chapter  12
16 Pages

The Chicago Plan after the Passage of the Banking Act of 1935

The preceding chapters have presented the argument that the Chicago plan for banking reform had an important, and hitherto neglected role, in the banking legislation over the period 1933-35. New Deal banking legislation, as shaped by Marriner Eccles and Lauchlin Currie, clearly set the financial system on a path that moved toward the ultimate goal of greater Federal Reserve control over the money supply. With the preoccupations of world war on the horizon and the moves or departures of many of the key monetary players in the late 1930s, one would expect interest in the Chicago plan to decline. This might have occurred had it not been for the fact that Irving Fisher, who had retired from Yale, embraced the 100 percent reserve plan as his cause celebre from 1935 until his death in 1947. Though the Chicago economists were the first to propose the 100 percent plan as a solution to the financial problems of the 1930s, it is Irving Fisher who is most closely associated with the proposal and certainly was its most "enthusiastic and conspicuous proponent" (Allen 1977, 582; Allen 1993, 704). Fisher's proposal was essentially the plan as it had been developed in 1933 by the Chicago economists. The only modifications in Fisher's plan were the adoption of aspects of both Currie's proposal and that of James Angell.