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People Who Made a Difference:
Marriner S. Eccles

Marriner Eccles

Marriner Eccles making a speech
(place and date unknown).

The Great Depression of the 1930s: It was a crisis, all right.

The economy had taken a nose-dive. People lost jobs, houses, and life savings.

A man from Utah did a lot to help those people: Marriner S. Eccles.

Eccles was a brilliant businessman/banker who thought that anyone could succeed through thrift and hard work.

At least, he thought this until the big crash of 1929.

As he worked with the Utah Committee for Relief, he saw hard-working, thrifty people who couldn’t find work, people who were hungry, homeless, and hopeless.

Clearly, thrift and hard work were not enough.

Eccles pondered the sorry state of the nation and came up with bold, innovative solutions. And he found a new life’s goal. Instead of just making as much money as possible, he wanted to put his energy into creating a stable national economy.

Eccles in a Nutshell

In short, Eccles was brilliant, unconventional, and influential. He did not let politics sway him, but stuck to principles.

Dean May wrote, “Although his views were often unpopular, time usually proved them to be correct.”

Marriner S. Eccles: Leadership in Crisis 

An outsider shocks the insiders

In February 1933 an unusual man sat before the Senate Finance Committee. Small, lean, and intense, this banker from Utah was a nobody in Washington. Not one person in the room--least of all himself--could have dreamed of the major role he would soon play in the nation’s capital. Nor could they guess how profoundly his ideas would change the nation.

Marriner Eccles had been invited to Washington to offer his prescription for curing the Great Depression. He was among the last of 47 speakers at the hearings, so the mostly lame-duck senators probably sighed inwardly as he took his seat.

They had heard it all--or so they thought. Over and over again they had listened to two basic responses: either “I don’t know the solution” or “Reduce spending and balance the budget.”

But Eccles would soon wake up the jaded senators. His message, which challenged almost everything that had been said to that point, was this: The government should put idle men, money, and material to work. If the government spent enough money, he said, it would put more money in the hands of consumers, stimulate business, and begin a cycle of recovery.

In short, Eccles said that the way out of the depression was through deficit spending.

Savvy businessman or dangerous radical?

For many Americans today, “deficit” is a scary word. And in fact, it scared most people in 1932. But Eccles likely would not have supported today’s gargantuan deficit, or the war that helped create it. He spoke out against the Vietnam War, and he believed in deficits only in times of depression.

Otherwise, he believed, the government must balance the budget and pay off its debts.

He said, “I believe that inefficiency and waste should be eliminated…. I abhor politics and favoritism in any phase of government expenditures. I am as anxious as anyone to see the Federal budget balanced.”  

But Eccles’s deficit message during the Depression startled his hearers. At this time, even president-elect Franklin Roosevelt was supporting a balanced budget as the solution to the Depression.

So Eccles shocked the committee. Here he was, a millionaire banker who sounded, as he said himself, like a dangerous radical.

How did this “backwoods” guy come up with these ideas?

John Maynard Keynes hadn’t even published his similar theories yet.

Eccles claimed that he himself came up with his own ideas, largely through observation. There are interesting reasons to believe him. Historian Dean May argued that Eccles was in a unique position to buck the orthodoxy and formulate a new economic philosophy.

1. As a businessman, Eccles was involved in dozens of financial endeavors; he could see firsthand the complex interrelations in the economy.

2.  Then, too, Eccles lived in a physical and intellectual “backwoods,” far from the nation’s power centers. Since he wasn’t firmly entrenched in the establishment, he could think independently.

3.  Perhaps most intriguing of May’s points is the importance of Eccles’s Mormon background to his philosophies. In Utah, the concept of a cooperative planned economy was not all that strange. Nor was the belief that a centralized institution--in this case, the LDS church--should make sure that its members could meet their basic needs.

Thrift and hard work is all you need (yeah, right)

Even with this background, it had taken the jolt of the Great Depression to get Eccles moving down unorthodox paths. For most of his 40 years, he had been a capitalist and industrialist in the most traditional mold. At age eight he had gone to work in a box factory owned by his wealthy father, David Eccles; by age 11 he had saved his first $100 and proudly bought his first share of stock.

Without ever finishing high school he launched into a spectacular business career. By 1929 he had founded the largest bank in the region--First Security--and had become president, vice president, or director of a flock of thriving companies. Like his father before him, he believed that thrift and hard work were the keys to success.

The crash of ’29 brought him up short. Through bold and brilliant tactics he weathered the runs on his own banks, but his basic principles were shaken. As he worked on the Utah Committee for Relief, which administered funds to needy Utahns, he could see for himself that in this depressed economy hard work and thrift weren’t enough to guarantee security for all.

As he considered the problem, he began to see holes in the old belief that the economy was just a natural phenomenon. The economy was manmade, he reasoned, and could be manipulated. As a starting point, he thought the government should put the masses of unemployed Americans to work--not just as a humanitarian gesture but as a way to stimulate spending and therefore stimulate businesses. Earlier relief programs, on the other hand, had been aimed at helping corporations and banks survive the depression.

As he formulated his ideas, Eccles found a new life’s goal. While his objective had been to make as much money as possible, now he decided to put his energy into creating a stable national economy.

Speak up loud enough and eventually they’ll listen

And he went after that goal like a pit bull. When he read the budget-balancing proposals that Roosevelt sent to Congress in March 1933, he said later, “my heart sank.” With such a plan, he thought, the nation’s already-bleak economy would surely slide deeper. So he sent letters to people in Washington calling for immediate action to avert a crisis. Eventually, a small group of New Dealers in the Roosevelt administration invited him to meet with them. This group introduced him to other officials.

Many in the administration were at least willing to listen to what he had to say. After all, this man was no economist in an academic ivory tower. He was not a humanitarian do-gooder, a Kremlin agent, or even a Democrat. He was a hard-headed industrialist/banker who knew all about the needs of business.

Eccles gained enough attention in Washington that he was asked to join the Treasury Department as a special assistant over credit and finance. At the offer, he hesitated. He was used to working for himself, for one thing. And he knew nothing about government. But he decided to go--for 16 months--just to see if he could try out his theories. In the end, sixteen months became seventeen years.

So that’s where the FHA came from!

His first big act as a government bureaucrat was to midwife the Federal Housing Authority into existence.

Eccles was asked to join a committee to come up with a new housing program. Because nearly a third of the nation’s unemployed were in the building industry, the committee’s goal was to stimulate new construction. Eccles sat through a few meetings and listened to vague ideas circle around the room. Later, he would say that the committee members sounded like a bunch of social workers who could only think in terms of public housing.

But Eccles envisioned a plan that would not only help the disadvantaged but would at the same time stimulate the economy. As always, he believed that “a maximum amount of private spending should be stimulated by a minimum amount of public spending.”

So he made a “procedural” suggestion. Why not form a subcommittee to hammer out the details and bring a plan back to the large committee?

The secret of influence: Write the “first draft”

The suggestion worked. It worked so well, in fact, that Eccles was made subcommittee chair. “I was beginning to learn the ways of bureaucracy,” he wrote “--where nine points of the law starts  with the title of right to produce ‘the first draft’ of what is to be done.”

The plan he and his group hammered out would turn the old way of doing mortgages upside down. At the time, banks only lent up to 50% of a home’s value, and these loans were limited to five years. Building and loan associations would lend on 80%, but at a high interest rate. This forced homeowners to take out 2nd and 3rd mortgages, and when during the depression they defaulted on one, they defaulted on all.

Eccles’s group proposed three things: a single mortgage given on a high percentage of the property value, lower interest rates, and longer maturity. In order to induce banks to make these loans, the federal government would insure them. One percent would be added to the interest fee to create the insurance fund, and the government would make up the difference if the fund was insufficient.

In short, very little government investment would stimulate a great deal of private spending.

The FHA didn’t pass Congress without a great deal of controversy, opposition, and some changes. But it passed. According to Eccles, however, Roosevelt played politics in appointing an FHA administrator; rather than choosing someone who understood the program and its goals, he chose a man who knew little but was well-known. As a result, the program’s performance disappointed Eccles.

Inventing the Federal Reserve Board as we know it today

But Eccles had made his mark and had established himself as one of the president’s regular advisors. In August 1934 he was stunned to learn that the president was considering appointing him chairman of the Federal Reserve Board.

In his usual blunt way, Eccles told Roosevelt that he would not serve unless the Federal Reserve System was significantly overhauled. The Board, he felt, had become impotent in serving the public interest; instead, bankers had maneuvered the system so that it served their interests alone. As a result, control of the nation’s money supply had moved to Wall Street. When Roosevelt asked what changes were needed, Eccles asked for a month to prepare a memorandum.

He returned with a memorandum that led to the Banking Act of 1935. In it, he outlined several points to empower the Federal Reserve Board, basically creating the Board powers as it exists today.  

He felt that the Board had two pressing duties: to assure support for emergency financing to aid recovery and to assure that the recovery didn’t get out of hand and lead to another depression.

For two hours he explained his memorandum to FDR. The president listened intently, then finally “his powerful hands slapped down on the table in his characteristic gesture of decision.”

He said, “‘Marriner, that’s quite an action program you want. It will be a knock-down and drag-out fight to get it through. But we might as well undertake it now as at any other time.’”

FDR forgets "politics as usual"

He also told Eccles that there would be a lot of opposition to his appointment as chairman of the Federal Reserve, but that he didn’t “give a damn.”

“Well, Mr. President, if you don’t give a damn, I don’t see why I should,” Eccles replied.

He was unprepared for just how strong the opposition would be, however. Powerful interests in Congress--backed by New York bankers--were determined to defeat both the nomination and the Banking Act.

As the appointee, he didn’t wait for Senate confirmation to work on reforms that he felt were necessary to economic recovery. In his view, most of the administration’s relief efforts were little more than a dole and had little to recommend them from either a humanitarian or an economic point of view. Besides, he thought government aid had been too stringently “rationed.” The government wasn’t spending enough to stimulate the economy--but it was enough to accumulate a huge debt.

He pressured the president to support a large public works program as a means of jump-starting the economy; at the same time, Harold Ickes, Secretary of the Interior, and Harry Hopkins, director of the Federal Emergency Relief Administration, pushed the public works program with humanitarian arguments.

Putting idle people to work

The result was Roosevelt’s State of the Union address in 1935, in which he proposed the Works Progress Administration.

When the WPA was implemented, Eccles was still unsatisfied. Large as it was, the WPA was geared to employ only three million workers at subsistence level--while as many as ten million were unemployed. Besides, Eccles thought it “dehumanizing” to make applicants prove that they were, in essence, failures before they could receive help. “Literally millions of Americans went through hell before their pride was at last broken and they applied for WPA work,” Eccles later wrote.

Bucking big business

But in the meantime, he was taking over at the Federal Reserve and at the same time working for the Banking Act. An associate called and told him that influential bankers would withdraw their opposition to his appointment if he would remove from the act his proposed changes to the Federal Reserve System.

“You can tell your banker friends to go to hell,” Eccles responded. “The Governorship doesn’t mean that much to me. But these changes must be made with or without me.”

This attitude--of putting his ideals over personal reputation or gain--characterized Eccles’s entire Washington experience. Years later, he would demonstrate this attitude in an entirely different situation. After the war he doggedly and loudly fought President Truman’s economic policies.

Bucking big business can get you fired

But his argument--that the government must adopt tighter credit controls and balance the budget to control inflation--didn’t play well with businessmen. Truman accordingly replaced Eccles as governor of the Federal Reserve Board.  It would have been easy to leave Washington in a huff, but Eccles, knowing that he was needed, swallowed his pride and stayed on as one of the board members.

But in the 1930s Eccles was arguing not for balanced budgets but for deficits--and the same business community who would later fight his efforts to contract the money supply were now opposing him curtail spending and raise taxes opposed him for his appointment to the Federal Reserve.

The Alan Greenspan of his time

After a tangled political battle, Eccles won confirmation as governor of the Federal Reserve System and Congress adopted the Banking Act of 1935.

By 1936, the nation’s economy was much improved. So Roosevelt, who was still not quite converted to the gospel of government spending, decided to balance the budget. It wasn’t long before the country dropped into a sharp recession--and Eccles, with his weird ideas, became Washington’s favorite scapegoat. After all, this was the man who had pushed deficit spending, and as governor of the Federal Reserve he had raised the bank reserve requirements. Surely he was responsible for this setback.

Fighting to keep the country from falling off a cliff

Although he was losing friends fast, Eccles still pushed for his program. In October of 1937 he again conferred with the president and told him that the country was heading for a “really serious depression” and that only governmental action could turn the tide.

There were those in the administration, however, who kept pushing for a balanced budget. Stuck between warring factions, Roosevelt gave such mixed signals that Eccles wondered if he even understood the New Deal; later he realized that president was just not sure what to do. Eccles kept pressing his case.

Eccles did have allies in the administration. Three of them, Isador Lubin, Leon Henderson, and Laughlin Currie, wrote a memo arguing that reduced government spending had helped cause the recession. And it was Harry Hopkins who, through extended discussions with Roosevelt, finally convinced the president once and for all to jettison the idea of a balanced budget.

It's okay to change your mind, if better ideas come along

Eccles noted that the president was roundly denounced for changing his mind. “Yet,” he wrote, “the nation owed much to him because he did change and was not true to what he had said [about economics] when he ran for President.... Had he not changed, any praise of his consistency would be praise of a valueless value. It would have been a consistency maintained at the price of a ruined economy.”

It was Eccles who had first envisioned and given voice to the change Roosevelt embraced. And during the following years it was Eccles who would continue to stand by the president’s program even when others were timidly looking after their own political skins.

After Eccles gave a speech defending the administration’s new stance, a White House aide called to say that the “boss” appreciated the speech. “Here you are,” he said, “with much less reason to stand up for him than many others, yet you were the only one who did it.” The next morning Roosevelt himself called to condemn Eccles for keeping him up late, but to commend the excellent speech.

Fala preempts the meeting

FDR and Eccles respected each other, and usually the president listened attentively to what the man from Utah had to say. On one memorable occasion, though, his own visit was pre-empted by another White House regular--the president’s Scotty, Fala.

Eccles had come to the White House to discuss the economy but became frustrated when Roosevelt’s previous visitor stayed on and on, until most of Eccles’s scheduled hour was up. Just when Eccles finally had the president’s ear, Fala ran into the room--and the president began to play fetch with the dog. Inwardly seething with impatience, Eccles praised the dog’s clever tricks and waited for Roosevelt to get down to business.

Finally, Roosevelt put the ball away. Eccles sighed in relief and launched into his ideas. Suddenly the president bellowed, “Well I’ll be goddamned! Marriner, do you see what I see?”

In the corner of the room was Fala, relieving himself. Eccles watched in astonishment as the president summons a guard and ordered him to rub the dog’s nose in the mess “under the general supervision of the President of the United States.” By this time, Eccles’s hour was up. Later, when his friends roared at the story, he could only smile weakly.

World War II to the rescue

Earnest as he was in pushing his ideas, in the end it was not Eccles’s policies that pulled America out of the depression. World War II accomplished that-- and proved that massive government spending would indeed stimulate the economy.

Eccles always maintained that during the thirties his ideas of a “compensatory economy” were never really tried in full. The government never spent enough to put an end to the depression, even though it did improve the situation through its spending programs. Again, during and after the war, when he argued for stricter economic controls, his views were never really tried.

Politics-as-usual was the reason. Once when Congress kept ridiculing his ideas, he responded that if Congress and the American people really wanted a balanced budget, there should be no more waffling. Congress should balance the budget immediately.

The response was what Eccles called “a long sputter.” Politicians accused him of political trickery and conniving and came up with excuse after excuse. It was, Eccles said, the “same dialogue heard to this very day every time Congress is challenged to reduce expenditures.”

An independent mind to the end

When he left Washington in 1951, the Baltimore Sun said that he would be missed for “qualities of mind” that “are all too rare.... He is man of fearless independence of mind who has consistently called the shots as he saw them.”

In private life he retained that quality of mind, remaining independent, outspoken, and unorthodox. He opposed the Vietnam War from the beginning, and at a large presidential dinner in 1965 he stood and said so--after several other speakers had praised the war’s escalation.

Throughout the war he spoke out rationally and eloquently. He also argued for population control and diplomatic recognition of China, years before those ideas were popular.

He died in 1977. In summing up the man, Dean May has written, “Marriner Stoddard Eccles, intelligent, complex, and ambitious, seemed determined to make his mark in the world, and probably succeeded beyond all his expectations. Although his views were often unpopular, time usually proved them to be correct.”


Sources: Sydney Hyman, ed. Beckoning Frontiers: Public and Personal Recollections of Marinner S. Eccles (New York: Alfred A. Knopf, 1966); Sydney Hyman,  Marriner S. Eccles: Private Entrepreneur and Public Servant (Stanford: Stanford University Graduate School of Business, 1976); Dean Lowe May, From New Deal to New Economics: The Response of Henry Morgenthau, Jr., and Marriner S. Eccles to the Recession of 1937 (Brown University, Ph. D. thesis, 1974); pamphlets in the State History collections.