America's Bank: The Epic Struggle to Create the Federal Reserve (37 page)

Aldrich decreed that the next stage:
“Minutes of Meetings of Monetary Commission, 1908–1911,” Aldrich Papers, Reel 61.

Aldrich’s address suggested just how:
An Address by Senator Nelson W. Aldrich Before the Economic Club of New York;
quotes on 17, 19.

“The insurgents have been showing”:
Vanderlip to James Stillman, January 21, 1910, Frank A. Vanderlip Papers, Box 1-3; see also Vanderlip to James Stillman, February 11, 1910, ibid.

Progressivism embodied an attitudinal shift:
Nugent’s
Progressivism
is a worthy introduction to the subject.

To judge from newspaper sales:
According to the website Press Reference (www.pressreference.com/Sw-Ur/United-States.html), the number of newspapers in the United States hit a peak in 1910, at 2,600.

less—not more—tolerant:
Pringle,
William
Howard Taft,
1:413.

for much of the winter:
Vanderlip to Stillman, January 21, 1910.

“One cannot help feeling very confident”:
Warburg to Nelson Aldrich, December 24, 1909, Warburg Papers.

“It is a scheme based upon conditions”:
Warburg,
The Federal Reserve System,
1:35–46, 2:118.

“These sectional reserve banks”:
Ibid., 1:85–86, 2:160–61.

In a second lecture in 1910:
Ibid., 1:42–48; quote on 45–46.

The “United Reserve Bank” lecture:
Ibid., 36–37.

Roosevelt disembarked in New York:
“Million Join in Welcome to Roosevelt,”
The New York Times,
June 19, 1910; Pringle,
William Howard Taft,
1:538–55, especially 551 and 553–54; and Goodwin,
The Bully Pulpit,
640–41.

“We have had no national leadership”:
Theodore Roosevelt to Henry Cabot Lodge, August 17, 1910, quoted in James Chace,
1912: Wilson, Roosevelt, Taft and Debs—The Election That Changed the Country
(New York: Simon and Schuster, 2004), 56.

Roosevelt conveniently overlooked:
Wiebe,
Businessmen and Reform,
91; and Pringle,
William Howard Taft,
1:420.

“My intercourse with Aldrich”:
Notes (quoting Roosevelt letter to Lodge, September 10, 1909), Aldrich Papers, Reel 61.

As progressives battled for control:
Arthur S. Link,
Woodrow Wilson and the Progressive Era,
1910–1917
(New York: Harper and Row, 1954), 5. Reel 42 in the Aldrich Papers contains extensive correspondence and material relating to the Bristow charge. See also “Rubber, Aldrich and the Tariff,”
The New York Times,
July 28, 1910; “Bristow Makes New Charge,”
The New York Times
,
July 26, 1910; “Insurgents Gained Four,”
The New York Times,
August 4, 1910; and “Senator Bristow and Senator Aldrich,”
The Outlook,
August 27, 1910.

a private railroad car:
Goodwin,
The Bully Pulpit,
643.

“Roosevelt is certainly making”:
Vanderlip to James Stillman, September 2 and September 9, 1910, Vanderlip Papers, Box 1-3.

a far more radical agenda:
Chace,
1912,
56. In his famous “New Nationalism” speech, delivered in Osawatomie, Kansas, on August 31, 1910, Roosevelt said, “Every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require it.” He also called for a “moral awakening.”

Although he supported the notion of financial reform:
In his speech at Osawatomie, Roosevelt said: “It is of profound importance that our financial system should be promptly investigated, and so thoroughly and effectively revised as to make it certain that hereafter our currency will no longer fail at critical times to meet our needs.”

Aldrich intended to wait out:
Aldrich’s correspondence (in the Aldrich Papers) documents that he was closely, and anxiously, monitoring the 1910 campaign.

“The political pot is boiling here”:
Perkins to J. P. Morgan, October 11, 1910, George W. Perkins Sr. Papers.

The collision hurled him several feet:
“Aldrich Not Badly Hurt,”
The New York Times,
October 22, 1910; William H. Taft to Aldrich, October 21, 1910, Aldrich Papers, Reel 43. That Aldrich was already planning a trip is confirmed by a letter Frank Vanderlip wrote to James Stillman, in which Vanderlip reported that Aldrich “met with what came very near being a severe auto accident” and that the mishap “has naturally postponed the conference that was in mind”: Frank A. Vanderlip with Boyden Sparkes,
From Farm Boy to Financier
(New York: D. Appleton-Century, 1935), 212.

On election day:
Results in Nugent,
Progressivism,
89.

“It is hardly an exaggeration”:
Frederick Jackson Turner, “Social Forces in American History,”
American Historical Review
16, no. 2, 217–33. Turner had delivered the essay to the American Historical Association in Indianapolis on December 28, 1910.

“We shall appeal to the thoughtful men”:
“Keep Politics Out of Finance—Aldrich,”
The New York Times,
November 12, 1910. The occasion was the annual dinner of the Academy of Political Science of New York.

His plan was so secret:
“Minutes of Meetings of Monetary Commission.”

CHAPTER
SEVEN
: JEKYL ISLAND

“A Banker uses the money of others”:
Walter Bagehot,
Lombard Street: A Description of the Money Market
(London, 1873), 9. Apparently, the words up to the semicolon are Ricardo’s and the rest is a paraphrasing or interpretation from Bagehot.

“Public utility is more truly the object”:
“Report of the Secretary of the Treasury on the Subject of a National Bank,” read to the House of Representatives, December 15, 1790.

Aldrich insisted on absolute secrecy:
Narrations of Jekyl trip sourced to the Warburg Papers, “Jekyl Island Conference, Nov. 18-26, 1910” and “Jekyl Island Conference Nov. 18, 1910,” are in Nelson W. Aldrich Papers, Reel 61 (hereinafter Warburg Narration 1
and 2, respectively). The narrations are in the third person, but were written by either Warburg or someone with close access to him.

Aldrich also recruited Frank Vanderlip:
Warburg Narration 1; and “Notes on an Interview with A. Piatt Andrew,” February 1, 1934, A. Piatt Andrew Papers.

six co-conspirators:
Vanderlip’s 1935 memoir,
From Farm Boy to Financier
(witten with Boyden Sparkes; New York: D. Appleton-Century), says Ben Strong was also at Jekyl. This seems highly unlikely. In a letter to Stillman on November 29, 1910 (the day after his return), Vanderlip described a party of only six. Warburg Narrations 1 and 2 include only the six named participants. Andrew also cites the same six participants in “Notes on an Interview with A. Piatt Andrew.” Finally, the earliest public account of the trip, a cursory mention in an article by B. C. Forbes, “Men Who Are Making America,”
Leslie’s Weekly
123, no. 42 (October 19, 1916), identifies Aldrich, Andrew, and the three bankers (omitting Aldrich’s secretary, Shelton) and specifically mentions that “later” Strong “was called into frequent consultation” and “joined the first-name club.” This suggests that the subsequent close identification of Strong with the Jekyl party (Strong, of course, was to become the first president of the New York Federal Reserve Bank) blurred Vanderlip’s later recollection, which was not published until twenty-five years after the trip. One final corroborating bit of evidence is that the Jekyl Island trip was not mentioned in Lester V. Chandler’s thorough-seeming 1958 biography of Strong.

It was Davison who arranged:
Warburg Narration 1; and Vanderlip,
From Farm Boy to Financier,
213–14. Some accounts say Warburg purchased a gun, but his son James said he “borrowed a lethal weapon” as camouflage: James Warburg,
The Long Road Home
(Garden City, N.Y.: Doubleday, 1964), 29.

“On what kind of an errand”:
Warburg Narrations 1 and 2 are the source for the entire train encounter between Warburg and Vanderlip.

Aldrich set a workmanlike:
Warburg Narration 2; and Vanderlip,
From Farm Boy to Financier,
215. Disappointingly, Andrew’s diary contains no entries for the several months leading up to and including the Jekyl trip.

“Now gentlemen, this is all very pretty”:
Warburg Narration 1.

For the next eight days:
Vanderlip to James Stillman, November 29, 1910, Frank A. Vanderlip Papers, Box 1-3; and Vanderlip,
Farm Boy to Financier,
215.

The Jekyl Island Club, founded in 1885:
Description of club history and setting from my visit to Jekyll Island (as a footnote later in the chapter explains, the spelling of the island’s name was changed years later); author interview with John Hunter, director of historical resources for Jekyll Island Authority; and displays at Jekyll Island Museum, January 18, 2013. For Morgan arranging that there were no other guests, see Michael Clark Rockefeller, “Nelson W. Aldrich and Banking Reform: A Conservative Leader in the Progressive Era,” A.B. thesis, Harvard College, 1960, 35.

“We were working so hard”:
Vanderlip,
From Farm Boy to Financier,
216. Vanderlip’s memoir recounts that Davison and Strong went swimming and riding. For reasons stated in endnote for page 108 (on Notes pages 293–94), it is unlikely Strong was there, and since Andrew was an indefatigable athlete—in particular a swimmer and rider—and close to Davison, it is likely he meant Davison and
Andrew.

Aldrich set the pace:
Warburg Narration 1; and “The Drafting of the Aldrich Plan: Meeting of the Statesmen at Jekyl Island,” Aldrich Papers, Reel 61 (hereinafter Warburg Narration 3).

his ideas on how to structure it:
Vanderlip to Stillman, November 29, 1910.

Warburg favored a stronger government role:
Warburg Narrations 1 and 3; and
Michael A. Whitehouse, “Paul Warburg’s Crusade to Establish a Central Bank in the United States,”
The Region
(publication of Federal Reserve Bank of Minneapolis), May 1989.

tension arose:
Warburg Narration 1; and Vanderlip,
From Farm Boy to Financier
, 216.

The pair reached an impasse:
Warburg Narrations 1 and 3; Vanderlip,
From Farm Boy to Financier,
216; and Thomas W. Lamont,
Henry P. Davison: The Record of a Useful Life
(New York: Harper and Brothers, 1933), 98–100, 101.

“The notes must count”:
Warburg Narration 1.

wild turkey and oyster stuffing:
Vanderlip,
From Farm Boy to Financier
, 216.

With the basic points of the reform:
Warburg Narration 1; and Lamont,
Henry P. Davison,
100.

The final, crucial task:
Warburg Narration 1.

Aldrich prevailed on the issue of reserves:
Ibid.

Each participating bank would belong:
The description of the Aldrich Plan in this passage comes from Rockefeller, “Nelson W. Aldrich and Banking Reform,” especially 39–45; “Aldrich Money Plan Avoids Central Bank,”
The New York Times,
January 18, 1910; Paul M. Warburg,
The Federal Reserve System: Its Origin and Growth—Reflections and Recollections
(New York: Macmillan, 1930), 1:58–62; Elmus Wicker,
The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed
(Columbus: Ohio State University Press, 2005), 67–69; and Richard T. McCulley,
Banks and Politics During the Progressive Era: The Origins of the Federal Reserve System, 1897
–
1913
(New York: Garland, 1992)
,
234–40.

Governance in the association:
Rockefeller, “Nelson W. Aldrich and Banking Reform,” 41; McCulley,
Banks and Politics During the Progressive Era,
236, 237; and “Aldrich Money Plan Avoids Central Bank.”

“It was strictly a bankers’ bank”:
Warburg,
The Federal Reserve System,
1:59–60.

bankers—not government—would be in control:
McCulley,
Banks and Politics During the Progressive Era,
234.

“These are business questions”:
Rockefeller, “Nelson W. Aldrich and Banking Reform,” 44–45.

Warburg suggested they also organize:
“Introducing the Aldrich Plan to the Bankers and the General Public,” Aldrich Papers, Reel 61. See also Warburg Narration 1; and Warburg,
The Federal Reserve System,
1:58.

The group disbanded quietly:
Vanderlip,
From Farm Boy to Financier,
217.

“I am back from Jekyl Island”:
Vanderlip to Stillman, November 29, 1910.

“Zivil was greatly pleased”:
Ibid.

Aside from a couple of vague allusions:
As discussed in an earlier note, the article by B. C. Forbes, “Men Who Are Making America,” appeared in
Leslie’s Weekly
on October 19, 1916. It is probable that either Forbes or his source had been at the train depot in Brunswick, Georgia, to greet the unlikely “duck hunters.” See also Warburg,
The Federal Reserve System,
1:58, 60. The authorized biography was Stephenson’s
Nelson W. Aldrich.