America's Bank: The Epic Struggle to Create the Federal Reserve (17 page)

From recent information, I am inclined
to think that Mr. Glass is willing to go further than was indicated at the time I last saw you. That is, I think you accomplished your purpose of leading him one step at a time; and that it is quite likely he would be willing to take a further step in regard to an organization that would be more unified than that suggested by a considerable number of separate institutions of rediscount.

Openly imitating the Aldrich Plan was out of the question for the Democrats. However, there was much in the Plan that clearly had merit and could not be avoided.
The subcommittee finessed this delicate issue
, according to Willis’s later recollection, by agreeing that if any “desirable feature” was found in any other plan, “that should commend it rather than militate against it.” This was Willis’s
tortured way of justifying the decision to adopt useful points from the Aldrich Plan.

That spring, Willis scratched out the beginnings
of a bill. Glass encouraged him, but over the summer he was in Lynchburg (and temporarily absent from legislative work) to face a primary challenge. Willis continued to correspond with Laughlin on what the new banking bill should look like.

Meanwhile, in the other House Banking subcommittee, Pujo named
Samuel Untermyer
, a sharp-elbowed corporate lawyer, to head the investigation of the Money Trust. The choice of Untermyer as staff counsel made bankers quiver. Untermyer had made a fortune organizing financial syndicates and corporate combinations. Then, in midcareer, he had become an outspoken critic of trusts and of Wall Street. Bankers suspected that his conversion was politically motivated. Untermyer, a lifelong Democrat, had sought a U.S. Senate seat and was said to harbor grudges over his defeat; he also was shadowed by whispers of unethical business practices.

What frightened bankers was that Untermyer, an investor who participated in
lucrative stock deals
and cultivated orchids in his leisure, knew where the Street’s secrets were buried. Jack Morgan cabled his father that he expected the probe to be “
unpleasant
.”
Untermyer made quiet overtures
to Warburg and Vanderlip, trying to assure them his intentions were noble, but the bankers surely regarded Untermyer as a wily operator to be handled with care.

Glass was also worried about Untermyer.
The congressman was warned
that he should quickly occupy the legislative space or—despite the agreement to split the committee—Untermyer would encroach on his turf. Coincidentally,
Untermyer had been born in Lynchburg
, just two months after Glass. Untermyer was also the son of a Confederate soldier, but he had moved north after the war, attended Columbia Law School, and, at twenty-four, become a partner in a New York firm.

In fact, Untermyer did have designs on the bill drafting, a plum he hoped would follow from the hearings. He sensed an opportunity for glory in rewriting the banking laws and was to become a serious threat to Glass. Probably, he felt that Glass could be shoved aside at an opportune time. In May, Untermyer began to collect information from Wall Street banks; then he started to call witnesses. The hearings would be recessed in June for the duration of the political campaign, but Untermyer was laying the groundwork for a series of explosive cross-examinations after the election.

The campaign was one of the most exciting ever. It featured heated races in both parties, primaries in a dozen states, and women voting in California and other jurisdictions. Moreover, with Wilson, Roosevelt, and La Follette all vying for one or the other party’s nomination, the possibility loomed that America would veer in a radically new direction. While candidates hit the stump, suffragettes paraded in New York City and Congress adopted the Seventeenth Amendment; once the requisite number of states approved, no future Aldrich could reach the Senate without a popular vote.

The patriotic spirit was mirrored in surging crowds to watch baseball, which newspapers were calling the national pastime. Grandstands were festooned on opening days with flags and bunting; three new concrete and steel stadiums debuted, including Fenway in Boston. “
Baseball men are more optimistic
than ever this season,” so reported the
Times
. Taft, who had begun a tradition of throwing out the first ball, had burnished the game’s status as a unifying American ritual.

The Democrats had something to learn from the sport, for they had yet to cohere as a national party. They had won only two elections since the Civil War and, to a large degree, were still a patchwork of white southerners, western farmers, and urban ethnics. Even though Wilson was every bit a segregationist (his father had owned slaves, and Woodrow was
opposed to “social relations
” between the races), he was the most unifying of his party’s candidates and the one with the greatest appeal to progressives and independents. He was
also the only Democrat whose view of central banking was more than a rehash of Jacksonism, even if his views on the subject were far from settled. While Champ Clark, seen as the front-runner, did not campaign, Wilson crisscrossed the country to give scores of speeches that testified to his faith in what a democracy could accomplish.

But the primaries did not go well for Wilson. The governor was a virtuoso orator in a time when Americans admired oratory, his biographer Arthur Link observed, but his idealistic sermons appealed “
chiefly to men’s minds
” rather than to their “passions.” He finished behind Clark in a slew of primaries, including Illinois, Nebraska (Bryan’s home state), Massachusetts, and California.

Meanwhile, Bryan beseeched Wilson
to declare himself plainly—and publicly—on banking reform. Wilson no doubt had Bryan in mind when he told an audience in Albany, Georgia, “I have heard a great many people object, and I must admit that I am myself opposed, to the idea of a central bank.” This departed from his previous comments, and reflected desperation more than conviction. Indeed, as if to hedge his own statement, Wilson quickly added, “But we have other agencies in the United States that are much more powerful than a central bank.” Once again, he turned his fire not on centralism in government but on the supposed power of Wall Street. Sincere or not, his rhetoric in Georgia helped to rescue his campaign. Colonel House was able to
procure a statement from Bryan
that he would consider either Wilson or Clark acceptable as a nominee. Wilson also collected endorsements from influential newspapers, including the
Kansas City Star
and the
Raleigh News and Observer
. And he reeled in contributions from well-heeled friends. As the primary season ended, Wilson finally racked up a string of victories.

The Republican contest was personal and bitter.
La Follette, whose campaign
was underfinanced and underorganized, resented Roosevelt for stealing his thunder, but their enmity was nothing compared with the Shakespearian drama between Roosevelt and Taft. The two old friends turned foes wounded each other as only
intimates can. Taft called Roosevelt a “dangerous egotist” and a “flatterer of the people.” Roosevelt labeled Taft a “fathead” and a hypocrite—a strange charge to level at such a candid public servant. Little was said about banking reform—Taft did not want to emphasize his support of the Aldrich Plan, and Roosevelt was not so interested in it—but this contest was never about issues: it was about Roosevelt’s inability to let his successor govern on his own.
Roosevelt’s stated reason for running
was that Taft had betrayed his ideals; he was not a true “progressive,” for he had cultivated the support of party bosses like Aldrich (that much was true, although Roosevelt had once cultivated the same party bosses). On the issues that Roosevelt had championed as president, Taft had
a generally sound record
. On conservation, he had been just as vigorous at protecting public lands from development as had his predecessor. On antitrust, Taft had brought far more cases—indeed, more than Roosevelt thought were warranted. Taft also created the Department of Labor and signed legislation mandating an eight-hour day for federal contractors; he also promoted the income tax amendment. But Roosevelt, in 1912, advocated a more strident progressivism than he previously had. Far more than Taft, he wanted the government to pursue social justice and redistribution. Throwing his lot with “the people,” Roosevelt advanced the ill-thought idea of
letting voters overturn decisions
of judges, which Taft, himself a jurist, regarded with horror. Since their differences were largely ones of temperament, or of degree, much of Wall Street regarded Roosevelt as an opportunist. “
In years past he has done
some excellent things,” Thomas Lamont, a senior Morgan adviser, said of the former president. “But studying his campaign of the last few months I cannot help believing that his chief object at the present time is to get back into power.”

Taft controlled the party organization; Roosevelt’s only chance would be to light a fire in the primaries. At the beginning of April, he drubbed the President in Illinois and then in Pennsylvania.
Two days later, Piatt Andrew
, who was campaigning for Taft, dined with
Warburg at the Willard Hotel in Washington, where they surely discussed the sobering election news and the outlook for reform. After dinner they heard some truly awful news: after a glancing collision with an iceberg, the RMS
Titanic
had sunk into the North Atlantic. One of those who perished was the President’s military aide,
Archie Butt
, whom Taft regarded almost as part of his family (Butt had also devotedly served Roosevelt). The President and the nation were plunged into gloom. Vanderlip, trying to explain the momentary pause in business, reported to Stillman, “
The horror of the thing
has affected everybody’s mind.” Taft cleared his schedule and skipped the baseball opener. Little was going well for the President.

On April 19, Taft was thrashed in two more primaries. Presidents in that era did not campaign, but
Taft felt compelled
to counter Roosevelt on the stump. He headed into Massachusetts, making whistle stops in Springfield, Worcester, and many smaller towns, where he rebutted Roosevelt’s charges and what he claimed were the former president’s distortions of his record. Roused from his usual torpor, Taft attacked with brio, denying that he had ever been disloyal and accusing his mentor of pursuing a divisive strategy of stirring “class hatred.” However, he had no relish for this battle with “an old and dear friend.” At one stop he professed, “This wrenches my soul.” Concluding the day in a packed arena in Boston, Taft said his challenger was consumed with personal ambition and unfit for office. A reporter encountered the President after this bitter tirade, on the train home, slumped on a lounge. “Roosevelt was my closest friend,” Taft said. Then he began to weep.

As the campaigns peaked, the Citizens’ League mounted a furious publicity blitz. Regardless of who was nominated, James Laughlin was intent on securing platform statements favoring reform. With the Republicans due to gather in Chicago, followed by the Democrats in Baltimore,
the league ratcheted up
its spending to create a reformist groundswell at the conventions. Laughlin organized an artful campaign (even as
he and Warburg continued to tussle
over policy
and the budget).
Speakers were booked
around the country; newspapers were relentlessly courted. The league bulletin was sent to every Washington correspondent, generating a stream of dispatches. According to an internal league memorandum, “Many of the fundamentals of banking reform, as advocated by the League, have become matters of common knowledge in editorial rooms.” Laughlin realized that—just as Vanderlip had predicted—the Money Trust inquiry had reawakened interest in banking; the league’s job now, as another internal memo put it, was merely “
directing public opinion into definite channels
.” A shining example was an editorial that appeared in the
Lexington
(Kentucky)
Herald
on June 4—two weeks before the Republican convention—which confidently, if rather inaccurately, explained the Aldrich Plan as a bill for protecting America from the Money Trust.

Laughlin was hopeful that businessmen
would rally delegates in their local communities. In Arkansas (one of forty states where the Citizens’ League was active) businessmen received agitated calls to action, portraying the league as a David battling for a sounder currency against the supposed opposition of Wall Street. These efforts were carefully coordinated, in advance of the conventions, with pitches to Arkansas editorial writers.

Laughlin’s earlier insistence on keeping
the league nonpartisan proved shrewd, for he was able to court both parties. As Chicago neared, he dared to hope that the Republicans would endorse the Aldrich Plan outright. While expectations for the Democrats were more modest, Laughlin thought supportive language in Baltimore could have great effect, because it would bolster Glass and Willis’s legislative effort.
In several southern states
, Laughlin lobbied influential Democrats, urging them to adopt pro-reform planks at their state conventions. Whether his hosts understood the fine points of banking was beside the point, as Laughlin underscored in a note, redolent with irony, to Warburg: “The Democratic plank in Texas first damned
Aldrich and then used practically our [exact] language” in proposing a reform, he confided.

Laughlin also wrote to Bryan—and, appealing to his sense of history, pleaded with him to soften his resistance. Knowing that Bryan would dominate the platform discussions in Baltimore, Laughlin implied that moderate language on banking would help the party snap its string of defeats:

The country will
, in the present campaign, be studying to see whether the Democratic Party can be trusted on a great new constructive measure affecting our credit organization. It ought not to be maneuvered out of position on an issue appealing to classes whose votes it wants. . . . Seldom has a greater opportunity presented itself to a public man than to you in these very days before the Conventions to win favorable regard.