Fait Accompli

As they faced reporters in brilliant sunshine on the L.B.J. Ranch, any lin gering hostility between Lyndon John son and Federal Reserve Board Chair man Martin seemed to evaporate like morning dew.

Only the day before, President John son had publicly expressed his "regret" over the board's 4-to-3 decision to raise the discount rate in order to counter in flationary trends (TIME, Dec. 10). As sembling his quadriad of top economic advisers -- Treasury Secretary Fowler, Council of Economic Advisers Chair man Gardner Ackley, Budget Director Charles Schultze, and Martin himself--in Texas, Johnson discussed the state of the economy with them for two hours.

As Martin explained the board's action, it was intended to "remove boulders" that were causing disturbing "eddies" in the flow of money.

Martin later told newsmen that John son "in no way placed me in the role of defying the President or the Johnson Administration" -- which was how many had described the board's move. It was the timing of the rate hike that chiefly irked the President, who would have preferred that the board wait until after he presented his budget to Congress in January. On broad economic policy, said Martin, "I think the President and the Federal Reserve System have exactly the same objectives. I know I speak for the entire system when I say that we are doing everything in our power to promote the President's program."

Though the board had signally dented his consensus, Johnson managed to ap pear equally amiable. "We all recognize the Federal Reserve is a board of experts in money and marketing," he remarked mildy. "And I make no pre tense to being a monetary expert. Even experts have a division of opinion 4 to 3, and we do have division all the time within the Government."

Silly Noises. In any case, there was little the President could do about the rate increase, for the Federal Reserve Board is wholly independent of Congress and the President. Indeed, by accepting the fait accompli gracefully, Johnson retained the goodwill of the banking community and fiscally conservative businessmen (see U.S. BUSINESS). Moreover, if the board's tighter money policy causes the economy to dip too sharply, Johnson can rightfully argue that he opposed the discount boost all along. On the other hand, if the 58-month-long economic boom continues unabated, as most economists expect it to, Johnson--not the board--will get the credit.

The only really silly noises came from Congress. Texas Democrat Wright Patman, a cheap-money advocate who as chairman of the Senate-House Joint Economic Committee has waged a long feud with the Federal Reserve, announced that he would hold an investigation this week "to find out who is in charge in this country, the Reserve Board or the President of the United States." Louisiana's Russell Long, who will succeed Harry Byrd as chairman of the Senate Finance Committee when Congress reconvenes next month, showed his innocence of economics by protesting: "Nothing could be more unpopular than a major increase in interest rates on the eve of Christmas, when the average man will be borrowing money to provide gifts of joy to his wife and children. Mr. Martin's Christmas gift to the money lenders is an example of Dickens' Christmas Carol told in reverse."

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