Treasury Fed Accord

Biographies

 

Biographies:
John Wesley Snyder (1895-1985)

Secretary of the Treasury (1945-1953)

As the Secretary of the Treasury at the time of the Accord, John Snyder was the primary adversary of the Federal Reserve. Ultimately, his conflict with the Fed stemmed from his firm belief in the philosophy of "good financing" for the federal government, which held that the government should be able to issue as much debt as needed on the most favorable terms. To implement such a principle, Snyder had no choice but to obtain the Federal Reserve's cooperation in pegging interest rates at low levels in the government securities market. During the 1940s this cooperation came about voluntarily, but during Snyder's term, the Fed sought to be released from this obligation.

The objectives that John Snyder pursued were always aligned with what he deemed to be in the best interests of the Treasury, even if those policies were disagreeable to professional economists and Fed officials. After the war, the Treasury was responsible for funding the rebuilding of a war-torn world. Given that much of the funding was to be achieved through the issuance of large amounts of Treasury debt, it was only natural that Snyder would wish to minimize the interest costs derived from the debt. From the strict perspective of financing the federal budget, Snyder's policies were on target.

John Wesley Snyder was born on June 21, 1895, in Jonesboro, Arkansas. He spent a year at Vanderbilt University's Engineering School before entering the Army in 1915 to serve as a second lieutenant in the field artillery during World War I. After the war he went back to Arkansas to be a bank clerk, and he never graduated from college. During the postwar period he remained in the Army Reserve, where he met another young reserve officer, Harry S. Truman, with whom he would develop a lifelong friendship.

During the twenties, Snyder moved to St. Louis, where he became further involved with banking. In 1931, he was employed by the Comptroller of the Currency, and six years later he became the St. Louis regional director of the Reconstruction and Finance Administration. Snyder was one of the earliest supporters of Truman's Senate reelection bid in 1940.1 From that time until Truman assumed the presidency five years later, Snyder had access to Truman's closest political circle.

When Truman became President in April of 1945, he initially appointed Snyder as the Federal Loan Administrator. Two months later, Snyder became the director of the Office of War Mobilization and Reconversion. In that position, he supervised the dismantling of World War II price controls and helped convert industries back to peacetime production. His successful execution of those operations led Truman to consider him for a higher position. Truman did not consult Snyder before he named him to the position of Secretary of the Treasury, but Snyder accepted. He was to become one of Truman's closest advisors on not only financial matters, but also general domestic and foreign policy issues. Truman valued Snyder's counsel to the extent that Snyder was often the last person to whom Truman spoke before he made final decisions.2

Snyder's role within the Truman Administration was to lead the conservative faction. He moved to deregulate price controls and wartime restrictions in the summer and fall of 1945. This brought him into conflict with other members of the Truman cabinet who felt that such actions, if precipitated too rapidly, would spur inflation and cause a recession. In some cases, regulations had to be reinstated when their removal failed to achieve the intended purpose.

Snyder did not always concur with Truman. He opposed Truman's 21-point program of September 1945, which among other things called for increases in employment insurance.3 However, Truman went ahead with the plan anyway. This instance illustrates that Snyder's opinion was respected, but his advice was not always taken.

On the fiscal policy front, however, Snyder and Truman were usually united. Snyder was instrumental in implementing the Truman Doctrine and the Marshall Plan to reconstruct war-torn Europe.4 He opposed any measure that would jeopardize the federal government's ability to pay down the debt and thus opposed a Republican push in Congress to cut taxes in 1947. He argued that the economy was already operating at full capacity and that the taxes were needed to restrain inflation. His campaign against the Republicans was successful, but then he was politely snubbed by Truman when the President proposed his own tax cut to redistribute the tax burden. Privately, Snyder opposed the measure, but publicly he supported it.5 Truman's plan never actually made it through Congress; instead, another Republican tax proposal passed and then survived Truman's veto.

The Truman-Snyder alliance was never more essential than during the administration's conflict with the Federal Reserve. As Truman's second presidential term progressed, the Federal Reserve began to chafe under its obligation to peg the interest rates on government securities. As a matter of principle, the President did not want to punish patriotic citizens by raising interest rates and thus lowering the value of their bonds. Snyder pressured the Fed to hold the rate peg at artificially low levels. When the Korean War intensified, it became likely that the Treasury was going to need to issue new debt. Thus, in the interest of minimizing the service charge on the extra debt, the Treasury wanted to extend the rate peg indefinitely. The conflict developed into a full-blown institutional battle that was fought behind closed doors as well as in the public arena. Snyder felt that it was essential to raise debt cheaply in order for the country to fight the communist threat. By contrast, the Fed argued that subduing inflation at home was just as important for the same reason. Although Snyder and Truman resisted fiercely, support for their position dwindled and the conflict was resolved by the Accord. In the end, Truman approved the Accord on Snyder's recommendation.6

John Wesley Snyder retired from government at the end of Truman's second term and worked on the boards of several philanthropic institutions after his retirement. He died at the age of 90 on October 8, 1985.


Footnotes

1See Eleanora Schoenbaum and Clark S. Judge, Political Profiles. The Truman Years (New York: Facts on File, 1978), p. 505.
2Schoenbaum and Judge (1978, 505).
3Schoenbaum and Judge (1978, 506).
4Associated Press. Obituaries. "John W. Snyder Dies at 90." Washington Post. 9 October 1985.
5Schoenbaum and Judge (1978, 507).
6See 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): 33-55.

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