Inventory of the Frank H. Neely Papers, 1937-1969 [bulk 1964-1969]

He was also a forceful and highly competent executive. Neely ran things. First he ran the Fulton Bag and Cotton Mills, an industrial challenge. Then he ran Rich’s department stores, one of the city’s largest retail operations. Even though Rich’s was a family business and Neely was not family, he ran it, first in fact and then in name as well. He ran local government, civic, and charitable organizations too numerous to mention. And in his spare time he experimented with scientific agriculture on his Norcross farm and wrote books like The Manager, A Human Engineer.

And Neely ran the Federal Reserve Bank of Atlanta for 16 years. Four Bank presidents answered to him during his long tenure. The presidents were by law the chief executives of the Bank, and Neely happily let them manage the details of daily administration. But on broader policy questions they all answered to Neely, who made it clear that he expected the Bank to be efficient, progressive, and productive, and that no one would be asleep at the switch.

One officer who worked closely with Neely, Malcolm Bryan, later reminded him of “the days in 1938 and 1939 when you were prowling the institution from cellar to garret and asking all of the pertinent questions that appealed to your orderly and experienced mind about the flow of work, the equipment, the layout of the shop—and, in passing, making ungracious but pertinent fun of the broken-down adding machines, over-age typewriters, and bedraggled and inefficient equipment generally.”

Neely spent considerable time in his chairman’s office at the Bank, where he frequently held long and sometimes animated meetings with whomever was president. All the presidents became quite familiar with his prodding. Other staff members had little contact with him and regarded him as severe and a little frightening.

Actually, Neely knew very well what the 1935 act had done to his office and his Bank and what Eccles was tying to do with the System. Moreover, he generally supported these objectives. He would have been more impatient with the old decentralized System. It suited him to be a volunteer chairman instead of a professional staff member, and his own agenda for shaking up the Atlanta Fed dovetailed reasonably well with Eccles’s agenda for the System.

The Bank's research department in the 1940s.

The rise of research
At the top of Neely’s agenda was attracting a top-notch economist to the Atlanta Bank and establishing a strong research department. That was where the future lay, he shrewdly concluded after he saw the ambitious plans in Washington for turning the System into a powerful agency for conducting monetary policy. The Board in Washington and the New York Bank already were starting to build research departments. Economists would be needed and heeded. Neely went right to work on the problem. In June 1937 he told the Atlanta board that they needed to hire a recognized economist. In July he told them that he had been to Washington to confer with E.A. Goldenweiser, the Board’s chief economist, and that Malcolm Bryan was the man to hire. Bryan, born in Illinois and trained as a graduate student at the University of Chicago, had been professor of economics at the University of Georgia since 1925. He was a popular lecturer, an eloquent communicator, and a sophisticated and possibly brilliant economist. The Board of Governors already had “discovered” him and brought him to Washington to work on special projects, on a leave of absence from the university, when Neely learned about him.

In January 1938, just after he was named chairman of the Atlanta Bank, Neely wrote to the Board in Washington, proposing to start a research and statistics department in Atlanta and to hire Bryan to manage it. Eccles approved, and Bryan was hired as vice president at a salary of $7,500.

The Bank always had compiled certain statistics of commercial interest—commodity prices, department store sales, and so forth—and published the data in printed monthly reports. Feeding such information to the Board staff in Washington was part of the Federal Reserve agent’s job, but this work had never been considered a primary function of the Bank. In 1921, when Chairman McCord had proposed starting a Bank library, Governor Wellborn had stocked it with edifying fiction for the clerical staff. But 1938 was a different matter. Economic data and analysis were needed to support and direct the kind of economic management the Board was attempting. To meet the demand, Bryan organized a true research library and hired a librarian. In the Bank’s Monthly Review, the old statistical compilations of routine commercial data were compressed to make room for more analytic, scholarly reports. By 1942 the research department had a staff of six.

Slow days in a stagnant economy
Even with ambitious intentions and supportive research, the Fed found the economy balky and difficult to manage through the 1930s. The modest recovery that began in 1933 continued until a recession in 1937 wrecked the fragile progress. The banking system, once the wave of bank closings and liquidations had passed, was a reservoir of largely unused capacity. Reserves rose to unprecedented levels, leaving banks ready to lend to borrowers who never showed up. It was not surprising, therefore, that member banks rarely asked the Fed for credit. Rediscounts, in Atlanta as elsewhere, were rare, even when the rediscount rate dropped to an all-time low of 1.5 percent in 1937, well below 1920’s record high of 7 percent. The government securities on which the Bank largely depended for income now were held in a pooled account managed at the System level. Like their members, the Reserve Banks sat on a mountain of excess reserves. Excess reserves posed problems for the Washington architects of the new monetary policy because they insulated the banks from any actions the Fed could take. The Fed was figuratively in the driver’s seat of a stalled car. It may have held the steering wheel, but unless the car would move it could not be directed.

Operations, in Atlanta and other District cities, were flat. There simply was little to do, and, with depressed earnings, the Bank tried to take in sail and operate as economically as possible. Employees who left often were not replaced. When home-office cashier M.W. Bell retired, President Newton told the board that a new cashier was unnecessary, that other officers could handle his duties. (By statute, the cashier was custodian of all monies, investments, and securities; in practice he was a general manager of asset and liability activities at the Bank.) Director J.A. McCray, chairman of the building committee since 1916, recommended disbanding that committee since it had no foreseeable work to do.

The changeover to a more centralized system left bruised feelings among many of the District Bank directors and officers, who did not like to see local authority reduced. Resentment surfaced at an April 1940 meeting of Reserve Bank chairmen at Sea Island, Georgia. The chairmen, Neely reported, said that they felt unimportant now that the Washington Board, rather than the local board, was making the policies and directing the operations of District Banks. The Washington staff was overbearing in issuing new rules and regulations, the Bank chairmen complained. Governor Ronald Ransom, a former Atlanta banker, conceded that Reserve Bank operations had become largely mechanical, but he urged the Banks to emphasize research and become important sources of business and economic information.

A succession of presidents
A series of uncontrollable circumstances forced management changes at the Atlanta Fed and prevented it from falling into step with the new orientation of the System as quickly as Neely probably would have liked. Bryan may have been Neely’s farsighted idea of the new breed of Reserve Bank president, but Neely had to wait 13 years to bring his plan to fruition, as untimely deaths forced sudden management changes. Oscar Newton certainly was no new-breed central banker. Like McCord, Wellborn, Black, and Johns, his roots were in commercial banking, and he had been drafted into a Reserve Bank dominated by credit and operations concerns. The winds of change scarcely had begun to blow, however, when, on February 10, 1939, reportedly in the midst of a board meeting, Newton had a sudden heart attack and died three days later (having been “stricken at his post of duty,” as the board’s eulogy put it).

Within a week, the new president was 55-year-old Robert S. Parker, a lawyer whose prestigious firm (which included a descendent of Thomas Jefferson and a relative of Woodrow Wilson) had represented the Bank since it opened.