Treasury Fed Accord



William McChesney Martin Jr. (1906-1998)

Chairman of the Board of Governors (1951-1970)

William McChesney Martin Jr. was born on December 17, 1906, to William McChesney Martin and Rebecca Woods. Martin's connection to the Federal Reserve was forged through his family heritage. In 1913, Martin's father was summoned by President Woodrow Wilson and Senator Carter Glass to help design the Federal Reserve Act that would establish the Federal Reserve System on December 23 that same year. His father later served as governor and then president of the Federal Reserve Bank of St. Louis.

Martin was a graduate of Yale University, where his formal education was in English and Latin rather than economics.1 However, he still maintained an intense interest in the subject through his father. His first job after graduation was at the St. Louis brokerage firm of A.G. Edwards & Sons, where he became a full partner after only two years.2 From there Martin's rapid rise in the financial world landed him a seat on the New York Stock Exchange in 1931, just two years after the stock market crash at the start of the Great Depression. During the early part of that decade, Martin's work toward reforming the institutional flaws of the stock market led to his election to the exchange's board of governors in 1935. There he worked with the SEC to reestablish confidence in the stock market and prevent future crashes. He eventually became president of the New York Stock Exchange at age 31, leading newspapers to label him the "boy wonder of Wall Street."3 Like his tenure as governor on the exchange, Martin's presidency focused on cooperating with the SEC to reform the stock exchange so it would serve more as a public institution than as a club for the wealthy.

During World War II, Martin was drafted from the exchange into the U.S. Army. There he supervised the disposal of raw materials on the Munitions Allocation Board. He was also a liaison between the Army and Congress and the supervisor of the lend-lease program with the Russians.

Martin's return to civilian life was also a return to the financial world, but this time it was on the side of the federal government. Harry Truman, a fellow Democrat, appointed Martin as head of the Export-Import Bank, which he operated for three years. It was at this institution that he was publicly viewed as a "hard banker." He insisted that loans be sound, secure investments; on that principle he opposed the State Department on multiple occasions for making loans that he saw as being motivated purely by politics. On those grounds he would not permit the Export-Import bank to be used as a fund for international relief.

Martin finished his career with the Export-Import bank when he was called to the Treasury to be the assistant secretary for monetary affairs. Martin had been with the Treasury for about two years when its conflict with the Federal Reserve reached its climax. During the period immediately preceding the final negotiations with the Fed, Secretary of the Treasury John Snyder went into the hospital. Under these circumstances, Martin became the head negotiator for the Treasury. From the Treasury's perspective, Martin was a valuable representative. He had a thorough understanding of the Federal Reserve System and of financial markets; furthermore, he was viewed as an ally of Truman, who strongly opposed Fed independence. During negotiations, Martin reestablished contact between the Treasury and Fed, which had been forbidden under Snyder.4

With Robert Rouse, Woodlief Thomas, and Winfield Riefler of the Fed, Martin negotiated the Accord. The FOMC and Secretary Snyder accepted the Accord and its compromises, and it was approved by both institutions. The Chairman of the Board of Governors at the time of ratification was Thomas McCabe, who would officially resign from his position just six days after the statement of the Accord was released. The Truman Administration saw the resignation of McCabe as the perfect opportunity to recapture the Fed almost immediately after it had supposedly broken away. Truman selected Martin to be the next Chairman of the Board of Governors, and the Senate approved his appointment on March 21, 1951.5

Contrary to Truman's expectations, however, Martin guarded the Fed's independence, not just through Truman's administration but also through the four administrations that would follow. To the present day, his term as Chairman is the longest term the Board of Governors has seen. Over nearly two decades, Martin would achieve global recognition as a central banker. He was able to pursue independent monetary policies while still paying heed to the desires of various administrations. Although the objectives of Martin's monetary policy were low inflation and economic stability, he rejected the idea that the Fed could pursue its policies through the targeting of a single indicator and instead made policy decisions by examining a wide array of economic information. As Chairman, he institutionalized this approach within the proceedings of the FOMC, gathering the opinions of all governors and presidents within the System before making decisions.6 As a result, his decisions were often supported by unanimous votes on the FOMC.

Externally, Martin was perceived as being the dominant decisionmaker at the Fed. Throughout his tenure, he defended the right of the Fed to take actions that would sometimes conflict with what the President wanted. He regularly asserted that the Fed was responsible to Congress and not to the White House.7

William McChesney Martin Jr. ended his term as Chairman of the Board of Governors on January 30, 1970. On that day, his career in public service ended, but he continued to work, holding a variety of directorships for a group of nearly 24 firms and nonprofit institutions for almost 30 more years. On July 28, 1998, at the age of 91, he died at his home in Washington, D.C.


1Barnard S. Katz, ed. Biographical Dictionary of the Board of Governors of the Federal Reserve (Westport, CT: Greenwood Press, 1992), p. 193.
2Bart Barnes, "Longtime Fed Chairman William Martin Jr. Dies," The Washington Post, 29 July 1998.
3See Robert L. Hetzel and Ralph F. Leach, "The Treasury-Fed Accord: A New Narrative Account," Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001): 50.
4Hetzel and Leach (2001, 50).
5Hetzel and Leach (2001, 52).
6Katz (1992, 201).
7For further reading on Martin's tenure, see Katz (1992) and Robert L. Hetzel and Ralph F. Leach, "After the Accord: Reminiscences on the Birth of the Modern Fed," Federal Reserve Bank of Richmond Economic Quarterly 87 (Winter 2001).

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