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

by Roger Lowenstein

  Aldrich liberally buying economics books: Biographer’s notes, Aldrich Papers, Reel 61; and Stephenson, Nelson W. Aldrich, 337–38.

  the group ventured to Berlin: Andrew, Diary; and “Chronology on Monetary Commission Work of Senator Aldrich.”

  a dispatch written by Napoleon: National Monetary Commission, An Address by Senator Nelson W. Aldrich Before the Economic Club of New York, November 29, 1909, 61st Cong., 2d sess. (Washington, D.C.: Government Printing Office, 1910), 28.

  suggested that Aldrich gather: Frank A. Vanderlip with Boyden Sparkes, From Farm Boy to Financier (New York: D. Appleton-Century, 1935), 211.

  Andrew and the Davisons: Andrew, Diary.

  the interviews: Biographer’s notes, Aldrich Papers, Reel 61; and National Monetary Commission, Interviews.

  Davison and Aldrich pressed their hosts: National Monetary Commission, Interviews; quotes come from pp. 31–32, 356, 201–2, and 212, respectively.

  fifty-eight meetings: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 23; and Aldrich Papers, Reel 29.

  Reynolds, the Chicago banker, maintained: Stephenson, Nelson W. Aldrich, 339.

  safari in Africa: Discussion of Roosevelt’s pending trip was public within weeks of the election: see, for example, “Explorers See Roosevelt,” The New York Times, November 21, 1908.

  “I like your ideas”: This anecdote is drawn from Warburg, The Federal Reserve System, 1:56, and from “Aldrich Becomes Converted to Idea of a Central Bank, May–October 1908,” Aldrich Papers, Reel 61.

  “It is easy to imagine”: Warburg, The Federal Reserve System, 1:56–57.

  Warburg jumped into the fray: Paul Warburg to Piatt Andrew, December 14, 1908, Aldrich Papers, Reel 28; and Warburg, The Federal Reserve System, 1:33–34, 57.

  a monument to his decades: “Money Commission Meets,” The New York Times, November 23, 1908.

  “he doesn’t like being pilloried continually”: “Aldrich Weary of Senate,” ibid., November 2, 1908.

  Aldrich intended to devote: “Senator Aldrich Tells of His Trip,” ibid., November 19, 1908.

  The commission certainly had plenty: National Monetary Commission correspondence, Aldrich Papers, Reel 27. For New York State, see a banking department letter to Arthur Shelton, July 23, 1909, ibid.

  “Really, gentlemen, I have nothing to say”: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 31–32, quoting the Milwaukee Journal.

  Butler asked whether Aldrich: Nicholas Murray Butler to Aldrich, January 25, 1909, Aldrich Papers, Reel 29; Aldrich’s reply is in ibid.

  Woodrow Wilson turned down an invitation: “Chronology on Monetary Commission Work of Senator Aldrich”; Frank Vanderlip to Aldrich, December 1, 1908, Aldrich Papers, Reel 28; and Vanderlip, From Farm Boy to Financier, 211.

  “What I am anxious to do”: Henry F. Pringle, The Life and Times of William Howard Taft (New York: Farrar and Rinehart, 1939), 1:382 (italics added).

  bruised his mentor’s ego: Ibid., 384, 387–88.

  conversation at dinner was strained: Ibid., 392.

  “It is coming to be an open secret”: Vanderlip to Lord Revelstoke (Edward Charles Baring), January 27, 1909, Vanderlip Papers, Box 1–3. For a full and compelling account of the Taft-Roosevelt relationship, see Doris Kearns Goodwin’s The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism (New York: Simon and Schuster, 2013).

  CHAPTER SIX: PROGRESSIVISM

  “Neither the political prejudice”: Nelson W. Aldrich, National Monetary Commission, An Address by Senator Nelson W. Aldrich Before the Economic Club of New York, November 29, 1909, 61st Cong., 2d sess. (Washington, D.C.: Government Printing Office, 1910), 27.

  “Financial questions are perplexing”: Taft quoted in “Taft Advocates Currency Reform,” The New York Times, June 23, 1911.

  He was bombarded with pleas: Letters from U.S. Steel (April 6, 1909) and National Biscuit (April 19, 1909) to Aldrich are in Nelson W. Aldrich Papers, Reel 31; letter from Royal Weaving’s Joseph Ott to Aldrich (May 6, 1909) is in ibid., Reel 32.

  Against these letters Aldrich had: Ibid., Reels 31–33; see especially Reel 33, which contains Secretary of State Philander C. Knox to Aldrich, May 26, 1909, enclosing translation of a note from the Turkish embassy.

  Always at ease working: Nathaniel Wright Stephenson, Nelson W. Aldrich: A Leader in American Politics (New York: Scribner’s, 1930), 351.

  “for a speedy end of the Tariff wrangle”: Paul Warburg to A. Piatt Andrew, July 26, 1909, Aldrich Papers, Reel 35.

  Andrew at least kept the Monetary Commission: A. Piatt Andrew, Diary of Abram Piatt Andrew, 1902–1914, ed. E. Parker Hayden Jr. and Andrew L. Gray (Princeton, N.J., 1986), entries for June 29, 1909 (Wright), and April 27, 1910 (Gettysburg).

  The tariff work thrust Aldrich: For the Taft-Aldrich relationship during the tariff legislation, see Henry F. Pringle, The Life and Times of William Howard Taft (New York: Farrar and Rinehart, 1939), 1:411–15; and Doris Kearns Goodwin, The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism (New York: Simon and Schuster, 2013), 593–94, 597. The source for the White House portico is Stephenson, Nelson W. Aldrich, 351. Taft’s letter to Aldrich of July 29, 1909 (Aldrich Papers, Reel 35), in which the President remarks, “I regret exceedingly to differ with you upon this subject . . . ,” is suggestive of Taft’s reluctance to confront Aldrich.

  The President had more success: Walter Nugent, Progressivism: A Very Short Introduction (New York: Oxford University Press, 2010), 84.

  Aldrich did agree, reluctantly: See the fascinating recollection “Notes on an Interview with A. Piatt Andrew,” February 1, 1934, on mimeograph in the A. Piatt Andrew Papers. The interviewer, Andrew L. Gray, wrote that “Aldrich told me in personal conversations that his own inclination would have been to liberalize [reduce the duties] considerably but that he could not do so without letting down his old associations who had stuck by him through thick and thin.”

  “meets the full approval”: James W. Van Cleave of the National Association of Manufacturers to Aldrich, May 19, 1909, Aldrich Papers, Reel 33. For appraisals of the Payne-Aldrich tariff, see Pringle, William Howard Taft, 1:425; Robert H. Wiebe, Businessmen and Reform: A Study of the Progressive Movement (Chicago: Elephant, 1989), 95; Stephenson, Nelson W. Aldrich 357–58; and Arthur S. Link, Wilson, vol. 2, The New Freedom (Princeton, N.J.: Princeton University Press, 1956), 178.

  Senator Jonathan Dolliver of Iowa: Goodwin, The Bully Pulpit, 593.

  La Follette and other progressives: Richard T. McCulley, Banks and Politics During the Progressive Era: The Origins of the Federal Reserve System, 1897–1913 (New York: Garland, 1992), 226.

  Albert B. Cummins: “Cummins Will Give No Quarter in Fight,” The New York Times, November 7, 1909.

  “distrusted, disliked, even hated”: “Aldrich the Master of Details,” Current Literature 47 (August 1909), 145–47.

  a second European study tour: “Chronology on Monetary Commission Work of Senator Aldrich,” Aldrich Papers, Reel 61. For the meeting with Churchill, see Michael Clark Rockefeller, “Nelson W. Aldrich and Banking Reform: A Conservative Leader in the Progressive Era,” A.B. thesis, Harvard College, 1960, 34–35; and Stephenson, Nelson W. Aldrich, 362.

  The bankers in his circle: Various correspondence in Aldrich Papers, Reels 35–37.

  a barnstorming tour in the West: Stephenson, Nelson W. Aldrich, 363.

  “I am particularly pleased”: Henry Davison to Aldrich, August 6, 1909, Aldrich Papers, Reel 35.

  “some interests of mine”: Aldrich to Porfírio Diaz, August 28, 1909, ibid., Reel 36.

  Aldrich by now was a very wealthy man: Stephenson, Nelson W. Aldrich, 367; Carrere and Hastings (architects) to Aldrich, July 15, 1910, Aldrich Papers, Reel 42; and Senator Boies Penrose to Aldrich, March 25, 1910, ibid., Reel 41. Reel 61 of ib
id. is replete with stock transactions, many of them substantial.

  Even ordinary Americans: Various correspondence, Aldrich Papers, Reels 30, 37. Ravenscroft’s book appeared in 1911.

  The most interesting proposal: Victor Morawetz, The Banking and Currency Problem in the United States (New York: North American Review Publishing, 1909); see especially 45–46, 84–86.

  “Wall Street influences”: “Taft with Aldrich for a Central Bank,” The New York Times, September 15, 1909.

  nine midwestern cities: “Chronology on Monetary Commission Work of Senator Aldrich.”

  “one which will satisfy the manufacturers”: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 35, 54.

  Local coverage tended: National Monetary Commission (probably A. Piatt Andrew) to Paul Warburg, November 19, 1909, and unidentified Milwaukee newspaper clipping, both in Aldrich Papers, Reel 61.

  “What do you do when you”: Quoted in Rockefeller, “Nelson W. Aldrich and Banking Reform,” 74.

  “the ghost of Andrew Jackson”: An Address by Senator Nelson W. Aldrich Before the Economic Club of New York.

  Although Warburg and he: Paul M. Warburg, The Federal Reserve System: Its Origin and Growth—Reflections and Recollections (New York: Macmillan, 1930), 1:57.

  “The universal American nation”: Paul Moritz Warburg Papers, Folder 91.

  Warburg believed that if Americans: Warburg, The Federal Reserve System, 2:160.

  Aldrich decreed that the next stage: “Minutes of Meetings of Monetary Commission, 1908–1911,” Aldrich Papers, Reel 61.

  Aldrich’s address suggested just how: An Address by Senator Nelson W. Aldrich Before the Economic Club of New York; quotes on 17, 19.

  “The insurgents have been showing”: Vanderlip to James Stillman, January 21, 1910, Frank A. Vanderlip Papers, Box 1-3; see also Vanderlip to James Stillman, February 11, 1910, ibid.

  Progressivism embodied an attitudinal shift: Nugent’s Progressivism is a worthy introduction to the subject.

  To judge from newspaper sales: According to the website Press Reference (www.pressreference.com/Sw-Ur/United-States.html), the number of newspapers in the United States hit a peak in 1910, at 2,600.

  less—not more—tolerant: Pringle, William Howard Taft, 1:413.

  for much of the winter: Vanderlip to Stillman, January 21, 1910.

  “One cannot help feeling very confident”: Warburg to Nelson Aldrich, December 24, 1909, Warburg Papers.

  “It is a scheme based upon conditions”: Warburg, The Federal Reserve System, 1:35–46, 2:118.

  “These sectional reserve banks”: Ibid., 1:85–86, 2:160–61.

  In a second lecture in 1910: Ibid., 1:42–48; quote on 45–46.

  The “United Reserve Bank” lecture: Ibid., 36–37.

  Roosevelt disembarked in New York: “Million Join in Welcome to Roosevelt,” The New York Times, June 19, 1910; Pringle, William Howard Taft, 1:538–55, especially 551 and 553–54; and Goodwin, The Bully Pulpit, 640–41.

  “We have had no national leadership”: Theodore Roosevelt to Henry Cabot Lodge, August 17, 1910, quoted in James Chace, 1912: Wilson, Roosevelt, Taft and Debs—The Election That Changed the Country (New York: Simon and Schuster, 2004), 56.

  Roosevelt conveniently overlooked: Wiebe, Businessmen and Reform, 91; and Pringle, William Howard Taft, 1:420.

  “My intercourse with Aldrich”: Notes (quoting Roosevelt letter to Lodge, September 10, 1909), Aldrich Papers, Reel 61.

  As progressives battled for control: Arthur S. Link, Woodrow Wilson and the Progressive Era, 1910–1917 (New York: Harper and Row, 1954), 5. Reel 42 in the Aldrich Papers contains extensive correspondence and material relating to the Bristow charge. See also “Rubber, Aldrich and the Tariff,” The New York Times, July 28, 1910; “Bristow Makes New Charge,” The New York Times, July 26, 1910; “Insurgents Gained Four,” The New York Times, August 4, 1910; and “Senator Bristow and Senator Aldrich,” The Outlook, August 27, 1910.

  a private railroad car: Goodwin, The Bully Pulpit, 643.

  “Roosevelt is certainly making”: Vanderlip to James Stillman, September 2 and September 9, 1910, Vanderlip Papers, Box 1-3.

  a far more radical agenda: Chace, 1912, 56. In his famous “New Nationalism” speech, delivered in Osawatomie, Kansas, on August 31, 1910, Roosevelt said, “Every man holds his property subject to the general right of the community to regulate its use to whatever degree the public welfare may require it.” He also called for a “moral awakening.”

  Although he supported the notion of financial reform: In his speech at Osawatomie, Roosevelt said: “It is of profound importance that our financial system should be promptly investigated, and so thoroughly and effectively revised as to make it certain that hereafter our currency will no longer fail at critical times to meet our needs.”

  Aldrich intended to wait out: Aldrich’s correspondence (in the Aldrich Papers) documents that he was closely, and anxiously, monitoring the 1910 campaign.

  “The political pot is boiling here”: Perkins to J. P. Morgan, October 11, 1910, George W. Perkins Sr. Papers.

  The collision hurled him several feet: “Aldrich Not Badly Hurt,” The New York Times, October 22, 1910; William H. Taft to Aldrich, October 21, 1910, Aldrich Papers, Reel 43. That Aldrich was already planning a trip is confirmed by a letter Frank Vanderlip wrote to James Stillman, in which Vanderlip reported that Aldrich “met with what came very near being a severe auto accident” and that the mishap “has naturally postponed the conference that was in mind”: Frank A. Vanderlip with Boyden Sparkes, From Farm Boy to Financier (New York: D. Appleton-Century, 1935), 212.

  On election day: Results in Nugent, Progressivism, 89.

  “It is hardly an exaggeration”: Frederick Jackson Turner, “Social Forces in American History,” American Historical Review 16, no. 2, 217–33. Turner had delivered the essay to the American Historical Association in Indianapolis on December 28, 1910.

  “We shall appeal to the thoughtful men”: “Keep Politics Out of Finance—Aldrich,” The New York Times, November 12, 1910. The occasion was the annual dinner of the Academy of Political Science of New York.

  His plan was so secret: “Minutes of Meetings of Monetary Commission.”

  CHAPTER SEVEN: JEKYL ISLAND

  “A Banker uses the money of others”: Walter Bagehot, Lombard Street: A Description of the Money Market (London, 1873), 9. Apparently, the words up to the semicolon are Ricardo’s and the rest is a paraphrasing or interpretation from Bagehot.

  “Public utility is more truly the object”: “Report of the Secretary of the Treasury on the Subject of a National Bank,” read to the House of Representatives, December 15, 1790.

  Aldrich insisted on absolute secrecy: Narrations of Jekyl trip sourced to the Warburg Papers, “Jekyl Island Conference, Nov. 18-26, 1910” and “Jekyl Island Conference Nov. 18, 1910,” are in Nelson W. Aldrich Papers, Reel 61 (hereinafter Warburg Narration 1 and 2, respectively). The narrations are in the third person, but were written by either Warburg or someone with close access to him.

  Aldrich also recruited Frank Vanderlip: Warburg Narration 1; and “Notes on an Interview with A. Piatt Andrew,” February 1, 1934, A. Piatt Andrew Papers.

  six co-conspirators: Vanderlip’s 1935 memoir, From Farm Boy to Financier (witten with Boyden Sparkes; New York: D. Appleton-Century), says Ben Strong was also at Jekyl. This seems highly unlikely. In a letter to Stillman on November 29, 1910 (the day after his return), Vanderlip described a party of only six. Warburg Narrations 1 and 2 include only the six named participants. Andrew also cites the same six participants in “Notes on an Interview with A. Piatt Andrew.” Finally, the earliest public account of the trip, a cursory mention in an article by B. C. Forbes, “Men Who Are Making America,” Leslie’s Weekly 123, no. 42 (October 19, 1916), identifies Aldrich, Andrew, and the three bankers (omitti
ng Aldrich’s secretary, Shelton) and specifically mentions that “later” Strong “was called into frequent consultation” and “joined the first-name club.” This suggests that the subsequent close identification of Strong with the Jekyl party (Strong, of course, was to become the first president of the New York Federal Reserve Bank) blurred Vanderlip’s later recollection, which was not published until twenty-five years after the trip. One final corroborating bit of evidence is that the Jekyl Island trip was not mentioned in Lester V. Chandler’s thorough-seeming 1958 biography of Strong.

  It was Davison who arranged: Warburg Narration 1; and Vanderlip, From Farm Boy to Financier, 213–14. Some accounts say Warburg purchased a gun, but his son James said he “borrowed a lethal weapon” as camouflage: James Warburg, The Long Road Home (Garden City, N.Y.: Doubleday, 1964), 29.

  “On what kind of an errand”: Warburg Narrations 1 and 2 are the source for the entire train encounter between Warburg and Vanderlip.

  Aldrich set a workmanlike: Warburg Narration 2; and Vanderlip, From Farm Boy to Financier, 215. Disappointingly, Andrew’s diary contains no entries for the several months leading up to and including the Jekyl trip.

  “Now gentlemen, this is all very pretty”: Warburg Narration 1.

  For the next eight days: Vanderlip to James Stillman, November 29, 1910, Frank A. Vanderlip Papers, Box 1-3; and Vanderlip, Farm Boy to Financier, 215.

  The Jekyl Island Club, founded in 1885: Description of club history and setting from my visit to Jekyll Island (as a footnote later in the chapter explains, the spelling of the island’s name was changed years later); author interview with John Hunter, director of historical resources for Jekyll Island Authority; and displays at Jekyll Island Museum, January 18, 2013. For Morgan arranging that there were no other guests, see Michael Clark Rockefeller, “Nelson W. Aldrich and Banking Reform: A Conservative Leader in the Progressive Era,” A.B. thesis, Harvard College, 1960, 35.

  “We were working so hard”: Vanderlip, From Farm Boy to Financier, 216. Vanderlip’s memoir recounts that Davison and Strong went swimming and riding. For reasons stated in endnote for page 108 (on Notes pages 293–94), it is unlikely Strong was there, and since Andrew was an indefatigable athlete—in particular a swimmer and rider—and close to Davison, it is likely he meant Davison and Andrew.