Peter Conti-Brown on Marriner Eccles and the Refounding of the Fed

Link to The Power and Independence of the Federal Reserve on Amazon

Marriner Eccles may be the Mormon who had the most positive impact on the course of history for a reason unconnected to any church office held or explicitly religious role. Yet I suspect that most Mormons could not say what he did and why it was so important. 

Marriner Eccles transformed the Federal Reserve from the creaky structure that helped that US lurch into the Great Depression into an organization much closer to the Fed we know today, and because of the Fed’s prestige, ultimately influenced central banking in many other nations as well. Here is the story of Marriner Eccles and the refounding of the Fed as told by Peter Conti-Brown in his wonderful book The Power and Independence of the Federal Reserve:  

Nibbling around the edges of the Wilsonian federalist central bank might have remained the order of the day had it not been for Marriner S. Eccles, perhaps the most intriguing figure in Federal Reserve history. Eccles’s father was a Scottish immigrant, a Mormon convert, a bigamist (Marriner’s mother was his father’s second wife), and, in time, one of the wealthiest men in the state of Utah. Eccles thrived in his father’s business and expanded it into mining, timber, and especially banking. He was a millionaire in his own right by the age of twenty-two.

Eccles rose to national prominence in part because of his success as a banker during the height of the banking crises of the Great Depression. With bank failure rates reaching unprecedented heights, Eccles’s banks survived, largely owing to his own savvy ability to maintain credibility and confidence. While there were other successful bankers, what made Eccles noteworthy was that he was also something of a radical. For example, at the 1932 Utah State Bankers Convention, he laid out his theory of the Depression and its cure in plain language. “Our depression was not brought about as a result of extravagance,” he said. “It was not brought about as a result of high taxation.” It came, instead, because “[w]e did not consume as a nation more than we produced. We consumed far less than we produced. The difficulty is that we were not sufficiently extravagant as a nation.” There was a simple reason for this: The theory of hard work and thrift as a means of pulling us out of the depression is unsound economically. True hard work means more production, but thrift and economy mean less consumption. Now reconcile those two forces, will you? Eccles had a solution, too: “There is only one agency in my opinion that can turn the cycle upward and that is the government.”

In modern parlance, we’d call arguments like these Keynesian. But 1932 was four years before John Maynard Keynes had published his General Theory of Employment, Interest, and Money, the book that expounded the notion that government should be responsible for compensating for slack in consumer demand. Though they had never met, the millionaire Mormon from Utah had anticipated the dapper Cambridge don’s worldview. In an amusing historical aside, the two did eventually meet during the Bretton Woods negotiations about the future of the world’s postwar economic order. Despite their common diagnosis of depression and consumption, they didn’t take well to each other. Eccles thought the British needed to make better assurances of repayment to the United States for prewar loans, a source of great consternation to the British. “No wonder that man is a Mormon,” Keynes retorted to a colleague outside of Eccles’s hearing. “No single woman could stand him.”

Eccles didn’t make much more headway with the bankers and businessmen who heard him articulate these heretical views in Utah in 1932 than he did with Keynes in 1944. “Poor Eccles,” a president of a western railroad is said to have remarked. “He must have had so terrible a time with his banks that he is losing his mind.” No matter. Their opinions mattered much less than that of Rex Tugwell, already part of FDR’s original “Brains Trust.” In Eccles, Tugwell had discovered an indispensable resource: a western banker whose ideas were even more radical than the incoming administration’s. Eccles came to work with the new Roosevelt administration as a special assistant to the secretary of the treasury.

Eventually, Eccles was considered for the position of “Governor” of the Federal Reserve Board. To give a sense of how the board governor position was then perceived, the post became vacant when Eugene Black resigned—to take the position of governor of the Federal Reserve Bank of Atlanta.

Eccles refused the president’s offer. In response to inquiries of his availability, he responded that he “would not touch the position of governor [of the Federal Reserve Board] with a ten-foot pole unless fundamental changes were made in the Federal Reserve System.” Roosevelt invited him to propose his view of what those changes should be, and he and an assistant prepared a three-page blueprint of what amounted to a refounding of the Federal Reserve. That refounding would eliminate the federalist compromise. He narrowed his sights on the Reserve Banks: “Although the Board is nominally the supreme monetary authority in this country,” he wrote in a memo to Roosevelt, “it is generally conceded that in the past it has not played an effective role, and that the system has been generally dominated by the Governors of the Federal Reserve Banks.” As an “unfortunate result,” he continued, “banker interest, as represented by the individual Reserve Bank Governors, has prevailed over the public interest, as represented by the Board.” Eccles’s position was notable: Eccles was himself a banker whose views were represented by the Federal Reserve Bank of San Francisco, and yet he sought the banks’ exclusion from national policy. The problem wasn’t only one of inappropriate banker influence on the system; it was also one of governance. “With such an organization” as the Federal Reserve System, wrote Eccles’s assistant and partner in Fed reform, Lauchlin Currie, “it is almost impossible to place definite responsibility anywhere. The layman is completely bewildered by all the officers, banks and boards. Even the outside experts know only the legal forms.” Eccles proposed a radical legislative overhaul to resolve both the problems of governance and banker influence.


Eccles sold Roosevelt on the proposal. He committed the presidency to the passage of Eccles’s bill, and Eccles accepted the governorship so that he could more effectively lead the legislation through Congress from inside the Fed. The New York Evening Post summarized the point perfectly: “Marriner S. Eccles is a unique figure in American Finance—a banker whose views on monetary policy are even more liberal than those already embraced by the New Deal.”

In transforming the Fed into something that was ultimately much more effective at keeping the economy on track than what the Fed was before, Marriner Eccles exhibited the “save the world” ethic I see as one of the best elements of Mormonism.