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222 PART III/DEBACLE OF AN IDEA<br />
All these bonds were quasi-money or what might be called multiple<br />
money, since any member bank that was short of lending power could<br />
always sell them or discount them at its Reserve bank and thereby obtain<br />
additional reserves. The Board therefore renewed its recommendation<br />
that banks be required to hold special reserves ofcash assets or government<br />
bonds that could not then be used as -banking reserves for the<br />
purpose of multiplying the banks' depositpower.<br />
The most that the Federal Reserve was able to obtain was a Joint<br />
Resolution of August 8, 1947, which continued the authority to control<br />
consumer credit under Executive Order 8843 until not later than November<br />
1. This authority soon lapsed but again in 1948 (August 16) a Joint<br />
Resolution restored the authority over consumer credit toJune 30 , 1949.<br />
A Joint Resolution of the, same date also amended Section 19 of the<br />
Federal Reserve Act to 'give the Board additional authority to increase<br />
reserves for a period endingJune 30, 1949, within limits of 30 per cent<br />
for central reserve city banks, 24 per cent for reserve city banks, 18 per<br />
cent for other banks, and 7 1/2 per cent for time deposits. This authority<br />
was not renewed when it expired.<br />
At this juncture, Eccles' wings were unexpectedly, and somewhat mysteriously,<br />
clipped by Truman's failure to redesignate him as Chairman of<br />
the Board at the end of his term on February 1, 1948. Truman did not<br />
notify Eccles of his decision until nine days before his term expired and<br />
the reason for this sudden act, so embarrassing to Eccles, has never been<br />
explained.*<br />
Truman professed no lack of confidence in Eccles and promised to<br />
nominate him for Vice Chairman, but this appointment was never made.<br />
At the same time there was delay in naming a new Chairman ofthe Board<br />
and Eccles continued to act as interim Chairman until the appointment<br />
of Thomas A. McCabe April 15, 1948.<br />
Eccles' reduction in rank combined with the outbreak ofwar in Korea<br />
in july, 1950, to bring the issue between Treasury and Federal Reserve<br />
to a pyrotechnic climax.<br />
During the fall Treasury financing ofthat year the Reserve allowed the<br />
rate on one-year Treasury notes to rise to 1 1/2 per cent despite a<br />
Treasury announcement of its intention to refund $13,570 million issue<br />
*Eccles attributes it to the influence ofthe Giannini interests ofCalifornia whose hostility<br />
Eccles incurred by his opposition to the expansion of the branch banking system of the<br />
Giannini-controlled Bank of America National Trust and Savings Association, the largest<br />
banking chain in the U. S. and today the largest banking institution in terms oftotal assets.<br />
(Op. cit. Part 7, ch. 3, pp. 434-FF.)
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