America's Bank: The Epic Struggle to Create the Federal Reserve (47 page)

While Hitchcock insisted:
“Caucus Vote to Be Binding,”
The New York Times,
November 29, 1913; and Coletta,
William Jennings Bryan
,
2:137.

in his annual message:
“Wilson Triumphs with Message,”
The New York Times,
December 3, 1913; see also “An Annual Message to Congress,” December 2, 1913, in
The Papers of Woodrow Wilson,
29:5.

Adding to the pressure:
Press conference of December 1, 1913, in
The Papers of Woodrow Wilson,
28:600; “To Push Money Bill at Night Sessions,”
The New York Times,
November 27, 1913; and “Adopt Long Hours to Pass Money Bill,”
The New York Times,
December 7, 1913.

“I have never seen so much power”:
Vanderlip to. J. P. Morgan Jr., November 18, 1913.

Owen held a slim lead:
“Money Bill Faces Close Senate Vote,”
The New York Times,
November 24, 1913.

But the Senate became embroiled:
Timberlake,
The
Origins of Central Banking in the United States,
201–2, notes that the inflation debate surfaced only in December. For contemporaneous discussion on whether reserves should be legal tender, see, for example, the
New York Times
’s outraged editorial of November 16, 1913, “Bryanizing the Money Bill,” as well as Vanderlip’s second appearance before the Senate,
Banking and Currency: Hearings,
vol. 3. See also Willis,
The
Federal Reserve System,
456–57, 467–68.

the Senate cut reserve requirements:
Glass,
An Adventure in Constructive Finance,
210.

“at home or abroad”:
Willis,
The Federal Reserve System,
1654; the House language (ibid., 1626) was less explicit. However, the House version also permitted national banks to open overseas branches.

coax the various parts:
The two versions can be compared in ibid: Senate, 1651; House, 1623. See also West,
Banking Reform and the Federal Reserve,
212.

farm state senators:
The Senate bill permitted farm mortgages for five years. The House bill also permitted such mortgages, but only for durations of one year. See Willis,
The Federal Reserve System,
1633–34, 1664.

“little by little”:
“Root Sees Peril in Money Bill,”
The New York Times,
December 14, 1913.

Prices had consistently fallen:
Although calculations of inflation before 1913 are necessarily estimates, various indices of wholesale prices did exist.
Historical Statistics of the United States, 1789–1945,
prepared by the Census Bureau (Washington, D.C.: Government Printing Office, 1949), 231–32, shows a general wholesale index falling from 127 in 1865, the year the Civil War ended, to 100 in 1873. It hit bottom at 71 in 1896, and recovered to 100 in 1912, where it remained in 1913. The index was a composite of various subindices, including ones for commodities, farm products, hides, and leather. A contemporaneous source, Charles A. Conant, a banking specialist who testified before the Interstate Commerce Commission in 1913, noted that wholesale prices had plunged from 1880 to 1896, and subsequently regained much, though not all, the lost ground: “Why Prices Are Up,”
The New York Times,
December 14, 1913. Conant testified that a wholesale index fell to 90.4 in 1896, “more than 40 per cent below the prices of 1880,” implying that the index was above 150 in 1880. In 1912, Conant’s index stood at 133.6, still below the figure implied for 1880. Moreover, the decline in prices began well before 1880. A later pair of experts, Milton Friedman and Anna Jacobson Schwartz, in
A Monetary
History of the United States, 1867–1960
(Princeton, N.J.: Princeton University Press, 1971), 32–33, estimate that from 1867 to 1879 prices fell at an annual rate of 3.5 percent (some indices give even faster rates of decline). Regardless, the post–Civil War trend was clearly, and consistently, down. Even in the later expansionary phase, inflation was relatively restrained. From the trough of the recession in 1896, prices rose at a rate of just under 3 percent through 1900, hardly surprising given the severity of the contraction. Thereafter—that is, from 1900 to 1912—inflation was measured at precisely 2 percent per annum.

he had caught a cold:
See the following entries in volume 29 of
The Papers of Woodrow Wilson
:
Wilson to Mary Allen Hulbert Peck, December 8, 1913 (p. 23); diary entries of House, December 12 (pp. 32–33), December 14 (p. 34), and December 16 (p. 36). See also William McAdoo to House, December 7, 1913, House Papers, Box 73.

Luckily for Wilson, public support:
George Reynolds to Glass, December 18, 1913, telegram, Glass Collection, Box 42; Willis,
The Federal Reserve System,
507–8; Link,
The New Freedom,
235; and Kolko,
The Triumph of Conservatism,
241.

Warburg peppered Senator Owen:
Warburg to Robert Owen, December 4, 1913, Warburg Papers, Folder 11; and Warburg to Robert Owen, December 15, 1913, ibid., Folder 12. See also Warburg,
The Federal Reserve System,
1:121.

He also corresponded with business executives:
H. A. Wheeler to Warburg, December 13, 1913, Warburg Papers, Folder 12; Solomon Wexler to Warburg, December 15, 1913, telegram, ibid.; Warburg to H. E. Hammond, December 17, 1913, ibid.; and Charles D. Norton to Warburg, December 17, 1913, ibid. See also various Warburg correspondence in the Warburg Papers with officials of Merchants’ Association of New York and the New York Chamber of Commerce.

“throwing up [his] hands”:
Festus J. Wade to Warburg, December 10, 1913, ibid., Folder 11; and Festus J. Wade to Warburg, December 15, 1913, ibid, Folder 12. On Warburg’s latest plan, see Warburg,
The Federal Reserve System,
1:122–24, as well as numerous items of correspondence toward the end of 1913 in the Warburg Papers.

relations between the two framers:
Warburg,
The Federal Reserve System,
1:115; and Glass to Paul Warburg, November 22, 1913, Glass Collection, Box 8.

Warburg kept Glass closely informed:
Glass,
An Adventure in Constructive Finance,
209. See also Warburg,
The Federal Reserve System,
1:115–17, reproducing two letters
attesting to their frequent contact. On December 15, 1913, Warburg wrote to Glass on a favorite technical subject, rediscounting. Three days later he anxiously followed up, “I have not heard from you concerning the rediscount clause.”

the Virginian stunned Warburg:
Warburg,
The Federal Reserve System,
1:125. See also Glass to Paul Warburg, December 24, 1913, Glass Collection, Box 8, in which Glass repeated the suggestion that Warburg consider a Federal Reserve Board post.

On December 17, after eighty:
Willis,
The Federal Reserve System,
503; and “Democrats Heed Root’s Warning,”
The New York Times,
December 18, 1913.

he went for a ride:
“President Takes a Drive,”
The New York Times,
December 18, 1913; and Laughlin,
The Federal Reserve Act,
169. For the votes on December 19, see “Currency Bill Passes Senate,”
The New York Times,
December 20, 1913; one Progressive also voted in favor.

Warburg rifled off a:
Warburg to Robert Owen, December 19, 1913, Warburg Papers, Folder 12.

“It is a terribly tiring business”:
Warburg to Arthur Spitzer, December 19, 1913, ibid., Folder 11. See also Warburg’s letter of December 19 to Harry A. Wheeler, president of the U.S. Chamber of Commerce, in ibid., Folder 12; and Warburg,
The Federal Reserve System,
1:121.

“no prospect at all”:
Timberlake,
The Origins of Central Banking in the United States,
202.

The conferees worked with surprising speed:
The House-Senate conference dealt with dozens of individual items. The conference changes are detailed in Willis,
The Federal Reserve System,
511–19; and Glass,
An Adventure in Constructive Finance,
212–19; in addition, high (and low) points are treated in Warburg,
The Federal Reserve System,
1:126–29. See also Glass’s speech to the House of Representatives, December 22, 1913, in Glass Collection, Box 22, as well as “Money Bill May Be Law To-day,”
The New York Times,
December 22, 1913, and “Money Bill Goes to Wilson To-day,” “Currency Bill Conference Report,” and “Changes Made in the Bill,” all from ibid., December 23. For a more detailed comparison, in his
The Federal Reserve System,
Willis reprinted the House bill (p. 1614), as well as the Senate bill (p. 1637), and those versions may be contrasted with the final Federal Reserve Act (p. 1667).

“legal tender”:
Willis,
The Federal Reserve System,
456–57, 467–68; for $1 and $2 bills, see “Changes Made in the Bill”; for distinctive engravings, see “Currency Bill Conference Report.”

The conferees tackled the truly sticky points:
“Money Bill May Be Law To-day”; and “Money Bill Goes to Wilson To-day.” For Warburg’s bitter disappointment, see Warburg,
The Federal Reserve System,
1:121–23, 128–29.

Only the makeup of the board remained:
“Money Bill May Be Law To-day”; and “Money Bill Goes to Wilson To-day.” For analysis of this issue, see West,
Banking Reform and the Federal Reserve,
132–33.

bolstering the authority:
Warburg,
The Federal Reserve System,
1:128; Seymour,
The Intimate Papers of Colonel House,
139; Broesamle,
William Gibbs McAdoo,
115; and Willis,
The Federal Reserve System,
518. For amplifying the power of the board, see Willis,
The Federal Reserve System,
518. Glass,
An Adventure in Constructive Finance,
215, is the source for 4:10 a.m. Terms of board members in the House bill were to have been eight years; in the Senate bill, six years.

who had barely slept, in pajamas:
Seymour,
The Intimate Papers of Colonel House,
139. For House’s evening at the White House, see House diary, December 22, 1913, in
The Papers of Woodrow Wilson,
29:55.

Glass presented the conference report:
Glass’s December 22, 1913, speech is in Glass Collection, Box 22; see also Willis,
The Federal Reserve System,
511; and “Money Bill Goes to Wilson To-day.” The House vote was 298–60.

“I’ll do the deed first”:
“Wilson Signs the Currency Bill; Promises Friendly Aid to Business,”
The New York Times,
December 24, 1913. Wilson asking Glass and Owen to come closer is from Glass,
An Adventure in Constructive Finance,
227. For the President’s departure, see these
New York Times
articles: “Wilson’s Vacation Plans” (December 21, 1913), “President Off for a Rest” (December 24), and “President Wilson Spends Happy Day” (December 26)
.

“The impossible has happened”:
Warburg,
The Federal Reserve System,
1:129.

“dominated by the Democrats”:
Ibid.

Representative Lindbergh said acidly:
Link,
The New Freedom,
239.

“a great advance”:
The
New York Tribune
’s opinion was quoted in “Result Will Be Good, Is Opinion of Press,” a compendium of editorial reactions from other newspapers,
The New York Times,
December 24, 1913; the
Times
’s own editorial, “An Important Omission,” appeared on December 25. For other editorial commentary, in the main positive, see the December 22 issues of
Philadelphia Bulletin, Cincinnati Enquirer, Chicago Post,
and
New York Mail
(all of which were excerpted in the
Times
compendium), as well as the
Boston Daily Globe
(December 22), the
Washington Post
(December 24), and the
Lawrence
(Mass.)
Journal-World
(December 24).

“than business dared to hope”:
“Review and Outlook,”
The Wall Street Journal:
December 29, 1913, which also mentioned that the banks were pleased. See also “Owen Bill Is Liked,”
The New York Times,
December 21, 1913.

Although Vanderlip sourly hinted:
Vanderlip to James Stillman, December 29, 1913, Vanderlip Papers, Box 1-5; this letter includes “I feel firmly that I would rather take my chances under the legislature of the State of New York . . . than under the federal government so far as banking charter rights are concerned.” For the applications for membership, see “Banks Eager to Enter,”
The New York Times,
December 23, 1913, as well as an untitled item in ibid., December 24, 1913.

“While my heart bleeds”:
Paul Warburg to Glass, December 23, 1913, Glass Collection, Box 7.

“It is you that just now”:
House to Paul Warburg, January 1, 1914, House Papers, Box 114a.

CHAPTER
FOURTEEN
: EPILOGUE

“The measure itself was the result”:
Houston’s diary entry of December 23, 1913, cited in Warburg,
The Federal Reserve System:Its Origin and Growth—Reflections and Recollections
(New York: Macmillan, 1930), 1:129.

“Mr. Wilson experienced”:
Carter Glass,
An Adventure in Constructive Finance
(Garden City, N.Y.: Doubleday, 1927), 36.