Selected Papers of Allan Sproul Edited by Lawrence S. Ritter Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Selected Papers of Allan Sproul Edited by Lawrence S. Ritter Federal Reserve Bank of New York December 1980 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Library of Congress Catalog Card Number 80-67915 Book Design: Joseph Penczak Design, Inc. Printed in United States of America Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Table of Contents Preface by Anthony M. Solomon..................... ix Foreword by Paul A. Volcker............................. xi Chapter 1 Allan Sproul, 1896-1978 A Tower of Strength” 1 Chapter 2 Monetary Policy and Inflation Introduction...............................................................................................23 1. Letter to Winthrop W. Aldrich (1951).......................................... 25 2. Letter to Alfred Hayes (1964)......................................................... 27 3. Letter to Henry H. Fowler (1 9 6 5 )...................................................29 4. Letter to Alfred Hayes (1970)......................................................... 31 5. Talk to Wells Fargo Board of Directors (1 9 7 4 )...........................33 6. “Monetary Policy and Government Intervention” (1968).........37 Chapter 3 Postwar Treasury-Federal Reserve Conflict and the Accord Introduction............................................................................................... 49 1. The “Accord”—A Landmark of the Federal Reserve System (1964).................................................................. 51 2. Letter to Robert T. Stevens (1 9 5 0 ).................................................74 3. Letter to C.F. Cobbold (1950)......................................................... 78 4. Letter to Thomas B. McCabe (1951)...............................................81 5. Letter to James E. Shelton (1951)...................................................83 6. Letter to M urray J. Rossant (1963).................................................86 7. Letter to M urray J. Rossant (1966).................................................88 V Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Chapter 4 Human Judgment and Central Banking Introduction...............................................................................................89 1. “ Policy Norms and Central Banking” (1970).............................91 2. Congressional Testimony on “Bills Only” (1954).................... 105 3. Letter to Murray J. Rossant (1961).............................................. 112 4. Letter to Alfred Hayes (1961)....................................................... 114 5. Letter to Henry Alexander (1961).................................................116 6. “Money Will Not Manage Itself’ (1963)................................... 120 Chapter 5 Deposit Interest Rate Ceilings Introduction.............................................................................................129 1. Letter to Alfred Hayes (1960)....................................................... 131 2. Letter to Alfred Hayes (1960)....................................................... 133 3. Letter to Alfred Hayes (1966)....................................................... 135 4. Excerpt from “Coordination of Economic Policy” (1966) ... 139 Chapter 6 Federal Reserve Structure and Monetary Policy Introduction.............................................................................................141 1. Statement on Federal Reserve “Independence” (1952).........143 2. “Reflections of a Central Banker” (1955)................................. 149 3. Letter to Alfred Hayes (1958)....................................................... 165 4. Letter to Alfred Hayes (1958)....................................................... 168 5. Letter to Alfred Hayes (1958)....................................................... 170 6. Statement on the Report of the Commission on Money and Credit (1961)............................................................171 VI Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Chapter 7 Foreign Aid Introduction.............................................................................................185 1. Letter to Alfred Hayes (1960)....................................................... 187 2. “India and Pakistan: Critical Testing Ground of Foreign Aid” (1 9 6 0 )..............................................................188 3. Statem ent on Foreign Aid (1 9 6 3 )................................................. 198 Chapter 8 International Financial Problems Introduction.............................................................................................205 1. “Gold, Monetary Management, and the Banking System” (1949).....................................................207 2. Talk to Wells Fargo Board of Directors (1975)........................ 221 3. Talk to Wells Fargo Board of Directors (1977)........................ 227 4. Talk to Wells Fargo Board of Directors (1977)........................ 230 Portfolio of Photographs of Allan Sproul and his handwritten notes about an offer of the presidency of the World B a n k ..........................................148-149 VII Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Preface JLhe impetus for this volume to honor the memory of Allan Sproul came from Paul A. Volcker. As a young economist in the early fifties, Mr. Volcker worked at this Bank under Mr. Sproul. He remained in touch with him after he, in turn, became the Bank’s President in 1975. Preparation of the volume, under Mr. Volcker’s direction, was initiated several months before he was appointed Chairman of the Board of Governors of the Federal Reserve System. Many people contributed to the preparation of this book. The Bank is particularly indebted to Lawrence S. Ritter, Professor of Finance at New York University, who made the final selection of the material to be included, edited where necessary, and arranged the papers. He wrote the introductory biographical sketch of Mr. Sproul and the chapter in­ troductions. In the process of gathering information for the introductory biography, Professor Ritter was generously assisted by several people whose help was invaluable. They include Charles A. Coombs, Robert V. Roosa, Robert G. Rouse, William F. Treiber, and Thomas O. Waage, all of whom had been colleagues of Mr. Sproul at this Bank; Richard P. Cooley, Chairman of the Board, Wells Fargo Bank; Murray J. Rossant, Director, The Twentieth Century Fund; and last, but by no means least, Mary C. Regan, Mr. Sproul’s secretary at the Federal Reserve Bank of New York for twenty-five years. Carl W. Backlund, Chief, Central Records and Archives Division of this Bank, undertook the initial sifting and winnowing of the large volume of Mr. Sproul’s papers—including his speeches, articles, Con­ gressional testimony, internal memoranda, and letters. Stephen V.O. Clarke, Research Officer and Senior Economist, then reduced this material to manageable proportions, organized it in terms of subject matter, and made a preliminary selection of papers for inclusion in the book. To all of them, we owe a deep debt of gratitude. Anthony M. Solomon President December 1980 Digitized for FRASER IX http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Foreword A M ■Lllan Sproul was the third chief executive officer of the Federal Reserve Bank of New York, having been its President from January 1941 until he retired in June 1956. He came to this Bank as Secretary in 1930, after serving during the twenties at the Federal Reserve Bank of San Francisco. His interest in public policy and central banking was lifelong. Those who knew him were invariably impressed with the breadth of his vision combined with technical competence, the strength of his convictions combined with a grace and temperance in intellectual combat, the sense of dignity and position combined with a warmth of personal friendship. During his presidency of the “New York Fed”, he stimulated a whole generation of Federal Reserve officials to find their careers in central banking and related professions, fostering monetary stability in this country and international economic cooperation. Throughout his “retirement”, he continued to support those causes, con­ sulting with those from Presidents on down who sought his judgment. The volume of his writings—published and unpublished—bears testimony to the scope of his interests and the quality of his thought. A representative selection from these writings is of more than historical interest, and a fitting memorial for a great central banker. Paul A. Volcker December 1980 XI Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Chapter 1 Allan Sproul 1896-1978 “A Tower of Strength” A M m llan Sproul, president