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Published by EH.NET (October 2000) 
 
Silvano A. Wueschner, _Charting Twentieth-Century Monetary Policy:  
Herbert Hoover and Benjamin Strong, 1917-1927_. Westport, CT:  
Greenword Press, 1999. xi + 178 pp. 9.95 (cloth), ISBN:  
0-313-30978-7. 
 
Reviewed for EH.NET by Mark Toma, Department of Economics, University  
of Kentucky. <[log in to unmask]> 
 
 
_Charting Twentieth-Century Monetary Policy_ by Silvano Wueschner,  
Assistant Professor of History at William Penn College, is a history  
of the political forces that shaped United States monetary policy  
during the 1920s. What is intriguing about this account is the  
injection of Herbert Hoover into the picture. While a big-time player  
in the Great Depression, Hoover was seemingly only a bit-player  
earlier in the 1920s as head of the Commerce Department. By  
documenting the birth and growth of Hoover's monetary policy agenda  
in the 1920s, Wueschner's analysis sets the stage for a deeper  
understanding of the politics of the Great Depression. 
 
Wueschner's account of monetary policy during the 1920s unfolds as a  
struggle between Hoover who covertly exercised influence through  
kindred spirits on the Federal Reserve Board and Benjamin Strong who  
overtly exercised influence as Governor of the Federal Reserve Bank  
of New York. Simply put, Strong was a monetary internationalist who  
favored cooperation between the Fed and the Bank of England while  
Hoover was a monetary nationalist who favored rivalry among national  
central banks. On the domestic front, the tables were turned. Hoover  
was all in favor of cooperation -- as long as the Federal Reserve  
Board led the way with strong central powers over discount and open  
market operation powers. In contrast, Strong opposed the Board as  
monetary czar. He sought to increase the powers of the individual  
Reserve banks, particularly the New York Fed. 
 
In the 1920s, the divisive issue between the two sides was whether  
the Fed's monetary policy would be "easy," as favored by Strong, to  
smooth the way for the international gold standard, or "tight," as  
favored by Hoover, to combat stock market speculation. The basic  
structure of the Federal Reserve seemed to favor Hoover since the  
original Reserve Act provided the Board with relatively strong powers  
to influence the discount rates established by the individual Reserve  
banks. The Act contained a loophole in the Board's control, however.  
Individual Reserve banks were authorized to conduct open market  
operations on their own. With the New York Fed playing a leading  
role, Reserve banks tended to purchase government securities for  
their own accounts when discount policy was tight. The overall  
result, as summarized in the title of the penultimate chapter "Easy  
Money," was that the easy money policy won by default. Strong's  
internationalism beat Hoover's nationalism in the 1920s. 
 
Although beyond the scope of book, it is interesting to consider how  
the policy tension between Hoover and Strong in the 1920s set the  
stage for policy during the Great Depression. As is well known, the  
Hoover Administration won an isolationist victory on trade policy  
with passage of the Smoot-Hawley Tariff Act. Less purposefully,  
Hoover also attained the type of monetary policy that he had earlier  
sought as the Board effectively exercised its muscle in shutting down  
open market operations during the Great Depression. Hoover's fiscal  
and monetary nationalism carried the day. 
 
Wueschner's history has much to offer two groups of academic  
researchers -- those with a general interest in the politics of US  
democracy and those with a special interest in the monetary policy of  
the early Federal Reserve. I, for one, was surprised to learn that  
the head of the Commerce Department in the 1920s played such an  
important role in shaping the course of monetary policy for decades  
to come. 
 
 
Mark Toma is an Associate Professor of Economics at the University of  
Kentucky. His recent research ("Open Market Operations and the Great  
Depression," working paper) is on Federal Reserve policy during the  
1920s and 1930s. 
 
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