John W. Snyder Oral History Interview, August 13, 1969

Oral History Interview with
John W. Snyder

Secretary of the Treasury in the Truman Administration, 1946-53. Other Federal positions once held include Executive Vice-President and Director, Defense Plant Corporation, 1940-43; Assistant to the Director of the Reconstruction Finance Corporation, 1940-44; Federal Loan Administrator, 1945; Director, Office of War Mobilization and Reconversion, 1945-46. Secretary Snyder was a longtime close friend of Harry S. Truman beginning with their service in the U.S. Army Reserves after World War I.

Washington, D.C.,
August 13, 1969
By Jerry N. Hess

[Notices and Restrictions | Interview Transcript | Additional Snyder Oral History Transcripts]

Notice
This is a transcript of a tape-recorded interview conducted for the Harry S. Truman Library. A draft of this transcript was edited by the interviewee but only minor emendations were made; therefore, the reader should remember that this is essentially a transcript of the spoken, rather than the written word.

Numbers appearing in square brackets (ex. [45]) within the transcript indicate the pagination in the original, hardcopy version of the oral history interview.

RESTRICTIONS
This oral history transcript may be read, quoted from, cited, and reproduced for purposes of research. It may not be published in full except by permission of the Harry S. Truman Library.

Opened September, 1970
Harry S. Truman Library
Independence, Missouri

[Top of the Page | Notices and Restrictions | Interview Transcript | Additional Snyder Oral History Transcripts]

Oral History Interview with
John W. Snyder

Washington, D.C.,
August 13, 1969
By Jerry N. Hess

[1757]

SNYDER: Mr. Hess, in our interview #44, I believe it was, I undertook to cover the first three years of my administration as Secretary of the Treasury, and had planned with you to do the second three years in our subsequent interview. In studying it over and making my plans for this present interview, I found it to be possibly more effective to go back and cover the whole term that I was in the Secretary of the Treasury's office. Now, with your permission, I'm going to try that out.

Today, I'm going to bring the whole six and a half year period that I served as Secretary of the Treasury into a composite report, which I think will serve better to outline the importance of the various activities

[1758]

and steps taken than to take the two bites of three, and three and a half years separately. Therefore, I'm going to proceed, with your permission, to give an account of the activities of the Secretary of the Treasury, during my six and a half years in office.

Six fiscal years after the close of World War II, ending with the fiscal year 1952, represents a period of important developments in fiscal policies and operation. Therefore, I'm going to take this occasion to review the functioning of the Nation's financing during this six year period, plus probably an additional seven months which coincides with my term of office as Secretary of the Treasury.

During this six year period, the Government first had to adjust to the problems arising from the aftermath of the war and, subsequently,

[1759]

to the task of rearming to meet the Communist challenge. Accordingly, my report will describe the various measures taken to finance the Government's activities and will deal with the whole range of Treasury policies in the field of debt management, taxation, international financial arrangements, and improvement in operating activities, against the background of national economic developments.

One of the major problems facing the Treasury when I took the oath of office on June 25, 1946, was the achievement of the balance between revenues and expenditures which would provide for a surplus of revenues to be applied to a reduction of the enormous debt that had been built up during the World War activities. On

[1760]

the day that I took office, I recall saying, "It is the responsibility of the Government to reduce its expenditures in every possible way; to maintain adequate tax rates and to achieve a balanced budget or even better."

It was recognized that the problems of Treasury and general government policy involved in changing over from a deficit situation to a balanced budget or better, were extremely complex. There was wide-spread public agitation for across the board reductions in taxes, and for the abolition of various special taxes which have been put into effect during the war. While many improvements in the structure of our wartime tax system were clearly called for, the size of our large wartime debt made it imperative that we give consideration to the need for debt reduction,

[1761]

along with the need for improvements and revisions in the wartime tax structure. By the middle of 1946 it was already evident that fulfilling these requirements would be a task of major proportions. Our public debt had increased five-fold during World War II and on June 30th, 1946, it amounted to two hundred seventy billion dollars. The Government's obligations represented 60 percent of all outstanding debts, public and private, as compared with less than a fourth in 1939, before the United States started its World War II defense and war finance programs. Of the two hundred seventy billion dollar total public debt in June, 1946, commercial banks held eighty-four and a half billion dollars representing 71 percent of their earning assets and the Federal Reserve banks held twenty-three and a half billion.

[1762]

It was recognized that this bank-held debt had an inflationary potential, and that every effort would have to be made in the interest of a sound peacetime economy to reduce the volume of securities held by the commercial banking system.

The government securities holdings of individuals represented another type of problem. As a result of the intensive sales programs of the World War II period and the response of the people to these drives, government security holdings of individuals, including marketable as well as non-marketable issues, had jumped from ten billion dollars before the war to sixty-four billion dollars on June 30, 1946. Widespread ownership of the securities of the Government was essential to sound public debt management in the years that were to follow. It was of great importance

[1763]

that individuals retain their holdings of government obligations and, if possible, increase them. But could this be achieved if widespread unemployment developed and the funds invested in savings bonds were required to tide people over an emergency period? Remember that a depression had occurred after every other major war in our history. There were many who felt that it would occur again and that it would inevitably be accompanied by wholesale liquidation of savings bonds. Still another area of uncertainty was represented by the large volume of government securities held by non-bank financial institutions, such as insurance companies and mutual savings banks. In June 1946 the eleven and a half billion dollars of government obligations held by mutual savings

[1764]

banks constituted about 64 percent of their total assets. The corresponding percentage for life insurance companies was 46 percent. Other insurance companies were in a similar situation. In addition, other non-bank investors, business corporations, state and local government and others had substantial amounts of funds invested in government issues. It could be foreseen that all of these institutions and organizations would need to draw upon at least a part of their government security investments in order to finance reconversion and expansion programs of private business and of state and local government units, once the peacetime economy got fully underway. In view of these circumstances, it was clear that the Treasury had a double task. It would have to promote fiscal programs and

[1765]

conduct financing and debt management operations in such a way as to safeguard, at all times, the high credit position of the Government; and it would have to shape these policies in such a way as to encourage, rather than hinder, the adjustments which individuals, financial institutions, and business concerns of all kinds, would have to make in the course of returning to more normal conditions.

These were some of the problems which were clearly apparent to me in 1946 on the domestic front. At the same time, the United States faced a whole range of new problems in international finance. These arose from the war and the position with which the United States had attained at its close, as the leading financial power of the world. Some of these problems related to various financial settlements growing

[1766]

out of the war, others were the problems of organizing a postwar world based on sound economic principles which would assure improvement in world economic conditions and standards of living. In June 1946, no one could have foreseen the precise nature of many of the issues confronting the United States Government, particularly in the light of the rapidly changing world political and economic scene. The United States Government, as well as the other nations of the Western World, had to feel its way towards programs and policies which would bring about the desired results. It was apparent then that the stability and progress of the postwar would have to be based on improving standards of living in all countries; the maintenance of the high level of production and employment and expansion of

[1767]

world trade; and the attainment of internal fiscal stability as a condition to sound international financial policies. These conditions of progress were interrelated. Without sound finance the dangers of wide swings in the levels of prices, and consequently of production and employment, and maladjustments of international payments and capital movements were very great indeed. The countries of the world had to make efforts to check the war and postwar inflation by appropriate fiscal and monetary measures. These were problems of how and under what conditions the United States could assist the countries in war torn areas in restoring production and international trade. There were questions of the desirable levels of exchange rates for international transactions and the ways and means of reducing barriers to international

[1768]

payments and trade. These were among the questions to which we in the Treasury had to give earnest attention. It had been my objective to do my part in bringing about sound financial conditions in the international sphere from the very day I took office. This task is not one which any Secretary of the Treasury alone can perform; nor is it one which the United States Government alone can guarantee. It implies the development of consistent policies on the part of the principal nations and the reconciliation of their divergent interests in the light of the benefits to the world as a whole. Nevertheless, the Treasury Department is in a position to exert a steady and continuous influence on the direction of the policy of the United States Government, and indirectly on the policies of other governments. The Congress established the National Advisory Council on

[1769]

International Monetary and Financial Problems, with the Secretary of the Treasury as chairman, as the coordinating agency for United States international financial policy and as a mechanism for bringing that policy to bear on the international financial organizations which had been projected as the mechanisms for international, financial cooperation. We had to deal with the settlement of lend-lease and other wartime arrangement, with the terms of loans extended abroad, the forms and terms of assistance programs and, of course, the evolution of our policies by the International Monetary Fund and the International Bank for Reconstruction and Development. As appropriate occasions have arisen, our policies in international finance have always been stated in congressional hearings through the United States representatives

[1770]

on the Fund and the International Bank, through less formal conversations occurring at various times, and under differing circumstances, between the Treasury and the finance ministers and other representatives of foreign governments. The main lines of the United States Government policies, with respect to international financial matters, have remained clear through all that difficult period, though the means of implementing those policies necessarily have varied with time and circumstances. The maintenance of the international stability of the dollar has been the keystone of the United States policy ever since the close of World War II and the Treasury sought to maintain this stability through gold and exchange policy and through its international financial policies.

Secondly, it had been our objective to

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strive toward sound policies on the part of other countries, both by assisting them directly, or indirectly, and by cooperating with them in international bodies. In each of these spheres it was our aim to contribute to the greatest extent possible towards the building of a world of free and strong nations, able to maintain their economies on a sound economic basis while working with other countries to create the conditions under which all could prosper more.

In addition to this broad national policy, there was another area in which the problems of the Treasury were particularly pressing in June 1946. This was the area of operating activities. The Treasury Department is a vast operating organization. Most of its activities are large-scale. They involve hundreds of millions

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of items. They represent many billions of dollars. They affect many millions of people. The magnitude is far greater than any comparable transactions elsewhere, either within this country or within any other country in the world. With activities of such great size and complexity, the problems of management were difficult and complicated.

In World War II the growth of our economy and in governmental operations greatly increased the volume of financial operations which flowed through the Treasury Department. Savings bonds alone, each one requiring separate registration, rose from something like over five million pieces issued and redeemed in 1940, to over three hundred forty-six million pieces in 1946. The number of tax returns increased from over nineteen million to over eighty-one million.

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Printing of currency, stamps and many more documents, increased from four hundred forty-six million sheets in 1940 to more than six hundred eighty-four million in 1946. The number of Government checks processed by the Treasury showed a large increase. In almost every area of Treasury operations, in fact, there was an enormous expansion in the volume of routine business. While the war was going on, it had not been possible to modernize operations on the basis of new mechanical procedures. Recruitment of competent personnel likewise was severely restricted. The tremendous increase in Treasury operations, consequently, had to be handled by the restricted facilities of a department geared to do a prewar volume of operations. In 1946, although the war was over, a great part of the expanded volume of

[1774]

Treasury operations remained. It was of the greatest importance to modernize and streamline the services of the department in order to enable it to meet the increased responsibilities and needs of the Federal Government.

Now this brief review of the scope and the complexity of the Treasury's responsibilities as the postwar period began, gives some perspective for evaluating the record of accomplishment from the vantage point of the close of 1952. This record I'm going to discuss with you now. The major problems of the Treasury during my term of office, and the ways in which these problems were worked out, will be grouped under several headings.

I'm going to talk with you first this morning about the maintenance of confidence in the credit of the United States Government.

[1775 ]

in the broadest sense maintenance of confidence in the credit of the Government depends upon our ability as a nation to keep our free enterprise economy healthy and growing, and to use our governmental instruments wisely in promoting this end. Ever since the establishment of the Treasury Department in 1789, the Secretary of the Treasury has been charged with particular responsibilities in this area. On the list of duties which the Congress prescribed in the act of 1789, setting up the department, the most significant, historically, was to "prepare plans for the improvement and management of the revenue and for the support of the public credit." Each Secretary of the Treasury since that time has recognized that in peace, or war, any substantial impairment of the credit of the Federal Government would be a major blow

[1776]

to the maintenance of high production and employment, and to the orderly operation of our private enterprise system. Every effort has been made, therefore, to maintain confidence in the Government's credit, it has been found possible to achieve and maintain, in this country, an economic climate favorable, not only to high level of current activity, but also to a very large volume of long term investment. It is axiomatic that investment programs looking far into the future cannot be made in a financial climate characterized by doubt and uncertainty. Confidence is essential and in any economy where the public debt constitutes the single most important factor in the financial life of the nation, the cornerstone of confidence in the future is confidence in the credit of the Government. This confidence was maintained

[1777]

following World War II and the economy enjoyed an unprecedented period of soundly-based prosperity. All sections of our economy, in varying degrees, participated in the forward movement following the war. Probably no single measure of the strength and potential power of the American economy is as revealing as the figures on investment in plants and equipment during the postwar period. Before the new defense program, made necessary by the invasion of Korea, got underway, private business had taken a long look at the future and invested a record one hundred billion dollars in modernization and expense. The figure for the entire period since the end of World War II had risen to the phenomenal total of approximately a hundred and seventy billion dollars by the close of 1952, only a part of which was a

[1778]

result of the new Korean defense program. While these developments were going on, the Treasury found it possible to keep substantial amounts of Government obligations in the hands of non-bank owners. The holdings of the commercial banking system had been cut back sharply. Non-financial institutions had retained a considerable volume of government securities even though they had participated, to a very large extent, in financing the forward movement of American business. Savings bonds holdings of individuals had increased, rather than decreased, and the savings bond program had been an important factor in stimulating thrift in all forms. Taken together, our debt management policies added up to an achievement which is of the greatest significance in the period of new international tension, which we experienced since the invasion

[1779]

of Korea in June 1950. Before the country was called upon, at that time, to face the burdens of increasing rearmament and security programs, it had been demonstrated that a debt of the magnitude of more than two hundred and fifty billion dollars could be managed successfully. It had been demonstrated that debt management operations of vast proportions could be conducted without setting off harmful repercussions in the economy. The savings bonds program, and thrift habits in general, had taken firm hold in the financial life of the Nation. There was no doubt that the financial structure and the financial operations of the Government were capable of meeting the strain placed upon them by the continuing threat of further Communist aggression.

As we go along, Mr. Hess, if you have

[1780]

questions, I would be very happy if you would bring them up and we can interrupt this recording at any time.

The next item that I am going to take up will be the reduction of the public debt by ten and three quarters billions of dollars, and achievement of a budget surplus of about three and three quarters billions dollars in the six years ending June 30, 1952.

Mr. Hess, I am also going to outline for you the improvement in the structure and the ownership composition of the public debt during the postwar years and show you how the provisions of securities, suitable to changing investor requirements, were offered to the public.

During the six years ending June 30, 1952, the United States Government had accumulated

[1781]

budget surplus of approximately three and three quarters billions of dollars. This surplus, together with funds over and above normal needs available in the cash balance at the end of wartime financing, made it possible to reduce the public debt from approximately two hundred seventy billion dollars on June 30, 1946 to two hundred fifty-nine billion at the close of the fiscal year 1952.

I'm going to hand you at this point, Mr. Hess, a table which shows the surplus or deficit of receipts compared with expenditures for each of the six fiscal years ending with the fiscal year 1952. I wish you would insert this table into the script that we are now producing.

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Fiscal Years	Surplus**	Deficit**	Collective Surplus
7-1-1946 to 6-30-1947	754		754
7-1-1947 to 6-30-1948	8,419		9,173
7-1-1948 to 6-30-1949		1,811	7,362
7-1-1949 to 6-30-1950		3,122	4,240
7-1-1950 to 6-30-1951	3,510		7,750
7-1-1951 to 6-30-1952		4,017	3,733
7-1-1952 to 9-30-1952*		3,900	- 167
10-1-1952 to 3-31-1953*		1,900	- 2,067
	12,683	14,750	- 2,067

*These figures were taken from Page 11 of the Annual Report of the Secretary o£ the Treasury for Fiscal Year 1953 which was signed by G. M. Humphrey, Secretary of the Treasury.
**Millions

The achievement of a budget surplus of about three and three quarters billion dollars in the six months ending June 30, 1952, is more remarkable in view of the serious problems which our economy faced during that period. After World War II we undertook a rapid shift from war to peace. Readjustment to a peacetime economy was still in process when it became clear that our help was needed to turn back the threat of

[1783]

communism in Europe. The program to aid European recovery succeeded in putting communism on the defensive throughout Western Europe and in Greece and in Turkey. No sooner had the success of this program become evident, however, than the dictator countries struck in a new area. The attack on Korea gave notice that the Communist plans for world domination were being relentlessly pursued. It was necessary to begin a new security program. Here at home and in alliance with other friendly nations, adapted to the requirements of a strong and lasting defense against Communist aggression, it is significant that we had been able to do these things and still achieve a substantial budget surplus for the six-year period which could be applied to the reduction of our huge wartime debt. Moreover, it had been found possible during this period, made a significant contribution

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to the financial health of our country and our economy. The reduction in bank holdings of Federal Reserve securities by substantially larger amounts than the reduction in the total debt outstanding, was made possible by the Treasury's program for the widest possible distribution of government securities outside the commercial banking system. Ever since the close of World War II the goal in the Treasury's debt management program has been to place the maximum amount of securities with non-bank investors. Such a program requires, of course, that the Treasury provide these investors with securities suitable to their requirements. A good example of this policy is found in the securities placed with the financial institutions other than commercial banks, such as savings banks and insurance companies. It is generally recognized that the

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Treasury's longest term bonds are particularly suitable for investment of funds of institutions of this type. But in a growing dynamic economy the investment market represented by these funds is constantly changing. The Treasury, therefore, had kept constant watch on the accruing funds of non-bank financial institutions in connection with each major financing operation in which institutional investors might participate. I consulted with representatives of these groups. At meetings held in the Treasury Department, all the facts available to the studies of the Treasury had been placed before them by members of my staff and we, in turn, sought and received their counsel as to the procedures for refunding our new financing which should be adopted at any particular time. The result was that the Treasury had maintained a considerable

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investment of long-term institutional funds in government securities, despite the great outflow of such funds into mortgages and other private business. This reflects not only our joint efforts that were made with various investor groups to fit government securities into a changing investment situation, but also the maintenance of a basically sound position in the public market for United States Government securities. With a debt of over two hundred fifty billion dollars, an orderly situation in the government bond market at all times was one of the vital requirements of the policy which safeguards the government credit and fosters an environment favorable to long term investments. In addition to the efforts that were made to provide a satisfactory outlet for the funds of non-bank financial institutions, the Treasury

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also maintained an active program for attracting and holding the short term funds of business corporations, The issuance of tax anticipation bills, which represented at that time a new departure in Government financing, might be mentioned now in this connection. These bills were designed as an investment medium for funds accrued by corporations to meet the heavy tax payments due on March 15 and June 15 of each year. The anticipation bills, together with savings notes and regular bills, fulfill the purpose of providing an outlet for short term business funds of all kinds. Approximately six billion dollars of savings notes, largely held by corporations, were outstanding on December 31st, 1952. Tax anticipation bills were outstanding in the amount of four and a half billion dollars as a result of the offerings in October and

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November of 1952. And about two and a half billion dollars of tax anticipation bills were sold in October and November of 1951 and were used mainly by corporations in payments of taxes due in March and June of 1952.

I think that this brief review of the experience that we had with securities particularly suited to business needs, indicates that the Treasury had considerable success in providing investment outlets both for corporation tax reserves and for the large volume of other short term funds which business organizations must have kept on hand during periods of high business activity. The Treasury's savings bond program which was shaped primarily with the requirements of individual investors in mind, was undoubtedly the best-known of all our activities to meet investor needs and to encourage wide-spread ownership of Government securities.

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In addition to that type of financing I want to briefly call attention, at this point, to the fact that we greatly stimulated thrift and individual savings throughout our country by an active promotion of United States savings bonds. The importance of the Government's achievements in holding and increasing the wartime investment of the American people in savings bonds can best be appreciated when we recall the doubts and fears which were widely expressed on this matter during the early postwar period On June 30, 1946 there were forty-nine billion dollars of savings bonds outstanding, of which approximately forty-three and a half billion were in the hands of individuals. A large number of these securities were owned by people of limited financial resources whose government bond holdings

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represented their only liquid savings. No one could predict what would happen to those investments as the business situation developed. After every other major war in our history we had experienced severe depression and wide-spread unemployment. Reconversion from wartime to peacetime business, which was in process back in 1946, represented the most rapid and far-reaching business adjustment which had ever taken place in this country. And at the same time it was realized then that the size of the Government debt would bring problems of debt management more difficult and complex than any we had ever faced before. Savings bond holdings represent one of the imponderables in this situation. At the time, many thought that a wholesale liquidation of savings bonds would take place in the near future, and that such a movement would be

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unavoidable. If business fell off sharply, it was argued that ready cash would be needed to tide people over the hardships of unemployment, and savings bonds represented the chief source of ready cash for millions of families. If business and employment held up, people would cash their bonds, on the other hand, to finance purchases of goods which they had been unable to buy during the war. At best the outlook was certainly clouded with uncertainty. But at this time, after careful consideration and study and after a discussion of the problem with the banking fraternity, the Treasury came to believe that a nation-wide thrift campaign was needed which would enlist not only the savings bond promotion activities, but also the assistance of all the savings bond groups of the country,

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including the commercial banks. The purpose of this campaign was to make people aware of the desirability of holding on to their bonds and increasing their savings, generally. When it became clear that the widely heralded prospective depression in the early postwar period was not occurring, and when consumer goods became available in quantity, consumer buying reached and maintained a volume far beyond the business experience of any previous period. Many savings bonds were cashed to pay for new houses, new cars, educational programs, family emergencies and such. But other bonds were bought, thus demonstrating that the Treasury's thrift program had taken hold. In addition, substantial amounts of wartime bond purchases were retained as permanent investments. Clearly, the thrift habits which the Government continually emphasized during the war and postwar years in connection

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with the savings bond program have become strongly entrenched, and even continues to this day in spite of the greatly changed financial picture. The important feature of the savings bond program during the war and postwar years had been not solely to sell Government securities, but rather to encourage savings habits in general. There is no doubt that the Treasury's promotion program for savings had succeeded in stimulating savings of all kinds. This was particularly true in the case of the many families whose savings bond purchases through the payroll deduction plan had represented their first experience with regular savings. At this point, Mr. Hess, I want to touch briefly on the use of debt policy, cooperatively with money credit policy, to contribute towards healthy economic growth of the country. Maintenance

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of stable credit conditions has long been recognized as an important influencing factor in the maintenance of high activity and employment. Important responsibilities in this area had been assigned by the Congress to the Federal Reserve system and these responsibilities involved keeping fluctuations in the total supply of credit from becoming so excessive as to endanger healthy economic, growth and the maintenance of sustained high activity. The Treasury had the responsibility for debt management policies. The public debt, at the close of the fiscal year 1952, amounted to over 40 percent of all debts, public and private, and among the important holdings of Government securities were those of the banking system. It was clear, therefore, that the Federal Reserve's responsibility for sound public debt policy were intermingled

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and must be discharged cooperatively. The broad objectives of the two agencies were the same. The problem was to balance the many difficult considerations that entered into policies formation on each particular matter involving both debt management and credit policy. Throughout the period since the close of World War II, the Treasury and the Federal Reserve system had agreed on fundamental objectives of maintaining a high level of production, employment, and income, with as great price stability as possible under the varying conditions which existed in the economy. The related objectives, which were involved as the postwar period proceeded, were also a matter of agreement between the two agencies. These included: First, maintenance of confidence in the credit of the Government.

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Two, maintenance of a sound market for the securities of the United States Government. Three, restraint during much of the period of overall credit expansion. Four, increase in the ownership of Government securities by non-bank investors and reduction in the holdings of the banking system. And finally, fifth, adjustments from time to time in the wartime pattern of interest rates as this became appropriate.

There were differences of opinion on various occasions as to the techniques which should be employed in reaching these objectives. But there was never any disagreement as to the fundamental goal to promote stable economic growth through credit and debt policy while meeting the fiscal requirements of the Government. During those years, the Treasury and the Federal Reserve

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worked together on the several programs which were undertaken to achieve their joint objectives. The two agencies cooperated in a debt reduction program concentrated on the holdings of the commercial banking system. Both agencies were also in favor of encouraging savings throughout the economy. They were also in agreement that when the occasion called for them, selective credit controls and other selective restraints could be useful in dealing with inflationary pressures. In the process of carrying out these programs, the views of the two agencies often differed as to matters of emphasis, selection of instruments, and methods to be employed, and the timing. All these matters, however, were the subject of continuing consultation between members of my staff and myself on the one hand, and representatives

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of the Federal Reserve system on the other. The outbreak of hostilities in Korea presented new problems of monetary and debt management which increased the need for close cooperative planning and consultation between the Treasury and the Federal Reserve System. The situation which we faced at that time differed from any in our previous experiences. The attack on Korea and the response of our country at the United Nations, truly, did not precipitate an all-out war. The defense program had to take into account the fact that further Communist aggression might at any time be attempted. The new strains which these developments placed on our economy and on the finances of the Government were recognized by the Treasury and the Federal Reserve. On March 4, 1951 the two agencies made a joint

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announcement emphasizing their common purpose in assuring the successful financing of the Governments requirements and maintaining soundness in the public debt structure. As the result of the continuing joint efforts of the two agencies, the financing of the Government's requirements, including its requirements for new money during the period of the Korean emergency, was successfully conducted with a minimum strain on the financial structure of the Nation.

At this point, Mr. Hess, I had planned to give you a review of our tax policies and actions during the Truman administration, but I have decided that I will postpone this discussion until a later date, at which time, at a special taping, we'll take up the tax structure and the reorganization of the various

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agencies of the Treasury Department. If that's agreeable with you, we will pass up that item at this moment.

At this time, Ill touch briefly on the formulation, expression and coordination of the United States foreign financial policies during my time in the Treasury. The six and a half years of my term as Secretary of the Treasury, were years of rapid evolution in United States foreign financial policies required to meet and rapidly changing developments in the world political and economic situations. We passed through the immediate postwar adjustment to the termination of lend-lease arrangements, and through the period of emphasis on the physical recovery of industrial and agricultural production here in our own country. In 1949 and 1950 we increasingly devoted attention to

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financial, monetary, and exchange policies, which were making it possible to approach the kind of international monetary system and level of international trade with reduced reliance on United States assistance which we had been seeking. Then in 1950, the attack on the Republic of Korea posed for us the necessity of new emphasis on defense throughout the free world and presented new problems in the financial relationships of the United States with other countries. Throughout this period, while dealing with the immediate and urgent problems which continuously arose, 1 sought to keep before the world our broad objective of high level world trade and investment which would improve the standard of living of the free peoples and obtain higher levels of useful production, employment and trade.

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Conscious of the financial costs of our foreign assistance programs, I sought to encourage greater reliance on trade and investment and a better balance in international accounts through investment and through realistic exchange rates backed up by vigorous and sound internal financial policies among the countries participating in our assistance programs. Our hope was to achieve a goal of expanding multilateral trade and a greater degree of convertibility of currencies, which would open the world to an increasing extent to the stimulating and constructive forces that would be brought into play by the competitive price system operating internationally as well as domestically. Accordingly, we sought the removal of hampering restrictions, whether they took the form of restrictive tariffs, quotas, prohibitions,

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exchange restrictions, or any other artificial supports or devices. In the United States, we were able to contribute decidedly to these objectives. We maintained a strong currency and through our free convertibility of dollars into gold for international transactions, provided the foundation upon which the world monetary system could be rebuilt. We made substantial progress in reducing our barriers into free flow of international commerce through our tariff reductions and in the improvement of our customs administration.

I was greatly pleased to see our imports grow significantly during that period, and I had great hopes that our friends abroad would be in position soon to pay their way, to an increasing extent, by trading freely in world markets. Much of the progress which we could make towards this

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goal depended upon the actions of our governments. I took an active part in our efforts to obtain their cooperation in promoting these objectives. Opportunities were provided through personal contacts, through expressions of this Governments views, and through constant contacts between the Treasury and foreign finance ministers. Representatives of foreign governments frequently came to Washington to discuss problems of mutual interest and I made many visits to foreign countries for consultations and conversations with our allies' financial officers on numerous occasions. Of course, ultimate decisions and exchange, fiscal and other major financial matters had to be taken by the countries concerned, But we were in a position to seek their cooperation and to express our views. In addition to the normal

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relations between governments, we then possessed the new International Monetary Fund, an international organization which had been formed to devote special attention to the promotion of consultation and cooperation in exchange policies with a view to avoiding conflicting courses of action by the nations of the world. Throughout my term as Secretary of the Treasury I served as Governor of the United States in this institution. It was a great privilege to me to have the opportunity to take an active part in the Fund's early formative stages, and in its subsequent development through the years.

In addition to this broad concern, a number of problems arose in the coordination of grants and credits being undertaken by a variety of administering agencies. I was chairman

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of the National Advisory Council on International and Monetary Problems which was charged by Congress with responsibilities for such coordination. The council reviewed the financial policy issues arising in the series of annual assistance programs, as well as those presented by the continuing operation of national and international lending agencies. In the later part of the period, and particularly after the aggression in Korea, the Treasury had been concerned with the financial aspects of our mutual security programs. As the mutual defense programs developed under the aegis of the North Atlantic Treaty Organization, it became apparent that many of the major decisions in foreign countries could be taken only with the active participation and approval of the finance ministers. Frequently the critical

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questions concerned the financial effort required of NATO members relative to the contributions being made by other members and to the form and amount of the United States assistance. At the time our contribution to the common effort was a matter of major concern to the United States taxpayer. Accordingly, at the designation of the President, I became a member of the council of the North Atlantic Treaty Organization serving in this capacity with the Secretary of State and the Secretary of Defense.

A special responsibility arose from the Korean conflict. In support of our efforts in Korea, I took action on December 17, 1950, to block financial transactions involving Communist China or North Korea. This measure not only immobilized existing dollar assets

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of Communist China and North Korea and their Nationals but prevented these areas from selling their goods to markets in this country for foreign exchange which could be used to aid their attacks upon our forces.

Many of these international financial problems required fairly constant attention throughout the period that we're now discussing. In each of the postwar years, however, circumstances required that special attention be given to one or more particular aspects of the broader international financial problem as indicated in the following instances: When I began my term of office in June 1946, we were faced with the problem of immediate postwar relief and reconstruction and the task of building a stronger international monetary system. An initial part of the latter task was the carrying

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forward of the organization and functions of the financial institutions which had been originated in the Bretton Woods conference in 1944. One of these institutions was the International Monetary Fund, which was designed to improve the standards of living of its members and to promote production and trade through international cooperation and exchange policies. It was directed to work toward a world of free exchange and convertible currencies and, to this end, was provided with funds available for short term financial assistance to be associated with its consultations and review of the exchange, monetary, and financial problems of its members.

The second new institution, the International Bank for Reconstruction and Development was designed to make, or, guarantee, international

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loans for productive purposes. I participated in the formulation of policies for the two organizations through the National Advisory Council, which advised representatives of the United States on the boards of the two institutions. As United States Governor, I also represented the United States at the seven annual meetings which were held while I was Secretary of the Treasury. The year 1947 was marked by an increasing evidence that many foreign countries, particularly in Europe, were unable to effect the conversion to peace time conditions and carry out the needed reconstruction without serious internal inflationary stresses and a critical strain upon their balance of payment. The immediate postwar program of relief on an international basis began to be replaced by United States foreign

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relief programs, Our effort to rebuild the world monetary system was set back by the failure of the British attempt to make sterling convertible and the rapid exhaustion of the funds provided by the Anglo-American financial agreement. As administrator of the Anglo-American financial agreement, in consultation with the National Advisory Council, I conferred with the representatives of the British Government on the situation arising out of the 1947 crisis. Recognizing the economic stresses under which the European countries were laboring, the Executive branch developed and presented to our Congress in the winter of 1947-48, proposals for European recovery programs. As chairman of the National Advisory Council I guided the deliberations of the Council on the major financial

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policy questions raised by programs of this magnitude and character. In presenting the views of the Council to the Congress, I pointed to the large outstanding obligations of the European countries and recommended that the bulk of the assistance be provided in the form of grants, rather than loans, in order that we might avoid so large an increase in debt as to operate to the disadvantage of future trade and private investment. The importance of efforts by the participating countries to increase production and expand trade and seek financial stability was, greatly stressed. Particular emphasis was given to the vital importance of the control of inflation through appropriate fiscal and monetary policies, taxation, and improved fiscal administration, curtailment of the postponable expenses, sound

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credit and debt policies, and appropriate exchange rates. It seems ironic that our country, in the past several years, has failed to note carefully our admonition to the countries of Europe back in those days of 1947 and '48.

Also in 1948, it became apparent that financial reforms were necessary in Germany and Japan. In both countries the early postwar period was characterized by acute inflation which impeded economic recovery internally and kept them in a weak international position supported by large appropriations administered by the United States military forces. The Treasury cooperated actively with the State and Defense Departments in planning and carrying out the currency reform in Germany. This reform was highly successful and gave impulse to the striking recovery in the balance of

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payments and the internal prosperity of Western Germany. Through the National Advisory Council, attention was focused on the Japanese situation in the same year and recommendations were made which eventuated in special missions to Japan. These missions advised the supreme commander and the Japanese officials on exchange policy and internal measures. The stabilization program resulting from these efforts provided an impressive stimulus to Japanese recovery. In 1949 progress was being made in a number of Continental European countries in controlling inflation and strengthening their currencies. However, in my presentation to the Congress of the recommendation of the National Advisory Council in the spring of that year, I suggested that the problem of exchange rates should be reviewed with a number of European countries

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during the current year with a view of exploring the extent to which they might improve their position by an adjustment of their overvalued currencies. In the autumn of 1949, shortly after the conclusion of the annual meeting of the International Monetary Fund, and the International Bank, the British Government decided to adjust the par value of the pound sterling and this was quickly followed by a number of adjustments in other exchange rates. Following this world-wide adjustment, the current deficit of the rest of the world with the United States which had been more than seven billion dollars per annum early in 1949, dropped to about a third of this figure at the then current level of United States assistance. This permitted some improvement in foreign reserve. Although the exchange adjustments did not

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account for all of this favorable turn in the world payment situation, it did seem clear that they contributed substantially to this result. The invasion of Korea set off a new series of disturbances throughout the world. Prices rose and increased military preparations added to the generally inflationary pressures in many countries. Large imports by the United States resulted in considerable additions to the gold and dollar reserves of the sterling area and other raw material producing countries. But the high prices of raw materials adversely affected the European manufacturing centers. There were suggestions forthcoming that some of the raw material producing areas appreciate their currencies with respect to the dollar. The National Advisory Council opposed any general

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revision of exchange rates by countries maintaining exchange restrictions or receiving special United States assistance. And I stated the view of the United States that such action was not justified in view of our armament efforts and our mutual assistance programs and would merely give a trade advantage to particular countries. New evidence of inflationary strain and external pressure on the balance of payments developed abroad in the latter part of 1951, and was continued right up into 1952. These developments emphasized the close relationship of international financial policy to a sound balance of payments position. This theme was developed during the consultations and discussions of the International Monetary Fund during the summer of 1952. Efforts were undertaken, particularly by the United Kingdom and

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other countries, to arrest inflationary trends. In the annual meeting of the International Monetary Fund and the International Bank in Mexico in September of 1952, I noted an increasing realization of the vital importance of controlling internal inflation through sound fiscal and financial policies. Expressing the views of this government, I emphasized the essential, but frequently unpopular, role of the finance minister in urging the difficult road of fiscal and monetary measures which minimized inflationary pressure as against the easy and frequently popular road of inflation and exchange and trade restrictions which leads, in reality, to instability and to weakness.

I somewhat emphasized our international financial problems at this point for the purpose of comparison with our current problems which we

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have been experiencing in the last three or four years.

At this point, Mr. Hess, I had intended to discuss, in detail, some of the reorganization and management improvement [see p. 1861] programs which we undertook in the Treasury during my administration. I have decided, however, that rather than to include it at this present interview that I will discuss this phase at a separate interview at a later date. To conclude this present interview I would like to point out that this review of the Treasury policies and programs from June 1946 through December 1952, that the extraordinary conditions in the postwar period required extraordinary efforts to deal with them. As I pointed out, the revenues of the six fiscal years ending June 30th, 1952, more than paid for Government expenditures during

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those years and confidence in the credit of the Government was maintained. Within the Treasury Department and in cooperation with other units of the Government a great many forward steps were taken to improve operating practices and to provide better service to the public at a minimum cost. In the international area, although our position as lender in world affairs was relatively new, our Government successfully met the challenge of effective leadership in new international financial organizations, effective aid to our allies in their struggle to rebuild their economies and their international trade, and effective cooperation with other free nations in a program of mutual defense against aggressions. Of course, I must point out that many problems still remained for consideration and action by

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succeeding administrations. The major one was the continuing threat represented by the Communist programs for world domination. The progress already made, however, under the Truman administration provided a strong basis for future endeavors to promote the conditions which would make for a lasting peace.

HESS: You mentioned the adjustment in exchange rates in the foreign currency and I would just like to ask your opinion of the recent devaluation of the franc by France, since it's very much in the news.

SNYDER: That will have to require a little seasoning to see how it fits in with the world exchange rate pattern. I will point out, though, that this has been long overdue. The financial community has been thinking about this for a

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long time and methods of meeting it when it did come have been somewhat thought out. It did not cause much of a flurry yesterday in world exchange patterns. There was, of course, considerable buying of German marks, probably because of the German mark at this moment is one of the stable currencies of Europe. There was some selling of sterling which is a very weak exchange right now, weak currency. I do not think it disturbed the dollar position a great deal or the Canadian dollar, the U.S. dollar or the Canadian dollar. We will have to see whether there are some other weaker currencies that might cause some doubt as to their stability and bring about adjustment of some of them. We'll have to wait several weeks, I think, to see what effect it might be on world trade and, thereby, on our American stock

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markets. We've always got to stay alert to the shifting patterns of economic programs of the various member countries of the International Monetary Fund. There's a hundred and thirteen members, some of which do not have a very viable position in the economic world. There are many of them that have difficult positions in their exchange and there's, unfortunately, a limited number that have strong economic positions in their world trade at this time. But, personally, I do not believe that if France can stand their own devaluation, internally, because this was a complete reversal of the De Gaulle policy, and we'll have to see how Pompidou can stand up to his leadership internally without some other taking over. So, to answer your question, it will take us a few weeks to see just what the effect, the

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permanent effect, might be.