Hard Money Populism

The first and so-far the only person I’ve heard call himself a “hard money populist” was my friend, Wayne Angell. That was several years ago when he was a member of the Board of Governors of the Federal Reserve and we served together on the FOMC. I wanted to give Wayne credit for the expression before someone else adopts it as something new and original.

Populism in U.S. monetary history was usually associated with opposition to the harsh discipline imposed by adherence to the gold standard. Gold money—hard money—was seen to favor creditors over debtors, especially evil bankers over worthy farmers. Going off gold was unthinkable, so the populists wanted to use more plentiful and cheaper silver as the basis or at least a basis for our currency. The battle cry came from William Jennings Bryan’s “thou shall not crucify mankind on a cross of gold” in his cross of gold speech in the 1896 presidential campaign.

When I joined the Richmond Fed in August 1968, the main “populist” making trouble for the “hard money Fed” was Wright Patman, Democratic Congressman from Texas, and Chairman of the House Banking Committee.

Mr. Patman had apparently paid a visit to the Richmond Fed before I arrived and legend had it that he had had the dining room menu printed in the Congressional Record. Apparently, he disapproved, but of what specifically I never heard. Perhaps it was the shad row that was served in season on board meeting days. If so, I could agree with him on that. My favorite was a combination of Virginia ham and lightly breaded fried oysters. It wasn’t very fancy; just good home cooking.

Eating in the dining room was a rare treat for a young economist, but a price had to be paid by getting grilled by the Bank’s President. The economics questions weren’t tough. The questions that I dreaded had to do with things like what kind of mileage I got on my car and how much electricity did I use on average. I never knew the answers to such questions, which made me look uninformed and lazy in the boss’s eyes.

When I first arrived, there was a tradition of passing around a box of cigars at the conclusion of the board lunch and we could each take one, even though most of us didn’t smoke. I didn’t think a once-a-month cigar would be addictive, and I still don’t. Unfortunately, because of Wright Patman’s close attention to such matters, the cigar ritual was dropped shortly after my arrival.

When I became President of the Dallas Fed in early 1991, our populist nemesis was another Texas Congressman, Henry B. Gonzalez, Chairman of the House Banking Committee. What is it about Texas? Like Patman, Mr. Gonzalez came at us from the left. Money was always too tight to suit him. Mr. Gonzales had many claims to fame, one of which was that he once punched a guy during a difference of opinion. Turned out he was a boxer in his younger days.

It was with some trepidation that I found myself sitting beside him during a banquet in his home town of San Antonio and was the person chosen to introduce him. He was the keynote speaker. As it turned out, he and I hit it off at dinner and peace broke out between him and the Fed, at least for that evening.

I didn’t use to think of Congressman Ron Paul—guess where he’s from—as a populist. After all, he came at us from the right, not the left. I thought of him as a Libertarian who was steeped in Austrian economics. He came by for a visit at some point during the early 1990s and was surprised that a Fed guy—that’s me—was somewhat familiar with Austrian economics, even though I grew up on Friedman rather than Hayek.

Mr. Paul and I visited again when I was Chancellor of the Texas A&M University System in 2005 or 2006. He came to address a Young Republican’s Club and the attendance was embarrassingly small. Nevertheless, he was a good sport and gave them the “whole load” as if there was standing room only. He is quite a gentleman. Unfortunately, that makes his anti-Fed views appear less threatening even though the title of his latest book is End the Fed.

I guess “hard money populist” is a term that fits Ron Paul, even though, as a practical matter, I’d rather go with Wayne Angell’s version.

The rhetoric and the committee vote on the confirmation of Chairman Bernanke has been very distressing for me in many ways, not the least of which is that several of my friends seem to have turned anti-Fed in order to burnish their new-found populist personas. I just don’t see how they can honestly get around the fact that the Chairman has done an outstanding job over the past couple of years.