Oral History Interview with
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.
John W. Snyder
June 18, 1969
By Jerry N. Hess
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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.
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Opened September, 1970
Harry S. Truman Library
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Oral History Interview with
John W. Snyder
June 18, 1969
By Jerry N. Hess
HESS: Secretary Snyder, to begin this morning on our discussion of taxation
and the public debt, before we get into some specific measures that came
before Congress in the Truman administration, I'd like to ask you just
a general question about management and the public debt. In his Memoirs
Mr. Truman states that the management of the public debt during his administration
could be summarized in three time periods: From April the 12th, 1945 to
June 30, 1946; from July the 1st, 1946, until the Korean conflict in 1950;
and beginning with the fiscal year in 1951 until the end of the administration,
matters revolved around the situation in Korea. Could you comment on the
three time periods as outlined by President Truman?
SNYDER: I think that would be a good plan, and during the course of our
discussions, we will certainly bring those three debt management periods
into proper focus. However, to try out a presentation of this, I thought
this morning I would take up the beginning of my identification with the
debt management problem beginning in June of 1946. This was a little over
a year after Mr. Truman's administration began. However, we can go back
and pick up, if you like, regarding what happened before that time. Unfortunately,
Fred Vinson is no longer available, having passed away several years ago.
But to tie the program in for Mr. Truman's administration on debt management,
I will undertake to fill in what happened during
the year when Mr. Truman took office in April of 1945, up until the time
that I became Secretary of the Treasury.
I think I'll start with one hundred and sixty-eight years ago. It was
one hundred and sixty-eight years ago that Albert Gallatin became Secretary
of the Treasury, and at the time when Gallatin undertook the extremely
difficult task of guiding the fiscal affairs of a young nation. I think
that the account of his success is one of the important pages of our history.
He established right from the beginning a meticulous accounting system
in the Treasury, and his clear reports on the Government's finances are
still model documents down to today. It was upon this foundation that
the Treasury developed the reputation of integrity and efficiency that
has won the confidence
and respect of the American people through the years. With the staunch
support of his President, President Jefferson, Gallatin was the first
to develop the theory that during times of national peace and prosperity
the Treasury must show ample surpluses to be applied towards an orderly
reduction of the public debt. He realized that the nation must, in such
times, prepare itself to cope with an emergency that might later arise.
He realized that our permanent economic well-being rests upon fiscal solvency.
Such has been the primary fiscal objective of President Truman throughout
his administration. And as his Secretary of the Treasury, I sought always
to work towards that goal.
The Secretary of the Treasury is charged with the responsibility of the
supervision of the national credit. I cannot overemphasize the vital
importance of the financial obligations which our country has assumed
through the years, and particularly during the war years. Not only our
own security, but the foundation of world peace has depended on our accepting
these obligations with a solemn sense of trusteeship. There can be no
compromise either in our determination to pay that much which we justly
owe, no matter how difficult the road. You must remember that it will
be the part of each of us, a part of our creed, that we as a people stand
inflexibly for a substantial and orderly reduction of our national debt.
We have roamed far away from that at times during our history, but it's
just as true today, in my opinion, as it was back in Gallatin's time,
when he first set that
model of the operation of the Treasury.
One of the most important recollections that I have was a statement that
I made on the day that I took office. I said, "Decisions of policy are,
of course, of no avail, unless they are based on the best available data
and unless they can be promptly and vigorously carried out. It is most
providential that the Department of the Treasury possesses such an outstandingly
able and devoted staff of public servants." That has been true throughout
the years. The Treasury has attracted some of the most competent public
servants of any department in our whole Government. Its continued ability
to finance this growing Government has been an outstanding tribute to
the founders of the Treasury policy and those who have kept it up to date
with changing times,
as the years roll by. I recall saying that on that opening day that it
would be presumptuous for me to state in detail at that time the various
fiscal and monetary measures which the Government would employ in order
that the country may quickly complete its transition from war and effect
the reconversion to a stable and prosperous economy. But I did determine
from the very beginning that I would use to the fullest advantage the
good counsel of able and learned men in fiscal, financial and monetary
matters, both in and out of Government; and throughout my period from
1946 to '53, I tried to follow that procedure in the operation of the
HESS: Who did you rely on outside the Government for advice the most?
SNYDER: I called on a great concourse of people.
HESS: Who was the most helpful?
SNYDER: That would be very difficult to pinpoint, because I was there
six and a half years, nearly seven years, and at different times, different
people were called on to be of assistance. I had a great many bankers,
businessmen, lawyers, some of them that I can recall very particularly:
Bob Fleming, here in Washington; Ned Brown, a banker out in Chicago; Walter
Smith in St. Louis; John Evans in Denver; A. P. Giannini in San Francisco;
Henry Spencer in Boston; L. D. Kurtz in Philadelphia are a few that come
HESS: Do you recall any particular cases that those gentlemen may have
helped you with?
SNYDER: Well, it was continuous. With bankers it
was largely in debt management. It was in selecting the right kind of
securities. The bankers now were talking about the right kind of securities
to offer to the public, which would be the most acceptable, which the
public would buy more readily; and on various tax matters when I was working
on a tax bill or tax proposal, they were extremely helpful in that sense.
Henry Spencer of Boston, the First National Bank of Boston, was always
ready and willing to be helpful. Mr. Baruch was extremely helpful. In
industry Clair [Clarence] Francis of General Goods -- I can go on and
name any number. In California I had two very able bankers out there,
the Gianninis, A. P. and Mario Giannini. George Eccles of Utah, he was
the brother of Marriner, and a very able banker. And, of course, I would
almost go back and get you a list, if you'd like to have a fuller list
of people who were helpful.
HESS: What I was wondering if we could develop something on the interrelationships,
the working relationships, between Government and private industry, the
private sector in matters of finance.
SNYDER: Well, it was clearly demonstrated that during my period we did
have remarkable assistance. For instance, I may have mentioned this at
one time, but I'll repeat it in light of your question. When I took over
the Treasury, I made an early decision that I was not going to continue
the savings bond program if it in any way was going to be resisted by
the banking fraternity because it was putting the Government
in a very competitive position with the private banking and commercial
banking operation. I had always felt for many years, after we got our
better road system and transportation system, that postal savings were
very competitive and wasn't justified. Of course, maybe when it was first
put in, and post offices were located in most remote places, and communications
were bad, transportation poor, it might have been justified at that time,
but it has since been discontinued, as you know. Well., I felt the same
way about the savings bond program, that if the bankers felt that it was
competitive and not desirable, I would find a way to bring that to a close.
So I sat down with [Vernon L.] Clark, who was the head of the savings
bond program at the time, and studied the situation very carefully and
we decided to put it up to the
bankers on the basis that we would no longer appeal to the public to
buy savings bonds as a patriotic act or a defense act, but as a good,
economic act on the part of the saver; that he was saving bonds because
it was a good thing to have savings and that by putting it on that pitch,
selling the idea that savings was good for the individual to prepare him
to buy the things that he might otherwise miss buying: an education for
his children, a new house, maybe an automobile in the future, but saving
for a real purpose, for an economic purpose, a standard of living purpose.
We put that before the bankers. I had a meeting of the bankers' committee
that had been dealing with savings bonds, the American Bankers Association,
and I put it squarely up to them and told them that it was my intention
to be guided largely by
their reactions. They felt that the savings bonds were too competitive
and were drawing away from the rebuilding of our economy in the private
sector. I wanted them to tell me so, but my plan was to do it strictly
as an economic device, and not as to the patriotic or any appeal of that
sort. To a man they said, "On that program we'll back you 100 percent,
and please do not discontinue the savings bond program." And through my
whole period as Secretary, that committee worked constantly with me in
the promotion of savings bonds, and in the planning of bonds, in its terms,
in its interest rates, I had their full support. So there is a very pointed
case of private industry working with Government.
HESS: Just as a matter of conjecture, was there ever
a case where the advice that you received from private industry and from
private bankers went counter to the advice that you may have been receiving
from Treasury Department officials?
SNYDER: Of course you're going to have that, but they were always amenable.
There was only one time that I really had a real problem and that was
in 1950 after Korea started. I had started planning, which I'll develop
in our debt management story here, I had begun to move away from the extremely
low interest rates that had been engendered during the war by an arrangement
that had been worked out between Federal Reserve and the Treasury. They
kept rates extremely low. The bill rates were down as low as 5/8ths
and 7/8ths at times, and the note rates were around 2, 2¼ ,
2½. The the long-term rates were down to 3½ and 4. So I had begun with
the assistance of Lee Wiggins who came in as Under Secretary of the Treasury.
He succeeded Max Gardner who had been appointed Ambassador to the Court
of St. James. Lee had been a banker, he had been president of the American
Bankers Association, and he was very well suited to assist me in this
problem. I was going to try to work out a gradual increase in the
rates so as to not throw any sudden weight on the economy. Frankly, a
sudden rise in interest rates can be just as harmful as a sudden drop,
in my opinion. It was working out, and had worked out very well up
until 1952. I had had some arguments with the Federal Reserve Bank, the
New York Bank particularly, and Mr. Allan Sproul, who was the head of
it, was continually trying
to get the Fed back as the chief financial arbiter that New York ought
to be the money center. But after the financing and the debt that we had
rolled up in the Government, and the annual budget and the requirements
of our international commitments, the money center had moved to Washington,
and is still here. The largest controlling factor of the money situation
is right here in Washington. It sometimes may not have been handled too
well, but certainly it has been handled as well as it could possibly have
been handled by the New York bankers, as has been demonstrated so many
times, including going back to the depression on down to date.
HESS: I have a question on that. The recent rise in the interest rates,
when they went from 7½ to 8½ about two weeks ago, now wasn't
that started by the New York bankers?
SNYDER: That's right.
HESS: So they still exercise quite a good deal of power?
SNYDER: They do. There's no question about that. Mr. Hess, I'm going
to now go back and take up the operation of the Treasury in the fiscal
and monetary field during my administration.
For the fiscal year ending June 30, 1947, that was the first year that
I had operated. I came in in June of '46, and I was able to report the
first year that the Government had closed its fiscal year with a surplus.
This was the first surplus that we had had in many years, back before
the twenties. During the fiscal year 1947, the first full fiscal year
following the end of the war, we had made substantial progress in the
reconversion of the American economy to a peacetime basis. By the end
of the year, all previous records of civilian production had been surpassed.
I think I reported that back in our talk on reconversion when I was in
OWMR. Goods and services were being produced at an annual rate of about
two hundred and thirty billions of dollars, and the accumulated backlog
for demand for some types of goods was being satisfied at a very growing
pace. We were able to make that swing in a phenomenal manner, notwithstanding
the high rate of industrial output, full employment, and generally good
harvest. Scarcities of various kinds continued into the year after, particularly
in services. This was also true in housing, housing
materials, automobiles, certain electrical equipment, fuel, industrial
and agricultural machinery, and some other products; and perhaps the greatest
shortage that had been deferred for the whole period of the war, housing,
office buildings, factories, and automobiles were back into production
for the consumer. All these things put a terrific load on the economy,
and all this pressure or desire for things, of course, had an effect on
prices, because labor was demanding increased pay, people wanted things
that were not available, and in scarcity, of course, prices are always
I'm going to call your attention to this because that became a very critical
problem that we had to face, and particularly because of its effect on
inflation. We had been
threatened, as you know, with tremendous inflation following the war
because of the great demand, and the big backlog of savings that we had
stored up because people had bought savings bonds, had deposited money
in savings banks, and withheld it during the war as a patriotic and as
a defense purpose. And the fear was that this tremendous backlog of demand
was going to give us a very rough time from an inflation standpoint. As
it turned out, you recognize that we didn't have as bad inflation as most
of the economists had predicted. This brings me to one of the early policy
positions that I took in regard to debt management, and that was that
the great need for the Federal Government to pursue an anti-inflationary
fiscal policy in the conduct of Government financing. We ought to use
anti-inflationary fiscal policy. The Government must maintain a strong
financial position to assure the continued well-being of our country.
If the Government is not in a strong financial position, it's felt throughout
the whole of our nation's operation. It was always my belief that revenues
ought to be held at a high level while we were in a period of prosperity,
and that would give us the strength to meet the situation should we ever
have a recession, or even a depression.
The President, right from the beginning, faced the problem with great
clarity of thinking. He said, "Let's don't rush too quickly in cutting
back certain of our taxes." We wanted to use as a restraining influence
on the inflationary pressure, our taxes. We had hoped in the early days
that we were going to
be able to reduce the debt annually, and continue with a strong position
financially. However, the President recognized right from the beginning
that we would have to plan some tax relief, and go after a better balanced
tax structure, but we wanted to study it carefully before we moved into
it. President Truman thought that any general tax reduction right at the
beginning would bring on inflationary pressures at a time of such great
demand. So, that was all given careful consideration.
I want to point out to you that the total public debt at the time, June
30, 1947, was two hundred and fifty-eight billion dollars. This was a
reduction from the peak of the debt at the time that I came into the Treasury
of about two hundred and seventy-nine billion dollars. We had reduced
the debt nearly twelve billion
dollars, out of the surplus and out of the application of cash positions.
During the fiscal year 1947, we must record then that we reduced the debt
by about twelve billion dollars.
We went to work on a plan, as I've just told you, a new savings bond
plan, but we got the banks to work with us, and it was so successful that
it served towards a redistribution of the ownership of the bank debt.
We sold to people rather than to banks, and helped a great deal in slowing
down the great demand for commodities until we could get the supply moving.
The concentration of debt had largely gone into the hands of the banks,
and we started into a program of trying to move it, as I say, out to the
public. This concentration of debt reduction on the bank holdings helped
tremendously in alleviating inflationary pressures during this
About this time, upon the recommendation of Mr. Truman and on the action
of the House Ways and Means Committee, they began public hearings in connection
with the comprehensive review of the entire Federal tax system. I appeared
as the first witness, and I think maybe it would serve the best purpose
for me to read you a little out of the statement that I made when I appeared
before that committee, because I was putting great confidence in our effort
to start intelligently to improve our tax structure. In trying to work
our way out of the recession, and during World War II, we had met the
situation for revenue by placing a tax on anything that was handy at the
time. And we had a rather knotty, horrible looking tax structure that
had bumps all over it that needed to be corrected, and developed a lot
of loopholes and should be given attention to. And we realized that it
was going to be a real problem. When you started trying to remove a tax
on one side, somebody on the other side would holler, and it had to be
intelligently studied. So, among other things, I said in my appearance
before the House Ways and Means Committee on May 19, 1947:
The first requisite of a tax system is that it should produce adequate
revenue to balance the budget and to provide a substantial payment
on the public debt. In order to sustain the confidence of the public
in the integrity of the Government's obligations and its financial
I said that as Secretary of the Treasury, I was responsible for the management
of the public debt, and that I was:
Keenly aware that the Federal Government securities are an important
part of the assets of the banks, insurance companies, and other financial
institutions that serve the public as the repositories of its savings.
Moreover, ten millions of persons are direct owners of Federal security.
We have a great responsibility to build a tax system which will preserve
the fundamental soundness of our financial system. As a first step
towards the development of a postwar tax system, facts and evidence
should be assembled for the consideration of both the Executive and
the Legislative branches of the Government. This information will
come from the hearings that are being initiated today, and also from
the continuing technical research work of the tax staffs of the Treasury
Department and the Joint Committee on Internal Revenue Taxation. Later
when this necessary information is at hand, a sound tax program can
be developed. By beginning early, as this committee has, we shall
have time to make a thorough going study of the present tax system
to consider carefully a large number of possible revisions and to
work out a well-balanced program. A program can be outlined first
in broad terms, and the final details worked out as the budgetary
and economic situation grows clear. When the budgetary and economic
situation grows clear. When the time comes to draft legislation, measures
already agreed upon can be taken up in the order of their priority.
It is highly unlikely that the fiscal and economic situation
will warrant enactment of all the ultimately desirable revisions
at one in the same time, but advance planning and study will make
it possible to proceed in an orderly fashion without prejudicing any
necessary part of the program and without the danger of reducing the
revenue too rapidly.
I restated at that time the principles that I believed should guide our
studies and to call attention to a number of the tax problems that needed
careful consideration. I did not feel it proper at that time to make any
specific recommendations regarding the tax system, because I felt it was
so vital that we gather this information carefully and assemble it and
put it in form that we could study it to see the kind of taxes we have
now, the kind of revenue we were going to need, what the President's plan
in his State of the Union message would be, and to go about it in a very
careful, orderly fashion. I believed so thoroughly that
a sound tax system should meet the following essential tests:
The tax system should produce adequate revenues; it should be equitable
in its treatment of different groups; it should interfere as little
as possible with incentives to work and to invest; it should help
maintain the broad, consumer markets that are essential for high-level
production and employment. Taxes should be as simple to administer
and as easy to comply with as possible, while the tax system should
be flexible and change with changing economic conditions. It should
be possible to achieve this flexibility without frequent revisions
of the basic tax structure once it has been established. A stable
tax structure with necessary flexibility confined largely to changes
in tax rates and exemptions should make it easier for business and
government to plan for the future.
I think that that brings into focus for us, the situation as we faced
it, our general thinking, the thinking of the President and of myself,
and of our communication of our belief and of our policy to the Congress
at the very time when we were starting the tax revision plan.
Unhappily, as you know, though we made great strides, we never made the
goal of really getting a well-rounded tax structure set up, because the
pressures, as I've just said, were so great from all different segments
that as you tried to go into one direction, you got pressures from the
other. And while we did make some very good progress, I regret to say
that the Ways and Means Committee at that time, nor since, nor has the
Congress, nor has any administration, been able to round out a smooth
tax structure with as few loopholes as possible, and without certain pressures
where they shouldn't be.
HESS: Do you or do you not think that the tax structure at the present
time is in somewhat better condition than it was perhaps at the end of
the Truman administration?
SNYDER: To some degree there have been some adjustments made, I will
say, though, that I think that all of the changes that were made
later grew out of that tax study that was made back under the Truman administration.
HESS: What were a few of those changes?
SNYDER: We'll get to them as we come along.
HESS: I have one other question that I would like to ask. You mentioned
that both you and the President thought that it was the best thing to
keep taxes at a little higher level after the end of the war, to apply
towards the national debt...
SNYDER: No, no. Our reason right after the war for keeping the higher
rate was as a deterrent to inflation, and that being the case we could
apply any surpluses that were generated to the reduction of the debt.
That was secondary, really. The number one reason for keeping the tax
structure high immediately following the war, was largely anti-inflation.
HESS: Anti-inflation measures. Still, this resulted in the retention
of higher taxes, correct?
SNYDER: That's right.
HESS: What was the opinion of some of the bankers and the industrialists
who you talked to and who you were friends with about the retaining of
the high taxes?
SNYDER: We discussed it with them, told them the problems. They realized,
as did we, that it would only add to the spending stream if we had any
large reduction in taxes, at the very time
that we were trying to get the economy moving again. They realized it
would force prices up, which they didn't want any more than we did.
HESS: Wouldn't some of them want prices to be raised? They are selling
-- they have something to sell?
SNYDER: Well, industrialists are a little more cautious than you might
think. They are more for volume, actually, than the price. They figure
that if they get the volume they can adjust the price that will bring
them a good return in their profits. They are thoroughly for the profit
system, as private enterprise properly should be. I'm for the profit
system, I don't think that capital should be squeezed so hard with taxation
and other labor pressures and things that they are not able to make a
a profit, because capital is a commodity just the same as muscle is.
And if you happen to be a man with capital, and I happen to be a man with
muscle, you've got just as much right to make a profit off of your capital
investment as I have off of my investment of my muscle in labor.
HESS: Were there any industrialists, do you recall, at this late date,
who did want, perhaps, drastic reductions in taxes?
SNYDER: I don't recall any in particular. There was a general call for
reduction. First labor started hollering about reducing taxes, and it
was soon taken on by the organizations that later got into HEW, the public
service organizations -- and the newspapers and economists -- that was
where the demands came from; but I
don't think that the great pressure came from either industry or banking.
The demand for reduced taxes came largely from the economic side.
HESS: Do you want to call it a day for this morning, and we'll start
on the next year's next week.
SNYDER: Then I'll try to shape it up and flow on into it. We won't just
go year by year, except if it has some bearing on change in policy and
debt management, or in the fiscal policy. I'll have to point out the problem
that we were called on for the international picture. If you think this
is a good way of operating it, why we'll proceed along this line.
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