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Miller also had a strong supporter in Treasury Secretary W. Michael Blumenthal, an acquaintance from days when Blumenthal was running Bendix Corp. An interview with Carter, who had met him briefly four times before, clinched the job for Miller. It seems fitting that two self-confident businessmen from rural backgrounds, who had initially sought success by going to military academies and who styled themselves economic moderates and social liberals, should hit it off. Miller faced a tough grilling by the Senate Banking Committee about bribes paid by Textron to spur sales of its Bell helicopters in Iran. His cool, precise answers convinced all the Senators except Chairman William Proxmire that he had had no idea that the Shah's brother-in-law was the secret owner of a company to which Textron paid commissions. Some documents that subsequently came to light indicate that lower-ranking Textron officials did know, but there is no evidence that they told Miller.*
The job that he stepped into is as tough as any in Washington. The Federal Reserve is a kind of bankers' bank: it regulates commercial banks that account for more than 70% of all bank deposits, holds the funds that they are required to keep on reserve, clears checks for them. But its most important functions are to determine the supply of money and the level of interest rates—and no questions touch off more disagreement in American policymaking. If the Federal Reserve is not condemned by the AFL-CIO's George Meany for causing unemployment by being too stingy, it is certain to be damned by Economist Milton Friedman for spurring inflation by being too generous. All too often it will simultaneously incur the wrath of liberals and conservatives.
The chairman has a prickly relationship with the rest of Government. The President appoints and the Senate confirms the chairman and the six other governors of the board, and thereafter neither can give them orders. Burns has boasted that once, when Nixon's Treasury Secretary George Shultz called on him to plead that the Fed pump out more money, Burns angrily ordered Shultz out of his office.
However, the Federal Reserve and the Administration must try to get along. The Fed cannot press a tight-money policy so far as to prevent the Treasury from borrowing enough to cover the budget deficit (that would mean Government failure to pay its bills, which would shake the whole financial structure), but it can foil Administration policy by being tight or loose. So every chairman becomes a nonofficial adviser to the President.
At the Fed, the chairman has no statutory power to command. He has only one of seven votes on the board and one of twelve on the Federal Open Market Committee (FOMC), which makes the key operating decisions on money supply and interest rates. The practice is to have discussion go around and around the table until a consensus emerges, and take a vote only after its outcome has become a foregone conclusion. A forceful chairman can guide and shape the debate, but it had been thought that Miller's lack of training in banking might cause him to defer to his strong-minded colleagues.