CHAPTER XVIII
BANKING AND CURRENCY REFORM

EXHILARATING AS WILSON'S triumph was, he did not gloat long over it, for there was still more difficult business afoot. In the same breath with which he congratulated his associates upon the passage of the tariff act, the President said: "There is every reason to believe that currency reform will be carried through with equal energy, directness, and loyalty to the general interest." This was the second step that he had proposed --to set the business of the country free.

Woodrow Wilson had come into the Presidency less expert in the technique of banking than in that of tariff making, but his grounding in the philosophy of credit was both broad and deep. At the Johns Hopkins he had read almost every treatise on the monetary history and experience of the United States and had mastered Bagehot's Lombard Street. His interest in the subject had quickened as a result of the Panic of 1893 and popular agitation for free silver, and in 1897 he had asserted that nothing but currency reform could touch the cause of discontent. He had ascribed the Panic of 1907, which had obstructed his quadrangle plan, in part to the nation's banking practice. Standing under a giant rubber tree in a Bermuda street, he had said to a friend: "I would reform the banking laws; they are a disgrace to our great country."1

The Panic of 1907 had stimulated bankers, under the leadership of Republican Senator Aldrich, to try to substitute a centralized banking system for the inelastic and unscientific credit structure that had collapsed three times since the Civil War. A National Monetary Commission studied the banking systems of the world and reported to Congress, in 1911 and 1912, a plan that was drawn up largely by Paul M. Warburg of Kuhn, Loeb & Company and endorsed by the American Bankers' Association. A great central institution was proposed, with fifteen regional branches that were to be controlled by member banks.

This proposal, and a Republican act of 1908 that had increased the reserve of currency, did not satisfy progressives, who dreaded the "money power" with which the name of Aldrich--a protectionist--was

____________________
1
Mrs. Borden Harriman to the writer, Feb. 22, 1951.

-300-

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