Back at the Bank

With a sigh of relief, moneymen from Wall Street to Main Street heard last week that President Johnson had appointed William McChesney Martin, 60, to his fifth four-year term as chairman of the Federal Reserve Board. "This bank is delighted," said a Chase Manhattan senior vice president. So was First National City, whose president, George S. Moore, said of Martin: "This is a time when his experience is needed." No less enthusiastic were foreign bankers, who also see Martin as a staunch defender of the sound dollar that is so necessary to their economic wellbeing.

The President, who plainly does not cherish Martin's independent ways, reappointed him with reluctance, made a barebones announcement of the news. Johnson also made a point of including the information that Board Member Charles N. Shepardson, a longtime Martin supporter, will face mandatory retirement when he reaches 70 late this month. Another sour note was struck by Texas Democrat Wright Patman, chairman of the House Banking Committee and an outspoken easy-money advocate. Martin's reappointment, said Patman, will "cause this Administration much sorrow in future years."

Such critics reflect a tendency to categorize Martin as a diehard, unswerving conservative--but Martin's record belies the notion. He is, rather, a monetary pragmatist who makes, and changes, policy according to what he sees as current requirements. A lifelong Democrat, Martin was a successful Wall Street broker and a familiar figure in Manhattan nightspots in the '30s. When he was named chairman of the New York Stock Exchange in 1938, President Roosevelt told him: "Your job is the worst in the world--next to mine." After leaving the exchange, Martin served as president of the Export-Import Bank, then as Assistant Secretary of the Treasury. He was named chairman of the Fed in 1951 by Harry Truman--no fiscal conservative.

At the Fed, Martin was unhesitating about applying monetary brakes whenever he saw inflation threatening--as, for example, during the Korean War and again last year. Yet it was under Martin that the FRB provided much of the stimulus for the 1960-65 boom by expanding credit and increasing the money supply at an unprecedented peacetime rate. It was that ability--and willingness--to fit policy to contemporary needs that won for Martin the confidence of the banking and business community. And in the last analysis it was that confidence, strongly expressed, that all but forced President Johnson to reappoint him.

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