William McChesney Martin

William McChesney Martin, Jr.
File:William McChesney Martin, Jr..jpg
9th Chairman of the Board of Governors of the Federal Reserve
In office April 2, 1951 – February 1, 1970
Preceded by	Thomas B. McCabe
Succeeded by	Arthur F. Burns
Personal details
Born	December 17, 1906 New York City
Died	July 28, 1998(1998-07-28) (aged 91) Washington, D.C.
Nationality	American
Profession	economist

William McChesney Martin, Jr. (born December 17, 1906, St. Louis, Missouri – died July 28, 1998, Washington, D.C.) was the ninth and longest-serving Chairman of the United States Federal Reserve, serving from April 2, 1951 to January 31, 1970 under five Presidents.

Early life

William McChesney Martin, Jr. was born 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. 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. 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 towards increasing regulation of the stock market led to his election to the exchange's board of governors in 1935. There he worked with the U.S. Securities and Exchange Commission (SEC) to attempt 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." Like his tenure as governor on the exchange, Martin's presidency focused on cooperating with the SEC to increase regulation of the stock exchange.

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 Soviet Union.

Head of the Export-Import Bank

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.

Chairman of the Federal Reserve

With Robert Rouse, Woodlief Thomas, and Winfield Riefler of the Fed, Martin negotiated the 1951 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 B. 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.

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. As a result, his decisions were often supported by unanimous votes on the FOMC. His most famous quote about his central banking philosophy was, "The job of the Federal Reserve is to take away the punch bowl just when the party starts getting interesting," referring to the need to raise interest rates when the economy is at its most active.

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.

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, such as serving as a trustee on the board of the Rockefeller Brothers Fund.

On July 28, 1998, at the age of 91, he died at his home in Washington DC.

Trivia

After the presidential election of 1960, GOP candidate Richard Nixon blamed his defeat on Martin's tight-money policies.

References

• Portions of this article are based on public domain text from the Federal Reserve Bank of Richmond.

• The trivia article is collected from the footnotes of Tom Wicker's

biography of Dwight D. Eisenhower.