America's Money Machine

220 PART III' / DEBACLE OF AN IDEA
enacted the Employment Act of 1946, which declared "the continuing
policy and responsibility of the Federal Government to use all practical
means ... to coordinate and utilize all its plans, functions, and resources
for the purpose of creating and maintaining ... conditions under which
there will be afforded useful employment opportunities ... for all able,
willing and seeking to work. . . ."
The pressure, which the Federal Reserve could not resist, was on to
continue to maintain low interest rates that would encourage private
business investment and expansion.
Following Roosevelt's death on April 12, 1945, and the succession of
Harry S. Truman to the Presidency, Eccles' influence at the White House
began to decline, despite the fact that Truman maintained Eccles in the
chairmanship until the end of his term in February, 1948. By the end of
the war prices had already moved substantially above pre-war levels,
particularly real estate and securities, into which investment, blocked off
by price controls ofcommodities, had moved. Farm land was up some 44
per cent over the 1935-39 level,* urban real estate up from one-third to
one-half above prewar,t and stock prices some 75 per cent above the
1942 average.t
Eccles urged a penalty tax on capital gains and retention ofthe wartime
excess profits tax; but the country was in no mood for restraint, either of
prices or ofcredit, and during the summer and fall of 1945 most of these
war time controls were removed. At the same time, to head off the possibility
ofa depression, the government embarked on a program to stimulate
housing through veterans' loans and easier terms of payment under
Federal Housing Administration insured loans. In order to broaden the
demand for these loans and to maintain the market, the Federal National
Mortgage Association, a subsidiary ofthe Reconstruction Finance Corporation,
undertook to purchase large quantities of mortgages. The effect
was prompt and decisive. The volume of mortgage financing on homes
of one to four family units rose from $18.6 billion in 1945 to around
$45.2 billion in 1950. The annual volume of mortgages rose from $4.8
billion to $16 billion. l
As Eccles and the Federal Reserve Board attempted to exercise influence
in the direction of tighter credit, the difference between the Trea-
*From $33 per acre average for U. S. to $47 (Historical Statistics o/the U. S., Washington,
G. P. O. 1960).
tMedian asking price for existing houses, Washington, D. C. rose from $6,416 in 1939
to $10,131 in 1945. (Ibid.)
tlndex for common stocks (1941-43=10) moved from 8.67 in 1942 to 15. 16 in 1945.
(Ibid.)