America's Money Machine

208 PART Ill/DEBACLE OF AN IOEA
excess credit in the economy. The Council, ofcourse, since it was chosen
by banks of the several Reserve districts, did not see eye to eye with the
Eccles expansionist program. It pointed out two alternatives, either to
reduce Federal Reserve credit outstanding by selling offSystem holdings
ofsecurities, or to raise bank reserve requirements. Under the 1935 Act,
it will be recalled, the Board had authority to raise reserve requirements
by as much as 100 per cent ofthe minimums set by the 1917 amendments
to the basic act.
The recommendations, supposedly private, did not remain so, and
immediately became a subject of public debate-not so much as to the
desirability of the action as to the choice of means.
It was not the commercial bankers in general, but the powers now in
control ofthe Federal Reserve System, who stood in opposition to tighter
credit. Among the bankers who supported new credit controls was Winthrop
W. Aldrich, Chairman ofthe Chase National Bank, New York City's
largest bank. S. Parker Gilbert ofJ. P. Morgan & Co., however, took an
opposite view, in support of Eccles. The Board of Governors and the
Federal Open Market Committee now issued statements to the effect that
business recovery-which was the principal object of Reserve policyhad
not advanced far enough to warrant such action, and that there was
no evidence of credit overexpansion.
Throughout this controversy, Eccles was still in the positiotl of an
interim appointee, with his status under the new banking act stillobscure.
Roosevelt continued to procrastinate in appointing the new Board of
Governors, but to quiet rumors and to forestall opposition he did announce
in September his intention to nominate Eccles to the new Board'
of Governors C1nd to designate him as chairman. There remained, however,
the question of a board membership that would support Eccles'
policies. On this issue, the oppositibn of Glass was to be expected.
Time was running out. The new Board had to be appointed by February
1, 1936, when the act became effective. Eccles was Ilot above using
what he admits were Machiavellian tactics to hoodwink Glass and to
hamstring his future opposition. He proposed to Roosevelt that Glass be
given the privilege of naming- three· of the seven members of the new
Board, but only from a li·st which Roosevelt would pick beforehand' (all
of whom would of course be New Dealers). It was like playing with
marked cards, but Glass, whether wittingly or no, accepted, probably
realizing that the Roosevelt tide was running too strong to resis-t. The
new nominees went to the Senate, and' were confirmed without a heating
and without a record VOle.