William McChesney Martin

Martin's return to civilian life was also a return to the financial world, but this time it was in the Federal government. Harry S. Truman, a fellow Democrat, appointed Martin director of the Export-Import Bank, which he operated for three years (1946-1949). It was at this institution that he was publicly viewed as a "hard banker." He insisted that loans be sound, secure investments; on that principle he opposed the State Department on multiple occasions for making loans that he saw as being politically motivated. On those grounds he would not permit the Export-Import Bank to be used as a fund for international relief.

Martin left the Export-Import bank when he was summoned to the Treasury to serve as assistant secretary for monetary affairs. Martin served at the Treasury for about two years when its conflict with the Federal Reserve Board reached its climax. During the period immediately preceding the final negotiations with the Fed, Secretary of the Treasury John W. Snyder was hospitalized. In this situation, Martin became the chief negotiator for the Treasury. From the Treasury's perspective, Martin was a valuable representative, for he had a thorough understanding of the Federal Reserve System and of financial markets. Furthermore, he was viewed as an ally of Truman, who strongly opposed the Fed's independence. During negotiations, Martin re-established communication between the Treasury and Fed, which had been forbidden by Snyder.

With Robert Rouse, Woodlief Thomas, and Winfield Riefler of the Fed, Martin negotiated the 1951 Accord. The Federal Open Market Committee (FOMC) and Secretary Snyder accepted the Accord, and it was approved by both institutions. The Chairman of the Board of Governors at the time of ratification was Thomas B. McCabe (1893–1982), who would officially resign from his position just six days after the statement of the Accord was released. The Truman Administration saw the resignation of McCabe as the perfect opportunity to regain control of the Fed almost immediately after it had supposedly become independent. Truman appointed Martin to serve as the next Chairman of the Board of Governors, and the Senate approved his appointment on March 21, 1951.

Contrary to Truman's expectations, however, Martin guarded the Fed's independence, not just through Truman's administration but also through the four succeeding administrations. To the present day, his term as chairman is the longest term in the history of the Fed. For nearly two decades, Martin would achieve global recognition as the world's most important central banker. He was able to pursue independent monetary policies while still paying heed to the desires of various presidential administrations. Although the objectives of Martin's monetary policy were low inflation and economic stability, he rejected the idea that the Fed could pursue its policies based on a single indicator (an example of oversimplification) and instead made policy decisions by examining a wide array of economic data. As chairman, he institutionalized this strategy in the proceedings of the FOMC, gathering the opinions of all governors and presidents within the System before making decisions. As a result, his decisions were often supported by unanimous votes on the FOMC. The task of the Federal Reserve, he famously said, is "to take away the punch bowl just as the party gets going,"[4][5] that is, raise interest rates just when the economy reaches peak activity after a recession.

Martin was selected administrator-designate of the Emergency Stabilization Agency, part of a secret group created by President Dwight D. Eisenhower in 1958 that would serve in the event of a national emergency, and that became known as the Eisenhower Ten.[6]

After the presidential election of 1960, Republican Party candidate Richard Nixon blamed his defeat on Martin's tight-money policies.[7]

Martin was elected to the American Academy of Arts and Sciences in 1963 and the American Philosophical Society in 1972.[8][9]

In 1966 he underwent successful prostate surgery.[10]

Externally, Martin was perceived to be the dominant decision-maker at the Fed but this is only a perception.[11] Throughout his tenure, he defended the right of the Fed to take actions that would sometimes conflict with presidential goals. He regularly asserted that the Fed is responsible to the US Congress and not to the White House. Lacking confidence in Martin, Richard Nixon expected him to resign at the outset of the new administration in 1969, but Martin chose to remain in his post. Pursuing a tight-money policy to suppress inflation, by mid-1969 Martin ran afoul of Nixon's concern that the Fed was in danger of pushing the nation into economic recession, a belief that had been publicly stated by conservative economist Milton Friedman. At a White House meeting on October 15, 1969, Nixon confronted Martin over his tight-money policy, but Martin declined to yield. Two days later, the White House announced that Arthur Burns would replace Martin as chairman of the Federal Reserve on Feb. 1, 1970.[12]

The 1974 William McChesney Martin Jr. Federal Reserve Board Building

Martin ended his tenure as Chairman of the Board of Governors on January 30, 1970. On that day, his career in public service ended, but he continued to work, holding a variety of directorships of corporations and nonprofit institutions, such as the Rockefeller Brothers Fund.

Martin was an avid tennis player who played tennis nearly every day on the tennis court located outside the Federal Reserve Board Building in Washington, D.C.[13] Martin would go on to serve as president of the National Tennis Foundation and chair of the International Tennis Hall of Fame after retiring from the Federal Reserve.[14]

He died of a heart attack at his home in Washington, D.C., on July 28, 1998, at the age of 91.[15]