America's Money Machine

29.
Doubtful Victory
No HEAD of the Federal Reserve System provided more dynamic
leadership, more clear-cut policy conceptions, or more fervent
championship of Federal Reserve independence of function than did
Marriner S. Eccles during his seventeen years in official capacity, ofwhich
fourteen were as the chief executive officer (governor or chairman) and
three as a member of the Board of Governors. It was Eccles' boldness,
stubbornness, and presumptuousness that finally brought the issue of
Federal Reserve-Treasury relations into open feud and what seemed
ultimate victory for the Federal Reserve. Nevertheless, the extent of this
victory remains doubtful.
Following the close ofhostilities, in 1945, as we have noted, Eccles, no
longer the champion ofspending, became the advocate offiscal solvency,
together with credit controls to prevent what he foresaw as a runaway
inflation. Specifically, he urged that the war-time controls ofthe economy
be retained until peace-time production had been restored and that reduction
be made in the money supply in the hands of the public. Some
success was achieved in the latter. The Treasury managed to obtain
budget surpluses from mid-1946 to mid-1948 which resulted in some
reduction of government debt held by the banks, but the precipitate
removal of war-time controls led prices to move upward in response to
the tremendous consumer demand.
A factor in the defeat ofthe advocates ofcredit control was the general
fear that the country would plunge into a depression as soon as war-time
orders and employment eased off; in early 1946 (February 20) Congress
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