America's Bank

by Roger Lowenstein

  Aldrich set the pace: Warburg Narration 1; and “The Drafting of the Aldrich Plan: Meeting of the Statesmen at Jekyl Island,” Aldrich Papers, Reel 61 (hereinafter Warburg Narration 3).

  his ideas on how to structure it: Vanderlip to Stillman, November 29, 1910.

  Warburg favored a stronger government role: Warburg Narrations 1 and 3; and Michael A. Whitehouse, “Paul Warburg’s Crusade to Establish a Central Bank in the United States,” The Region (publication of Federal Reserve Bank of Minneapolis), May 1989.

  tension arose: Warburg Narration 1; and Vanderlip, From Farm Boy to Financier, 216.

  The pair reached an impasse: Warburg Narrations 1 and 3; Vanderlip, From Farm Boy to Financier, 216; and Thomas W. Lamont, Henry P. Davison: The Record of a Useful Life (New York: Harper and Brothers, 1933), 98–100, 101.

  “The notes must count”: Warburg Narration 1.

  wild turkey and oyster stuffing: Vanderlip, From Farm Boy to Financier, 216.

  With the basic points of the reform: Warburg Narration 1; and Lamont, Henry P. Davison, 100.

  The final, crucial task: Warburg Narration 1.

  Aldrich prevailed on the issue of reserves: Ibid.

  Each participating bank would belong: The description of the Aldrich Plan in this passage comes from Rockefeller, “Nelson W. Aldrich and Banking Reform,” especially 39–45; “Aldrich Money Plan Avoids Central Bank,” The New York Times, January 18, 1910; Paul M. Warburg, The Federal Reserve System: Its Origin and Growth—Reflections and Recollections (New York: Macmillan, 1930), 1:58–62; Elmus Wicker, The Great Debate on Banking Reform: Nelson Aldrich and the Origins of the Fed (Columbus: Ohio State University Press, 2005), 67–69; and Richard T. McCulley, Banks and Politics During the Progressive Era: The Origins of the Federal Reserve System, 1897–1913 (New York: Garland, 1992), 234–40.

  Governance in the association: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 41; McCulley, Banks and Politics During the Progressive Era, 236, 237; and “Aldrich Money Plan Avoids Central Bank.”

  “It was strictly a bankers’ bank”: Warburg, The Federal Reserve System, 1:59–60.

  bankers—not government—would be in control: McCulley, Banks and Politics During the Progressive Era, 234.

  “These are business questions”: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 44–45.

  Warburg suggested they also organize: “Introducing the Aldrich Plan to the Bankers and the General Public,” Aldrich Papers, Reel 61. See also Warburg Narration 1; and Warburg, The Federal Reserve System, 1:58.

  The group disbanded quietly: Vanderlip, From Farm Boy to Financier, 217.

  “I am back from Jekyl Island”: Vanderlip to Stillman, November 29, 1910.

  “Zivil was greatly pleased”: Ibid.

  Aside from a couple of vague allusions: As discussed in an earlier note, the article by B. C. Forbes, “Men Who Are Making America,” appeared in Leslie’s Weekly on October 19, 1916. It is probable that either Forbes or his source had been at the train depot in Brunswick, Georgia, to greet the unlikely “duck hunters.” See also Warburg, The Federal Reserve System, 1:58, 60. The authorized biography was Stephenson’s Nelson W. Aldrich.

  “secret meetings of the international bankers”: Eustace Mullins, The Secrets of the Federal Reserve (1952; repr., n.p.: Bankers Research Institute, 1983).

  to establish a cartel: G. Edward Griffin, The Creature from Jekyll Island: A Second Look at the Federal Reserve, 3rd ed. (Westlake Village, Calif.: American Media, 1998). See, for instance, pp. 19–20: “Most of Warburg’s writing and lecturing on this topic was eyewash for the public. To cover the fact that a central bank is merely a cartel which has been legalized, its proponents had to lay down a thick smoke screen of technical jargon. . . . There was not the slightest glimmer that, underneath it all, was a master plan which was designed from top to bottom to serve private interests at the expense of the public. . . . The consequences of wealth confiscation by the Federal-Reserve mechanism are now upon us.”

  the centenary of the Aldrich mission: Mark Thornton of the Ludwig von Mises Institute presented a paper at the “Birth and Death of the Fed” conference on Jekyll Island, February 26–27, 2010. Ron Paul was one of the conferees. Ben Bernanke, the Federal Reserve chairman, appeared as part of a subsequent conference, on November 4–6, 2010, co-sponsored by the Atlanta Federal Reserve Bank and Rutgers University.

  “the main business of a bank”: Frank Vanderlip to Glass, July 24, 1913, Carter Glass Collection, Box 16.

  They wanted a more resilient banking system: For a further exploration of the bankers’ motives, see McCulley, Banks and Politics During the Progressive Era, 229–332.

  Vanderlip’s correspondence makes emphatically clear: On the very day Vanderlip returned to work from Jekyl Island, he stressed in a letter to Aldrich his eagerness to see the “enlargement of the powers of national banks” via the opening of foreign branches. In this letter, Vanderlip pointedly noted that it was a matter “upon which I have had several conferences with the President [Taft].” Appearing to defer to Aldrich’s discretion, Vanderlip wrote that he understood that the senator might object to separating the international issue from the broader one of banking reform. Unwilling to let the matter rest, however, he added, “Of course, it is unnecessary for me to say that we deem it extremely desirable so to extend the powers of national banks as either to permit foreign branches or permit the organization of banks to conduct foreign business.” Vanderlip to Aldrich, November 28, 1910, can be found in both Aldrich Papers, Reel 43, and Vanderlip Papers, Box 1-3.

  While sequestered on the island: Warburg Narration 1.

  they orchestrated a two-pronged attack: “Introducing the Aldrich Plan to the Bankers and the General Public”; and Rockefeller, “Nelson W. Aldrich and Banking Reform,” 58, 59–60. The western bankers included Forgan and Reynolds in Chicago and Festus J. Wade in St. Louis.

  Warburg bombarded Aldrich: Paul Warburg to Aldrich, December 6, 1910, Aldrich Papers, Reel 43.

  “Will you please find out from Mr. N”: Paul Warburg to Andrew, December 18, 1910, Andrew Papers, Box 22, folder 7.

  “I hear all kinds of things that Senator Aldrich”: Warburg Narration 1.

  the American Academy of Political and Social Science: “Senator Aldrich Would Weld Greater Banking System,” The New York Times, January 8, 1911; and Warburg, The Federal Reserve System, 1:62.

  press accounts grew steadily: “Senator Aldrich Ill,” The New York Times, January 6, 1911; and “Aldrich Is Ill in Bed,” ibid., January 13, 1911.

  His Jekyl confreres tactfully: “Introducing the Aldrich Plan to the Bankers and the General Public”; and Warburg, The Federal Reserve System, 1:62. Mrs. Aldrich’s diary entry is quoted in Aldrich Papers, Reel 61. The advice of Aldrich’s doctor comes from Aldrich to Henry Davison, January 26, 1911, telegram, Aldrich Papers, Reel 44.

  Aldrich’s ill-timed absence: “Introducing the Aldrich Plan to the Bankers and the General Public”; and Warburg, The Federal Reserve System, 1:61–62.

  “Laughlin, did you ever see”: A. Piatt Andrew, Diary of Abram Piatt Andrew, 1902–1914, ed. E. Parker Hayden Jr. and Andrew L. Gray (Princeton, N.J., 1986); and James L. Laughlin, The Federal Reserve Act: Its Origin and Problems (New York: Macmillan, 1933), 16–17.

  “undue favoritism with the central bank”: Warburg to Samuel Sachs, January 12, 1911, Paul Moritz Warburg Papers, Box 1, folder 1.

  the Jekyl conspirators minus Aldrich: Andrew, Diary; “Notes on an Interview with A. Piatt Andrew”; and “Introducing the Aldrich Plan to the Bankers and the General Public.”

  “for their criticism and action”: A copy of Aldrich’s letter to commission vice chair Edward B. Vreeland, typed and edited in Aldrich’s hand, dated January 16, 1911, is in the Aldrich Papers, Reel 44. See also Rockefeller, “Nelson W. Aldrich and Banking Reform,” 45.

 
; Aldrich himself was absent: Aldrich’s telegram of January 16, 1911, to James Forgan states, “My doctors say that it is necessary for me to go South at once” (Aldrich Papers, Reel 44); he apparently left that day. See also Andrew’s note of the same date to Forgan, in ibid., Reel 61; and “Aldrich Goes to Georgia,” The New York Times, January 17, 1911.

  the debate over the Aldrich Plan: “Aldrich Money Plan Avoids Central Bank,” The New York Times, January 18, 1911; and “Shaw Denounces the Plan,” ibid., January 19, 1911.

  His colleagues’ strategy: “Bankers Here Approve Plan: Paul M. Warburg Declares It Is Well Adapted to Conditions in This Country,” ibid., January 18, 1911; “Introducing the Aldrich Plan to the Bankers and the General Public”; Warburg, The Federal Reserve System, 1:62–63, 567–71; and Rockefeller, “Nelson W. Aldrich and Banking Reform,” 63–64.

  bankers were the generals: Warburg made this observation, retrospectively, in The Federal Reserve System, 1:60–61.

  CHAPTER EIGHT: INTO THE CRUCIBLE

  “We want the views”: Michael Clark Rockefeller, “Nelson W. Aldrich and Banking Reform: A Conservative Leader in the Progressive Era,” A.B. thesis, Harvard College, 1960, 46.

  the approval of James Forgan and George Reynolds: Ibid., 61.

  “I am very sorry to bother you”: Henry Davison to Aldrich, January 23, 1911, telegram, Nelson W. Aldrich Papers, Reel 44.

  The retreat took place: Shelton invitation to bankers, January 23, 1911, ibid., Reel 44; “Minutes of Meetings of Monetary Commission, 1908–1911,” ibid., Reel 61; and Biographer’s notes, ibid. See also James Forgan to Andrew, January 17, 1911, A. Piatt Andrew Papers, Box 22, folder 7; Rockefeller, “Nelson W. Aldrich and Banking Reform,” 61; and Richard T. McCulley, Banks and Politics During the Progressive Era: The Origins of the Federal Reserve System, 1897–1913 (New York: Garland, 1992), 242–44.

  “Every attempt to do my work”: Quoted in Nathaniel Wright Stephenson, Nelson W. Aldrich: A Leader in American Politics (New York: Scribner’s, 1930), 383–85.

  “Am improving so slowly”: Aldrich to Henry Davison, January 26, 1911, telegram, Aldrich Papers, Reel 44. For details of Aldrich’s recuperation, see the diary of Abby Aldrich excerpted in ibid., Reel 61.

  The result was to make the Reserve Association: Loose notes, ibid., Reel 61; Forgan to Andrew, January 17, 1911; A. Piatt Andrew to Warburg, March 30, 1911, Paul Moritz Warburg Papers; Rockefeller, “Nelson W. Aldrich and Banking Reform,” 62; and Robert Craig West, Banking Reform and the Federal Reserve (Ithaca, N.Y.: Cornell University Press, 1974), 84. For brevity, the account in the text omitted a step. After the ABA currency committee approved the Aldrich Plan in March, the organization’s executive committee, meeting in early May in Nashville, ratified that decision.

  Warburg, while reaping a victory: Laughlin to Paul Warburg, June 8, 1911, James Laurence Laughlin Papers, Box 4, Paul M. Warburg folder.

  Shrewdly, he told the press: “Currency Reform: Its Popular Side,” The New York Times, July 26, 1911. Warburg’s account is in Paul M. Warburg, The Federal Reserve System: Its Origin and Growth—Reflections and Recollections (New York: Macmillan, 1930), 1:69–70, which more generally discusses his involvement in organizing the National Citizens’ League. See also Lucy D. Chen, “Banking Reform in a Hostile Climate: Paul M. Warburg and the National Citizens’ League” (working paper, April 2010), 12, available at http://www.fas.harvard.edu/~histecon/crisis-next/1907/docs/Chen-Warburg_Final_Paper.pdf; Laughlin to Warburg, June 8, 1911, as well as other correspondence in Laughlin Papers, Box 4, Paul M. Warburg folder; and Warburg’s correspondence in the Aldrich Papers, Reel 61.

  The Citizens’ League’s publicity was similarly: Warburg, The Federal Reserve System, 1:72, 68; and Chen, “Banking Reform in a Hostile Climate,” 15.

  The league’s strategy was also controversial: Warburg, The Federal Reserve System, 1:131; Rockefeller, “Nelson W. Aldrich and Banking Reform,” 66; and Chen, “Banking Reform in a Hostile Climate.”

  But Laughlin had a prickly, self-important streak: The view of Willis, Roosevelt, and others that Laughlin should distance the league from Aldrich comes from James L. Laughlin, The Federal Reserve Act: Its Origin and Problems (New York: Macmillan, 1933), 38, 43, and 78. See also the untitled essay on the Citizens’ League in the Aldrich Papers, Reel 61.

  consider submitting a plan of his own: “Notes for Mrs. Nichols in Life of Aldrich” (accompanies letter to Jeannette P. Nichols, February 7, 1927), Laughlin Papers, Box 2, Nelson W. Aldrich folder; see also notes from Warburg Papers in Aldrich Papers, Reel 61; Laughlin, The Federal Reserve Act, 51; and Warburg, The Federal Reserve System, 1:76, 89.

  Aldrich became newly despondent: “Notes for Mrs. Nichols in Life of Aldrich.”

  A rift opened: Laughlin, The Federal Reserve Act, 44–48; and Gabriel Kolko, The Triumph of Conservatism: A Reinterpretation of American History, 1900–1914 (New York: The Free Press of Glencoe, 1963), 188. For Warburg’s dislike of Laughlin, see Biographer’s notes, Aldrich Papers, Reel 58.

  Relations were further strained: James Laughlin to James Forgan, August 13, 1911, Aldrich Papers, Reel 61; Laughlin, The Federal Reserve Act, 44–48; Stephenson, Nelson W. Aldrich, 395; and “Notes for Mrs. Nichols in Life of Aldrich.”

  was leaked to the Times: “To Rid Money Plan of Aldrich’s Name,” The New York Times, July 6, 1911; the editorial, “A Campaign for Monetary Reform,” appeared in the Times the next day, July 7.

  put intense pressure on Laughlin: Laughlin, The Federal Reserve Act, 44. Forgan was among those who pressured Laughlin to cooperate with Aldrich.

  a parley on Aldrich’s yacht: Lester V. Chandler, Benjamin Strong, Central Banker (Washington, D.C.: Brookings Institution, 1958), 32, recounts that Strong, who was increasingly engaged with the topic of central banking, discussed the Aldrich Plan “at length” with Aldrich on the senator’s yacht in August 1911. See also A. Piatt Andrew, Diary of Abram Piatt Andrew, 1902–1914, ed. E. Parker Hayden Jr. and Andrew L. Gray (Princeton, N.J., 1986), which records five days in July and August on which he met with Aldrich, often with other parties, on his yacht, usually to discuss the Aldrich Plan.

  a bimonthly newsletter: Rockefeller, “Nelson W. Aldrich and Banking Reform,” 66.

  Touring the South: Laughlin, The Federal Reserve Act, 64, 74–75, 80–81, and 93. See also, for Laughlin’s publicity campaign, McCulley, Banks and Politics During the Progressive Era, 244–45. Laughlin says the league’s periodical was bimonthly, but various others, including Warburg (The Federal Reserve System, 1:73), say it appeared biweekly.

  state banking associations signed on: Numerous telegrams and letters from individual state associations, Aldrich Papers, Reel 45; Andrew to William H. Taft, August 28, 1911, Andrew Papers, Folder 7; George Reynolds to Laughlin, July 14, 1911, Laughlin Papers, Box 4, G. M Reynolds folder; and Rockefeller, “Nelson W. Aldrich and Banking Reform,” 66.

  Treasury Secretary MacVeagh was harder: “Taft Advocates Currency Reform,” The New York Times, June 23, 1911; “MacVeagh Indorses Aldrich Bank Plan,” The New York Times, November 12, 1911; “Memorandum Concerning Public Aspects of Mr. MacVeagh’s Administration,” Andrew Papers, Box 22, folder 4; Andrew to Senator W. Murray Crane, June 29, 1912, ibid., Box 20, folder 24; and “Notes on an Interview with A. Piatt Andrew, Feb. 1, 1934,” ibid., Box 2, folder 10, which states, “Senator Aldrich had little regard for Secretary MacVeagh.” See also Andrew Gray, “Who Killed the Aldrich Plan?” The Bankers Magazine 54 (Summer 1971), available at http://books.google.com/books?id=RAB3ynybv0UC&lpg=PA216&dq=andrew+gray+who+killed+the+aldrich+plan&source=bl&ots=eNjeHvf9IF&sig=D8DUQr5tcU2CcjUPBEjVqYD9NX4&hl=en&sa=X&ei=UtEDU5rfFu3I0gHmgoDYCA&output=reader&pg=GBS.PA216.)

  Aldrich’s return to action: The public hearings are documented in Arthur Shelton to C. H. Huttig (president of the Third National Bank, St. Louis), October 13, 1911, Aldrich Papers, Reel 46; “Minutes of Meetings of Monetar
y Commission”; and Rockefeller, “Nelson W. Aldrich and Banking Reform,” 65.

  a round of speeches: Paul Warburg to Aldrich, October 15, 1911, Aldrich Papers, Reel 46 (for Aldrich speeches in Indiana on October 26 and Chicago on November 11); and Rockefeller, “Nelson W. Aldrich and Banking Reform,” 65, which notes that Aldrich also spoke in Kansas City and (in the East) in Philadelphia and New York. In addition, he addressed the ABA in New Orleans in November.

  control would be “impossible”: “Money Trust Could Not Buy Control,” Journal of Commerce, October 23, 1911; a clipping was found in Warburg Papers, Folder 91.

  The first inkling of trouble: The National City episode is largely drawn from the splendid account in Harold van B. Cleveland and Thomas F. Huertas, Citibank: 1812–1970 (Cambridge, Mass.: Harvard University Press, 1985), 62–68. The National City letter was dated June 28, 1911; it is quoted in “Giving Up Control of Outside Banks,” The New York Times, November 4, 1911.

  openly colluded in others: One notorious example of collusion concerned the National Bank of Commerce, the second-largest bank in New York. Morgan, Baker, and Stillman all owned slices of the bank and jointly directed its management and board. When National City conceived of its investment affiliate, the affiliate acquired Vanderlip’s share of the Bank of Commerce, so that National City now became a partner with two other Wall Street titans—Morgan and Baker.

  The Citizens’ League was alarmed: John Farwell to Paul Warburg, July 20, 1911, Aldrich Papers, Reel 61 (from Warburg Papers). The Times quote comes from “The National City Company,” November 4, 1911. See also “Giving Up Control of Outside Banks.”

  “was as remote to the managers”: Paul Warburg to John Farwell, July 24, 1911, Laughlin Papers, Box 4, Paul M. Warburg folder.

  “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.