Federal Reserve History: Breaking News From 1948 - Banking Mogul Ousts Fed Chairman
By Historian Richard H. Smith
Wall Street has made clear over the last week that it wants Federal Reserve Chairman Ben Bernanke to stay in his position. The White House and Treasury Department are supporting Bernanke against the opposition of some rank-and-file lawmakers, and he is likely to emerge victorious.
It was much easier to take out a Fed chairman sixty years ago. All it took then were a few scribbled notes from one banker to his very good buddy, the Secretary of the Treasury.
Not just any banker, of course. A.P. Giannini, the San Francisco grocer who founded and personally ruled the Bank of America financial empire was probably the most powerful and influential banking mogul of modern America. Business Week called him the father of modern consumer banking. Time Magazine named him one of the hundred most influential Americans of the 20th century. He's been the subject of six biographies and is the only banker ever honored by a US postage stamp.
Giannini was a dominating visionary who wanted to make banking privileges available to the "common man", not just the finagling Wall Street financiers whom he despised. As his bank's branches began to dot the Main Streets of every American community, Giannini came to believe that what was good for Bank of America was good for all of America. So he saw nothing wrong in courting Harry Truman's life-long friend and confidant, Secretary of the Treasury John Snyder, as his personal emissary in Washington. And when the Fed Chairman of the day, New Deal holdover Marriner Eccles, opposed the unregulated growth of what he called the "banking octopus of the West Coast", Giannini let Truman know, through Snyder, that Eccles ought to go. And the President obliged.
Fed Chairman Marriner Eccles with FDR.
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This secret power-play, only hinted at in unconfirmed newspaper gossip of the day, is detailed in a cache of previously-unknown Giannini notes and letters that I recently discovered as a dealer in rare books and historical manuscripts.
These papers reveal how Giannini used Snyder's influence to scuttle all federal restraints on his gigantic Transamerica holding company - while continually assuring Snyder that the moment he left Government, he would be assured of the top executive position, alongside Giannini's son and heir, at the Bank of America.
When Giannini first began this correspondence with Snyder, months after Harry Truman's unexpected succession to the Presidency, the banker had just retired as Chairman of the Board of Bank of America and handed over managerial reins to his son, leaving him free to concentrate on protecting his interests in Washington. Since he obviously considered Snyder a good friend on whom he could rely, the papers are full of blunt comments which demonstrate the wide variety of those interests.
No doubt the 78 year-old Giannini felt confident that these letters, usually handwritten to Snyder from hotels while on his world-wide travels and simply signed "A.P.", would never see the light of day. Snyder did indeed keep them salted away and they remained forgotten long after the death of both men.
Inscribed books and letters to Snyder from Truman, Eisenhower and Kennedy, were sold at Christie's auction house in New York last year, but this historic collection of letters was overlooked and nearly discarded. I purchased the papers sight unseen merely because I knew that handwritten letters by Giannini - on any subject - were never seen outside of institutional collections, including the Bank of America's own closely-guarded corporate archives. I had no inkling of the explosive content of the letters.
Marriner Eccles
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During the last years of Giannini's life, the banking giant was himself no longer actively involved in company management, but he assured Snyder that his son and successor also
thinks so well of you and of your proved friendship that in discussing with you the matter of a tie-up that I think he will just say to you 'Write you own ticket'. He feels a man of your caliber and international standing is very much needed in our organization now that we are the top Bank of the country, which we want to continue to be and with your added help it will be a dead certainty&I stand a full 100% on anything that my son...may have said to you and that you are welcome at any time that your own good judgment dictates and most heartily too.You'll fit in to the picture perfectly and it'll be practically your own picture.
In vowing his political loyalty to President Truman, Giannini - one of the largest Democratic Party contributors in California - sometimes went overboard. After listening to broadcast journalists Drew Pearson and Walter Winchell attacking Truman:
Isn't there really some way that the President can curb these two fellows through censoring their Radio talks or ruling them off the Radio whenever they indulge in any comments on the air that's contrary to the interests of the Govt or its people. Their Press columns should also receive the Govt's previous OK.
A variety of requests for small favors then led up to a very big favor. Federal Reserve Chairman Eccles continued to assault the Bank of America and its affiliates as a runaway monopoly, and Giannini, believing himself unfairly maligned, became convinced that he could never find "justice" in Washington so long as Eccles retained the position for which he had first been chosen by President Roosevelt.
The issue came to a head at the beginning of the presidential election year of 1948 when Marriner Eccles came up for reappointment as Fed chairman. Giannini wrote Snyder,
Rumors seem to point to the reappointment of a certain man who has consistently violated his Oath of office when acting on many of the matters pertaining to certain Interests. I'm wondering if, at the moment, there isn't any one readily available as successor...
On January 27, 1948, Wall Street was puzzled by the news that President Truman had "demoted"Eccles to Vice Chairman of the Federal Reserve, appointing another chairman in his stead. One liberal Democratic Senator demanded to know "who went to the President" to engineer Eccles' ouster. Truman said publicly that it was his own idea.
Giannini privately wired Snyder
Heartiest congratulations John. Too bad it wasn't good riddance but things I know don't usually work that way politically. Strikes me successor is of the proper caliber and will doubtless follow the law and absolutely safe and sound policies, not Doctor Keynes...
As for Drew Pearson's report that Giannini had publicly boasted, "I did it!"-
a damnable falsehood.. I want to assure you, John, that I certainly didn't make that boast and he isn't going to be able to prove it. Of course, my saying it to you in the last letter had no connection with it but I guess I made the mistake of saying to you what would probably indicate I had been responsible for its previous use.
Snyder was taking no chances. The letter to which Giannini refers - in which he apparently made that boast privately - is missing from these files.
Snyder was later called before a Senate Committee and pointedly asked if Giannini had promised him a job with Bank of America; he refused to reply and the Senators had no evidence that linked the Secretary of the Treasury with Giannini's campaign to "reshuffle" the Federal Reserve Board.
The rest of that year, Giannini made clear to Snyder his gratitude, and his commitment, "with the greatest of pleasure", to the embattled Truman's reelection, which many pundits felt to be a losing cause. Giannini offered to sign a personal letter to all his companies' stockholders and depositors and 15,000 employees, praising Truman for overruling the holdover "New Dealers" in his Administration who were allied in a "diabolical Conspiracy" against the Bank, "smearing us all over the world" as an unrestrained monopoly.
Thanks to you and your Chief for righting an injustice- we ought to shout his name from the house tops...
President Truman, of course, won re-election in a political upset, and Snyder remained in the Cabinet until the end of Truman's econd term. He never went to work for the Bank of America, perhaps because Giannini himself died a few months later. Not until the 1950s did Washington move to break up Transamerica - the brainchild of the self-educated ex-grocer from San Francisco who had some of the highest officials of the US Government at his beck and call.
Giannini would probably have been astonished to learn that, in exercising his political influence to the hilt, he had inadvertently laid the foundation for the cozy relationship between Wall Street and Washington that has persisted to this day.
PHOTO - A.P. Giannini
Dec 28, 2011 at 1:54 PM
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Same for you and yours!
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Oh Yea, making sure the sheep have no clue what RP stands for.........A few days from now and the world is gona turn on its ass when RP wins. ...I Hope !