: A New Narrative Account," Federal
Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001): 33-55.
7See Hetzel and Leach (2001, 51).

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Win eld Rie er (1897-1974)
Assistant Chairman to the Board (1948-1959)
Win eld Rie er was a native of Bu alo, New York. Born on February 3, 1897, he served in
World War I and earned the Croix de Guerre for his actions in France. Rie er graduated from
Amherst College in 1921. His government career began right after college with a job as a
Department of Commerce representative in Buenos Aires, and he joined the Federal Reserve
sta in 1923. While there, he developed a table in the Federal Reserve Bulletin currently
known as "Reserves of Depository Institutions and Reserve Bank Credit."
Today, this table provides a consolidated Treasury-Fed account of the factors that supply and
absorb bank reserves and currency.1 While at the Fed, he earned a Ph.D. in Economics from
the Brookings Institution. His thesis was later published as a book entitled "Money Rates and
Money Markets in the United States."2 The book shows how the actions of the Fed that
a ected bank reserves also in uenced short-term interest rates.
Rie er left the Fed in 1934 to take a full-time position at the Institute for Advanced Studies at
Princeton University as the head of the Economics Department. With the support of the
Institute, Rie er contributed to a variety of government functions. He served with the
Roosevelt Administration as central coordinating statistician in 1934. There he made a
substantial contribution to the real estate market with his concept of the self-amortizing
home mortgage. Prior to the development of this concept, home mortgages were given only
ve years to mature followed by a payment of the principal. In conjunction with that
contribution, Rie er helped to write the Federal Housing Act, which allocated funds to
communities in need of redevelopment.
In 1937, still with the Institute, he was appointed to be a substitute member of the
permanent nance committee of the League of Nations. During World War II, he was
instrumental in bringing several League organizations to the United States.3 In 1942, he
directed operations in London for the Board of Economic Warfare, which was responsible for
assessing the economic strength of the Axis Powers as well as determining e ective policy
measures that inhibited the production capacity of the enemy.

With the war's end, Win eld Rie er returned home to rejoin the Federal Reserve as a
consultant with the Philadelphia Board of Directors. It was there that he made an impression
on Thomas B. McCabe, who had served on the Philadelphia board since 1937. When McCabe
was appointed Chairman of the Board of Governors, he made it a requirement of his
acceptance that Rie er join him as his personal advisor. It was an opportunity for Rie er,
who wanted to reestablish the Fed's independence, which had been virtually lost soon after
the Fed was restructured in 1935. He believed that the Fed should always aim its e orts
towards economic stabilization and that its current activities in the government bond market
were impeding its progress toward that objective.4 In 1948, Rie er resigned his position with
the Institute of Advanced Studies. He joined McCabe in Washington and was instrumental in
negotiating the nal settlement of the Accord with future Fed legend William McChesney
Martin, Jr. 5 When Martin left the Treasury and came over to the Fed, Rie er served as his
personal adviser, too. Rie er retired in 1959, having seen his convictions regarding Fed
independence put into practice. He died on April 8, 1974.

content of this biography received important contributions through conversation with

Donald Rie er, the son of Win eld Rie er.

L. Hetzel and Ralph F. Leach, "The Treasury-Fed Accord: A New Narrative Account,"

Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001): 35, footnote 5.
2Obituary for Win eld Rie er, New York Times, 10 April 1977.

for Win eld Rie er (1977).

and Leach (2001, 35, footnote 5).

Hetzel and Leach (2001, 33-55) for further details.

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John Wesley Snyder (1895-1985)
Secretary of the Treasury (1945-1953)
As the Secretary of the Treasury at the time of the Accord, John Snyder was the primary
adversary of the Federal Reserve. Ultimately, his con ict with the Fed stemmed from his rm
belief in the philosophy of "good nancing" for the federal government, which held that the
government should be able to issue as much debt as needed on the most favorable terms.
To implement such a principle, Snyder had no choice but to obtain the Federal Reserve's
cooperation in pegging interest rates at low levels in the government securities market.
During the 1940s this cooperation came about voluntarily, but during Snyder's term, the Fed
sought to be released from this obligation.
The objectives that John Snyder pursued were always aligned with what he deemed to be in
the best interests of the Treasury, even if those policies were disagreeable to professional
economists and Fed o cials. After the war, the Treasury was responsible for funding the
rebuilding of a war-torn world. Given that much of the funding was to be achieved through
the issuance of large amounts of Treasury debt, it was only natural that Snyder would wish
to minimize the interest costs derived from the debt. From the strict perspective of nancing
the federal budget, Snyder's policies were on target.
John Wesley Snyder was born on June 21, 1895, in Jonesboro, Arkansas. He spent a year at
Vanderbilt University's Engineering School before entering the Army in 1915 to serve as a
second lieutenant in the eld artillery during World War I. After the war he went back to
Arkansas to be a bank clerk, and he never graduated from college. During the postwar
period he remained in the Army Reserve, where he met another young reserve o cer, Harry
S. Truman, with whom he would develop a lifelong friendship.
During the twenties, Snyder moved to St. Louis, where he became further involved with
banking. In 1931, he was employed by the Comptroller of the Currency, and six years later he
became the St. Louis regional director of the Reconstruction and Finance Administration.
Snyder was one of the earliest supporters of Truman's Senate reelection bid in 1940.1 From
that time until Truman assumed the presidency ve years later, Snyder had access to
Truman's closest political circle.

When Truman became President in April of 1945, he initially appointed Snyder as the Federal
Loan Administrator. Two months later, Snyder became the director of the O ce of War
Mobilization and Reconversion. In that position, he supervised the dismantling of World War
II price controls and helped convert industries back to peacetime production. His successful
execution of those operations led Truman to consider him for a higher position. Truman did
not consult Snyder before he named him to the position of Secretary of the Treasury, but
Snyder accepted. He was to become one of Truman's closest advisors on not only nancial
matters, but also general domestic and foreign policy issues. Truman valued Snyder's
counsel to the extent that Snyder was often the last person to whom Truman spoke before
he made nal decisions.2
Snyder's role within the Truman Administration was to lead the conservative faction. He
moved to deregulate price controls and wartime restrictions in the summer and fall of 1945.
This brought him into con ict with other members of the Truman cabinet who felt that such
actions, if precipitated too rapidly, would spur in ation and cause a recession. In some cases,
regulations had to be reinstated when their removal failed to achieve the intended purpose.
Snyder did not always concur with Truman. He opposed Truman's 21-point program of
September 1945, which among other things called for increases in employment insurance.3
However, Truman went ahead with the plan anyway. This instance illustrates that Snyder's
opinion was respected, but his advice was not always taken.
On the scal policy front, however, Snyder and Truman were usually united. Snyder was
instrumental in implementing the Truman Doctrine and the Marshall Plan to reconstruct
war-torn Europe.4 He opposed any measure that would jeopardize the federal government's
ability to pay down the debt and thus opposed a Republican push in Congress to cut taxes in
1947. He argued that the economy was already operating at full capacity and that the taxes
were needed to restrain in ation. His campaign against the Republicans was successful, but
then he was politely snubbed by Truman when the President proposed his own tax cut to
redistribute the tax burden. Privately, Snyder opposed the measure, but publicly he
supported it.5 Truman's plan never actually made it through Congress; instead, another
Republican tax proposal passed and then survived Truman's veto.
The Truman-Snyder alliance was never more essential than during the administration's
con ict with the Federal Reserve. As Truman's second presidential term progressed, the
Federal Reserve began to chafe under its obligation to peg the interest rates on government
securities. As a matter of principle, the President did not want to punish patriotic citizens by
raising interest rates and thus lowering the value of their bonds. Snyder pressured the Fed
to hold the rate peg at arti cially low levels. When the Korean War intensi ed, it became
likely that the Treasury was going to need to issue new debt. Thus, in the interest of
minimizing the service charge on the extra debt, the Treasury wanted to extend the rate peg
inde nitely. The con ict developed into a full-blown institutional battle that was fought
behind closed doors as well as in the public arena. Snyder felt that it was essential to raise
debt cheaply in order for the country to ght the communist threat. By contrast, the Fed

argued that subduing in ation at home was just as important for the same reason. Although
Snyder and Truman resisted ercely, support for their position dwindled and the con ict was
resolved by the Accord. In the end, Truman approved the Accord on Snyder's
John Wesley Snyder retired from government at the end of Truman's second term and
worked on the boards of several philanthropic institutions after his retirement. He died at
the age of 90 on October 8, 1985.

Eleanora Schoenbaum and Clark S. Judge, Political Pro les. The Truman Years (New York:

Facts on File, 1978), p. 505.

and Judge (1978, 505).
and Judge (1978, 506).

Press. Obituaries. "John W. Snyder Dies at 90." Washington Post. 9 October 1985.


and Judge (1978, 507).


Robert L. Hetzel and Ralph F. Leach, "The Treasury-Fed Accord: A New Narrative
Account," Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001): 33-55.

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Home / Publications / Research / Special Reports / Treasury Fed Accord / Bios

Allan Sproul (1896-1978)
President of the Federal Reserve Bank of New York (1941-1956)
Allan Sproul was born on March 9, 1896, in San Francisco. He attended high school in the
Bay Area and then matriculated at the University of California at Berkeley. World War I
disrupted his college education when he enlisted in the Army Air Force and learned to y biplanes. He was promoted to o cer status and his squadron was sent to Britain in 1918, too
late to experience any combat. He returned to California and completed his bachelors
degree in pomology, the study of growing fruit, at the College of Agriculture. Sproul applied
his degree by working brie y with the California Packing Company, which packaged farm
produce, and then as an agricultural adviser for two small banks in Southern California.
Sproul's life and career took a signi cant turn when a friend recruited him to the Federal
Reserve Bank of San Francisco. Sproul accepted a position as the head of the research
department at the regional reserve bank. Reminiscing later, he would recall that he did not
know what a central bank was. However, given that the Fed had been chartered only seven
years before, it was unlikely that even those in the banking industry were entirely aware of
what exactly a regional branch of the central bank was supposed to do. Starting in 1920,
Allan Sproul compiled and presented economic data concerning the conditions of the twelfth
Federal Reserve district. He soon became the assistant to the chairman and secretary of the
bank and began to learn how economic policy was formed.1 By 1924, Sproul had himself
become secretary of the San Francisco bank. His new position required him to travel across
the country to attend monetary policy meetings in Washington. Those occasional journeys
would bring another signi cant change to Sproul's life. While he was in Washington, his
abilities came to the attention of two men from New York, Benjamin Strong and George L.
Harrison. Strong was the president of the New York Fed and Harrison was his assistant. They
o ered the Californian the position of secretary of the New York Fed.
So eager was the New York Fed to obtain Sproul's services that it kept the job o er open
long after Strong died in 1928. Although Sproul was initially reluctant to accept the o er, he
could not resist the action stirring on the East Coast in the wake of the stock market crash of
1929; in 1930 he decided to accept the post in New York.

Joining the New York Fed as secretary on March 1, 1930, Allan Sproul was rst assigned to
the foreign exchange department. Four years later he became a special assistant to
Harrison, who had taken over as president of the bank after Strong's death, and two years
after that he ascended to rst vice president, a position that eventually required him to take
the helm of the open market Trading Desk. When the former manager on the Desk left the
Fed for another job in September of 1938, Allan Sproul was placed in charge of open market
operations for the entire Federal Reserve System.
On January 1, 1941, only a decade after he had been persuaded to come to New York, Sproul
became president of the bank. The man who brought him there, George Harrison, had
decided that the shift in power within the System from NY to the Board in Washington had
cut into the prominence of the New York Fed beyond his tolerance; he left and was replaced
by Sproul. For Sproul, the presidency of the New York Fed was accompanied by the vicechairmanship of the Federal Open Market Committee. Sproul's appointment coincided with
the start of the Fed's policy of supporting the interest rate peg on Treasury debt issuance.
This peg was set at 3/8 percent on the three-month securities and 7/8 percent on one-year
As vice-chairman of the FOMC, Sproul worked with Marriner Eccles, who was the chairman of
the FOMC. Eccles and Sproul were not in agreement on every monetary policy issue, but they
did agree that the rates of 3/8 and 7/8 on two short-term securities were too low given the 2
to 2.5 percent rate being o ered on the longer-term bonds. With the yield spread so wide,
they felt that the Fed would end up holding an excessive amount of short-term securities
when investors and banks exchanged those instruments for longer-term bonds.2
The disagreement between the Treasury and the Fed over the bond spread would soon
expand into a wider con ict. With the war's end, the necessity to maintain the rate peg was
called into question. In 1948, President Truman declined to reappoint Marriner Eccles as
Chairman of the Board of Governors. Although denied the chairmanship, Eccles remained on
the Board.
With the outbreak of the Korean War in June 1950, the con ict heated up between the Fed
and the Treasury. With the likelihood of new debt issuance on the horizon, Treasury tried to
persuade the Fed to continue its maintenance of the interest rate peg. Some members of
Congress, like Illinois Senator Paul Douglas, sided with the Fed. Others, like Texas
Representative Wright Patman, sided with the President. Sproul, Eccles, and McCabe were
the leading members of the FOMC who voiced their concerns over the e ect of the interest
rate peg on money stock growth and in ation. Eccles labeled his own institution an "engine
of in ation."3 Sproul asserted that under current circumstances, the Federal Reserve was
being forced to behave as a bureau of the Treasury rather than an independent central
bank.4 In early 1951, in the nal months of the dispute, Sproul and Chairman McCabe
corresponded extensively and also met with President Truman and Treasury Secretary
Snyder in an e ort to settle the disagreement. Truman advocated other methods of stopping
credit and money growth besides raising interest rates. Sproul maintained that the Federal

Reserve could only retain monetary control by permitting the market to determine the
interest rate. The Fed remained rm in its position, and since the Treasury needed to retain
investor con dence in the government securities markets, it decided to settle and negotiated
the Accord.5
The political restorm surrounding the Accord created an uncomfortable environment for
Allan Sproul.6 His main concerns were with the proper functioning of monetary policy. The
public attention that he received during the controversy was something that he hoped to
avoid in the future; however, he was to enter another institutional battle soon after the
Accord. The Fed had a new Chairman, William McChesney Martin, Jr.; McCabe and Eccles,
with whom Sproul had successfully worked to secure Fed independence, resigned and
returned to their home states. The source of this new con ict was the issue of whether the
Fed should restrict its open market operations to trading just Treasury bills. This "bills-only"
policy was enacted in September of 1953 by the Board of Governors in Washington D.C.
Sproul opposed the bills-only policy on the grounds that it closed o other potential
channels in the monetary transmission mechanism and thus inhibited the speed with which
monetary policy actions could take e ect.7 Another aspect of the controversy involved a
power rivalry within the Federal Reserve System. As a regional bank in the nation's nancial
capital, the New York Fed was more in uential than other banks in the system. Sproul
believed that "bills only" was simply an e ort by the Board of Governors in Washington to
gain an upper hand over the New York Fed.8
Sproul had little liking for the politics of the struggle that he led against the Board. The
con ict was emotionally and physically damaging to Sproul and may have caused the ulcers
from which he su ered. At this point in his career, he felt that the rewards were hardly worth
the stress. Thus, in a move that surprised many of his colleagues, he resigned his presidency
on June 30, 1956, and moved back to California.
The bills only policy that Allan Sproul opposed was eventually abandoned in 1961. At that
time, it was deemed ine ective in coordinating interest rates with objectives in the balanceof-payments. After his retirement, Sproul maintained an active life in the banking industry. In
particular, he gave many presentations to the Wells Fargo bank. He maintained contact with
those who had served with him during his tenure at the New York Fed, including Marriner
Eccles, who was also living in California. He continued working until seven weeks before his
death on February 21, 1978.

these nominal positions do not exist within the regional banks. Most of these
adjustments came with the Banking Act of 1935. Prior to 1935, men like Benjamin Strong and
George Harrison were called "governors" of the Federal Reserve Bank of New York, whereas
today they would be called "presidents." Positions within the Board of Governors also
evolved with the Banking Act. The Board of Governors itself was called the "Federal Reserve
Board." It was seated by four "members," who today would be the equivalent of "governors";

today's "chairman" and "vice-chairman" of the Board of Governors were then called the
"governor" and "vice-governor" of the Federal Reserve Board. For more information on the
changes produced by the Banking Act of 1935, see Carl H. Moore, The Federal Reserve System:
A History of the First 75 Years (North Carolina. McFarland & Company, Inc., 1990) pp. 88-89.

Selected Papers of Allan Sproul, ed. Lawrence S. Ritter (New York: Federal Reserve Bank

of New York, 1980) p. 7-8.

Papers of Allan Sproul (1980, 11).

L. Hetzel and Ralph F. Leach, "The Treasury-Fed Accord: A New Narrative Account,"

Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001): 44.

See Hetzel and Leach (2001, 33-55).


Selected Papers of Allan Sproul (1980, 11).


See Robert L. Hetzel and Ralph F. Leach, "After the Accord: Reminiscences on the Birth of

the Modern Fed," Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001):

The original designers of the Federal Reserve System intended for monetary power to be

decentralized, away from Washington. The 12 regional banks located throughout the country
were given some discretion with regard to discount rates and banking regulation. However,
with its close proximity to Wall Street, the Federal Reserve Bank of New York quickly became
the most powerful regional bank within the system. This was in part due to the amount of
assets that it had under management, but was also attributed to its control over the Trading
The Trading Desk comprises a group of traders at the New York Fed who conduct nancial
transactions on behalf of the entire Federal Reserve System. Today, these transactions are
commonly referred to as open market operations, which consist of the purchase or sale of
U.S. Treasuries. For a complete discussion of the Trading Desk and open market operations
see Ann-Marie Meulendyke, U.S. Monetary Policy & Financial Markets (New York. Federal
Reserve Bank of New York, 1998) and Frederic S. Miskin, The Economics of Money, Banking and
Financial Markets (New York, Addison Wesley Longman, Inc., 1997).

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Home / Publications / Research / Special Reports / Treasury Fed Accord / Bios

Harry Truman (1884-1972)
33rd President of the United States (1945-1953)
Harry Truman was the primary advocate for maintaining the interest rate peg on
government securities. His con ict with the Federal Reserve arose because although he
properly pursued the objectives of "good nancing," that is, cheap debt for the government,
he overlooked the necessities and bene ts of an independent monetary policy controlling
in ation.
Harry Truman was born on May 8, 1884, to John Anderson Truman and Martha Ellen Young
in the town of Lamar, Missouri. In 1901, he graduated from Independence High School.
Although he was a good student, he never received any degree higher than that of a high
school diploma.
After graduation, he worked a series of jobs in the Kansas City area before enlisting in the
Missouri National Guard in 1905. After 1906, Truman lived on and helped operate the family
farm in Grandview with his parents and brother. After he left the National Guard in 1911, his
jobs in the Grandview area included road overseer and post-master. In addition, he engaged
in several failed business ventures that related to raw materials. Truman reenlisted in the
National Guard in 1917 and was sent o to ght in World War I, arriving in France on April
13, 1918. He engaged in combat for about two months before the armistice was signed.
Truman's political career began in 1924 when he ran for an eastern judgeship on the Jackson
County Court. However, he lost this election to Henry Rummel. For the next two years, he
worked as a membership salesman for the Kansas City Automobile Club. In 1926, he was
elected to be a judge on the Jackson County Court, where he presided until 1934. At the end
of his second term as a judge, Truman was elected to a Missouri seat in the U.S Senate under
the Democratic Party. He would serve for a decade in the Senate during what he would call
the "happiest 10 years of my life."1
During World War II, Truman served on many committees connected to the administration
of the war e ort. He headed the Special Committee to Investigate the National Defense
Program that was created to investigate the nation's mobilization e ort in hopes of making it

more e cient. It was later estimated that the results of this investigation saved the
government up to $11 billion.
On July 21, 1944, Truman was nominated for the o ce of vice-president at the Democratic
National Convention in Chicago. He was elected to the vice presidency on November 7 of
that same year. Six months later, the death of President Franklin Delano Roosevelt thrust
Truman into the White House.
From Truman's perspective, the con ict with the Federal Reserve was as much a matter of
fairness as it was of economics. While Secretary of the Treasury John W. Snyder made the
argument that releasing the peg on interest rates would hurt the scal position of the
federal government during a crucial period, Truman wanted the Fed's cooperation on the
principle of protecting the small town investor. During World War I, Truman had had a
personal experience with buying government debt when he bought Liberty Bonds. He then
felt cheated when the interest rate on the Liberty Bonds rose after their issue. The value of
the bonds declined with their rise in interest yield. Truman remembered this incident as an
insult to his patriotism. Now that he was President, he felt an obligation not to let the price
of government bonds decline.2
During the second half of the 1940s, through the Fed's interest rate peg, Truman was able to
enforce that principle. In the meantime, the United States was playing an important
international role, helping to establish the United Nations while redeveloping Europe and
Japan through the Marshall Plan and the Truman Doctrine.
But that brief period of peace ended with the outbreak of the Korean War in June of 1950.
Truman felt that the United States had to mobilize quickly to stop the spread of communism,
as is clearly expressed in his 1951 State of the Union Address:
The threat of world conquest by Soviet Russia endangers our liberty and endangers the
kind of world in which the free spirit of man can survive. This threat is aimed at all
people who strive to win or defend their own freedom and national independence.
Indeed, the state of our Nation is in great part the state of our friends and allies
throughout the world. The gun that points at them points at us, also. The threat is a
total threat and the danger is a common danger.3
In November of 1950, the Chinese intensi ed the war by crossing the Yalu River and pushing
American forces back toward the 38th parallel. The Truman Administration faced an
extended con ict and a possible world war if the ghting expanded into China or the Soviet
Union. Even though many U.S. government expenditures in Korea had been funded by tax
increases, Chinese entry meant that the Treasury would have to issue new debt to pay for
the war. The Fed quickly foresaw the consequences that would arise if the price of U.S.
Treasuries continued to be subject to its control. With annualized in ation running near 20
percent in late 1950, the Fed argued that the low peg on interest rates had to be raised.
Truman and Snyder countered that cheap nancing was still essential for the ght against

the communists. In an attempt to reconcile their di erences, Truman, Snyder, and members
of the FOMC held a series of meetings. In spite of these e orts, the con ict soon spilled over
into Congress and into the press.
The Fed forced a resolution of the issue when in February 1951 it informed the White House
that it was no longer willing to support the current situation of pegged interest rates.4
Truman called a meeting with the Chairman of the Board of Governors, Thomas McCabe,
Allan Sproul, who was the President of the Federal Reserve Bank of New York, and other
government policymakers. In that meeting Truman advocated direct credit controls as an
alternative method for slowing in ation. This method would allow interest rates to remain
unchanged. But the Fed representatives regarded Truman's alternative as a return to the
bureaucracy that tightly controlled and rationed the economy during World War II. They also
saw this suggestion as part of an attempt by Truman to keep the Fed under the
administration's control.
The dispute was settled on March 3, 1951, with the Treasury-Fed Accord. Chairman McCabe
would o cially resign from his position just six days after the statement of the Accord was
released.5 Truman selected Martin to be the next Chairman of the Board of Governors, and
the Senate approved his appointment on March 21. This decision bothered some on the
Board of Governors, for prior to his appointment, Martin had been with the Treasury and
had in fact negotiated the Accord on behalf of the Treasury. However, Chairman Martin in
fact worked to solidify the Fed's independence that had been made possible by the Accord.
Truman's administration ended on January 20, 1953. After attending Eisenhower's
inauguration, he left Washington by train and headed back to Independence, Missouri. Even
after his retirement from the White House, Harry Truman would continue to be recognized
for his contributions to postwar stability. He died on December 26, 1972, at the age of 88.

John W. McDonald. May 1984. "10 of Truman's Happiest Years Spent in Senate,"
Independence Examiner Truman Centennial Edition.

Robert L. Hetzel and Ralph F. Leach, "The Treasury-Fed Accord: A New Narrative
Account," Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001): 39-40.
See Truman's State of the Union Address of 1951,
For further details, see Hetzel and Leach (2001, 49-53).
5See Hetzel and Leach (2001, 51-52).

Additional Resources

Harry S. Truman Library & Museum
Biography of Truman on White House's web site

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