America's Money Machine

218 PART III / DEBACLE OF AN IDEA
ble for bank purchase plus $34 billion that would become eligible within
the next fifteen years, all with inflationary potential.
It went on to say:
If the Federal debt occupied the relatively subordinate place in the economy
that it held even up to 1940, the problems ofdebt management would
be far simpler.... However, the Federal public debt at the end of 1945 had
reached $280 billion, or nearly six times what it was five years before.
Whereas it was equal to about one-fourth of the entire debt of the country
in 1940, by the end of 1945 it was now two-thirds. 9
The Board now proposed that the policy of maintaining the government
market be abandoned, at least so far as the short-term rate was
concerned, while it offered to continue to hold the long-term rate at 2 1/2
per cent.
In 1946 the preferential rate ofdiscount of 1/2 per cent on government
securities was finally discontinued. Nevertheless, the Treasury continued
to hold an iron grip on Federal Reserve policy, and, as Eccles somewhat
bitterly commented, "The pattern of war finance had been firmly established
by the Treasury; the Federal Reserve merely executed Treasury
decisions." 10
Eccles was a man who had to be riding a white charger; his responsibilities
now being confined, as he said, to a routine administrative job, he
began to look around for something to challenge. He now (1944) proposed
what he had thought ofyears before, the unification of the various
authorities over the monetary-banking system now distributed among the
Federal Reserve Board, the Comptroller ofthe Currency, and the Federal
Deposit Insurance Corporation.
Roosevelt, however, did not think this an opportune time, when the
country was still at war, to raise issues that would undoubtedly provoke
dissention, particularly as there was the doubtful legality ofhis war powers
to execute such an administrative change under the pretext of war
necessity. Eccles tried to find support elsewhere for his proposals, particularly
from James F. Byrnes, who had been' taken from the Supreme
Court bench to head the Office of War Mobilization, but the effort
bogged down. Eccles' term as Chairman of the Board of Governors was
now expiring, and Eccles in frustration asked not to be reappointed; but
Roosevelt would not hear to it, and he continued as head of the System
for another four years, until 1948.