Regional President Speech

FROM WAR TO PEACE WITH BANKS by Karl iU Bopp before the Delaware County Bankers Association Martin.inn 7:00 p.m. Thursday, March 30, 19U Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis Introduction • We must know where we want to go / "The Cat only grinned when it saw Alice* •• •Cheshire-Puss,1 she began, rather timidly, 'would you tell me, please, which way I ought to go from I here?1 \ 'That depends a good deal on where you want to get to,1 said the Cat. 'It doesn't much matter,1 said Alice. 'Then it doesn't much matter which way you go,' ^-said the Cat." . We must be prepared a. Preparation must be proper (1) liaginot minds won't help (2) "He might as well have et." b. Preparation must be in time (1) An incident at an outpost Sentry: "Haiti Who goes there?" Voice: "A foe." < Sentry: "Tou wait there a minute until I go see the Sergeant." Sentry to Sergeant: "You know he is siggwsed to say fa* Is a friend ¿it thealsay 'Bus' • But he Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis saiu he is a ioe. how what am I going to do?" Sergeant : "Let1 s look it up in the book.1' "fter half an hour fumbling through the book - Sergeant: "You go bacK. and tell that man to return next ^¿onth when we are better organized." (2) V<liat if Hitler surrendered tonorrow'2 3« The unique position 01 banking a. Enoriiioub expansion during the war period U. ù. member banks December 31 (Billion <v) m i 1942 34 74 u 53 26 53 • Wot as great us shipbuilding, aircraft, etc., but very large. b. i^o prospect of serious post-war decline. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 3 - 1. American war record ,, J Ü1 . A. The armed services '¿y B. Production TT^ ' V**' 1. Early mention of sacrifices o mA .2* Accomplishments Industrial production for war and for civiliana Year Total Civilian War 1932 58 58 0 1935-1939 100 100 0 July 1939 106 — July 1940 123 — — Dec. 1943 245 75 170 Despite 8-10 million in the armed forces* C* Finance Ownership of q. S. Government Securities (Estimated holdings in billions of dollars) Amount held Increase in holding., in Dee. 31. 19A3 m i 1242. ¿341 Bulks.... 72.1 2^*6 23*^ Nonbank... 96.6 32.5 2L.L 9.3 Total... l£$.7 57.1 47.8 13.4 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - u - II. Problems of reconversion Â. Demobilization B. Industrial reconversion 1. Nature of the problem (a) In general a high level of pi'oductive employment (b) In quantitative terms Civilian Armed Year labor force Employed forces Unemployed 13*6 1932 50.9 37.3 «3 1939 54.6 U.2 .4 10. 4 19A2 54.5 51.9 4.2 2.6 1946? 57.5 55-5 1.9 2.0 2. a "war versus a peace economy A question of markets In Yvar : Government buys In peace: '*.ho v.ili buy v.liat? 3. Production creates markets (a) General analysis (b) The "hitch": the individual employer versus all employers 4« The challenge 5. Individual company approach 6. '»¡hat can you do? - Buying a radio Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 5 - 7. Attitudes and approach to reconversion problems (a) Management (1) Henry J. Kaiser, industrialist "...the principal responsibility for post-war planning must rest squarely on management. "...in a machine age* a great mass of humanity must work for wages. This is not to say that the channels of opportunity for in­ dividual enterprise will be closed; but mass production under power driven machinery clearly delimits the types of business organization which can prevail. "Let' s go back into the risk busi­ ness. Accept all the hazards of enterprise and do a heroic job of building. This was the spirit of America. Can It be any less so today?...w (2) Eric A. Johnston, Pres., U.S. C. of C. "Clear definitions of the rules of the economic game to enable business to make plans are needed." Govern­ ment's. part. "...A competitive capitalistic society is found to be the most stimulating to the creative in­ stincts of the individual. And the individual is the keynote to economic Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 6 - "The prooleiu is to rei.iOve artificial shackles on hie Creative energy, to rule out regulation that acts as a strait-jacket on ambition, on inven­ tion, on economic venture ana tech­ nological pioneering; to restore norri£.j- human incentives of reward u:j. accomplishments." ihe boal is to restore workers to 11 steady, well paying jobs at the earliest possible moment." (b) Labor (1) Walter P. P.euther, V.P., Unitea Auto Yior^ers of America, CIO ...Government coordination ana uirection cje essential. . .."Yiithout Government initiative, the effect of mobilization of our national economic life ana proauetive effort cannot be acnievea." Proposes creation of a Peace Produc­ tion Board - Government, management, labor, farmers, consumers - with authority to plan, organize and direct reconversion ... "so as to achieve full ana continuous employ­ ment ." Advocates industrial councils in each major industry - management, labor and the consumer in the case of con­ sumer industries. The Government should operate plants in monopolistic or semi-monopolistic industries. Other plants should be leased to private industry. Yardstick. Digitized for FRASER http://fraser.stlouisfed.org/ For expansion in housing. Federal Reserve Bank of St. Louis - 7 - 8. Formal proposals (a) The George-Murray Bill (Hearings - Apr. U) (1) Separate Office of demobilization (2) Congress to be dominant (b) Truman Committee plan (1) Centralize responsibility (2) He stone civilian production quickly (c) The B&ruch-H&ncock master blueprint - broad outline of working principles (1) Aim and answer (A) Objective is to provide an answer to - "How an I going to make a living for myself and for those dear to me when the war is over in a manner of my own choosing?" (B) Private enterprise is adequate to provide the basis far a firm and lasting peace. Source of jobs* (I) No need for another system - Communism, etc. (XI) Private enterprise and com­ petition - resourcefulness. (2) Proposals (A) Human side of demobilization Work Director in the Office of War Mobilization (B) Settlement of terminated war Digitized for FRASER contracts http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 8 - Prime and subcontractors Ko "unemployment by audit" Negotiation with safeguards (C) Disposal of property - materials and plants The ¿Jurpius Property Director Sale of Gov't-owned plants (D) "Financial Kit” - release of working capital (I) Prompt payments (II) Simplified system of loans (I-*-I) Small business - finance and management (IV) Post-war tax lav. (3) Favorable conditions (A) V.ar controls: "Vie have not wanted to leave the Government after the war a jack-pot of controls which invite every pressure group to hit it." (B) Favorable climate - "if we create the atmosphere in which private initiative and resourcefulness - the traditional American spirit - can again take hold.” 9» Tripartite responsibility - coordinated efforts (a) Governmental policy (1) Release of working funds and property disposal (2) War controls 0) Tax structure Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 9 - (b) Business (1) Creative attitude in changeover (2) Increased output, markets, jobs (3) Concerted efforts - "Grass roots" approach (c) Labor (1) Creative attitude to ease changeover (2) Absorption of costs - cost per unit (3) Good business - common objective Eric A* Johnston - Boston Univ. Founders* Day 3/13/44 Management and labor must agree upon a program of mutual assistance. "I say just two things to you of management and to you of labor: One - go ahead and turn this country into a continuous brawl and the Govern­ ment will chain you bothj.. two - make a better choice, work together and stay free." "Bight now you (labor) are fvst where we of management were 10 years ago«" He pointed out that from 1921 to 1930 management had everything its own way with a friendly ad­ ministration in Washington, low taxes, and a friendly public* "And what did ws do with our power?" he asked. "On the economic side we gave this country a balloon boom that had to burst. On the moral Sid* we produced men like Insull and Hopson and Musica, who undermined confidence in business. "So what did we get? Beginning with 1933 we got tbs biggest public beating that any group of Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis 10 - Americans ever took. The public wanted us socked, and socked we were. "Gentlemen of labor, 1 must accuse you of not being very original. • .From 1933 to 1942 you rode high. A friendly administration in Washington; all sorts of favors fed to you daily from the Washington political table. Management weak and intimidated. "So what did you do with your power? On the economic side you gave yourselves a labor boom... On the moral side you produced men like Browne and hioff and Scalise, who gave all labor a black eye. "You forgot the veiy thing we forgot. In the architecture of American society, it's just three jumps from the master bedroom to the dog-house. "Now the dog-house is yawning for you. The Federal Government and many of the State govern­ ments are beginning to sock you with laws... If the public wants you socked, why, socked you will be. "And don't think you can duck any of it by yell­ ing 'anti-labor1 and 'reactionary' and 'Fascist'. We didn't escape any blows coming our way by yelling 'anti-business' and 'bureaucrat' and 'Communist'." Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis - 11 - C. Finance 1. Need for funds - maximum £36 billion (a) "Reconversion" cost - ola plant (b) Inventory (c) Equipment ana plant purchases (a) Deferred maintenance (e) Wartime tax accruals 2. Estimated availability of funds (a) Net wartime accumulation - , 10-20 billion (b) access to open market and DaiJcs (c) Inaiviaual savings §90 1940-1943......... billion By ¡aid-1945.......150 " III The role of baiJcs A. Do baiiks have a reconversion problem? B. The necessity of assuming risks 1. Earlier unfortunate experiences Result of (a) failure to realize risk was being taken (relied on outmoaed credit standards) (b) Bid not ^et up reserves 2. Solution Know what risks you are taking - including the risk to the banking profession. Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Karl R. Bopp (1944, March 29). Regional President Speech. Speeches, Federal Reserve. https://whenthefedspeaks.com/doc/regional_speeche_19440330_karl_r_bopp

@misc{wtfs_regional_speeche_19440330_karl_r_bopp,
  author = {Karl R. Bopp},
  title = {Regional President Speech},
  year = {1944},
  month = {Mar},
  howpublished = {Speeches, Federal Reserve},
  url = {https://whenthefedspeaks.com/doc/regional_speeche_19440330_karl_r_bopp},
  note = {Retrieved via When the Fed Speaks corpus}
}