The December 1997 Region included an interview with Carter Glass, the man who is credited, in large part, with the creation of the Federal Reserve System, and a man who, it should be noted, has been dead for some time. But the interview was accomplished nonetheless, owing to the efforts of James McAfee, general counsel of the Richmond Fed, who studied Glass' views and elocution and then answered questions pertinent to the Federal Reserve System—past, present and future. The interview elicited the following responses, including one from the late Marriner Eccles, the former chairman of the Federal Reserve Board and sometime nemesis of Carter Glass (Eccles' views are ably represented, in this case, by McAfee).
To the Editor:
In reading the fascinating interview with Carter Glass that you
published recently, herewith the one question that I would have
personally liked to ask Senator Glass: "When you helped draft
the Federal Reserve Act, you expected that it would prevent banking
crises such as had recently occurred in 1907. Yet in 1930-33,
with the Federal Reserve in full operation, the country experienced
a series of banking panics that dwarfed in magnitude the earlier
ones, culminating in 1933 in the temporary closure of the Federal
Reserve System itself. As it happened the law you helped draft
gave the Federal Reserve ample powers to have prevented the drastic
series of bank panics that occurred, to have prevented the stock
of money from having declined by a third from 1929 to 1933. My
question to you is, first, how do you explain the failure, and
second, what was your reaction at the time?"
Milton Friedman
Senior Research Fellow
Hoover Institution
Stanford University
Stanford, Calif.
To the Editor:
I'm just old enough to appreciate his [Carter Glass'] wisdom about
the inherent frailties of man (and woman!). And how I admire the
sense of outrage, to say nothing of the vocabulary so amply reflected
even in a posthumous interview. It's easy to sympathize with his
fulminations against the Congress (and even the Federal Reserve
Board) in leaving his beloved Glass Steagall Act out to dry as
the world of finance revolutionizes itself. Let's give the Act
a decent burial, and update the banking laws coherently. Alas,
it begins to look as though you will have to go a step further
to resurrect Carter Glass to get it done—and help keep the
Fed strong and regional in the process.
Paul Volcker
Former Chairman of the Federal Reserve Board
New York
To the Editor:
I enjoyed reading the transcript of Mr. Glass' conversation in
the recent special issue of The Region publication. Perhaps Mr.
Glass would have liked to comment on the following: At your extreme
advanced age, did you ever envision banking organizations like
the new Citigroup or BankAmerica with 160,000 to 180,000 employees
each and assets approaching $600 billion or even $700 billion
each? What will we see next?
W. Ronnie Caldwell
Executive Vice President
Federal Reserve Bank of Atlanta
To the Editor:
Carter Glass has been honored for his high intelligence, courage,
fluency and integrity, but it is sad to see his tongue of fire
lick out again in my direction after so many years. The plain
fact is that the Federal Reserve cannot fulfill its responsibility
of helping to maintain economic stability when the control of
the nation's banking system, through which the Federal Reserve
works, is fragmented between state and federal authorities and
among federal authorities. So long as the System is charged with
primary responsibility for monetary and credit management, it
needs the means with which to carry out that responsibility. The
imperative work we began to that end—particularly to wrest
control of public policy from the privately run Reserve banks,
to require state banks that join the FDIC to become Federal Reserve
members also, to consolidate all bank examinations and regulatory
functions under the single roof of the Reserve System, and to
define the objectives of national monetary policy clearly and
specifically—remains still incomplete after more than 60
years. Let us honor Carter Glass for the achievements of his middle
years, but let us not forget the harm he caused in old age when,
blinded by willful men who played on his ruffled vanity, he angrily
turned his talents and energy to blocking vital structural changes.
Marriner S. Eccles
1890-1977
