America's Bank: The Epic Struggle to Create the Federal Reserve

by Roger Lowenstein

  Archie Butt: Goodwin, The Bully Pulpit, 690–92, 571.

  “The horror of the thing”: Vanderlip to James Stillman, April 22, 1912, Vanderlip Papers, Box 1-4.

  Taft felt compelled: Goodwin, The Bully Pulpit, 693–94; and Pringle, William Howard Taft, 2:774, 781–82, Taft’s quotations in this paragraph are from “Taft Opens Fire on Roosevelt,” The New York Times, April 26, 1912.

  the league ratcheted up: James L. Laughlin, The Federal Reserve Act: Its Origin and Problems (New York: Macmillan, 1933), 65–67.

  he and Warburg continued to tussle: Laughlin to W. J. Lauck, May 25, 1912, Laughlin Papers, Box 3, W. J. Lauck folder; and Laughlin, The Federal Reserve Act, 54, 65–67.

  Speakers were booked: Speakers Bureau Reports for weeks ending June 8 and June 15, 1912, Warburg Papers, Box 8, folder 108; and Publicity Report for week ending June 8, 1912, ibid., pp. 4–5.

  “directing public opinion into definite channels”: Publicity Report for week ending June 15, 1912, ibid. The Herald article can also be found in Warburg Papers.

  Laughlin was hopeful that businessmen: For examples of the Citizens’ League’s outreach to both businessmen and editorial writers in Arkansas, as well as information on membership fees and a directory of the forty states with league offices, see Warburg Papers, Box 8, folder 108. This folder contains a flyer titled “ATTENTION! $$$ FOR YOU—IT’S YOUR BUSINESS $$$,” as well as the letter to editorial writers from the Arkansas Division, addressed to “Editorial Writer,” May 11, 1912.

  Laughlin’s earlier insistence on keeping: Publicity Report for week ending June 8, 1912 (“Following the national conventions, which, it is confidently expected, will both declare for a non-partisan revision of the banking and currency laws”); and Publicity Report for week ending June 15, 1912 (“It is anticipated that the Republican plank will be a frank endorsement of the plan of the National Monetary Commission”).

  In several southern states: See “Work of National Citizens League to get safe state Dem. Planks in 1912, along Aldrich bill lines, although ostensibly denouncing said bill, May 1912,” Aldrich Papers, Reel 61 (from Warburg Papers). This document quotes from several of Laughlin’s letters to Warburg in the spring of 1912.

  “The country will”: Laughlin to William Jennings Bryan, June 3, 1912, Laughlin Papers, W. J. Bryan folder.

  steer the Republican platform: Andrew, Diary, entries for June and July 1912; Franklin MacVeagh to Andrew (undated), Andrew Papers, Box 22, folder 1; Franklin MacVeagh to Andrew, April 23, 1912, ibid., folder 3; and Andrew to Franklin MacVeagh, May 10, 1912, ibid., Box 20, folder 20.

  “I can not think”: William H. Taft to Andrew, July 2, 1912, ibid., Box 22, folder 7. See also Franklin MacVeagh to Andrew, June 24, June 28, June 29, and July 2, 1912, and Andrew to Franklin MacVeagh, June 28, 1912, all in ibid., folder 3; and Andrew to Nelson Aldrich, June 26, 1912, ibid., Box 20, folder 23. Various correspondence in the Andrew Papers documents that Andrew made public a letter airing his complaints with MacVeagh.

  He was even less effective: Nugent, Progressivism, 91; Pringle, William Howard Taft, 2:804–5; Goodwin, Bully Pulpit, 705–6; and McCulley, Banks and Politics During the Progressive Era, 259. The Republican platform is available from American Presidency Project at www.presidency.ucsb.edu/ws/?pid=29633.

  “fever [of] excitement”: Andrew, Diary, entry of June 19, 1912.

  “We stand at Armageddon”: Pringle, William Howard Taft, 2:803, 809.

  “The Republicans have met”: Wilson to Mary Allen Hulbert Peck, June 23, 1912, in The Papers of Woodrow Wilson, 24:495.

  Laughlin, Willis, and Andrew converged on Baltimore: For Laughlin, see typed material on Citizens’ League, Warburg Papers, Box 8, folder 108; for Willis, see Willis to James Laughlin, June 17, 1912, Willis Papers, Box 7; and for Andrew, see Andrew, Diary, entry for June 1912. The description of Baltimore comes from Broesamle, William Gibbs McAdoo, 57.

  “The day is gray and grizzly”: Wilson to Mary Allen Hulbert Peck, June 17, 1912, in The Papers of Woodrow Wilson, 24:481–82.

  “a convention of progressives”: Wilson to William Jennings Bryan, June 22, 1912, in ibid., 493.

  CHAPTER TEN: WOODROW’S MIRACLE

  “A democratic nation is richer”: Speech in Frankfort, Kentucky, February 9, 1912, in Arthur S. Link, ed., The Papers of Woodrow Wilson (Princeton, N.J.: Princeton University Press, 1966–1989), 24:141–46.

  “The Aldrich Plan is 60 to 70 percent correct”: Vanderlip to James Stillman, September 20, 1912, Frank A. Vanderlip Papers, Box 1-4; and Henry Parker Willis, The Federal Reserve System: Legislation, Organization and Operation (New York: Ronald Press, 1923), 139–40. The two sources give generally consistent though not identical accounts of Wilson’s remark.

  “We oppose the so-called Aldrich bill”: The Democratic platform is available from American Presidency Project at: www.presidency.ucsb.edu/ws/?pid=29590. For Bryan’s authorship of the platform, see Paolo E. Coletta, William Jennings Bryan (Lincoln: University of Nebraska Press, 1969), 2:62; and Michael Kazin, A Godly Hero: The Life of William Jennings Bryan (New York: Knopf, 2006), 188.

  At the outset, Bryan threw the convention: Convention details from John J. Broesamle, William Gibbs McAdoo: A Passion for Change, 1863–1917 (Port Washington, N.Y.: Kennikat Press, 1973), 58–60; James Chace, 1912: Wilson, Roosevelt, Taft and Debs—The Election That Changed the Country (New York: Simon and Schuster, 2004), 150; Coletta, William Jennings Bryan, 2:59–64, and William Gibbs McAdoo, Crowded Years: The Reminiscences of William G. McAdoo (Boston: Houghton Mifflin, 1931), 145. Michael Kazin, a Bryan biographer, says that even though Bryan’s wife was eager for him to launch a fourth campaign in 1912, Bryan was sincere in his expressed desire not to run (A Godly Hero, 184).

  At Sea Girt, the governor anxiously: “Wilson Serene as Voting Goes On,” The New York Times, June 29, 1912.

  “My nomination was a sort of political miracle”: Wilson to Mary Allen Hulbert Peck, July 6, 1912, in The Papers of Woodrow Wilson, 24:541. Convention details come from “Murphy and Bryan in a Deadlock,” The New York Times, June 20, 1912; “Break to Wilson Seems at Hand as Convention Adjourns Till Today; He Leads on the 42nd Ballot,” The New York Times, July 2, 1912; Broesamle, William Gibbs McAdoo, 61–62; Chace, 1912, 154; John Milton Cooper Jr., Woodrow Wilson (New York: Knopf, 2009), 156; Arthur S. Link, Woodrow Wilson and the Progressive Era, 1910–1917 (New York: Harper and Row, 1954), 13; and Arthur S. Link, Woodrow Wilson: A Brief Biography (Cleveland: World, 1963), 54.

  more coherence to his evolving views: Link, Wilson and the Progressive Era, 20, stresses that Wilson remained a Jeffersonian. For Wilson’s idealistic view of businessmen, see William Diamond’s insightful The Economic Thought of Woodrow Wilson (Baltimore: Johns Hopkins University Press, 1943), 51–55; Diamond curtly dismisses the question of Wilson’s leftward evolution, observing tartly (p. 87), “Precisely why Wilson underwent this change is a problem for his biographer.” Cooper’s very good biography, Woodrow Wilson, cites opportunism as a partial answer but does not attempt a definitive answer, noting (p. 106), “When, how and why Woodrow Wilson became a progressive would become hotly debated questions after he entered politics.”

  “middle class is being more and more squeezed”: Speech in Frankfort, Kentucky, February 9, 1912, 141–46; and Richard Hofstadter, The Age of Reform (New York: Knopf, 1955), 225.

  “government by experts”: Chace, 1912, 203. For background on Wilson’s and Roosevelt’s views on the trusts, see ibid., 166, 194–203; Cooper, Woodrow Wilson, 163; Diamond, Economic Thought of Woodrow Wilson, 63–65; Hofstadter, Age of Reform, 223–28; Doris Kearns Goodwin, The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism (New York: Simon and Schuster, 2013), 667–70; Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900–1914 (New York: The Free Press of Glencoe, 1963), 209; and Alpheus Thomas Mason, Bra
ndeis: A Free Man’s Life (New York: Viking, 1956), 377.

  he had few misgivings about federal authority: See Cooper, Woodrow Wilson, 10. Elsewhere Cooper notes that Wilson “had never been able to swallow the legacies of state rights and limited government” that Democrats inherited from Jefferson (p. 143). For Wilson’s “Tory” remark, see Diamond, Economic Thought of Woodrow Wilson, 42. Even as early as Wilson’s graduate thesis, Congressional Government: A Study in American Politics (1885), he deplored the sectionalism in Congress as frustrating the purposes of the federal government: “These petty barons, some of them not a little powerful, but none of them within reach [of] the full powers of rule, may at will exercise an almost despotic sway within their own shires, and may sometimes threaten to convulse even the realm itself” (p. 30).

  “I do not know enough about this subject”: Acceptance speech, August 7, 1912, in The Papers of Woodrow Wilson, 25:12, 14.

  “I am for big business and I am against trusts”: Speech in Sioux City, Iowa, September 17, 1912, in ibid., 152. Wilson meant that while he was against monopolization he had no trouble with a business growing large by lawful means—but this was a distinction surely beyond the average voter. Wilson also said in his acceptance speech of August 7, “Power in the hands of great business men does not make me apprehensive, unless it springs out of advantages which they have not created for themselves” (ibid, p. 11). On Brandeis’s influence on the campaign, see Broesamle, William Gibbs McAdoo, 66; Cooper, Woodrow Wilson, 162–67; Kolko, The Triumph of Conservatism, 208–9; Link, Wilson and the Progressive Era, 20–21; and Mason, Brandeis, 377–80.

  He made the fair point: Chace, 1912, 206.

  Wilson also supported labor: Diamond, Economic Thought of Woodrow Wilson, 54–55, 70; and Link, Woodrow Wilson: A Brief Biography, 53.

  Wall Street was as divided: Due to Perkins’s role in the Roosevelt campaign, the Morgan-sponsored U.S. Steel was extremely uncomfortable with Perkins’s presence on its board. Jack Morgan asked Perkins—at least three times—to resign; Perkins refused: see J. P. Morgan Sr. to Perkins, August 18 and September 3, 1912, and Perkins’s memorandum of September 4 documenting Morgan’s telephone call that day, all in George W. Perkins Sr. Papers, Box 12. For Morgan and Carnegie’s support of Taft and Schiff’s support of Wilson, see Chace, 1912, 204. The senior Morgan aide Thomas Lamont also supported Taft: Lamont to W. J. Oliver, September 3, 1912, Thomas W. Lamont Papers, Box 123-6. For Warburg’s support of Wilson, see Ron Chernow, The Warburgs: The Twentieth-Century Odyssey of a Remarkable Jewish Family (New York: Random House, 1993), 140. Kolko’s The Triumph of Conservatism, 211, notes other prominent Jews supporting Wilson, including Henry Morgenthau Jr. and Bernard Baruch. For Untermyer’s gift and Vanderlip’s response, see Vanderlip to James Stillman, September 27, 1912, Vanderlip Papers, Box 1-4.

  he told an editorial writer: McCulley, Banks and Politics During the Progressive Era, 270–71. Aside from bankers, Citizens’ League members also contacted Wilson: see Paul M. Warburg, The Federal Reserve System: Its Origin and Growth—Reflections and Recollections (New York: Macmillan, 1930), 1:79; and James L. Laughlin, The Federal Reserve Act: Its Origin and Problems (New York: Macmillan, 1933), 113–14.

  His campaign utterances: See, for example, Wilson’s speech in Columbus on September 20, 1912, in The Papers of Woodrow Wilson, 25:203, in which his principal recommendation for currency reform was “You’ve got to make it elastic.”

  “You don’t understand politics”: Frank A. Vanderlip with Boyden Sparkes, From Farm Boy to Financier (New York: D. Appleton-Century, 1935), 225–26.

  Morgenthau reported to New York bankers: Vanderlip to Stillman, September 20, 1912; and Willis, The Federal Reserve System, 139–40.

  Wilson continued his courtship: Cooper, Woodrow Wilson, 168; and Coletta, William Jennings Bryan, 2:81.

  Laughlin was the only petitioner with: Laughlin, The Federal Reserve Act, 177–79.

  “the better part of an entire day”: Samuel Untermyer to Wilson, November 6, 1912, in The Papers of Woodrow Wilson, 25:528–29; Wilson’s response, dated November 12, is in ibid., 542.

  “formulated, tentatively, a substitute”: Carter Glass to Wilson, November 7, 1912, in The Papers of Woodrow Wilson, 25:530–31; Wilson’s response, dated November 14, is in ibid., 547.

  “short vacation”: Wilson to Ira Remsen, November 14, 1912, ibid.

  a conference between Willis and Untermyer: H. Parker Willis to Glass, November 7, 1912, Carter Glass Collection, Box 25/26. The conference had occurred the day before, November 6, which itself was the day after the election.

  “Mr. Untermyer contemplates”: Ibid.

  “the main ideas of the Aldrich bill”: Ibid.

  “impertinent activity”: Glass to Arsène Pujo, November 8, 1912; Glass to Arsène Pujo, November 12, 1912; and Arsène Pujo to Glass, November 11, 1912, telegram, all in ibid., Box 64. See also “Laughlin’s untitled and undated retrospective memorandum” (typed), James Laurence Laughlin Papers, Glass bill folder.

  “Moral: Put not your trust”: James Laughlin to Willis, November 21, 1912, H. Parker Willis Papers, Box 7.

  “been working on various phases”: Willis to Glass, November 7, 1912.

  In mid-November, Glass hosted Laughlin: Laughlin to Willis, November 21, 1912; “Laughlin’s untitled and undated retrospective memorandum”; and Laughlin, The Federal Reserve Act, 115, 117–19, and 120–21.

  Glass, in fact, was still laboring to understand: Colonel House recorded that Glass admitted his lack of expertise: see Edward House to Wilson, November 28, 1912, in The Papers of Woodrow Wilson, 25:564. Glass’s lack of expertise was also on display in a December 14, 1912, letter to Willis: “As I said to you last night, quite a number of questions present themselves to my mind” (Willis Papers, Box 1). Furthermore, Laughlin later wrote that Glass was “slow in taking in the banking principles,” although once he grasped them he was “firm in his position and was a good fighter for what he believed” (“Laughlin’s untitled and undated retrospective memorandum”). See also Robert Craig West, Banking Reform and the Federal Reserve, 1863–1923 (Ithaca, N.Y.: Cornell University Press, 1974), 94.

  “too prone to be suspicious”: Glass to H. Parker Willis, December 9, 1912, Glass Collection, Box 25/26.

  “allowed little or nothing to become public”: Warburg, The Federal Reserve System, 1:81.

  “sound banking” principles: Ibid., 81–82. For the Morawetz article, see West, Banking Reform and the Federal Reserve, 95.

  “I fear, Mr. Glass”: Carter Glass, An Adventure in Constructive Finance (Garden City, N.Y.: Doubleday, 1927), 32–37.

  “I think the quicker you see him”: Edward House to Wilson, November 28, 1912, in The Papers of Woodrow Wilson, 25:563–64.

  In December, Untermyer turned: “Five Men Control $368,000,000 Here,” The New York Times, December 11, 1912.

  Morgan regarded public testimony: See, for example, Jean Strouse, Morgan, American Financier (New York: Random House, 1999), 5.

  “by special train with half a dozen”: Vanderlip to James Stillman, December 20, 1912,Vanderlip Papers, Box 1-4.

  “No, sir; the first thing is character”: House Committee on Banking and Currency, Report of the Committee Appointed Pursuant to House Resolutions 429 and 504 to Investigate the Concentration of Control of Money and Credit, 62d Cong., 3d sess., submitted February 28, 1913 (Washington, D.C.: Government Printing Office, 1913), 136; available at https://fraser.stlouisfed.org/docs/historical/house/money_trust/montru_report.pdf. (Hereinafter cited as Pujo Report.)

  as later witnesses would demonstrate: See, for example, the testimony of George F. Baker, ibid., 1503.

  “You are an advocate of combination and cooperation”: Ibid., 1050.

  Untermyer deliberately zeroed in on railroads: Ibid., 1019, 1034, and 1035.

  had at times been “blundering”: Vanderlip to Stillman, Decem
ber 20, 1912.

  Laughlin proposed that monetary policy: Laughlin Papers, Plan D folder.

  Warburg also dashed off a fourteen-page: Warburg to Henry Morgenthau, December 7, 1912, Paul Moritz Warburg Papers, Box 1, folder 3. Warburg’s plan was, characteristically, elaborated in great detail. He proposed to Morgenthau that Congress enact two pieces of legislation, one for a bank with branches, another providing for a national clearinghouse. Warburg’s letter to Colonel House of December 19, 1912 (Edward M. House Papers, Box 114a) documents that the plan was conveyed to House, which surely means that Wilson was advised of it.

  Glass also met with Piatt Andrew: A. Piatt Andrew, Diary of Abram Piatt Andrew, 1902–1914, ed. E. Parker Hayden Jr. and Andrew L. Gray (Princeton, N.J., 1986), entry for December 14, 1912. Apparently at their breakfast meeting, Glass advised Andrew of his continuing worries about securing the Banking Committee chairmanship. Three days later, Aldrich wrote Andrew (A. Piatt Andrew Papers, Box 3, folder 17), offering to help Glass gain the chairmanship, presumably by putting in a word with his friends in Congress. This suggests that Aldrich, by then of course retired, was held in higher esteem by congressional Democrats than their public utterances suggested. Lastly, in another example of pressure for a central bank, the economist Charles Conant urged Glass to endorse a “concentration” of reserves (Glass to Willis, December 9, 1912).

  “deluged with letters”: Glass to H. Parker Willis, December 14, 1912, Glass Collection, Box 25/26.

  Glass’s every instinct was to try: James Laughlin to Willis, December 21, 1912, Willis Papers, Box 7. On Glass’s irritation over the attention Untermyer received from newspapers, see, for example, Glass to H. Parker Willis, December 3, 1912, Glass Collection, Box 25/26. For Glass’s efforts to screen witnesses, see West, Banking Reform and the Federal Reserve, 97–100.

  “Mr. Hulbert is a very sharp critic”: Willis to Carter Glass, December 14, 1912, Willis Papers, Box 1.

  Glass put off seeing him: Laughlin’s query regarding authorship is missing; Willis’s reply of December 18, 1912 (Laughlin Papers, Glass bill file) says: “As to authorship of the forthcoming measure, custom dictates that the Chairman’s name shall be given to any bill that may be reported.” Laughlin had proposed to Willis on December 2 that they and Glass meet promptly in Baltimore to discuss Laughlin’s progress. On December 6, when Laughlin received word from Willis that Glass wanted to put off a meeting until January, Laughlin realized his role would be strictly consultative. He immediately wired Glass, “Telegram received much disappointed at postponement.” More expressions of hurt followed. Notwithstanding his bruised feelings, Laughlin continued to revise his plan for Willis and Glass’s benefit, and succeeded in meeting Glass at his hotel on December 21. (See Laughlin correspondence of December 6, 7, and 21, 1912, in Willis Papers, Box 7.)