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

by Roger Lowenstein

  “could not have come out”: McCulley, Banks and Politics During the Progressive Era, 245.

  “My intuition is”: Vanderlip to Stillman, June 20, 1911, Frank A. Vanderlip Papers, Box 1-4.

  In November, Vanderlip wisely defused: “The National City Company”; “Giving Up Control of Outside Banks”; Cleveland and Huertas, Citibank, 66; McCulley, Banks and Politics During the Progressive Era, 259; and Henry F. Pringle, The Life and Times of William Howard Taft (New York: Farrar and Rinehart), 2:676.

  Lindbergh saw a parallel plot: “Wants a Bank Inquiry,” The New York Times, July 9, 1911.

  Bryan’s plan was not developed: Laughlin, The Federal Reserve Act, 155–56.

  “absolute commercial and industrial slavery”: Bryan quoted in Rockefeller, “Nelson W. Aldrich and Banking Reform,” 79.

  Warburg spent an evening: Paul Warburg to Andrew, December 14, 1911, Andrew Papers, Folder 7.

  La Follette proclaimed: ”La Follette Invades Taft’s Home State,” The New York Times, December 28, 1911.

  Lurking in the shadows of the La Follette: 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.

  Vanderlip sized up the turbulent politics: Numerous letters of Vanderlip to James Stillman are in Vanderlip Papers, Box 1-4; see, for instance, April 6, April 15, June 20, July 21, and September 29, 1911.

  the former president regarded it: In William Howard Taft, Pringle writes that previously “there was an outside chance that harmony, of a sort, might be achieved again. But it was not possible after the steel suit” (2:673). See also Doris Kearns Goodwin, The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism (New York: Simon and Schuster, 2013), 667–68.

  Morgan, who had been troubled: J. P. Morgan Jr. to Henry Davison, June 5, 1911, J. P. Morgan Jr. Papers, Box 5, book 8.

  “felt that all the old moorings”: Vanderlip to James Stillman, October 17, 1911, Vanderlip Papers, Box 1–4.

  in New Orleans: Proceedings of the 37th Annual Convention of the American Bankers Association, available at http://books.google.com/books?id=LBgaAQAAIAAJ&pg=PA340&lpg=PA340&dq=american+bankers+association,+proceedings+of+the+37th+annual+convention&source=bl&ots=dMH2bntf6H&sig=kT-uZ68Z3jQYHwsBaXmmcgtsm4E&hl=en&sa=X&ei=ldsQU6y2HuLF0gG714DoDw&ved=0CCcQ6AEwAA#v=onepage&q=american%20bankers%20association%2C%20proceedings%20of%20the%2037th%20annual%20convention&f=false].

  Banks were given greater license: See McCulley, Banks and Politics During the Progressive Era, 235–40.

  Aldrich received a five-minute ovation: “Bankers Indorse Aldrich Money Plan.”

  La Follette was making opposition: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 79. For La Follette’s Hamilton speech, see “LaFollette serves notice on Aldrich Plan, Dec. 30, 1911, Phil. N.Am. Dec. 31,” Aldrich Papers, Reel 61.

  Newspaper coverage was withering: A newspaper clipping found in Aldrich Papers, dated December 7, 1911 (the name of the paper is clipped off) states matter-of-factly that the “chief purpose” of the Aldrich plan was “to concentrate financial power in the hands of a very few men.” For the Rocky Mountain News quote, see Rockefeller, “Nelson W. Aldrich and Banking Reform,” 76.

  a body with “semi-public” powers: National Monetary Commission, Letter from Secretary of the National Monetary Commission Transmitting, Pursuant to Law, the Report of the Commission, 62d Cong., 2d sess., January 9, 1912 (Washington, D.C.: Government Printing Office, 1912), 14.

  In December, Representative Lindbergh: McCulley, Banks and Politics During the Progressive Era, 257.

  met in nearly daily session: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 83.

  New York banks, which held 20 percent: Warburg, The Federal Reserve System, 1:413. That they could elect three of thirty-nine representatives is my analysis, based on Letter from Secretary of the National Monetary Commission, 12–13.

  Aldrich confessed to Taft: “Aldrich Sees Taft,” The New York Times, December 14, 1911. In the spring of 1911, Vanderlip was already writing Stillman, “It may interest you to know that Taft has practically abandoned hope of re-election to a second term” (Vanderlip to Stillman, April 15, 1911).

  Andrew sent the former president: Theodore Roosevelt to Andrew, December 2, 1911, Andrew Papers, Folder 23; for thirty-five volumes, see Andrew to Woodrow Wilson, November 23, 1911, ibid., Folder 7.

  the governor was a leading candidate: Arthur S. Link, Woodrow Wilson and the Progressive Era, 1910–1917 (New York: Harper and Row, 1954), 11.

  “current is drifting very strongly”: Vanderlip to Stillman, July 21, 1911.

  “Ever since I have had”: John Milton Cooper Jr., Woodrow Wilson (New York: Knopf, 2009), 28.

  As a mature political scientist: Woodrow Wilson, “An Historical Essay, September 15, 1893: A Calendar of Great Americans,” in Arthur S. Link, ed., The Papers of Woodrow Wilson (Princeton, N.J.: Princeton University Press, 1966–1989), 8:368–80.

  “The supporters of the second bank”: Woodrow Wilson, A History of the American People, vol. 7, Critical Changes and Civil War (New York: Harper and Brothers, 1906), 45–46.

  “proved itself”: Ibid, 47.

  “I was born a politician”: Wilson’s letter to Turner is quoted in Arthur S. Link, Woodrow Wilson: A Brief Biography (Cleveland: World, 1963), 28–29.

  the silver campaign of Bryan in 1896: House to Woodrow Wilson, October 16, 1911, Edward M. House Papers, Box 119a. In this letter, Colonel House relates gossip about Wilson’s non-support of Bryan in 1896. See also the confirming response of a Wilson aide, October 17, 1911, ibid.

  George Harvey: Cooper, Woodrow Wilson, 91, 106, and 120.

  his eye on the White House: Ibid., 64; Link, Woodrow Wilson: A Brief Biography, 47–49.

  “the greatest monopoly in this country”: Paolo E. Coletta, William Jennings Bryan (Lincoln: University of Nebraska Press, 1969), 2:128; and “Gov. Wilson and the Aldrich Plan,” The New York Times, September 1, 1911 (citing Wilson’s August 26 interview with The Outlook).

  “everyone south of Canal Street”: Edward House to William Jennings Bryan, December 6, 1911, Aldrich Papers, Reel 61. For Wilson’s distancing himself from Harvey, see Cooper, Woodrow Wilson, 141; and James Chace, 1912: Wilson, Roosevelt, Taft and Debs—The Election That Changed the Country (New York: Simon and Schuster, 2004), 132–35.

  Andrew sent Wilson the Monetary Commission: Andrew to Woodrow Wilson, November 23, 1911, Andrew Papers, Folder 7; Woodrow Wilson to Andrew, November 27, 1911, ibid.; and Laughlin, The Federal Reserve Act, 176–77.

  William Garrett Brown: William Garrett Brown to Andrew, December 4, 1911, Andrew Papers, Folder 7; Andrew to Brown, December 5, 1911, ibid.; and Andrew and Brown letters, Aldrich Papers, Reel 61 (from Andrew Collection). See also House to Woodrow Wilson, December 15, 1911, House Papers, Box 119a.

  Wilson began to receive entreaties: Cooper, Woodrow Wilson, 182–83. Further biographical details of House can be found in Louis Gould, “Wilson’s Man in Paris,” The Wall Street Journal, January 17–18, 2015.

  “I have been with Mr. Bryan”: House to Woodrow Wilson, November 18, 1911, House Papers, Box 119a; and Chace, 1912, 139.

  in 1900 and 1908: Coletta, William Jennings Bryan, 2:44.

  Bryan came to dinner: Cooper, Woodrow Wilson, 141–42.

  knowing how Bryan felt: House to Wilson, December 15, 1911.

  addressing him as “My dear friend”: Woodrow Wilson to House, December 22, 1911, House Papers, Box 119a.

  “He is like my second personality”: Cooper, Woodrow Wilson, 192.

  House pursued Bryan’s support: Coletta, William Jennings Bryan, 2:35–38; and Colonel House’s assistant to Wilson, December 30, 1911, House Papers, Box 119a.

  CHAPTER NINE: THE GREAT CA
MPAIGN

  “The Democratic members”: Warburg to James Laughlin, April 22, 1912, Paul Moritz Warburg Papers, Folder 3. I have slightly shortened the quote; the passage in its entirety reads, “The Democratic members of the committee, leaving aside Pujo, are absolutely unfit to ever produce anything; they simply have not got the knowledge.”

  “No one class can comprehend”: “Wilson’s reference to Aldrich Plan (Phil. Press, Jan. 9, 1912),” January 8, 1912, Nelson W. Aldrich Papers, Reel 61.

  “I got in the motor”: “Filing of Report of Monetary Commission, Jan. 8, 1912 (from Andrew Coll., Gloucester),” ibid. The National Monetary Commission formally expired in March.

  “The bankers of the country”: “Wilson’s reference to Aldrich Plan.”

  faced three rivals for the nomination: Arthur S. Link, Woodrow Wilson and the Progressive Era, 1910–1917 (New York: Harper and Row, 1954), 11–12: and John J. Broesamle, William Gibbs McAdoo: A Passion for Change, 1863–1917 (Port Washington, N.Y.: Kennikat Press, 1973), 48–50

  “predatory wealth”: “Attitude of Wilson, Daniels, Kern and Bryan toward Aldrich Plan, Jan. 11, 1912,” Aldrich Papers, Reel 61 (from Warburg Papers).

  “In conversation with Mr. William”: “Attitude of Wilson toward Aldrich plan, Jan., 1912: A memo to Mr. Warburg, from Mr. Dinwiddie, Jan. 26, 1912,” ibid. (from Warburg Papers).

  He and Andrew were invited to a luncheon: “Monetary Plan and Roosevelt, 1912,” ibid. (from Andrew Papers). This document quotes Andrew’s letter to his parents of January 26, 1912, which described the luncheon.

  “Why not give Mr. Warburg”: Paul M. Warburg, The Federal Reserve System: Its Origin and Growth—Reflections and Recollections (New York: Macmillan, 1930), 1:77–78.

  In February, Roosevelt formally declared: Doris Kearns Goodwin, The Bully Pulpit: Theodore Roosevelt, William Howard Taft, and the Golden Age of Journalism (New York: Simon and Schuster, 2013), 580–82, 678, and 681; James Chace, 1912: Wilson, Roosevelt, Taft and Debs—The Election That Changed the Country (New York: Simon and Schuster, 2004), 31, 107, and 108; and Henry F. Pringle, The Life and Times of William Howard Taft (New York: Farrar and Rinehart, 1939), 1:318, 327, and 329, and 2:562, 749, 768, and 769.

  language in their platforms: Warburg, The Federal Reserve System, 1:77.

  “Why should not Wall Street”: Alfred Owen Crozier, U.S. Money vs. Corporation Currency: “Aldrich Plan” (Cincinnati: Magnet, 1912), 9, 205.

  He turned down all speaking invitations: Aldrich to James Forgan, January 31, 1912, telegram, Aldrich Papers, Reel 47; and Nathaniel Wright Stephenson, Nelson W. Aldrich: A Leader in American Politics (New York: Scribner’s, 1930), 405. For Aldrich’s stock portfolio, see correspondence in Aldrich Papers, Reel 47.

  “grim granite and slate”: Nelson W. Aldrich Jr., Old Money: The Mythology of Wealth in America (1988; repr., New York: Allworth Press, 1996), 26.

  The Democrats wrangled over the scope: For the origins of the Pujo hearings, see Richard T. McCulley, Banks and Politics During the Progressive Era: The Origins of the Reserve System, 1897–1913 (New York: Garland, 1992), 260–64.

  “The questions will be put”: J. P. Morgan Jr. to Henry Davison, April 26, 1912, J. P. Morgan Jr. Papers, Book 9.

  “wild imaginings”: Vanderlip to James Stillman, July 28, 1911, Frank A. Vanderlip Papers, Box 1-4.

  In March, the Banking Committee: “To Split Money Inquiries,” The New York Times, March 6, 1912. The next month, Laughlin made the point to Warburg that a separate legislative process was preferable. Referring to Samuel Untermyer, named as counsel to lead the Money Trust inquiry, Laughlin wrote, “Whatever Mr. Untermyer’s pyrotechnics, the Sub-Committee on the bill will continue its quiet work” (James Laughlin to Warburg, April 25, 1912, Warburg Papers, Box 1, folder 3).

  Glass was a Bryan Democrat: For a detailed account of Glass’s early career, which documents the central role of racial politics for Glass and his Virginia contemporaries, see Harry Edward Poindexter, “From Copy Desk to Congress: The Pre-Congressional Career of Carter Glass,” Ph.D. diss., University of Virginia, 1966.

  “misguided Negroes”: Rixey Smith and Norman Beasley, Carter Glass (New York: Longmans, Green and Co., 1939), 49.

  However, he had no false pride: James E. Palmer Jr., Carter Glass: Unreconstructed Rebel (Roanoke: Institute of American Biography, 1938), 54.

  Willis was close to Laughlin: McCulley, Banks and Politics During the Progressive Era, 292.

  protect his “baby”: Andrew to Paul Warburg, March 25, 1912, A. Piatt Andrew Papers, Box 22, folder 7.

  “simply have not got the knowledge”: Warburg to James Laughlin, April 22, 1912, Warburg Papers, Box 1, folder 3.

  As a southerner, Glass was suspicious: For evidence that Glass, early in 1912, was in fact hostile to centralization, see H. Parker Willis to Laughlin, March 30, 1912, James Laurence Laughlin Papers, Box 2.

  However, with Warburg prodding Laughlin: Warburg to Laughlin, April 22, 1912; in this letter, Warburg warns Laughlin, “I am worried about [Willis’s] articles in the Journal of Commerce. He writes against centralization of reserves.” See also Lucy D. Chen, “Banking Reform in a Hostile Climate: Paul M. Warburg and the National Citizens’ League” (working paper, April 2010), 19, available at www.fas.harvard.edu/~histecon/crisis-next/1907/docs/Chen-Warburg_Final_Paper.pdf.

  “From recent information, I am inclined”: James Laughlin to Willis, June 14, 1912, Henry Parker Willis Papers, Box 7.

  The subcommittee finessed this delicate issue: Henry Parker Willis, The Federal Reserve System: Legislation, Organization, Operation (New York: Ronald Press, 1923), 133–34. No notes from the subcommittee work in 1912 survive.

  That spring, Willis scratched out the beginnings: Willis to James Laughlin, June 17, 1912, Willis Papers, Box 7; and “Glass Wins Again in Sixth District,” Richmond Times Dispatch, August 9, 1912.

  Samuel Untermyer: Vanderlip to James Stillman, May 4, 1912, Vanderlip Papers, Box 1–4; Morgan Jr. to Davison, April 26, 1912; McCulley, Banks and Politics During the Progressive Era, 265–66; and Vanderlip to James Stillman, April 23, 1912, Vanderlip Papers, Box 1-4 (“The whole thing runs back to Unterrmyer’s ambition to go to the Senate”). For background on Untermyer, see McCulley as well as Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900–1914 (New York: The Free Press of Glencoe, 1963), 220.

  lucrative stock deals: Vanderlip to James Stillman, May 17, 1912, Vanderlip Papers, Box 1-4; this letter observes of a deal to sell a big block of Seaboard Company stock that “business as well as politics make strange bed fellows and one of the participants will be Samuel Untermyer for $1,000,000.”

  “unpleasant”: Jean Strouse, Morgan: American Financier (New York: Random House, 1999), 9.

  Untermyer made quiet overtures: Vanderlip to Stillman, April 27, 1912, Vanderlip Papers, Box 1-4; and Warburg to Samuel Untermyer (replying to Untermyer’s luncheon invitation), May 29, 1912, Warburg Papers, Box 1, folder 3.

  The congressman was warned: James Laughlin to Willis, May 5, 1912, Willis Papers, Box 7, advising Willis that Glass should occupy the field “in order to anticipate Untermyer.” Willis certainly relayed this information to Glass.

  Untermyer had been born in Lynchburg: The family was not long tenured in the South. Untermyer’s parents were German Jews who emigrated from Bavaria. When his father died, shortly after the Civil War, the rest of the family moved to New York.

  “Baseball men are more optimistic”: “Major Leagues’ Clubs Ready for Long Battle,” The New York Times, April 7, 1912. The other new stadiums were in Detroit and Cincinnati.

  opposed to “social relations”: Chace, 1912, 214. For the early state of the race, see Wilson to Josephus Daniels, January 18, 1912, in Arthur S. Link, ed., The Papers of Woodrow Wilson (Princeton, N.J.: Princeton University Press, 1966–1989), 24:64–65; John Milton Cooper Jr., Woo
drow Wilson (New York: Knopf, 2009), 151–53; and Broesamle, William Gibbs McAdoo, 52–53.

  “chiefly to men’s minds”: Arthur S. Link, Wilson, vol. 2, The New Freedom (Princeton, N.J.: Princeton University Press, 1956), 149.

  Meanwhile, Bryan beseeched Wilson: William Jennings Bryan to Wilson, April 1, 1912, in The Papers of Woodrow Wilson, 24:273; and “Southwest Georgia Greets Gov. Wilson with Big Reception,” press clipping of April 18, in ibid., 24:344.

  procure a statement from Bryan: Paolo E. Coletta, William Jennings Bryan (Lincoln: University of Nebraska Press, 1969), 2:44. For newspaper endorsements, see Cooper, Woodrow Wilson, 151, 154.

  La Follette, whose campaign: Goodwin, The Bully Pulpit, 670, 673–74. For Taft and Roosevelt name-calling, see Chace, 1912, 111–12.

  Roosevelt’s stated reason for running: “Roosevelt Denies Taft Is Progressive,” The New York Times, April 4, 1912; see also Pringle, William Howard Taft, 2:772–73, 776–77.

  a generally sound record: Goodwin, The Bully Pulpit, 627; and Walter Nugent, Progressivism: A Very Short Introduction (New York: Oxford University Press, 2010), 89–90.

  letting voters overturn decisions: Pringle, William Howard Taft, 2:768; and Goodwin, The Bully Pulpit, 679. For background on Taft’s attitude on labor, see Pringle, William Howard Taft, 2:619–25. Wall Street’s relationship with Roosevelt was complicated by his support for such Morgan-sponsored trusts as U.S. Steel. As Chace (1912, 204) and Vanderlip (Vanderlip to James Stillman, October 20, 1910, Vanderlip Papers, Box 1-3) document, the House of Morgan had turned against Roosevelt by 1912. Perkins was the exception. However, many financiers were also dismayed by Taft, due to his vigorous antitrust policy.

  “In years past he has done”: Lamont to W. J. Oliver, September 3, 1912, Thomas W. Lamont Papers, Box 123-6.

  Two days later, 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), entries for April 27, 29, and 30, 1912; for the dinner with Warburg, see ibid., entry for April 15.