America's Money Machine

196 PART III/DEBACLE OF AN IDEA
nor borrowers put their names to loans, for enterprises for which they see
no demand. As he stated in an address to the Utah Educational Association
in October of 1933, "A bank cannot finance the building of more
factories and more rental properties and more homes when half of our
productive property is idle for lack of consumption and a large percentage
of our business properties are vacant, for the want of paying ten­
ants."3
Eccles' solution· to this problem was for the government itself to embark
on large-scale spending. He declared that "the fundamental economic
plans, when they are finally established, will ofnecessity center on
the distribution of purchasing power and in the allocation of income
between investment and expenditure. So long as money is used as the
means ofdistribution and ofallocation, the fundamental economic plans
will be plans for determining the flow ofmoney. These plans will involve
public and semipublic expenditures on an expanding scale for cultural
and quasi-cultural services. They will involve relief of taxation that rests
on the consumer; the reduction of sales taxes, of real estate taxes, of
tariffs, and ofpublic service charges. They will involve the establishment
ofheavy income taxes, especially in the upper income brackets. They will
involve heavy taxation ofundistributed corporate surplus to force corporation
income into dividends and wages. These plans for determining the
flow of money are fundamental. Without them or their equivalent, no
permanent adjustment can be made."4
Eccles' novel views attracted the attention of Rexford Tugwell, one of
the Roosevelt "brain trust," then Under Secretary of Agriculture, who
invited him to Washington for a conference.
It was a time when the tensions within the New Deal were strong, with
Acheson, Sprague and Warburg holding the conservative fort and Warren,
Hopkins and Wallace, supported by men like La Follette and Norris
in the Senate, urging more vigorous government action. A friend of
Eccles, a former governor of Utah, George Dern, was Secretary of War
and Eccles' partner, E. G. Bennett, had been appointed a director of the
newly created Federal Deposit Insurance Corporation. The liberals were
in a dilemma. There were already doubts as to the efficacy of the gold
buying policy. As Eccles stated,
"They at least knew that ringing manifestos by themselves did not solve
problems. The pressures ofhuman distress to which their work exposed
them bore home the painful lesson that the task of removing fear and
want from the land could not be accomplished within the framework of
a balanced budget. On the other hand, they needed more than the doc-