Chapter One

  1. William McClay of Pennsylvania.

  2. Troops, the vast majority on 90-day or other short-term enlistments, would not re-enlist if not paid, nor if they were paid in the "rag-money" of many state banks. Supply was also a problem, for the same reasons.

  3. The Second Bank's capital was $35 million, four-fifths to be subscribed by individuals, states or businesses, one-fifth by the federal government. One-fourth of the private subscription was to be paid in gold or silver.

  4. William Gouge, A Short History of Paper Money and Banking in the United States (Philadelphia, 1833), II, 109.

  5. William N. Chambers, Old Bullion Benton, Senator from the New West (Boston, 1956), 182.

  6. Timothy W Hubbard and Lewis E. Davids, Banking in Mid-America: A History of Missouri's Banks (Washington, D.C., 1969), 20. The directors of the Bank of Missouri are listed in the Missouri Gazette, September 14, 1816. In 1819, the Bank of Missouri moved from its original quarters in Auguste Chouteau's basement to a building at 6 North Main Street. Frederic L. Billon, Annals of St. Louis in the Territorial Days (St. Louis, 1888), 88.

  7. Hubbard and Davids, Banking in Mid-America, 36-37.

  8. The traditional view that the "bank war" precipitated the Panic of 1837 was demolished by Peter B. Temin, in his The Jacksonian Economy (New York, 1969). See especially pages 20-27 and 49-58.

  9. Issuing bank notes in exchange for individual promissory notes or bills of exchange.

  10. Laws of the State of Missouri (1836-1837), 11-24. For an extended discussion of the politics of bank-charter fight, see James N. Primm, Economic Policy in the Development of a Western State: Missouri, 1820-1860 (Cambridge, Massachusetts, 1954), 18-31.

  11. Hubbard and Davids, Banking in Mid-America, 66.

  12. Ibid., 63-77; James N. Primm, Lion of the Valley: St. Louis, 1976-1980 (Boulder, 1981), 207-211.

  13. Banks in central reserve cities were required to keep all of their reserves in vault. St. Louis and Chicago had sought central reserve status in order to attract deposits from reserve city banks. New York continued to dominate, however, because the availability of the call money market enabled its banks to offer premium rates for such deposits.

Chapter Two

  1. Frank A. Vanderlip, "The Modern Bank" in The Currency Problem, and the Present Financial Situation (New York, 1908), 3, cited in Robert A. Degan, The American Monetary System (Lexington, Massachusetts, 1987), 15-16. See also Gabriel Kolko, The Triumph of Conservatism (New York, 1963), 152; and Robert H. Wiebe, Businessmen and Reform (Cambridge, Massachusetts, 1962), 63-65.

  2. Milton Friedman and Anna Jacobson Schwartz, in A Monetary History of the United States (New York, 1963), 165-167, suggest that the restriction of payments was "therapeutic," giving time for the panic to "wear off."

  3. Kolko, Triumph of Conservatism, 152; Wiebe, Businessmen and Reform, 65.

  4. Kolko, Triumph of Conservatism, 149.

  5. Hubbard and Davids, Banking in Mid-America, 122.

  6. W B. Stevens, A Centennial History of Missouri (St. Louis, 1922), III, 56-60; Hubbard and Davids, Banking in Mid-America, 86.

  7. Stevens, A Centennial History of Missouri, III, 56-60; Primm, Lion of the valley, 423.

  8. Kolko, Triumph of Conservatism, 183-184.

  9. Ibid., 184; Wiebe, Businessmen and Reform, 76.

  10. Degen, American Monetary System, 26-27.

  11. Ibid., 27; Kolko, Triumph of Conservatism, 184.

  12. Degen, American Monetary System, 25; Robert Craig West, Banking Reform and the Federal Reserve (Ithaca, 1977), 76-77, 82, 84-85; Paul Warburg, The Federal Reserve System; Its Origin and Growth (New York, 1930), II, 201-214.

  13. Thibault de Saint Phalle, The Federal Reserve, An International Mystery (New York, 1985), 49; Nathaniel W Stephenson, Nelson W. Aldrich (New York, 1930), 340.

  14. In each branch district and in each association, three-fifths of the governing directors would be chosen by member banks, each having one vote. The remaining two-fifths were to be chosen with each member bank voting in proportion to its capital, See J. Laurence Laughlin, Banking Reform (Chicago, 1912), 13-14.

  15. West, Banking Reform, 74-75; Warburg, The Federal Reserve System (New York, 1930), 1, 90-91.

  16. West, Banking Reform, 84.

  17. Wiebe, Businessmen and Reform, 77; Laughlin, Banking Reform, 16-18.

  18. Wiebe, Businessmen and Reform, 77-78.

  19. Kolko, Triumph of Conservatism, 185-186.

  20. Ibid., 187-189.

  21. Paolo E. Coletta, William Jennings Bryan (Lincoln, 1969), II, 126; Kolko, Triumph of Conservatism, 189.

  22. Carter Glass, An Adventure in Constructive Finance (New York, 1927), 29.

  23. From the Progressive Party platform of 1912, quoted in Arthur S. Link, Wilson, The New Freedom (Princeton, 1956), 201.

  24. Testimony of J. P. Morgan, senior partner of J. P. Morgan and Company, December 19, 1912. Final Report from the Pujo Committee, February 28, 1913, in Herman E. Krooss, editor, Documentary History of Banking and Currency in the United States (New York, 1969), III, 2107-2122, 2143-2195.

  25. Glass, Constructive Finance, 29.

  26. William Diamond, The Economic Thought of Woodrow Wilson (Baltimore, 1943), 101.

  27. Kolko, Triumph of Conservatism, 218, 226.

  28. Ibid., 223-226; Link, The New Freedom, 202; West, Banking Reform, 92-96.

  29. Glass, Constructive Finance, 61, 83-84.

  30. Quoted in Kolko, Triumph of Conservatism, 226.

  31. Glass, Constructive Finance, 81-84.

  32. Ibid., 91; Kolko, Triumph of Conservatism, 225-226.

  33. Glass to Festus Wade, July 31, 1913; quoted in Ibid., 222; Glass, Constructive Finance, 157.

  34. Krooss, Documentary History, 2207-2209; Glass, Constructive Finance, 90; Kolko, Triumph of Conservatism, 227; J. Laurence Laughlin, The Federal Reserve Act: Its Origins and Problems (New York, 1933), 136.

  35. Coletta, Bryan, II, 130-131; Glass, Constructive Finance, 94-96.

  36. Krooss, Documentary History, 2196-2206.

  37. Glass, Constructive Finance, 100-110.

  38. Ibid., 123-126; Coletta, Bryan, II, 130-133; David F. Houston, Eight Years With Wilson's Cabinet (Garden City, N.Y, 1926) I, 47-48.

  39. Brandeis suggested that bankers could assist the Federal Reserve Board as technical advisers. He believed they should have no voice in policy matters; their interests were "irreconcilable" with administration goals. Brandeis had been Wilson's first choice for Attorney-General, but New York and Boston bankers and railroad interests, fearing that he would press anti-trust prosecutions, had persuaded Wilson to look elsewhere. Brandeis' views were generally consistent with those of Bryan, La Follette, and other "radicals," but unlike them he did not attack business concentration as undemocratic or oppressive, but simply as unwieldy and inefficient. Henry L. Higginson, a Boston investment banker and Wilson supporter, orchestrated the attack on Brandeis' nomination. President A. Lawrence Lowell of Harvard also actively opposed Brandeis. See Coletta, Bryan, II, 133; Link, The New Freedom, 10-13, 212; Kolko, Triumph of Conservatism, 208.

  40. Krooss, Documentary History, 2207-2229.

  41. Link, The New Freedom, 216.

  42. Ibid., 217; Glass, Constructive Finance, 116.

  43. Kolko, Triumph of Conservatism, 232-233.

  44. Glass, Constructive Finance, 134-136.

  45. Ibid., 138-143; Link, The New Freedom, 218-223.

  46. Coletta, Bryan, 11, 135.

  47. Wiebe, Businessmen and Reform, 130-131; Link, The New Freedom, 225.

  48. Wiebe, Businessmen and Reform, 131-133.

  49. Ibid., 134-135; Link, The New Freedom, 225-227.

  50. Ibid., 228-229.

  51. Ibid., 229-232; Glass, Constructive Finance, 166-167; Kolko, Triumph of Conservatism, 239.

  52. Link, The New Freedom, 232-234; Wiebe, Businessmen and Reform, 136; Glass, Constructive Finance, 166-167.

  53. New York World, October 25, 1913, cited in Link, The New Freedom, 233-235.

  54. Kolko, Triumph of Conservatism, 240; Glass, Constructive Finance, 168-169.

  55. St. Louis Republic, November 20, 1913; Glass, Constructive Finance, 158.

  56. Ibid., 196, 220, 242-243.

  57. Link, The New Freedom, 237.

  58. Ibid., 237-238; West, Banking Reform, 132-135.

  59. New York Times, December 24, 1913; cited in Link, The New Freedom, 237-238.

  60. Coletta, Bryan, 11, 138-139. The Nation, November 26, 1914, 622; the New York Times, May 30, 1915; and the New York Tribune, December 24, 1913, all anti--Bryan for decades, conceded that his support for the Federal Reserve Act had been crucially important.

  61. Glass, Constructive Finance, 235; Kolko, Triumph of Conservatism, 242.

Chapter Three

  1. Thirteenth Census of the United States, 1910 (Washington, D.C., 1912); Census of Manufactures, 1909, Vol. IX, 643-667; testimony of A.L. Shapleigh before the Reserve Bank Oranizing Committee, St. Louis Republic, January 21, 1914.

  2. Secretary of the Treasury William G. McAdoo appointed a "preliminary technical committee" of banking experts early in January 1914. It was to precede the Organizing Committee in visiting cities aspiring to Federal Reserve banks and to report and make recommendations to that committee before its formal hearings. H. Parker Willis was chairman; other members included Andrew H. Benton of Peat, Marwick, and Mitchell, accountants; Joseph A. Broderick of the New York state banking department; Howard Wolfe of the A.B.A.'s clearing house committee; Ralph Dawson of the Guaranty Trust Company; and Edmund D. Fisher, New York City's deputy comptroller. See Willis, The Federal Reserve System: Legislation, Organization, and Operation (New York, 1923), 548.

  3. Federal Reserve Act, Section Two, in H. Parker Willis and William H. Steiner, Federal Reserve Banking Practice (New York, 1926), Appendix 1, 839-841.

  4. Reserve Bank Organizing Committee Pamphlet, Decision Determining the Federal Reserve Districts (Washington, 1914), 3-4, 10-14.

  5. Reserve Bank Organizing Committee, "Exhibits and Letters Submitted at the Hearings: in Wilbur C. Bothwell, "The Federal Reserve Bank of St. Louis;' (Ph.D. dissertation, Washington University, 1941), 36-37; St. Louis Republic, January 20, 1914

  6. St. Louis Republic, January 21, 1914.

  7. Ibid., January 22, 1914. Rolla Wells, Episodes of My Life (St. Louis, 1933), 381-382.

  8. Ibid., 449; Walter B. Stevens, Centennial History of Missouri, 1820-1921, II, 48-49; Primm, Lion of the Valley, 330-336

  9. Reserve Bank Organizing Committee, Minutes, in Bothwell, "Federal Reserve Bank," 39-41; St. Louis Republic, January 22, 1914.

  10. Bothwell, "Federal Reserve Bank," 41.

  11. Ibid., 41-42.

  12. Paul A. Warburg, The Federal Reserve System: I, 93. Warburg would have preferred four banks or three. Five was his outside number. On December 5, 1913, Warburg suggested four Federal Reserve banks, at New York, Chicago, St. Louis and San Francisco. Ibid., II, 279-281.

  13. St. Louis Republic, January 22, 1914.

  14. Ibid.

  15. Ibid., January 23, 1914; "Exhibits and Letters," in Bothwell, "Federal Reserve Bank," 48-49.

  16. St. Louis Republic, January 23, 1914.

  17. Ibid.

  18. Hubbard and Davids, Banking in Mid-America, 127, 129; See Houston, Eight Years With Wilson's Cabinet, I, 102-114.

  19. Ibid., 99, 102-108. Interestingly, Houston thought it did not matter much which cities were selected, if due consideration was given to ease of transportation and communication and to "customary practice." The districts were "so many reservoir agencies, under the general supervision of the general staff, the Federal Reserve Board, which could bring one or more districts to the aid of any other." Ibid., 105-106.

  20. Hubbard and Davids, Banking in Mid-America, 130.  See Warburg, Federal Reserve System, I, 778.

  21. Willis, The Federal Reserve System, 584-588; Bothwell, "Federal Reserve Bank," 54-55; Letter from the Reserve Bank Organizing Committee, "Vote for Reserve Bank Cities," 63rd Cong., Second Sess., H.R. Doc. No 1134 (Washington, 1914).

  22. Report to the Reserve Bank Organizing Committee by the Preliminary Committee on Organization, in Bothwell, "Federal Reserve Bank," 57-59.

  23. Preliminary Committee Report, 4-6, in Bothwell, "Federal Reserve Bank," 57; St. Louis Globe-Democrat
    , April 4, 1914; West, Banking Reform, 210-212.

  24. Reserve Bank Organizing Committee, Decision Determining the Federal Reserve Districts, 4-24; West, Banking Reform, 210; Willis, The Federal Reserve System, 589-597.

  25. St. Louis Republic, April 3, 1914.

  26. Ibid., April 4, 1914.

  27. St. Louis Globe-Democrat, April 3,1914.

  28. Ibid.

  29. St. Louis Republic, April 4, 1914.

  30. Ibid.

  31. St. Louis Globe-Democrat, April 4, 1914; St. Louis Republic, April 8, 1914. Willis, The Federal Reserve system, 587-589.

  32. Ibid., April 4, April 11, 1914.

  33. "Speech of the Hon. Carter Glass of Virginia in the House of Representatives," April 8, 1914. Included in the pamphlet, Decision Determining the Federal Reserve Districts. Numbered separately, 15 pages. Glass denounced the various critics of the district plan, including those from Baltimore and New York, but with special emphasis on the New Orleans resolutions.

  34. St. Louis Globe-Democrat, April 4, 1914.

  35. Ibid.

  36. Ibid.

  37. Willis, The Federal Reserm System, 587-588; Bothwell, "Federal Reserve Bank," 50; St. Louis Republic, April 11, 1914.

  38. St. Louis Globe-Democrat, April 4, 11, 1914; St. Louis Republic, April 11, 1914.

  39. St. Louis Globe-Democrat, April 7, 11, 1914; St. Louis Republic, April 11, 1914; West, Banking Reform, 210-212.

  40. St. Louis Globe-Democrat, April 4, 1914; Kolko, Triumph of Conservatism, 248.

  41. Link, The New Freedom, 450-451; St. Louis Globe-Democrat, May 5, 1914.

  42. Link, The New Freedom, 451-452.

  43. Kolko, Triumph of Conservatism, 248; Link, The New Freedom, 452.

  44. Ibid., 452-454.

  45. Ibid., 455-456.

  46. Ibid., 456; Kolko, Triumph of Conservatism, 249. Bankers in St. Louis praised the appointees. J.A. Lewis, cashier of the National Bank of Commerce, said: "Paul Warburg of New York understands all about international exchanges . . . W. P. G. Harding of Birmingham is a practical banker, I think the board will meet the approval of bankers throughout the country." "A better board could hardly have been chosen," said William McChesney Martin, vice-president of the Mississippi Valley Trust Company. ". . . Warburg is one of the best living authorities on the economic principles underlying all financial schemes . . ." St. Louis Globe-Democrat, May 5, 1914.

  47. Revised report of the Federal Reserve Board Committee on Redistricting, November 17, 1915, in Warburg, Federal Reserve System, I, 767-774.

  48. Ibid.

  49. Bothwell, "Federal Reserve Bank," 67-68; Federal Reserve Bulletin, December, 1915; Annual Report of the Federal Reserve Board, 1916; Warburg, Federal Reserve System, I, 781-801.

  50. Willis and Steiner, Federal Reserve Banking Practice, 17-18.

  51. Annual Report of the Federal Reserve Bank of St. Louis, 1915, 5.

  52. Ibid.

  53. Ibid.

  54. Annual Report of the Federal Reserve Board, 1918, 801.

  55. Hubbard and Davids, Banking in Mid-America, 145.

  56. The St. Louis Republic, The Book of St. Louisans, Second Edition (St. Louis, 1912),397

  57. Wells, Episodes of My Life, 383-384.

  58. Ibid., 384. The Federal Reserve Act defined the federal reserve agent as the representative in each district of the Federal Reserve Board, responsible for reporting to the Board, handling Federal Reserve note issues for the district, and serving as chairman of the reserve bank's executive board. The act did not mention governors. But Chairman McAdoo and the Board, believing that the spirit of the Federal Reserve Act called for an independent operating head, created the office of governor. The superior dignity of the latter title and the accompanying larger salary in most districts created ambiguity and caused conflict between the two offices. The governors eventually emerged as dominant. See Willis, The Federal Reserve System, 688-692, for an extended discussion of this problem. In St. Louis, Martin was the operating head from the beginning. When he was named governor of the St. Louis Federal Reserve Bank in 1929, after 15 years as federal reserve agent, neither his office nor his duties were changed, as his son Malcolm Martin recalled in July 1988.

  59. Annual Report of she Federal Reserve Bank of St. Louis, 1915, 6-7.

  60. Ibid., 7.

  61. Wells was treasurer of the Democratic National Committee in 1912. The initial salaries for governors and agents are listed in Willis, The Federal Reserve System, 691-692.

  62. Annual Report of the Federal Reserve Bank of St. Louis, 1915, 7-8.

  63. Ibid., 8-9.

  64. Ibid. , 9-12 .

  65. Ibid., 18-19.

  66. Ibid., 19.

  67. Ibid.

  68. Bothwell, "Federal Reserve Bank," 87-88.

  69. Annual Report of the Federal Reserve Bank of St. Louis, 1916, 5-6.