Public Policy: New Face at the Fed

The men who manage the nation’s monetary policy are divided on interest rates. Among the seven governors of the Federal Reserve Board, three have generally favored loose money and low interest rates on loans to stimulate the domestic economy, while four have argued for slightly higher short-term lending rates as a way to stop U.S. gold from flowing into the hands of foreign borrowers who find the U.S. a cheap money market. The tighter majority, led by Chairman William McChesney Martin Jr., prevailed last July, when the Fed hiked its lending rate to member banks from 3% to 3½%.

Last week President Kennedy acted to support the Martin majority. To fill an opening on the Fed Board, he picked J. (for James) Dewey Daane, 45, formerly Deputy Under Secretary of the Treasury. Daane (pronounced Dane) leans to the conservative side, was pushed for the job by Martin and Treasury Secretary Douglas Dillon. An economist with 21 years of seasoning in the Federal Reserve System, Daane succeeds G. H. King Jr., who usually voted with Martin.