Federal Reserve Board Chairman Jerome Powell in Salt Lake City on Monday revived an old warning from Utahn Marriner Eccles — father of the Federal Reserve System — perhaps to help push back against President Donald Trump’s aggressive pressure to lower interest rates.
Without specifically mentioning Trump in a speech to introduce a new KUED documentary about Eccles, Powell praised how Eccles insisted that the Fed must be “absolutely free” from politics, and created an independent system to control interest rates for the long-term good — rather than short-term political gain.
“Perhaps most importantly from my perspective as Fed Chair, he is responsible more than any other person for the fact that the United States today has an independent central bank — a central bank able to make decisions in the long-term best interest of the economy, without regard to the political pressures of the moment,” Powell said.
That comes as Trump has criticized the Fed for not lowering interest rates enough to fuel the economy. In an Oct. 1 tweet, Trump said rates are too high and that Fed officials “are their own worst enemies, they don’t have a clue. Pathetic.”
As I predicted, Jay Powell and the Federal Reserve have allowed the Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected. Fed Rate too high. They are their own worst enemies, they don’t have a clue. Pathetic!— Donald J. Trump (@realDonaldTrump) October 1, 2019
Powell did not mention that, but spoke about an Eccles quote on a plaque at the Fed headquarters named for him: “The management of the central bank must be absolutely free from the dangers of control by politics and by private interests.”
Fed Vice Chairman Randal Quarles also weighed in at the event by saying Eccles “was absolutely fearless in determining what he thought was right, and then doing that no matter the consequence" — and said Powell has the same quality.
Quarles, like Eccles, was raised in Utah, and is married to the grandniece of Eccles.
The pair honored Eccles — who is seen as the father of the modern Federal Reserve System, and a man who helped guide America out of the Great Depression — at the premiere of a new KUED documentary about Eccles. It will first air on Oct. 21 at 9 p.m.
“His ideas helped form the basis of Franklin D. Roosevelt’s New Deal and anticipated the not-yet published tenets of British economist John Maynard Keynes,” said Powell.
He recounted how Eccles as a relatively unknown banker from Utah — his family ran First Security Bank (later acquired by Wells Fargo) — started giving speeches during the Great Depression about possible solutions that caught the attention of Congress and Roosevelt.
Eccles had evolved from a full free-market Republican into someone who called for government intervention to fight the Depression’s effects. He recognized a need for intervention in markets after he helped save his own banks from runs by instructing tellers to move slowly, which prevented depositors from pulling out all of their funds amid panics.
“As the Depression deepened, he presciently recognized that the federal government should act forcefully to put people back to work and stimulate business,” Powell said, including allowing deficit spending in tough times and setting aside some surpluses in good times.
Eccles pushed such ideas as unemployment insurance and what became Social Security before Roosevelt took office. Roosevelt soon appointed him to the Federal Reserve’s board of governors — and in 1934 the president appointed him as its chairman at age 44.
“He accepted on the condition that Roosevelt support a restructuring of the Fed, which had failed to counter the contraction gripping the nation’s economy. And the result was the Banking Act of 1935, which significantly strengthened the structural independence of the Federal Reserve,” Powell noted.
Rep. Ben McAdams, D-Utah, who also spoke at the event, noted that Time magazine wrote in 1936, “A good many people believe Marriner Eccles is the only thing standing between the U.S. and disaster.”
Eccles oversaw money policy that would help the nation survive the Depression and fund World War II. Later, he would duel with President Harry Truman over whether the Treasury Department or the Fed should set and control interest rates. It led to an accord that clearly gave the Fed that power.
Powell noted that the Fed’s headquarters in Washington, D.C., is named for Eccles.
“I sit in the office where he sat,” Powell said. “His portrait hangs in a room where I frequently meet with guests or colleagues and staff. When I sit in my usual seat, he stands looking over my left should in an enigmatic expression neither approving or disapproving on his face — talk about pressure.”
Quarles added that Eccles is seen as the “architect of the complex system of governance that assures the American people that monetary and financial policy will be pursued as their sole interest,” not politics.
Eccles would later return to Utah to pursue his many business interests. He also ran unsuccessfully for the U.S. Senate here in 1952 as a Republican. He would later take stands against prevailing opinion that were vindicated, including opposing the Vietnam War and favoring opening relations with China.
He died in 1977 at age 87.