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NOMINATIONS OF ABBOT L. MILL
AND JAMES L. ROBERTSO
'
HEARING
STANFORD
LIBRARIES
SUBCOMMI'ITEE OF THE
COMMI'ITEE ON BANKING AND __CURRENCY
BEFORE A
UNJTED -8TATES SENATE
EIGHTY-SECQN.U_CON.:GRE!'S
-··- - -
SECOND SESSION
ON
'.1.'HE NOMINATIONS OF ABBOT L. MILLS, JR., AND JAMES
L. ROBERTSON TO BE MEMBERS OF THE BOARD OF
GOVERNORS OF THE FEDERAL RESERVE SYSTEM
FEBRUARY 1, 1952
Printed for the use of the Committee on Banking and Currency
UNITED STATES
GOVERNMENT PRINTING OFFICE
WASHINGTON : 19112
P72-44
SENATE COMMITTEE ON BANKING AND CURRENCY
BURNET R. MA YDANK, South Carolina, Chairman
1. W. FULBRIGHT, Arkansas
HOMER E. CAPEHART, Indiana
A.. WILLIS ROBERTSON, Virginia
JOHN W. BRICKER, Ohio
10HN SPARKMAN, Alabama
IRVING M. IVES, New York
1. ALLEN ·FREAR, JR., Delaware
ANDREW F. SCHOEPPEL, Kansas
PAUL H. DOUGLAS, Illinois
EVERETT M. DIRKSEN, Illinois
WILLIAM BENTON, Connecticut
BLAIR MOODY, Michigan
A. LEB PARSONS, Cleric
Joe. P. McMUBliY, Staff Director
SUBCOMMITTEE ON FEDERAL RESERVE MATTERS
A. WILLIS ROBERTSON, Virginia, Chairman
BURNET R. MAYBANK, South Carolina
HOMER E. CAPEHART, Indiana
PAUL H. DOUGLAS, Illinois
JOHN W. BRICKER, Ohio
11
CONTENTS
Statement ofMartin, William McC., Jr., Chairman, Board of Governors, Federal
Reserve System _____________________________________________ _
Morse, Wayne, a United States Senatorfrom the State of Oregon _____ _
Mills, Abbot L., Jr ____________ ________________________ __ ___ ___ .
Robertson, James L ___________ __ ____________________ ___ ____ ___ _
Letters, statements, etc., submitted for the record by-
r~o~-
~~~~,A~;n~;• ;run~:fsf~les -Se~ito~tii~ -siate"'-;,Y Or~go~~
Letter to Senator Maybank __________________________________ _
Robertson, James L.: Biography _______________________________ _
Ill
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NOMINATIONS OF ABBOT L. MILLS, JR., 'AND
JAMES L. ROBERTSON
FRIDAY, l!'BBBUARY 1, 1962
UNITED STATES SENATE,
SUBCOMMITTEE ON FEDERAL RESERVE MATTERS OF
COMMITTEE ON BANKING AND CURRENCY,
Washington, D. 0.
The subcommittee met, pursuant to notice, at 10:30 a. m., in
room 301, Senate Office Building, Senator A. Willis Robertson (chairman) presiding.
.
Present: Senators Robertson, Maybank, Douglas, and Capehart.
Also present: Senators Frear and Morse.
Senator ROBERTSON. The subeommittee will please come to order.
The purpose of this meeting is to give the members of this subcommittee an opportunity to meet two Presidential nominee members of the Federal Reserve Board, Mr. James Louis Robertson, of
Nebraska, and Mr. Abbot L. Mills, Jr., of Oregon.
The subcommittee is happy to have as a witness this morning a
distinguished member of the Senate from Oregon, Mr. Wayne Morse.
It is the policy of this committee, knowing how busy our colleagues
in the Senate are, to recognize them first.
Senator MAYBANK. Let me only make this statement. Senator
Bricker is detained in a very important meeting of the Joint Committee on Atomic Energy, and I will ask that the record show that
Senator Capehart has been detained and does not know whether he
will be here in time or not.
STATEMENT OF WAYNE MORSE, A UNITED STATES SENATOR FROM
THE STATE OF OREGON
Senator MORSE. Mr. Chairman, my statement will be exceedingly
brief. All it will be is a reiteration of the statements I have already
made in written form, on file with the committee, and that I have
prior to that letter stated orally to members of the committee.
I want to assure the committee that I endorse Mr. Mills unqualifiedly. He is recognized not only as one of the business leaders of
our State, but as a very sound banker, and one of our great civic
leaders as well.
I want to say without fear of successful contradiction, Mr. Chairman, that I do not know of anyone in our State who would bring to
this committee a wider cross section of support from the various
groups in our State than Mr. Mills, and I am perfectly willing to
let my letter on file with the committee speak for itself.
I add this one word in regard to Mr. Robertson. He does not
come from my State, but I am familiar with his record, and I am
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very happy, as a Member of the Senate, to have two such wellqualified men before the Senate for confirmation at this time.
Senator MAYB4NK. Mr. Chairman, I would like to have Senator
Morse's statement filed as a·part of the record.
Senator MoRsE. I would be happy to have my letter printed as a
part of the record.
·
(fhe letter referred to is as follows):
UNITED STATES SENATE,
January 25, 1952.
Hon. BURNET R. MAYBANK,
Chairman, Senate Banking and Currency Committee,
Senate Office Building, Washington, D. C.
DEAR SENATOR MAYBANK: I am pleased to advise you that the nomination
of Abbot L. Mills, Jr., of Portland, Oreg., as a member of the Federal Reserve
Board meets with my enthusiastic approval and endorsement. I have previously
endorsed him for nomination and now I am pleased to recommend and support
the confirmation of this nomination.
Mr. Mills is so exceptionally well qualified for this particular position that I
am very proud as a Senator from Oregon to support his qualifications. I am
enclosing some background material on Mr. Mills which Mr. E. C. Sammons,
president of the United States National Bank of Oregon, sent to me.
I have known Mr. Mills for a good many years, and I know him to be one of
the recognized financial leaders of our State. He not only is a very sound banker,
but he is also a very keen student of economic problems. He will bring to his
work as a member of the Federal Reserve Board a background of training and
practical experience in the field of banking and economics which will enable him
to do a superb job for his country in that position.
I shall be very glad to appear before your committee and answer any questions
within my knowledge concerning Mr. Mills,.if any member of the committee feels
that he needs more information than is already on file in support of Mr. Mills.
While I am writing this letter, I wish also to endorse the nomination of Mr.
James L. Robertson, of Nebraska, for appointment to the other vacancy of the
Federal Reserve Board. As you know, Mr. Robertson has been Chief Deputy
Comptroller of the Currency. In my opinion, his record of public service leaves
no doubt whatsoever concerning his excellent qualificationE" for appointment to
the Federal Reserve Board.
With best wishes,
Sincerely yours,
WAYNE MORSE.
Senator ROBERTSON. We have also as a witness the distinguished
Chairman of the Federal Reserve Board, Mr. William Martin. The
committee would be glad to hear from Mr. Martin as to whether these
two nominees are acceptable to him.
STATEMENT OF WILLIAM Mee. MARTIN, JR., CHAIRMAN, BOARD
OF GOVERNORS, FEDERAL RESERVE SYSTEM
Mr. MARTIN. Mr. Chairman, I am very glad to have an opportunity
to put in the record that both of these men are thoroughly acceptable
to me, that I have no mental reservation whatever in recommending
both of them to your committee. They have been selected by the
President for quality, for experience, for competence, and with the conviction that their primary interest will be in the public welfare. That
was the basis on which he offers these appointments, and from my personal investigation and knowledge of the background and capacity
and training and experience of these gentlemen, I have no hesitation
in recommending them completely for any consideration you may
care to give them.
Senator ROBERTSON. Are there any questions of Governor Martin?
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If not, we thank you, Governor.
Senator Douglas, did you want to ask Governor Martin anything?
Senator DouGLAS. Well, I would want to ask Mr. Robertson some
questions. I have no immediate questions of Governor Martin.
Senator RoBERTSON. The Chair would like to hear now from
the nominee from Oregon, Mr. Mills. He will give us for the record
a brief statement indicating where he was born, and wheri, and what
he has been doing in a general way since he was born.
STATEMENT OF ABBOT L. MIL~S, JR.
Mr. MILLS. Senator, and gentlemen, I was born in Portland, Oreg.,
September 26, 1898, and had my grammar schooling in Portland,
high school in the East, and graduated at Harvard College in 1921.
My father had been a banker ahead of me, and immediately on ·
graduating from college, I became an employee of the First National
Bank of Portland, continuing with that bank until December 31,
1932.
I left their employ as a vice president, and during that employ I
should add, I was delegated for a period of a year to serve as the
assistant secretary of an associated organization, the Pacific Coast
Joint Stock Land Bank.
On January 1, 1933, I became associated with the United States
National Bank, of which I am presently their first vice president and
a director.
The activities outside of banking that have claimed my attention
have largely been civic in character, in various capacities in that
regard, also serving as a consultant to two mayors of the city of Portland, and have had very pleasant and agreeable posts both with our
Oregon Bankers Association, and with the Association of Reserve
City Bankers.
Senator RoBERTSON. You have never held public office before?
Mr. MILLS. No, I have never held public office or run for public
office. My relationship to public office has been in capacities appointed by mayors, or a governor, or that sort of appointment.
Senator MAYBANK. What kind of appointments were those, Mr.
Mills?
Mr. MILLS. For the mayors of Portland, they were studies of the
city's fiscal problems, and with respect to the State, I served under
appointment by Governor McKay on his small-business committee.
Senator RoBERTSON. Do you regard public office as being a public
trust, with no twilight zone between right and wrong?
Mr. MILLS. Absolutely, for the reason that commercial banking is
likewise a public trust, and if you can advance from private banking
to public banking, and a larger area of public trust, it is a very worthwhile ambition to any man in the private field of finance.
Senator RoBERTSON. As a banker, making numerous contacts in the
past with the Federal Reserve System, have you looked upon the
Federal Reserve Board as a governmental agency that should work in
cooperation with the Treasury Department in the management of the
national debt, but not to be subordinated to it?
Mr. MILLS. That, essentially, is so. I am a strong believer in the
principles of the Federal Reserve Act, as it was originally passed by
Congress, and have always believed that the amend:rµents that have
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followed in the act have been organically evolutionary, but have never
undermined the principles of that legislation which calls for an independent organization, responsible to Congress.
Senator ROBERTSON. Are there any questions?
Senator MAYBANK. Mr. Chairman, I would like to ask that Mr.
Mills' biography be placed in the record.
Senator RoBERTSON. Without objection, the biography will be
inserted in the record to be included with the testimony of the witness.
(The biographical s_ketch referred to follows:)
ABBOT Low MILLS, JR.
Born: Portland Oreg., September 26, 1898.
Father: Abbot Low Mills, Sr., was for many years president of the First National Bank of Portland, and promininently identified ·with Oregon's civic and
commercial life.
Mother: Evelyn Scott Lewis.
Married: Katherine Ainsworth, August 4, 1924.
Children: Katherine Mills. Graduate of Scripps College, now teachmg in
Pasadena, C111if.
Abbot L. Mills. After serving enlistment in United States Marine Corps,
graduated from Pomona College, and now doing newspaper work in Santa Barbara
Calif. Married Joan Rich, father of two sons.
Sarah Mills Harball. After 2 ye~rs at Mills College, married Charles H. Harball, and now ranching in Polson, Mont. Mother of a daughter.
John Ainsworth Mills. Completed sophomore year at Cornell University, and
now apprentice seaman in the United States Navy.
Education: Grammar school, Portland, Oreg. High school, Middlesex School,
Concord, MasR. College, Harvard College, graduated with A. B. degree, class of
1921.
Military service: Commissioned second lieutenant, United States Army,
September 18, 1918. Attached to SATC Unit, Georgia School of Technology.
Honorably discharged December 1918.
Business connections: Entered employ of the First National Bank of Port.land,
October 1, 1920, as messenger. Served successively as assistant cashier and
vice president to December 31, 1932, except for the year 1923, or thereabouts,
during which served with the affiliated Pacific Coast Joint Stock Land Bank as
assistant secretary.
Entered employ of the United Stat.es National Bank of Portland, Oreg., January
1, 1933, and since have been continuously so employed as assistant. vice prei-ident,
vice president, and at this time as first vice president. Also serves as director of
the United States National Bank of Portland and of the United St.ates National
Corp.
Outside banking activities: l\fember, Association of Reserve City Bankers
since 1938, and serves on the Association's committee on Federal relat.ionships,
and as a trustee of the Banking Research Fund. :\lember, Oregon Bankers
Association committ.ee on le11:i,-;lation and taxation, and previously served on
various other of the association's st.anding committees.
Present out.side activities: l\Iember of National Cornmit.t.ce on Bov:- and Girls
Club Work, Inc. President, Portland 4-H Club Advisorv Councii. Director,
Oregon Tuberculosis and Health Association. Member, Governor's Committee
on 8mall Business. Overseer, Whit.man College.
Public appearances: Occasional lecturer on financial subjects, such as participating in the annual Pacific Northwest Bankers Conferpnces at Washington State
College; recent speaker at ·western Regional Trust Conference in Han Francisco,
etc.
Previous public services: Served two mayors of the city of Portland on committees having to do with municipal finance. President. and member of board of
trustees of Reed College. l\lember of Multnomah County Selective Service
Board No. I>. l\lcmhcr of l\Ierit System Council, Oregon Htat.e Welfare Comm1ss10n. Fiscal assistant in the Office of the Secretary of the Treasurv (1942).
President and treasurer, Harvard Club of Oregon. Trustee, Portland Art Association. Trustee, l\lultnomah Amateur Atheltic Club. President, treasurer,
and director, Port.land-l\lultnomah County Community Chest. Direct.or, Port-
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land-Multnomah County Chapter, American Red Cross. Director, Portland
Chamber of Commerce. Member, board of hospital trustees, Good Samaritan
Hospital. Director and treasurer, the Visiting Nurse Association. Director and
treasurer, Portland Open Air Sanitarium.
Society memberships: American Economic Association, Oregon Finance
Officers Association, and American Academy of Political Science.
Senator RoBERTSON. Are there any further questions?
Senator MAYBANK. I would like to ask Mr. Mills a question.
There are one or two States in the United States that have no
branch of the Federal Reserve Bank. When the bank was first set uo,
and it has always worked in the interest of the public, as you have said,
if a State should show why a branch bank should be set up there,
although they have not been setting up any branch banks I think in
the last 20 years, would you view it on its merits, and not because
something has not been done to give them an opportunity, or how
would you feel about that?
Mr. MILLS. Oh, most certainly. My observations, a,nd they have
been at a distance, of the reasoning that the Board of Governor3 has
followed in establishing or retiring branches has been in the interest of
the financial needs of the public, where they are required, and where
their need is proven to their satisfaction the facilities I am sure would.
be provided.
Senator MAYBANK. I would not want to make any statement about
it that would be binding, but it has been called to my attmtion as
chairman of this committee that there are places, communities. and
States that have increased greatly in population and business, and
it has been a drawback to them not to have a branch within the State,
because all the money has to leave the State, as you know how the
law works That is why I asked.
Senator ROBERTSON. Are there any further questions?
We thank you.
The subcommittee would now be pleased to hear from Mr. Robertson along the same lines as the questions asked of Mr. Mills.
STATEMENT OF JAMES L. ROBERTSON
Mr. RoBERTSON. Mr. Chairman, and members of the committee,
I was born and reared in Broken Bow, Nebr., and educated in the
public schools there. I attended Grinnell College, George Washington
University, and Harvard.
I began working for the Federal Government in 1927. With the
exception of 6 months I have been in the employ of the Government
ever since.
At the present time I am First Deputy Comptroller of the Currency.
Senator MAYBANK. Mr. Chairman, I make the same request, that
the biographical sketch submitted by Mr. Robertson be included in
the record.
Senator RoBERTSON. Without objection, that will be done.
(The biographical sketch referred to follows:)
James Louis Robertson, a career employee with 24 years service with the
Federal Government, was born and reared in Broken Bow, Nebr. His birth date
was October 31, 1907. After attending Grinnell College, he r'tucied at George
Washington University, from which he received both A. B. and LL. B. degrees.
He then did graduate work at the Harvard Law School, from which he received
his LL. M. in 1932. He entered tte Government service in 1927 as a clerk in
the United States Senate post office. Later he was a special agent of the
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
Federal Bureau of Investigation. In 1933 he became assistant counsel to the
Comptroller of the Currency, and in 1942 was made assistant chief counsel. He
served as a lieutenant (j. g.) in the United States Naval Reserve in 1943-44.
Thereafter he was appointed Third Deputy Comptroller of the Currency, and in
1949 he was deeignated First Deputy Comptroller. He was admitted to the Bar
of the Court of Appeals for the District of Columbia in 1931, and to the Supreme
Court of the United States in 1935. Mr. Robertson is married and has three
sons.
Senator RoBERTSON. How long have you been in the Office of the
Comptroller of Currency?
Mr. RoBERTSON. Since 1933, continuously, except for Navy service
in 1943-44.
Senator ROBERTSON. Are there any questions?
Senator DouGLAS. Yes, I would like to ask l\fr. Robertson some
questions.
First, may I begin by saying that from everything that I know you
have had an extremely honorable and distinguished record as Deputy
Comptroller of the Currency.
~Ir. RoBERTSON. Thank you verv much.
Senator DOUGLAS. I think you "are extremely efficient and from
everything I can learn that you are a man of high integrity, and have
been a splendid public servant. Any questions that I may now ask
should not be regarded in the slightest degree as any reflection upon
your character. I want to make that clear for the record.
You have now been in the Office of the Secretary of the Treasury
for almost 19 years.
Mr. ROBERTSON. I think I should correct that, Senator, just slightly
to say that I have been in the employ of the Comptroller of the
CmTency-S('Jlator DouGLAS. That is in the Department of the Treasury, is
it not?
:\Ir. RoREHTSON. That is l'ight, sir, and technicnlly it is cPrtainly
u bul'Pllll of the TrPasur_v, but for nil intPnts an<l purposes, it is opPruted
complPtPl_v sPparntPly.
S('nator Doum,As. But it is in the Department of the Treasury.
:\Ir. RoREHTSO'.'I. YPs, sir.
Senator DouGLAS. You have conducted a large number of bank
examinations'?
:\Ir. RoB1•;1rrsox. I ban• lwPn in charge of national hunk examinations for ,·pars.
Spnatoi· Don,L.\S. TIH'r<'forP _\'Oll know tlw procedure both of
inn,stm(•11t. lmnking, and of comllH'rl'ial banking very thoroughly.
:\Ir. Ro1:1-:nTso,. Of inV('stnwnt banking, within the conmwr·cial
banking fil'ld.
SPnutor Doi-GI.AS. YPs.
:\-Ir. Hoirn1nsox. I do not want to post> as an expPrt.
S('lrntor DorGI,.\s. \Vlwn tlw F<'d(•ntl Rl'S(•rve Board buys bonlls
in t,hP opl'n murkPt, whnt happl'lls'?
:\Ir. Hoin:1nsox. It cn•at(•<, additional rPsPrvPs.
SPmtlor Dot·GL.\S. Cn,ut(•s n'Sl'l'Vl'S which an• credited to mPmbPr
banks, doPs it not'?
:\Ir. RoirnRTsox. Thnt is rig-ht, sir.
SPnntor Dol"GL.\S. And this in turn makPs it possible for member
banks to l'xpand privalt' loans.
~fr. Ro1rnwrsox. Very definitely.
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Senator DouGLAS. In the ratio of approximately 6 to I.
Mr. ROBERTSON. That is right, sir.
Senator DouGLAS. So that the purchase of bonds by the Federal
Reserve System makes it possible for the private banking system to
expand credit in the ratio of approximately six times these bond
purchases.
Mr. RoBERTSON. There is no doubt about that.
Senator DouGLAS. The banks are naturally anxious to earn on
their assets, are they not?
Mr. RoNERTSON. Certainly.
Senator DouGLAS. An increase in the reserves of the banks is
therefore, in the Federal Reserve System, likely to be accompanied
by an increase in the loans which they make to private business; is
that not true?
Mr. RoBERTSON. It forms the basis for an, increase.
Senator DouGLAS. And the practice of commercial banking is one
in which the banks make the loan in the form of credit, against which
the borrower draws?
Mr. RoBERTSON. That is right.
Senator DouGLAS. That is, the loan comes first, and it creates the
deposit.
Mr. RoBERTSON. That is right.
Senator DouGLAS. So that purchase of these bond,s by the Federal
Reserve System tends to increase the amount of credit issued or
granted by private banks.
Now, then, what effect does that have upon the price level-the
increase in credit by private banks-what effect does that have on
the general price level?
Mr. RoBERTSON. Well, it is bound to have an inflationary tendency,
as long as they are increased.
Senator DouGLAS. That is right.
Now, therefore, the purchase of bonds by the Federal ReserYe
System increasing the reserves of the member banks has an inflationary
effect upon the general price level.
Mr. RoBERTSON. Oh, yes; I think that is true. That is not the only
way in which the excess reserves-Sena tor DouGLAS. And also because by an unbalanced governmental budget; but I have been referring to the private credit sector
of the field. Now what effect will inflation have upon the recipients
of fixed incomes?
Mr. ROBERTSON. In my opinion, inflation is probably as hazardous
to this country as war. It, is one of the major hazards we face.
Senator DouGLAS. How about the holders of bonds and mortgages
whose incomes are in terms of fixed money sums?
Mr. ROBERTSON. Any person who is on a fixed income is definitely
injured by inflation.
Senator DouGLAS. What about salaried workers?
Mr. RoBERTSON. I include those in fixed income. As to wage
earners, of course their wages go up. Prices go up on one hand, and
wages on the other. It is the middle group that is injured.
Senator DouGLAs. Salaried workers will lose because their salaries
will not rise as rapidly as the cost of living; is that not true?
Mr. RoBERTSON. Usually they go up after the cost of living goes up.
Senator DouGLAS. And not to the full degree of the cost of living.
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::\Ir. RoBERTSON. That is right.
Senator DouGLAs. How about old people on annuities?
::\fr. RoBimTSON. They are in the fixed-income class.
Senator DouGLAS. And how about the unorganized workers?
::\fr. RoBERTSON. Unless th(•ir wages go up, they are in much the
same position.
Senator DouGLAS. In the n•cent inflation, the earnings of unorganized workers have not inereased as mpidly as the cost of liYing.
::\Ir. RonERTSON. That is m_,. undPrstanding.
Senator DouGLAS. Arni evPn the orgunize<l workers, though their
wage ratPs may go up, they go up after a lag, so that they suffer an
inten·Pning loss.
::\Ir. Ro,rnnTsoN. VPrv dPfinitck.
Senator DOUGLAS. And the orily p<'ople who can profit are the
speculators, is that not triw, those who purchase stocks instead of
bonds, and thus intercept earnings which, if prices were stable, would
otherwise go to the bondholders; is that not true?
::\fr. RottEHTSON. That is right, speculators are in the group that
benefits. •
Senator DouGLAS. And the speculators also purchase commodities,
and th<'refore make gains at the expense of the fixed income groups.
Mr. RoBERTSON. That is true.
Senator DouGLAS. So that vou have a redistribution of income
within the community favoring 'speculators at the expense of investors
and those n•eeiving income which is more or less fixed.
Mr. RoBirnTsoN. That is one of thP rPsults of inflation.
Senator DouGLAS. Therefore if the .Federal Reserve Board purchasPs large quantities of Government bonds, it has an inflationary
effect.
:\Ir. ROBERTSON. A potentially inflationary effect.
Senator DouGLA8. Is it not true if you increase the reserves of the
banks, the banks will increase their loans, and the expansion of loans
will cause prices to rise?
Mr. ROBERTSON. Yes, Senator; they can then increase loans, but
you must add that is not the only way in which they can get their
excess reserves.
Senator DouoLAS. I understand that.
Now, are you acquainted with the policy of the Treasury during
these last few years?
Mr. RoBERTSON. Only superficially.
Senator DouGLAs. What do you understand the policy of the
Treasury to have been as regards the purchases by the Federal
ReservP System of GovernmPnt bonds?
Mr. RoirnRTSON. To the pxtent that I glean it from the newspapers,
and the newspapers only, Senator, I t11ke it the policy has been to
peg tlH' market for GovC'rnment bonds.
8(•nntor DouGLAS. And the policy has been to imiist that the
FedPral Rciwrve SystC'm buy appn•eiahlC' quantitiPs of Government
bonds in ordPr to do so, was it not?
:\Ir. Ho1rnnTsoN. I cannot sav that the Tn•asurv has insisted that
the FPdPral HPsPrve hu_v apprP<'i.nhlc q11antitiPs of dovPrnment bonds.
SP111ttor Don,LAB. You work for the TrPusurv and do not know
whnt the TrPasur.v policy has been.
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,Senator RoBERTSON. Senator, if you do not give the witness a
chance to answer the questions, I cannot follow him.
Mr. RoBERTSON. Let me state, Mr. Chairman, and Senator
Douglas, that although I have been in the Treasury I have no more
part to play in Treasury policy with respect to public debt management than any man in the street. I have never participated in their
conferences, I do not work with Treasury people as such, I work with
people in the Office of the Comptroller of the Currency. Consequentlv
I cannot sit here and pose as anyone who would know about Treasury
policy in this field, as a result of being a Treasury employee.
Senator DouGLAs. You are an intelligent and extremely honorable
man. Do you mean to say you do not know what the Treasury
policv has been in this matter?
Mi·. ROBERTSON. I mean to state that I know Treasury policy
only as a man in the street, and not from any inside knowledge.
Senator DouGLAS. Not as an expert.
Mr. ROBERTSON. ~fy expertness, if I have any at all, is in the
field of bank supervision, and not in the field of public debt
management.
Senator DouGLAS. Well, you have dealt with banks and you have
talked with bankers.
Mr. ROBERTSON. Oh, yes, I have.
Senator DouGLAS. Well, what do you think the Treasury policy
has been as respect the purchase of bonds by the Federal Reserve
System?
Mr. ROBERTSON. I think the Treasury policy has been, Senator,
that the bonds should be pegged by the Federal Reserve. Now,
your question before, Senator, was whether or not the Treasury had
msisted-and I cannot state that the Treasury has insisted, because
I do not know.
Senator DouGLAS. Did you read the testimony of Secretary Snyder
before the subcommittee, of which I was chairman, on that point?
l\fr. ROBERTSON. If so, it has been years ago, and I have no recollection of it. I have no recollection of it whatsoever.
Senator DouGLAS. Do you know what Secretary Snyder's policy
has been in this matter?
Mr. ROBERTSON. l know from the papers, Senator, yes, sir.
Senator DouGLAS. Well, what do you understand from the papers
to have been his policy?
Mr. ROBERTSON. My understanding of the policy is that the
Secretary of the Treasury believes that the market for Government
bonds should be pegged. Now, whether or not-Senator DouGLAS. Now-Mr. ROBERTSON. Let me answer the question. I do not know
whether that is his policy or not. That is my understanding.
Sena.tor DouGLAS. What would be the effect of the Federal Reserve
System pegging the price of Government bonds? Would not that
require appreciable purchases of Government bonds in order to do so?
Mr. ROBERTSON. Very definitely so, and that in itself would result
in inflationary pressures.
Senator DouoLAs. That is right; and is it not true that the Federal
Reserve System, according to Mr. Eccles' testimony which is clear on
this point, that Treasury pressure forced the Federal Reserve System
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
to buy large quantities of Government bonds from 1945 on until
1950, and that thereafter, from the fall of 1950 until approximately
March of 1951 the Federal Reserve System bought approximately
$3 billion more of additional bonds?
Mr. RoBERTSON. That is probably true.
Senator DouGLAS. And the effect of this was inflationary.
Mr. ROBERTSON. Oh, I think there is little doubt about that.
Senator DouGLAS. Now, is it not also true that the Treasury has
declared that this is its continuing policy, and that the administration
has declared that it is its continuing policy? Did not the President
of the United States, in a press conference recently held, say that he
still believed that the price of Government bonds should be pegged?
Mr. ROBERTSON. I think the newspapers quoted him to this effect.
Senator DouGLAS. Were those reports denied?
Mr. ROBERTSON. I have not the slightest notion. I have seen
nothing to that effect.
Senator DouGLAS. That thev have not denied.
Mr. RonERTSON. That is right.
Senator DOUGLAS. Therefore you presume that they are true.
Mr. ROBERTSON. No, I do not form decisions on this basis, Senator.
I am stating what I read in the newspapers about it, and that is all I
know.
Senator DOUGLAS. What is your own feeling as to the policy that
should be followed?
Mr. ROBERTSON. My own feelin~ of the policy that should be followed is this: I think the responsibility for managing the public debt
rests in the Treasury, and the Treasury alone. I think the functions
of the Federal Reserve system are to contribute toward economic
stability through the control of money and credit-the amount of it,
the availability of it, the cost of it.
I think that the control of the volume of money and credit has a.
great deal to do with inflationary pressures. I do not think it has
everything to do with it. I think the velocity of the turn-over of that
money is very important.
Senator DouGLAS. May I say this: Of course, you realize as prices
start to rise, velocity increases also, because each dollar is worth less
with the passage of time, so that this is a cumulative and not a compensatory effect.
Mr. ROBERTSON. I certainly do. I think the functions of the
Treasury and the functions of the Federal Reserve should be carried
out by those agencies in accordance with their best judgment, and I
do not think that either should be dominated bv the other.
I think, however, that each agency must formulate its own decisions, and carry out its actions in accordance with its own best judgment, but in the light of a very deep and sympathetic understanding
of the problems faced by the other agency. I do not think either
agency should dominate the other.
Senator DouGLAS. Mr. Robertson, did you follow the discussion
between the FPderal ResPrve System an<l the Secretary of the Treasury
last February?
Mr. ROBERTSON. No, I did not.
Spnator DouGLAS. In January and FPbruary. You did not follow
that at all?
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11
Mr. ROBERTSON. Not except as you can read in the newspapers.
I make that a definite point.
Senator DouGLAS. Did you read Mr. Eccles' book on this matter?
Mr. ROBERTSON. I have skimmed Mr. Eccles' book. I have not
read it thoroughly.
Senator DouGLAS. Is it not a fact that the Treasury and the Federal
Reserve System pegged the price of Government bonds by continuing large purchases, and the Federal Reserve System finally
balked at this?
Mr. ROBERTSON. That I do not know.
Senator DouGLAS. Do you believe that to be true?
Mr. RoBERTSON. I do not know.
Senator DouGLAS. What do you believe?
Mr. RoBERTSON. I believe that the market was pegged, and whether
that came from a dominating influence on the part of the Treasury,
or willingness on the part of the Federal Reserve, I am not in a position
to state.
Senator DOUGLAS. Well, do you know about the "White House
-conference where the parties were summoned over, both Federal
Reserve officials and Treasury officials, and that at the end of that
conference, to the surprise of the Federal Reserve System, a statement
was issued that the Federal Reserve System had agreed to peg bonds,
·and that the Federal Reserve Svstem later released a statement that
this had not been agreed to by.the Federal Reserve System?
Mr. ROBERTSON. I remember very well when that meeting was
held.
Senator DouGLAS. Do you remember what the Chairman of the
Federal Reserve Board lid, when he protested the statement that
was issued?
Mr. RoBERTSON. I have a general recollection of that series of
statements.
Senator DouGLAS. Now, suppose the Secretary of the Treasury
says that in order to maintain the price of Government bonds, and
to keep the interest rate down, the Federal Reserve Board should
buv Government bonds. "1'hat should the Federal Reserve Board
do.under those conditions, when to do so will produce great inflation?
l\fr. ROBERTSON. I would say the Federal Reserve Board should
very carefully consider the views of the Secretary of the Treasury,
who has a very great responsibility in financing the debt of this
Government, and the needed money for the purpose of carrying on
the Government.
I do not think that the Federal Reserve Board should consider
anything said by the Secretary of the Treasury as being an order.
Senator DouGLAS. No; but ·you would make it persuasive, would
you, though not controlling?
Mr. ROBERTSON. Something which should be very carefully considered.
Senator DouGLAS. And given great weight in the decisions which
you make.
Mr. ROBERTSON. Oh, I would certainly give it great weight.
Senator DouGLAS. Which do you regard as more important, to
obtain a stable interest rate on Government bonds even though it
entails raising prices, or to maintain stable prices even though it may
entail a rising interest rate?
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ABBOT L. MILLS, J'R., AND JAMES L. ROBERTSON
Mr. ROBERTSON. Senator, I do not think of myself as one qualified
to make an expert opinion-Senator DouGLAS. But you are going to be called upon-Mr. ROBERTSON. And I will attempt to prepare myself to make that
decision. But it requires more study than I have been able to give it,
Senator.
I would say just this: that it is extremely important that we curb
inflation in this country, and that is one of the most important things
I think we have to do. That is one of the reasons I am willing to
accept this appointment to the Federal Reserve Board, in order to
make a contribution to that end.
Senator DouGLAS. In order to do that, you have to restrict the
amount of private credit, and you cannot restrict the amount of
private credit if the Federal Reserve Board is buying appreciable
quantities of Government bonds.
Mr. ROBERTSON. It may be true-Senator DouGLAS. Well, is it not true?
Mr. ROBERTSON. I say it may be true.
Senator DouGLAS. Well, is it not true?
Mr. ROBERTSON. Let me make a statement first, Senat,or. There
are other ways of controlling credit which may be employed. I do
not know the best way of controlling credit at this time. I realize
that it must be done, and if that would necessitate a decision-Senator DouGLAS. What other way could be used besides limiting
the amount of bonds purchased?
Mr. ROBERTSON. There are possible ways, Senator-Senator DouGLAS. · Such as-Mr. ROBERTSON. A voluntary credit control program, or selective
credit controls.
Senator DouGLAS. Do you prefer selective credit controls to general
credit controls?
Mr. ROBERTSON. I do not. I say there are ways of controlling it,
one of which is selective credit controls. There could be, in my
opinion, controls over the amount of credit which banks may extend,
without regard to reserve requirements. That might require legislation. How it is best done, I do not know, but there are two things
that have to be done: One, you have to maintain confidence-Senator DouGLAS. In what?
Mr. ROBERTSON. In the United States Government, and its money.
Secondly-Senator DouGLAS. Do you think the price of bonds could fall to 80
or 82 if the Federal Reserve System did not support the price?
Mr. ROBERTSON. I do not consider myself well enough informed to
·
answer that.
Senator DouGLAS. Do you know about the nature of series D, E,
and F bonds?
Mr. RoBERTSON. Only in a very general way.
Senator DouGLAS. You do not know what series D a.nd E bonds are?
Mr. RoBERTSON. In a very general way, I say, Senator.
Senator DouGLAS. What are thev?
Mr. ROBERTSON. Well, E bonds are the savings bonds which are
held by a great man-'' people throughout the country. The redeemable
value is fixed, so they cannot fluct,uate.
Senator DouGLAS. Therefore, could they fall?
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
13
Mr. ROBERTSON. They could not.
Senator DouGLAS. Has not there been a great misapprehension
both by the Treasury and by other people in saying that the price of
Government bonds could fall to 80 or 82, when, as a matter of fact,
they are redeemable, and hence are very different from the bonds
issued in the First World War?
Mr. RoBERTSON. Oh, there is a great difference in the situation now
and in the First World War because of the existence of E bonds.
Senator DouGLAS. And these are redeemable at par by the buyer,
whereas the earlier bonds were not.
Mr. ROBERTSON. Oh, very definitely. The situation is very different.
·
Senator DouGLAS. Has there not been confusion on the part of the
Secretary of the Treasury and others on this point?
Mr. RoBERTSON. I do not say that, because I do not know what the
Secretary thinks on the subject.
Senator DouGLAS. There have been public statements that the
purchase of these bonds'was necessary in order to prevent bonds from
falling to 80 or 82. Now, you say they are redeemable at par, and
hence will not. fall. I congratulate you, that is correct.
Mr. ROBERTSON. It is correct as to the savings bonds, Senator,
but we must not apply that to all bonds. With respect to other
bonds, the prices of which do fluctuate, I do not know where they
would fall to, or how important it would be if they did fall.
Senator DouGLAS. Well, here is what we are afraid of, to put it
briefly. Let us get everything on the table.
.
Mr. RoBERTSON. Very well.
Senator DouGLAS. The Treasury has been trying to force the
Federal Reserve Board to buy, through its open-market committee,
unlimited quantities of bonds in order to maintain the price at a
low interest rate. The effect of that has been to expand bank
reserves, in turn to expand bank credit, which in turn leads to
inflation.
The Federal Reserve Board finally got up its courage and asserted
its independence some time in March. An agreement was entered
into, under which it was not bound to buy unlimited quantities of
bonds. It has not done so, and I want to congratulate the Chairman,
Mr. Martin, for the intestinal fortitude which he has disphyedthis far.
But we have a very clear intimation that the policy of the Treasury
and the Executive has not in fact changed. It is still believed by
them that the Federal Reserve Board should purchase quantities of
bonds to maintain the price, and so on. That has been stated
publicly. The dispute is obviously not over. Now, this is very
frankly what we are afraid of. We are afraid that the Treasury may,
by appointments to the Board, undermine the independence of the
Board and reverse its policy.
I therefore find myself in a very embatTassing position in dealing
with you, just as I found myself in an embarrassing position dealing
with Mr. Martin. I did not vote for Mr. Martin's appointment and
I did not vote against it. I was not certain whether he was unwittingly and unwillingly going to be compelled to play the part of
a Trojan horse or not. I was afraid that the Treasury was getting
a man on the Federal Reserve Board who would follow out Treasury
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
policy, and that after some months we would find the Federal Reserve policy would be reversed.
I want to say that thus far his conduct has been exemplary. He
has displayed a degree of persuasiveness and resoluteness which is
very admirable. I hope he contiunes in the path of virtue, and I
, will be praying for it.
,
Now, a second appointment comes up from the Treasury, a highly
skilled, highly honorable man in the Treasury, just as Mr. Martin
was a highly skilled and highly honorable man, but it is very hard
for anyone to disabuse himself of the philosophy and friendships
which he has made over a long period of time. I do not question
your integrity, your ability, or your sense of public devotion in the
slightest. I want to make that clear, but I view with some suspicion,
in view of the historic record, the comi.q.g of another man out of the
Treasury on to the Federal Reserve Board, because I am afraid,
desperately afraid, that it means the ultimate adoption of the Treasury policy on these bond purchases, and the sweeping of inflation
over this country. We are already in bad enough condition with the
governmental budget that will be unbalanced $9 billion this year,
which will force the Government to go to the banks to borrow, with
a consequent inflation of credit, and we will have a prospective
deficit of $14 billion next year. If you have public credit expanding,
or require the banks to expand credit to finance the deficit, and at
the same time have the Federal Reserve make large bond purchases,
then even though the Federal Reserve Board were filled with angels,
the effects would be no less catastrophic.
Mr. ROBERTSON. Senator, may I make a remark? I appreciate
the point of view from which you speak, and I feel I should state that
the Secretary of the Treasury has never asked me what my views were
on the so-called Treasury-Federal Reserve dispute.
Senator DouGLAS. Mr. Robertson, do you know what your views
are?
Mr. ROBERTSON. No official of the Treasury Department has ever
discussed with me the question of the pegging of Government bonds,
for example, or what the policy of the Federal Reserve System should
be, or what the policy of the Treasury should be, if .J may exclude
from "Treasury" the Office of the Comptroller of the Currency, itself.
Thirdly, Mr. Martin has never discussed with me the position
which I might take if I were called upon to make a decision on those
matters. I, myself, do not know what decision that would be, because
I have not been studying this question as one who is in the Federal
Reserve System, or in the Treasury, on the other side.
Fourth, let me say-Senator DouGLAS. Now, please do not disavow your connection
with the Treasury.
Mr. ROBERTSON. Let me make my statement, please.
Senator DOUGLAS. All right.
Mr. RoBERTSON. Fourth, and I think it is to his everlasting credit,
when I discussed with the President of the United States this appointment, he did not so much as inquire concerning my politics, he did
not inquire concerning any views I hold, he stated the appointment
was being made solely on merit, that he would never tell me how I
should act on any given problem, and that he would merely expect me
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
15
to perform my duties in accordance with my best judgment, and to
the best of my ability, which I think is to his real credit.
I would not enter on this job, if I am confirmed by the Senate, with
any preconceived notion of what decision I would make in any given
situation, because before I made that decision, I would expect to
study the whole problem much more carefully than I have been able
to study it in the past.
I would not consider myself subject, in any way, to the domination
of Mr. Martin, any member of the Board of Governors, the Secretary
of the Treasury, or the President of the United States. I consider
that I am taking this job as a free agent, and if that is not the basis
upon which it is to be, I do not want the job. I will do my duty as I
see it, and to the best of my judgment.
Senator DouGLAS. When I first entered politics, Mr. Robertson,
I thought in my naivete, that political leaders would ask for commitments in advance, and that definite agreements would be entered
into binding upon both parties. One learns as one goes along that
life is much more subtle than that. Almost nobody asks for commitments in advance, but they try to get men who have a favorable
opinions to them. The process is much more subtle than you seem to
imfly.
know you are an honorable man, but I cannot make out what you
feel about this question, and I have the suspicion that possibly you
may have been appointed not merely because of your integrity and
your ability, both of which are real, but also because of the belief
that having been 19 years over in the Treasury that you had imbibed
through that process a point of view favorable to the Treasury, and
that without any commitments being required of you, or even suggested to you. That you were coming over with the possible feeling
that at last the policy of the Treasury was to be vindicated, and that
the Federal Reserve should buy the Government bonds.
Mr. ROBERTSON. Senator, I think your question on that should go
to the Chairman of the Federal Reserve Board, and not to me.
Senator RoBERTSON. If the distinguished Senator from Illinois will
yield to the chairman for an observation, he may be able to either
remove the pain of that suspicion, or at least to modify it.
The chairman of this subcommittee is prepared to say that the
Secretary of the Treasury had nothing whatever to do with suggesting
the appointment of these two men. He told me that he was reluctant
to give up Mr. Robertson because of his substantial services in the
Comptroller's office, and that Mr. Delano had leaned heavily on him,
and regretted to lose him, but that neither he nor Mr. Delano would
stand in the way of what appeared to be a promotion for Mr.
Robertson.
The same thing applies to Mr. Mills. Neither Mr. Robertson
nor Mr. Mills was proposed by the Treasury Department, and any
rumor or suspicion that they have been nominated for this position
to carry out what has previously undoubtedly been the policy of the
Treasury Department to keep down the cost of servicing the national
debt through open market operations of the Federal Reserve Board
is absolutely without any foundation.
I am glad to hear our distinguished colleague from Illinois say that
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
Senator DouGLAS. Let the record be clear, I did not oppose it, I
did not vote for him. I suspended judgment.
Senator RoBERTSON. I am glad to hear you 'say he has shown
intestinal fortitude.
Senator DouGLAS. That is correct-thus far.
Senator RoBERTSON. So far?
Senator DouGLAS. So far, that is correct.
Senator RoBERTSON. I think, he will understand that you have your
eye on him at all times.
Senator DouGLAS. He is doing all right, but the reinforcements, I
am afraid, are coming in.
Senator ROBERTSON. Well, the chairman of the subcommittee does
not share that feeling. He has known Mr. Robertson, and he thinks
he has a pretty good name even if he did not come from Virginia, and
is not related to my branch of the family by the same name. I have
known him and observed his operations for a number of years, and
when the Chairman of the Federal Reserve Board told the chairman
of this subcommittee that he would like very much to get as one of
his assistants a man so well-versed in banking matters, so young, so
vigorous, so intellectually honest, I told him that I fully concurred in
that viewpoint.
I have not had the privilege of personally knowing Mr. Mills, but
everything I have heard about him has been entirely in his favor,
and I have seen somewhere in the press, an intimation-they did not
give the source of it-that this was a plan on the part of the Federal
Reserve Board to support the market when, as we now fear, the
Treasury has got to engage in deficit financing between now and
June 30 of some $5 billion, and in the Treasury's opinion, 14 or 14½
hillion dollars the next fiscal year, but I am glad the distinguished
Senator from Illinois has promised to give the Federal Reserve Board
substantial help in handling that problem by cutting that budget
$7 billion.
Senator DouoLAS. I hope we can cut it. I welcome the help of
· the distinguished Senator from Virginia.
Senator RoBI<~RTSON. The 8Pnator from Virginia is just as anxious
to cut it. He would like to spe it balancPd, but I do not think we
can balance it. I do not think WP are going to huvP substantial tax
incrPllSPS, and therPfore we have got to cut it.
The Senator from Virginia put a little piPcP in the record the otlH'r
day. It came out in the record ypsterday, suggesting spP<"ific cut,i
of $6 billion, and in the opinion of the author of that stutpmpnt, that
is a fmsible progrnm, 1 billion off domestic, 2 billion off fon•ign
rPhnhilitation, and 3 billion otf tlw military program. That is $6
billion. and tlw Smator from Virginia will wnteh with gTPllt i11terPst
tlH' progrnm suggestPd hy his distinguislwcl colh•ugue.
Now, as to the question of inflation, the chairman of this subcommittPP doPs not agree with the tlH'ory of the UnivPt·sity of Chicago
that thP increase in reserves is a barometer of inflation. Tlw chairman of this subcommittee notPs in the chart furnished by the Federal
Reserve Board how enormously hank dPposits havP incrrasNl. That
is not resprves from Govl'rnmrnt bonds, that is bank deposits, and the
bank dPposit.s rnn furnish 11 basis for erPclit, as wpll as a GovPrnment
bond.
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
17
He also has noticed charts of the Federal Reserve Board showing
that while theoretically a dollar of reserve is a foundation for a $6
increase in credit, the velocity of circulation has not kept pace with
over-all increase of money in circulation, and the $6 increase is geared
to the maximum volume of circulation, and it does not become effective to that extent, when the volume of circulation is very much
below its potential height.
Senator MA YBA.NK. I note a large volume of circulation goes into
productive capacity of this country, and that increased production
tends to keep down inflation in some circumstances.
Senator ROBERTSON. Well, it is not as inflationary as the credit
that goes into the production of other types of goods, but the chairman
of this subcommittee feels that all transfer of production from butter
to guns is in itself. inflat.ionary, all military spending is to some extent
inflationary, because what would otherwise go to meeting civilian
demands goes into something that is to be consumed on the battlefield. The million men we took out of civilian production in the past
year have to be supported in all of their needs by those still producing
consumer goods, and consequently the military spending, in itself, is
bound to be inflationarv. but we have certain check dams that we
erect,. and I think the Federal Reserve Board has done a fine job in
restricting credit to nonessential activities, and I wish to commend
the commercial banks of this country for their voluntary credit
restraint program.
I think they have done a fine job, but all of those subsidiary activities, and check dams, so to speak, will be ineffectual if we just go
blindly ahead knowing that we face a deficit of $5 billion this year,
and appropriate $85,400,000,000 next year against a maximum anticipated revenue of $70,900,000,000. We may not even get $70 billion,
because the business expansion that is contemplated may not materialize, and we have over 1,000 unemployed in the metropolitan area.
We have 160,000 skilled workers primarily unemployed in Michigan.
There was a little piece in the paper the day before yesterday saying
how in New England there was great unemployment, there was great
unemployment in sections of Connecticut, but on the other hand in
one city of Connecticut, loaded down with war contracts, they could
not get enough workers. There have been dislocations. There will
be 400,000 fewer new starts for homes this year than last year. We
will not have enough steel for highways, for schools, for public
buildings.
Mr. McDonald said he was not authorized. right now to get more
than about 30 percent of the structural steel he thought essential for
our highway program.
I will yield to the chairman.
Senator MAYBANK. There is nothing I can add, except as the Secretary said we will run 5 billion in deficit this year, 14 billion 1,1ext year.
Senator ROBERTSON. The chairman of this subcommittee personally
feels that the President has done better than usual in these two
appointments.
Senator DouGLAS. We can have inflation in two ways: (a) by
governmental deficits, which I think it is the duty of Congress to avoid
so far as possible, but also we can have inflation through; (b) expansion
of private credit. This expansion of private credit can come about,
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ABBOT L. MILLS, JR., AND JAMES L. ROBERTSON
as it has come about in the past, through the purchases of Government bonds by the Federal Reserve System, thus increasing bank
reserves, thus making it possible for banks to make greater loans and
create deposits against which private business draws checks, so that
you increase the total ratio of credit to goods.
I do not think that can be laughed off, and I do not say anyone is
trying to laugh it off, but it cannot be laughed off and dismissed.
That is the fundamental factor of banking, and anybody who does not
understand it certainly does not qualify either as a private banker or
as a member of the Federal Reserve System.
I think the policy of the Treasury in this respect since 1946 has
contributed largely to the inflation that has occurred. There is no
evidence that the Treasury has since changed its policy. The Federal
Reserve System was compliant up until February. It got its courage
together in February and asserted its independence over great opposition from the Treasury. I think Mr. Eccles, and others, played a
large part in this display of independence. Mr. Martin has done
well, thus far, but I want to say this: that if Treasury policy comes to
control the Federal Reserve Board, I think we are in for disaster, and
that is why, Mr. Robertson, I have subjected you to this crossexamination, not to make things uncomfortable for you, because I do
not want to do that, not to reflect upon your character, because I certainly do not want to do that, but because I view with suspicion the
Greeks when they bear gifts. I remember my Homer, how the Greeks,
unable to capture the city of Troy from outside, brought in a huge
wooden horse which was taken inside the city, dragged inside the city
by the Trojans, who admired it, and then from inside the horse came
the Greek soldiers who took the city from within. I do not want to
see that horse dragged inside the Federal Reserve Board, and then to
have the representatives of the Treasury come out of the horse and
take over the policy of the Board.
I invite you to read that passage in Homer's Iliad, and I invite the
financial writers to read that passage too. It has very eloquent.
bearing upon modern life.
Senator ROBERTSON. The distinguished Senator from Illinois has a
very distinguished precedent for his attitude. The great revolutionary
patriot, Thomas Paine, said that credit is suspicion gone to sleep.
Senator DouGLAS. The Senator from Virginia uses an incorrect
historical allusion. Credit is necessary. Business operates on it.
I am not trying to prevent the extension of private credit; I simply
say that it is a function of the Government to prevent the total amount
of credit, in relationship to the total quantities of goods, from increasing more rapidly than that quantity of goods, and that one of the
basic principles of the Federal Reserve System is to seek to maintain a
stable price level. Congress has dedicated the Reserve Board to that
task.
Now, that is not the task, though I think it should be, of the
Secretary of the Treasury, and I think the Secretary of the Treasury,
with all due justice to him as a person, has been in this matter, shortsighted. He has concentrated his attention upon the amount of
interest that the Government has to pay on Government bonds. He
has been so interested in keeping that interest rate down, the purpose
of which I join, but has been willing to have the price level go up as a
consequence. The Government has lost much more through the in-
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19
creased cost of materials, and pay increases, which we have had to
grant, than it has saved in interest charges, and the people in the
country have lost enormous amounts, in addition, and the policy has
had an unsettling effect.
Now, the future of the country in part lies at stake within your
breast, Mr. Robertson, and within the breast of Mr. Martin, and I
am a little bit disconcerted that so intelligent a man as you, one of
the most intelligent men in Government service, who has had practical
experience in examining banks, who has sat at a vantage point where
he has watched the whole banking process should deny any knowledge
of what has been going on and should not have formed an opinion.
I was similarly disconcerted when Mr. Martin said he had not formed
any opinion, when I subjected him to a similar friendly, though searching, examination.
I am a little bit suspicious of intelligent men and deep students of
banking, who when they come in before us plead ignorance, on such
fundamental matters.
.
Senator ROBERTSON. Chairman Martin, do you wish to niake a
statement?
Mr. MARTIN. I would like to for this record, because I think the
committee knows my feelings about Secretary Snyder, to make it
clear that the initiative for Mr. Robertson's appointment did not
come from_Secretary S!1yder, that I had to urge upon him the rele~se
of one of his best men m the Treasury to the Board, and I would like
also for the record, Senator Douglas, to say that the first thing the
Secretary said to me, in a series of conversations in which I urged him
to release Mr. Robertson, for this service, was, "I will be accused of
packing the Federal Reserve Board."
Senator DouGLAS. I have not accused him of that. I want to make
the record clear. I have simply said that men who have been exposed
for a long period of time to the climate of opinion of the Treasury are
now on the Federal Reserve Board. I am not accusing anybody of
doing anything. I simply say that the ties of friendship are moving
in here. I do not want to take chances with any Trojan horse.
Mr. MARTIN. I just want to make clear that the initiative in this
matter came from me. The President was good enough to appoint
Mr. Robertson, but Secretary Snyder recognized the danger of the
Trojan horse, and I am glad that you think that so far we have handled
things well. I am completely confident that with Mr. Robertson and
Mr. Mills alongside of me, we can continue to face the problem objectively and impartially, and I would like to point out for the record
that we have, since last April, decreased our holdings of Government
bonds by roughly $375,000,000.
Senator DouGLAs. The Senator from Illinois is aware of that. He
reads the Federal Reserve statements.
Senator ROBERTSON. Are there any other questions?
If not,gentlemen, we thank you very much for appearing.
We will now have an executive session on the nominations. '
(Whereupon, at 11 :35 a. m., the hearing adjourned into executive
session.) I
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