America's Money Machine

210 PART III/DEBACLE OF AN IDEA
business, was to continue downward until war influences again began to
course through the economy in 1942.)
Again, the nostrum for recovery, for which Eccles was the physician and
the Federal Reserve the apothecary, was increased federal spendingwhat
Eccles called "compensatory spending." Morgenthau, as the chief
fiscal officer, in an address before the American Political Science Academy
on November 10, 1937, had come out publicly for a balanced budget.
This had been with Roosevelt's approval, for Morgenthau was always
careful in clearing his positions with the President. Eccles, by his championship
ofspending, was able to win over the vacillatory Roosevelt, and
thus become practically the fiscal as well as monetary policy framer for
the New Deal. In this he had the stout support ofHarry Hopkins, reputed
author of the saying, "We will spend, spend, spend, and elect, elect,
elect."
Following a conference in Warm Springs with the President, in the
following April, in which Eccles was joined by three other Roosevelt
advisers, Leon Henderson, Aubrey W. Williams, and Beardsley Ruml,
Roosevelt was won over, and in his message to Congress on the fourteenth
he asked for resumption of large-scale spending.
Eccles' rise to dominant influence in both fiscal and monetary policy
was not without bruises. He was, as he states, "rapidly losing the few
friends I had and influencing fewer people." Among those now in opposition
to him was the powerfuljunior senator from Virginia, Harry F. Byrd,
with whom he engaged in acrimonious debate, first by letters, and later
by radio; Senator James F. Byrnes, later to become a Supreme Court
justice (1941) and still later (1944) head of the Office of War Mobilization;
and not least, Eccles' former chief and patron Henry Morgenthau.
Eccles, it must be recognized, was not in the forefront ofhis times. An
increasingly vocal element in Congress-representing an increasingly
vocal element in the electorate-was showing increasing impatience at
the failure of monetary policies to restore prosperity and to reduce the
rolls of the jobless. Chief among these were Senator Elmer Thomas,
father ofthe Thomas amendment, who succeeded in having reported out
of his Senate Committee on Agriculture a bill that would have devalued
the dollar by half, and made the Federal Reserve System responsible to
restore prices to the 1926 level. 5 Fortunately, the bill was referred to the
Committee on Banking and Currency for further consideration and so
buried. A bill originally introduced by Congressman Charles G. Binderup
of Nebraska proposed to deprive the Federal Reserve System ofall independence,
by means of government purchase of all the stock, and by