America's Money Machine

New Bridles for Old 199
on to say, experience showed that "the supply ofmoney tends to contract
when the rate of spending declines. Thus during the depression the
supply of money instead of expanding to moderate the effect of decreased
rates of spending, contracted, and so intensified the depression.
This is one part of the economy in which automatic adjustments tend to
have an intensifying rather than a moderating effect."7
Eccles apparently made such an impression upon the President in his
exposition ofhis theories that Roosevelt decided at once to appoint him
as Governor of the Federal Reserve Board despite the opposition of
Carter Glass, whose antagonism to Eccles was steadily mounting. On
November 10, Eccles' appointment was announced and on November 16
he was sworn in as a recess appointee; but Glass's opposition succeeded
in deferring Senate confirmation until the following April.
Eccles now through his influence outlined a spending program that
would represent "an addition to private investment and spending and not
a subtraction,"S providing the economic arguments while Hopkins and
Ickes supplied those from the well of human sympathies.
The ultimate result, Eccles states, was that the State of the Union
message ofJanuary, 1935, was devoted almost exclusively to the proposal
that Congress enact a reliefprogram with an initial appropriation ofsome
$4.5 billion. 9
As Governor of the Federal Reserve Board, Eccles now began to reform
the internal administration to draw more authority to himselfwhile
waiting action by the Congress on the bank legislation which Roosevelt
had appointed an inter-departmental committee to draft.
His first assault was on the Federal Advisory Council. This was the body
of twelve bankers, elected by the directors ofeach Federal Reserve bank
to represent and speak for the private banking system. The Council had
issued a public statement calling for a prompt balancing of the budget.
Eccles at his first meeting with the Council demanded that the Council
clear its statements with the Board. The demand aroused opposition but
was accepted. Eccles now moved to abolish the Committee on Legislative
Program and in doing so incurred the hostility of George Harrison,
Governor ofthe New York Federal Reserve bank. Under the threat ofthe
Roosevelt influence the Board agreed to its abolition, and Eccles now
became the spokesman for the Board on legislation.
Early in February the Administration presented the draft of new banking
legislation on which the interdepartmental banking committee had
been working. It immediately roused the antagonism of Carter Glass,