America's Bank: The Epic Struggle to Create the Federal Reserve (44 page)

“We will need the gold badly”:
Vanderlip to Stillman, May 24, 1913, Vanderlip Papers, Box 1-5; his follow-up letter is dated June 6, 1913, ibid., and see also a further letter to Stillman of June 13, also in ibid. See also various market reports in the first week of June, such as “Stocks Lowest in Five Years,”
The New York Times,
June 5, 1913, and “Review and Outlook,”
The Wall Street Journal,
June 9, 1913.

McAdoo suspected that Wall Street:
William McAdoo to House, June 18, 1913, House Papers, Box 73; and “Financial Markets,”
The New York Times,
June 13, 1913.

“should be pushed rapidly”:
“Review and Outlook.”

he had no choice but to oppose:
Paolo E. Coletta,
William Jennings Bryan
(Lincoln: University of Nebraska Press, 1969), 2:130–31; Joseph P. Tumulty,
Woodrow Wilson as I Know Him
(Garden City, N.Y.: Doubleday, Page, 1921), 178; and William Jennings Bryan and Mary Baird Bryan,
The Memoirs of William Jennings Bryan
(New York: Haskell House, 1971), 369–70. These three books give consistent accounts of the Wilson-Bryan meeting, though none supply a date. “Deep regret” is from Bryan and Bryan. As evidence of Bryan’s desire to be supportive, he had told his brother to hold back articles on banking reform in
The Commoner,
the family periodical, until Wilson’s position became known.

“It begins to look as if”:
Tumulty,
Woodrow
Wilson as I Know Him,
178.

“a brick couldn’t be thrown”:
“Wilson Denounces Tariff Lobbyists,”
The New York Times,
May 27, 1913.

the public was treated to a spectacle:
For a general account of the tariff debate, see Cooper,
Woodrow Wilson,
216–18; Link,
Wilson and the Progressive Era
,
36–42; and Link,
Wilson,
vol 2,
The New Freedom
(Princeton, N.J.: Princeton University Press, 1956), 177–94 (La Follette quote on p. 190).

“It is extremely dangerous”:
Louis Brandeis to Wilson, June 14, 1913, in
The Papers of Woodrow Wilson,
27:520; see also Alpheus Thomas Mason,
Brandeis: A Free Man’s Life
(New York: Viking, 1956), 397–99.

“to eliminate all banking representation”:
Glass’s account of this meeting is from Carter Glass to Willis, June 17, 1913, Willis Papers, Box 1, and from Glass,
An Adventure in Constructive Finance,
112–14.

“in the saddle”:
William G. McAdoo to House, June 18, 1913, House Papers, Box 73.

an “injustice” to deny bankers:
Owen,
The Federal Reserve Act,
74; and Willis,
The Federal Reserve System,
250. See also “Find Many Flaws in Bill: Democrats Divided on Currency Measure,”
The New York Times,
June 21, 1913. For Wilson’s choosing a fully
political board, see Broesamle,
William Gibbs McAdoo,
110–11. Owen’s description of the meeting appears in his
The Federal Reserve Act,
74–76
.

Still unable to sleep, Glass:
Glass to Willis, June 17, 1913; and Glass to Woodrow Wilson, June 18, 1913, Glass Collection, Box 8.

“a yielding of the classical doctrine”:
Willis,
The Federal Reserve System,
256, 258.

“If we can hold to the substance”:
Glass,
An Adventure in Constructive Finance,
123–25.

Bryan didn’t realize that
the notes:
James Neal Primm,
A Foregone Conclusion
(St. Louis: Federal Reserve Bank of St. Louis, 1989), chapter 2, “Banking Reform, 1907–1913”; available at www.stlouisfed.org/foregone/chapter_two.cfm. For Bryan’s reaction to Wilson’s compromise solution, see Coletta,
William Jennings Bryan
,
2:132.

“covered all over with the slime”:
New York
Sun
quoted in Link,
The New Freedom,
216. For the
New York Times
’s reaction, see “The President’s Views on Banking,”
The New York Times,
June 24, 1913, and “A Radical Banking Measure,” ibid., June 21, 1913.

“greater in some respects”:
“Vast Scope of the New Currency Bill,”
Washington Post,
June 22, 1913.

“Those things don’t count”:
Press conference, June 26, 1913, in
The Papers of Woodrow Wilson,
28:8.

Wilson, at Glass’s urging, invited:
Glass,
An Adventure in Constructive Finance,
127–28, 130; William McAdoo to Wilson, June 18, 1913, in
The Papers of Woodrow Wilson,
27:536; and Coletta,
William Jennings Bryan
,
2:133. See also Broesamle,
William Gibbs McAdoo,
108–10.

“Not an hour can I let”:
Wilson’s letter to Peck of June 22, 1913, is quoted in both Link,
The New Freedom,
213–14, and Cooper,
Woodrow Wilson,
220.

the President returned to the Capitol:
Link,
The New Freedom,
214; and “Money Reform Now, Is Wilson’s Demand,”
The New York Times,
June 24, 1913. Wilson’s speech appears in
Cong. Rec.
S2132–33 (June 23, 1913).

Bankers had urged reform:
“Forgan Denounces Bill,”
The New York Times,
June 24, 1913; and “Bankers Clear Up the Currency Plan,” ibid.

the Glass bill authorized Washington:
Willis,
The Federal Reserve System,
256–67. In deference to the banks, Willis scotched proposals to let individuals either do business with the Reserve Banks or own stock in them.

The goal was to establish collective:
Willis to Carter Glass, May 26, 1913, Willis Papers, Box 1; “Financial Markets,”
The New York Times
,
June 20, 1913; “Bankers Clear Up the Currency Plan”; Willis,
The Federal Reserve System,
273–74, 394–95; and James L. Laughlin,
The Federal Reserve Act: Its Origin and Problems
(New York: Macmillan, 1933)
,
141–42, 146–48 (quote on 148).

Wade spoke forcefully against:
Glass,
An Adventure in Constructive Finance,
112–16. See also Primm,
A Foregone Conclusion,
chapter 2; and “Money Bill Goes In; No Voice for Banks,”
The New York Times,
June 27, 1913.

they won important concessions:
Amended provisions to the bill reprinted in Willis,
The Federal Reserve System,
1605, 1608, and 1609. See also ibid., 394–95; Laughlin,
The Federal Reserve Act,
149; “Money Bill Goes In; No Voice for Banks”; and Link,
Wilson: The New Freedom,
217.

struck a sensible middle ground:
Wiebe,
Businessmen and Reform,
130. It is my interpretation that the bill was essentially faithful to what Warburg’s camp wished. Furthermore, in
The Federal Reserve System
(1:101), Warburg describes the bill, aside from the
“harmful changes” made to accommodate Bryan, as, “in the main, sound and highly commendable.” Similarly, Vanderlip’s first reaction to the published bill, even more favorable, was that it didn’t contain “any serious financial heresies” (Vanderlip to M. J. M. Smith, June 19, 1913, Vanderlip Papers, Box 1-5).

“not less than twelve”:
Willis,
The Federal Reserve System
,
1596. The version of the bill submitted June 26 cut reserve requirements to 20, 20, and 15 percent for central reserve, reserve city, and country banks, respectively (ibid., 1609–10), down from the previous standard of 25, 25, and 15 percent. For powers of the reserve board: see ibid., 1603; for its import and export provisions, ibid., 1604.

the mechanics of how the Reserve Banks:
McCulley,
Banks and Politics During the Progressive Era,
297.

“with a view to accommodating”:
Willis,
The Federal Reserve System,
1605. The “dual mandate” was enacted in the Federal Reserve Reform Act of 1977.

Glass imagined that since the banks:
See Glass,
An Adventure in Constructive Finance,
118–21. For Chicago’s terror, see George Reynolds to Glass, July 7, 1913, Glass Collection, Box 16: “The more I study the matter, the more I am convinced that the drastic and revolutionary requirement that all of the bank reserves of the country should be taken away from existing banks and placed with the Federal Reserve Banks, would have a much more far-reaching, detrimental effect upon business than any of you people have contemplated.”

Warburg, summering:
Warburg,
The Federal Reserve System,
1:101; Paul Warburg to House, July 1913, telegram, House Papers, Box 114a.

Davison begged Aldrich:
Henry Davison to Aldrich, July 3, 18, and 23, 1913, Nelson W. Aldrich Papers, Reel 47.

calling it “Bryanized”:
A. Piatt Andrew, “The Bryanized Banking Bill,”
Boston Evening Transcript,
June 25, 1913.

The ABA was also critical:
See Festus Wade to Glass, July 1, 1913, Glass Collection, Box 28; and Festus Wade to Glass, July 3, 1913, ibid., Box 37 (both moderate in tone). See also George Reynolds to Glass, July 7, 1913, ibid., Box 16, in which Reynolds, though diffident, professes not to be “hostile” toward the legislation. Wiebe,
Businessmen and Reform
,
131, 215, adds texture on the variation of banker opinions. See also Glass,
An Adventure in Constructive Finance,
118, 120–21; Gabriel Kolko,
The Triumph of Conservatism: A Reinterpretation of American History, 1900–1914
(New York: The Free Press of Glencoe, 1963), 232–34; and Willis,
The
Federal Reserve System,
395.

Forgan distributed to members:
Willis,
The Federal Reserve System,
276.

“dead and done for”:
“Amend or Abandon,”
The
New York Times,
June 29, 1913.

Glass, who had mightily extended himself:
Glass to Solomon Wexler, July 3, 1913, Glass Collection, Box 27; in this letter, Glass accused Wexler of reneging on their understanding. See also Glass,
An Adventure in Constructive Finance,
118, 120–21; Willis,
The Federal Reserve System,
395 and (“warfare”) 396; and Laughlin,
The Federal Reserve Act,
146.

“history will write down”:
Paul Warburg to House, July 22, 1913, House Papers, Box 114a.

$700 million of these bonds:
“The Government and Its Bonds,”
The New York Times,
July 14, 1913. The issue was covered extensively in the press. The changes gave holders of the 2 percent bonds the right to refund 5 percent of their bonds each year for new
securities with a higher interest rate, and for retirement at par of any outstanding bonds in twenty years.

However, the bonds continued to plummet:
“Drop in 2s a Bank Plot, Says McAdoo,”
The New York Times,
July 29, 1913; see also Broesamle,
William Gibbs McAdoo,
109–10.

the country’s seventy-five hundred national banks:
“160,980,084 Earned by National Banks,”
The New York Times,
December 9, 1913; the precise numbers were 7,514 national banks and $11.186 billion in assets.

“There must, in fact, be”:
Frank Vanderlip to Glass, July 24, 1913, Glass Collection, Box 16.

“We have a difficult Banking”:
Wilson to Ellen Axson Wilson, July 20, 1913, in
The
Papers of Woodrow Wilson,
28:44–45.

made up some 30 percent:
“Growing a Nation: The Story of American Agriculture,” available at www.agclassroom.org/gan/timeline/farmers_land.htm.

specifically included bank loans:
See section 13, “Rediscounts,” of the bill draft in Willis,
The Federal Reserve System,
1603–4. On the fears of agrarians, see, for instance, Kolko,
The Triumph of Conservatism,
234, citing the belief of Representative Joe Eagle (D-Tx.) that the proposed Fed would adopt a “paternalistic relationship” toward its member banks.

The spiritual leader of the agrarians:
On Henry and the radical rebellion, see Glass,
An Adventure in Constructive Finance,
131–34; Link,
The New Freedom,
219–21; and Kolko,
The Triumph of Conservatism,
234.

a series of amendments:
The radical amendments proposed in the House Banking Committee were covered extensively in the press; for example, these articles appeared that week in
The New York Times:
“Put Reserve Notes on a Gold Basis” (July 22, 1913), “Radicals Propose New Currency Bill” (July 23), “Tangle over Money Bill” (July 24), and “Urge Cotton, Wheat and Corn Currency” (July 25).

“quite beyond the pale of discussion”:
“Farmers’ Money,” ibid., July 26, 1913.

CHAPTER
THIRTEEN
: “THE IMPOSSIBLE HAS HAPPENED”

“Fleeing from the evils”:
Robert Craig West,
Banking Reform and the Federal Reserve
(Ithaca, N.Y.: Cornell University Press, 1974), 117–18.

“Isn’t it wonderful?”:
Wilson to Ellen Axson Wilson, September 19, 1913, in Arthur S. Link, ed.,
The Papers of Woodrow Wilson
(Princeton, N.J.: Princeton University Press, 1966–1989), 28:301.