Economic Quarterly

Until March 1951, the Treasury compelled the Federal Reserve System to continue the pegging of government security prices that had begun in World War II. To break free from that obligation, the Fed would have to win a public confrontation with the President of the United States. Such an outcome appeared improbable given the historical context of the Korean War. The authors chronicle the dramatic confrontation between the Fed and the White House that ended with the March 1951 Accord.