Read America's Bank: The Epic Struggle to Create the Federal Reserve Online
Authors: Roger Lowenstein
“[Carter Glass] is not the chief author”:
Samuel Untermyer,
Who Is Entitled to the Credit for the Federal Reserve Act?
(New York, 1927), foreword.
“Mr. Glass himself”:
James L. Laughlin,
The Federal Reserve Act: Its Origin and Problems
(New York: Macmillan, 1933), 136–37.
“A profanation of history”:
Glass,
An Adventure in Constructive Finance,
20, commenting on Charles Seymour’s
The Intimate Papers of Colonel House.
“It was not an ‘original proposal’”:
Henry Parker Willis,
The Federal Reserve System: Legislation, Organization and Operation
(New York: Ronald Press, 1923), 523.
“Glass and Willis have so”:
Paul Warburg to Laughlin, June 27, 1929, James Laurence Laughlin Papers, Paul M. Warburg folder.
“Mr. Warburg has never made”:
Willis,
The Federal Reserve System,
530.
“Congress should realize”:
Warburg to Laughlin, June 27, 1929.
“It had little or no relationship”:
Willis,
The Federal Reserve System,
523.
“I feel for it”:
Warburg quoted in “Our First Line of Financial Defense,”
The New York Times,
August 18, 1918.
“The law is full of indirect”:
Vanderlip to James Stillman, December 29, 1913, Frank A. Vanderlip Papers, Box 1-5.
It took some time, in 1914:
Roger T. Johnson,
Historical Beginnings . . . The Federal Reserve
(Federal Reserve Bank of Boston, 2010), chapter 3, “Making the System Work,” available at https://www.bostonfed.org/about/pubs/begin.pdf; and Sarah Binder and Mark Spindel, “Monetary Politics: Origins of the Federal Reserve,”
Studies in American Political Development
27, no. 1 (April 2013), 1–13.
the guns of August:
William L. Silber,
When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America’s Monetary Supremacy
(Princeton, N.J.: Princeton University Press, 2007); see especially chapter 4. The emergency currency was issued under the 1908 Aldrich-Vreeland Act—which had been set to expire in 1914 but, providentially, had been extended for a year by the Federal Reserve Act.
Even as the Fed got going:
Robert Craig West,
Banking Reform and the Federal Reserve
(Ithaca, N.Y.: Cornell University Press, 1974), 208–9, 215; Ron Chernow,
The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family
(New York: Random House, 1993), 187; John J. Broesamle,
William Gibbs McAdoo: A Passion for Change, 1863–1917
(Port Washington, N.Y.: Kennikat Press, 1973), 115–16; and Silber,
When Washington Shut Down Wall Street.
Glass warily monitored:
Willis to Carter Glass, August 18, 1914, Henry Parker Willis Papers, Box 1; Warburg,
The Federal Reserve System
,
1:493, 495–96.
repeated battles for control:
West,
Banking Reform and the Federal Reserve,
219, 222.
their assets became concentrated:
See ibid., 186–87, 190, 215, and 218; and Broesamle,
William Gibbs McAdoo,
115–16.
the agency would play a passive role:
Lester V. Chandler,
Benjamin Strong, Central Banker
(Washington, D.C.: Brookings Institution, 1958), 14, notes that the language of the bill suggested a passive approach. West makes a similar point in
Banking Reform and the Federal Reserve,
202, 205, and 192.
“After the institution has been going”:
For Sprague’s testimony, see
Banking and Currency: Hearings
Before the Committee on Banking and Currency, on H.R. 7837 (S. 2639),
U.S. Senate, 63rd Cong., 1st sess., 1:362, Septermber 6, 1913, available at https://fraser.stlouisfed.org/publication/?pid=429.
“is not to await emergencies”:
West,
Banking Reform and the Federal Reserve,
182.
catapulted America’s standing:
Ibid., 178.
Warburg’s insistent demands:
Warburg,
The Federal Reserve System,
1:137–77 (chapter 7). Warburg began his campaign for remedial legislation as soon as the ink on the original Act was dry. In January 1914, he made (in elegant cursive) a list of items entitled “Points where changes may be made” (Warburg Papers, Folder 107). Also found in his
files (Folder 104), apparently from a year or two later, is a typed list entitled “Amendments to Federal Reserve Act which are to be pushed.” See also his eleven-page letter to Glass recommending amendments in 1916, reproduced in Warburg,
The Federal Reserve System,
1:707. For the Fed soaking up much of the bullion, see West,
Banking Reform and the Federal Reserve,
176–77; Robert L. Owen,
The Federal Reserve Act
(New York: Century, 1919), 95–97; and Warburg, 1:149–57. In particular, Warburg states, “The importance of this new legislation can scarcely be overstated, for it was the amendment relating to reserves which enabled the Reserve System to corral and mobilize the country’s gold and thereby to finance, as well as it did, the unparalleled demands of the war” (p. 157). For an excellent summary of the 1917 amendments and its effects, including a chart documenting the increased note circulation, see Raymond P. H. Fishe, “The Federal Reserve Amendments of 1917: The Beginning of a Seasonal Note Issue Policy,”
Journal of Money, Credit, and Banking
23, no. 3 (August 1991), part I.
to spare Wilson the embarrassment:
Chernow,
The Warburgs,
187–89, captures the painful saga of Warburg’s departure, including Owen’s opposition to his renomination. For his support from bankers, see “Want Warburg to Stay,”
The New York Times
,
July 23, 1918. Although Owen and Warburg collaborated on the legislation, Owen never seems to have overcome his suspicion of Warburg as an international banker. Late in 1913, Owen offhandedly referred to Warburg’s firm, Kuhn, Loeb, as “representatives of the Rothschilds”—close to a blood libel, given that the claim (wholly unfounded) was used by anti-Semites to impugn Kuhn, Loeb’s loyalty. See
Banking and Currency: Hearings,
2:1867. For more on the tension between Owen and Warburg, see Warburg,
The Federal Reserve System,
1:498.
a severe but brief depression:
Gary Gorton and Andrew Metrick, “The Federal Reserve and Financial Regulation: The First Hundred Years” (working paper, August 2013), and Willis,
The Federal Reserve System,
1405–6, both credit the Fed with averting a panic. See also West,
The Federal Reserve and Banking Reform,
193–94.
Bank failures rose sharply:
Milton Friedman and Anna Jacobson Schwartz,
A Monetary History of the United States, 1867–1960
(Princeton, N.J.: Princeton University Press, 1971), 235.
the Reserve Banks shifted their emphasis:
Gorton and Metrick, “Federal Reserve and Financial Regulation”; and West,
The Federal Reserve and Banking Reform,
187–88, 190, and 219. Gorton and Metrick make the point that in 1913, the founders had no notion that active intervention in markets would weigh so heavily in the Fed’s activities. Warburg (
The Federal Reserve System,
1:176) tacitly admitted the point in acknowledging that “the importance of a definite open-market policy . . . is better understood today than it was when the Federal Reserve Act was written.”
ongoing ballast to the economy:
See West,
The Federal Reserve and Banking Reform,
224; and Federal Reserve Bank of Richmond, “Federal Reserve History: The Fed’s Formative Years,” available at http://www.federalreservehistory.org/Events/DetailView/60.
“orgies of unrestrained speculation”:
“Warburg Assails Federal Reserve,”
The New York Times,
March 8, 1929.
Davison had remained:
Priscilla Roberts, “World War I as Catalyst and Epiphany: The Case of Henry P. Davison,”
Diplomacy and Statecraft
18, no. 2 (June 2007), 315–50.
Frank Vanderlip, ever the eager:
Priscilla Roberts, “Frank A. Vanderlip and the National City Bank During the First World War,”
Essays in Economic and Business History
20, no. 2 (2002), 8; Vanderlip’s memoir, written with Boyden Sparkes, is
From Farm Boy to Financier
(New York: D. Appleton-Century, 1935).
in April 1915, he died:
Nelson W. Aldrich Jr.,
Old Money: The Mythology of Wealth in America
(1988; repr., New York: Allworth Press, 1996), 22. The figure of $16 million is an estimate.
The two men were never:
Lewis Gould, “Wilson’s Man in Paris,”
The Wall Street Journal,
January 17–18, 2015.
“He is generally regarded”:
“Carter Glass,”
The New York Times,
May 29, 1946.
Owen and Glass got into a nasty:
See the Federal Reserve profile of Owen available at www.federalreservehistory.org/People/DetailView/92. Owen’s 1919 memoir was
The Federal Reserve Act.
He later denounced the Fed:
See Owen’s foreword to Gertrude M. Coogan’s populist tract,
Money Creators: Who Creates Money? Who Should Create It?
(Chicago: Sound Money Press, 1935), a distillation of paranoid theories of the day, which Owen warmly endorsed.
“when received by Mr. Glass”:
Laughlin,
The Federal Reserve System,
533.
lobbied to keep him off the Reserve Board:
H. Parker Willis to Glass, December 25, 1913, Carter Glass Collection, Box 42.
“simply that of a critic”:
Willis,
The Federal Reserve System,
526, 530; the quotation at the end of the paragraph is from 526–27. Willis’s book is full of backhanded swipes at Warburg. His statement (p. 439) that the Reserve System “was eventually placed for operation very largely in the hands of persons who had antagonized the adoption of the measure” can only be read as a derogatory comment on Warburg’s elevation to the board. Willis’s assertion (p. 528) that the Aldrich bill was “based upon German experience,” whereas the Federal Reserve Act was (supposedly) modeled after the Bank of England, was an attempt to use Warburg’s origins to taint the legacy of the Aldrich bill.
“interesting work of imagination”:
Untermyer,
Who Is Entitled to the Credit for the Federal Reserve Act?
foreword; the quotation later in the paragraph is from ibid.
Warburg claimed that Glass’s book:
Warburg to Laughlin, June 27, 1929.
“like the old cathedrals of Europe”:
Warburg,
The Federal Reserve System,
1:10.
“not as the work of a single party”:
Ibid., 7.
To rebut the notion that financiers:
Ibid., 133.
Friedman and Anna Schwartz would call:
Friedman and Schwartz,
Monetary History of the United States,
171. Robert C. West reached the same conclusion in his detailed
Banking Reform and the Federal Reserve,
112. The Glass “admirer” is James E. Palmer Jr., author of the sycophantic
Carter Glass: Unreconstructed Rebel
(Roanoke: Institute of American Biography, 1938): see p. 71.
“its mother must have been”:
James Warburg,
The Long Road Home
(Garden City, N.Y.: Doubleday, 1964),
29.
The page numbers in this index refer to the printed version of this book. The link provided will take you to the beginning of that print page. You may need to scroll forward from that location to find the corresponding reference on your e-reader.
Page numbers beginning with 274 refer to endnotes.
Academy of Political Science,
101
–2,
293
,
326
Adventure in Constructive Finance, An
(Glass),
267
,
268
agrarians,
165
opposition to Glass-Owen by,
221
–22,
224
–26,
227
Agriculture Department, U.S., secretary of,
212
,
241
,
252
AIG,
259
Alabama,
148
Aldrich, Abigail P. T. Chapman,
34
–35,
42
,
82
,
120
,
130
Aldrich, Lucy,
197
Aldrich, Nelson,
5
–7,
42
n
–43
n
,
92
,
96
–97,
127
,
139
,
143
,
190
,
197
,
205
,
219
,
296
,
326
at ABA convention,
139
–40
Aldrich Plan coauthored by,
147
–48,
189
Aldrich Plan revealed by,
122
banking reform supported by,
92
,
93
,
100
,
199
banking regime defended by,
37
–39
breakdown of,
120
–21,
122
,
129
–30,
297
business’s role in government,
41
–42
central bank supported by,
79
,
88
–89,
97
–99,
101
,
104
,
111
on Citizens’ League,
132
–33
conversion of, to central bank champion,
34
,
77
–78,
88
death of,
265
as defender of status quo,
38
,
74
–75,
123
delegation to Europe headed by,
77
–78,
82
–91,
204
,
253
,
269
on Glass-Owen,
235
as head of National Monetary Commission,
79
–91,
104
,
106
,
120
influence of,
33
–34
Jekyl Island conference and,
106
,
107
–23,
249
n
on money shortages,
37
–38
in press,
33
–34,
44
,
89
,
120
,
122
–23,
133
,
134
,
140
progressives’ dislike of,
45
,
89
,
92
–93,
100
,
310
retirement from Senate of,
89
,
104
,
130
Roosevelt and,
38
,
44
,
102
–3,
132
,
141
,
158
tariff supported by,
37
,
41
,
92
–95,
103
–4,
134
,
140
,
234
,
291
unpopularity of,
90
,
105
,
132
–33,
138
,
310
Warburg and,
74
,
75
,
88
–89,
96
,
98
,
99
,
100
–101,
111
–12,
116
,
127
,
131
withdrawal from public life by,
151
Aldrich, Winthrop,
104
–5
Aldrich Plan,
113
–16,
119
–23,
160
,
177
,
185
,
256
,
265
,
269
,
298
–99,
301
,
312
,
313
,
323
,
335
ABA approval of,
128
–31,
134
,
139
–40
Bryan’s opposition to,
137
,
138
,
164
–65
Citizens’ League and,
132
–33,
135
commercial banks and,
122
conspiracy theorists and,
150
–51
Democratic Party and,
150
,
154
–55,
160
–61,
164
–65
drafting of,
128
Federal Reserve Act and,
123
,
269
–70
Glass proposals vs.,
171
–72,
181
–82
La Follette’s opposition to,
138
legislative adaptation of,
154
–55
midwestern opposition to,
134
regional branches in,
177
Republican Party and,
137
–38,
150
,
160
,
161
–62
Roosevelt and,
149
–50
submission to Congress of,
147
–48
Trenton draft of Glass and,
188
–89
Warburg and,
114
,
121
–22,
123
,
138
,
139
,
188
Willis’s criticisms of,
267
–68
Wilson and,
141
–46,
148
–49,
164
,
170
Aldrich-Vreeland Act (1908),
79
,
82
,
209
American Academy of Political and Social Science,
120
American Bankers Association (ABA),
38
,
55
,
269
,
297
–98
Aldrich Plan and,
128
–31,
134
,
139
–40
currency committee of,
130
,
216
–17
on Glass-Owen,
184
,
216
–17,
219
,
228
–29,
231
,
235
,
323
American Economic Association,
89
American Field Service,
264
Andrew, A. Piatt,
94
,
96
,
99
,
133
,
134
,
149
,
264
,
285
on Aldrich’s European fact-finding mission,
82
–83,
85
–86
Glass and,
310
at Jekyl Island conference,
108
,
110
,
119
,
122
,
129
,
294
on National Monetary Commission,
80
at 1912 Democratic convention,
163
at 1912 Republican convention,
161
–62
on Panic of 1907,
67
–68
role in preparing Aldrich Plan,
147
–48,
177
Shaw criticized by,
53
–54
in Taft campaign,
158
Treasury Department firing of,
161
Wilson and,
144
anti-federalists,
3
anti-Semitism,
169
,
172
,
262
–63,
314
,
334
antitrust laws,
80
banks and,
see
Money Trust
Articles of Confederation,
253
–54
asset currency,
33
,
38
,
74
,
78
,
79
n
assets,
181
financial,
226
Atlanta, Ga.,
68
Federal Reserve Bank in,
260
n
Atlantic City, N.J.,
129
–30
Bachmann, Michele,
137
Baer, George Frederick,
288
Baker, George F.,
62
–66,
80
,
116
,
135
,
139
,
192
,
299
Morgan’s collaboration with,
176
Baltimore, Md.:
banking reform meeting in,
20
Democratic National Convention in,
159
–61,
163
,
164
–66
Baltimore platform,
327
bank associations,
67
bank checks,
67
central banks supported by,
177
,
179
Glass-Owen supported by,
247
nineteenth-century,
16
private,
115
reform-minded,
128
on silver,
16
Wall Street,
see
Wall Street
western,
85
Wilson on,
143
–44
bank holidays,
68
Banking Act (1935),
266
banking charter rights,
332
banking reform,
5
–8,
33
,
45
,
46
,
60
,
89
,
93
,
98
,
150
,
159
,
175
,
191
,
201
–22,
268
–69,
325
federal control and,
216
Main Street and,
131
Taft and,
158
Wilson and,
73
,
128
,
143
–44,
148
–49,
167
–68,
177
,
195
,
198
,
201
–2,
205
–18,
221
–22,
223
,
227
–28,
310
banking system, unified,
122
bank loans, currency and,
226
–27
Bank of Commerce,
299
Bank of England,
2
,
83
–84,
85
–86,
335
American economy and,
56
–57
currency supply and,
86
–87
interest rates of,
5
–6
loans in time of scarcity by,
70
,
83
,
288
money issued by,
117
as private,
83
–84
and Wall Street recessions,
5
–6
cash reserves of,
87
Bank of the United States, first,
2
–3,
84
,
142
,
246
Bank of the United States, Second,
3
–5,
20
,
84
,
101
,
115
,
142
,
187
,
198
,
246
Bank of the United States, Third (potential),
3
bank runs,
2
,
63
,
81
,
200
,
204
,
245
,
249
banks:
asset currency and loans by,
33
bills of trade and,
39
branch offices of,
55
business and,
199
central reserve city,
14
–15,
26
–27,
39
n
,
182
,
248
n
,
311
chartering of,
41
country,
see
country banks
Fed and member,
322
federalism and,
183
for-profit,
181
in Gilded Age,
6
government power over,
207
growth of,
199
heartland,
46
interlocking directorates for,
222
,
225
,
228
international,
118
limited guarantee for,
313