THE PRINCETON DEPOT
The ghost of Andrew Jackson stalked before my face in the daytime and haunted my couch for nights.
—CARTER GLASS
I do not care what you call it, if you centralize the control. It will be a central bank in its final analysis.
—FESTUS J. WADE, testifying before House Banking Subcommittee
CARTER GLASS’S date with Woodrow Wilson was set for the governor’s office, in Trenton, at two-thirty on the afternoon of December 26, 1912. Glass was anxious to meet Parker Willis in advance; he fretted that this would require his leaving Lynchburg, Virginia, on Christmas Day, but then, Glass’s nature was to fret. He was intensely agitated by the pressure from bankers for a centralized scheme and worried that bankers had gotten to Wilson (a suspicion, of course, that was entirely correct). His anxiety rose when, just before he was to leave home, he received an urgent telegram: “Confined by attack of cold. Would you be kind enough to come to Princeton?” The change in plans, redirecting the pair to Wilson’s home, jolted Glass. He had met the president-elect only once or twice and worried whether Wilson, in his sickly state, would truly be attentive. Further upsetting Glass, his train was late—he telegrammed Willis that he would not reach Washington until after midnight.
As he traveled north, Glass wondered how he would gain the confidence of this eminent scholar—this university president. He surely took comfort that Wilson was also a southerner—born barely a year before Glass. The South, with its passion for states’ rights, had overwhelmingly supported Wilson,* and the South, Wilson had said, was “the only place in the world where nothing has to be explained to me.”
Yet Glass had cause for suspecting that Wilson’s sectional ties were more diluted than his own. Glass’s family had been in Virginia since 1648; Wilson’s had been southerners for only a generation. Wilson’s years in New Jersey had scrubbed his diction free of any southern accent, and his heart was unburdened by the resentments that had festered in the South since the Civil War. The president-elect loved the South, he had said, but rejoiced in its defeat. Carter Glass, a conquered soldier’s son, knew no such rejoicing. A more fundamental divide marked the two men’s characters. The diminutive Glass tortured himself with worry; Wilson was preternaturally self-confident, convinced by the time he grew into his full five feet eleven inches that he was destined for great things. As one biographer said, “He did not doubt.”
Princeton was bitterly cold and buried in snow that day. Glass and Willis arrived on a train that chugged behind a horse-drawn plow. From the Princeton depot, they traveled by carriage to the half-timbered house on Cleveland Lane. A butler led them past a blazing fire to Wilson’s bedchamber, where the president-elect, looking gaunt and obviously suffering a severe cold, was propped against pillows. Glass was painfully aware of his lack of formal education in the presence of two college professors, but Wilson’s bedraggled condition, the fact that he was attired in a mere robe, had a calming effect on Glass, as though putting him on a more even plane.
Glass had brought with him a few sheets of paper on which he scrawled some notes—nothing so formal as a draft. With trepidation, he began to outline his plan, calling on Willis to flesh out the details.
What Glass and Willis proposed was a series of Reserve Banks—fifteen or twenty spread about the country. Ordinary banks would subscribe to shares in the nearest Reserve Bank; thus, the Reserve Banks would be privately owned.*
The Reserve Banks would have several duties. They would issue notes—a new form of money, replacing the National Bank Notes based on government bonds. This new money would be issued to banks in return for assets. In other words, a bank that held a loan—say, from a local merchant—could exchange it for the new reserve paper, and turn illiquid assets into currency. Banks would have more access to ready cash to lend; the system would be less vulnerable to panic.
The Reserve Banks would also hold government deposits, including gold, providing a backstop for the currency. Glass also proposed that the Reserve Banks guarantee bank deposits, an idea that bankers—metroplitan bankers especially—detested. Since the Glass plan did not include any feature to bind the regional banks together, it was less centralized than the Aldrich Plan—which was, of course, his point. Indeed, it was far less centralized than the eventual Federal Reserve.
Glass and Willis laid out many of their items as talking points, testing to see how far Wilson was willing to push the banks. Would Wilson, for instance, be willing to compel the banks to join the new system against their will, or should the system be voluntary, like the ill-fated Aldrich Plan?
The most important feature—and one on which Glass and Willis were unambiguous—was that the banking system should be organized along regional lines. Thus, banks would be forced to place their reserves not with big banks in New York (as they did at present), and not in Washington, but in the vaults of the new Reserve Banks. The intent was to furnish, as Willis was to write, a “local field” for local funds. Put differently, they hoped to replace the New York–centric Money Trust with silos of credit dispersed across the length of the country.
What Glass had proposed was close to the laissez-faire ideal: each area represented by a bank that was its own duchy, autonomous, private, its size comfortingly tailored to nineteenth-century proportions.
Wilson listened intently. Something about the plan provoked him.
Bluntly, he inquired, “What have you done in regard to centralization?”
Glass stiffened. He replied that his Reserve Banks would report to the comptroller of the currency, the federal banking regulator established in 1863. This cursory check was not enough for Wilson. The president-elect suggested that though a central bank was impossible politically, it was desirable economically. Some compromise had to be worked out. Finally, Wilson issued what amounted to a command.
“You are far on the right track,” he began, but the plan needed something more—“a capstone.” Wilson explained that he meant a central board in Washington, sitting above the Reserve Banks. Wilson had surely been briefed in advance; his idea of a “capstone” may have been inspired by Paul Warburg (who had recently provided his plan to Colonel House).* In any case, the suggestion for a capstone reflected Wilson’s deepest-held values, for he was telling Glass that he wanted the banking system to mirror the federalist design of the U.S. government itself. It was a masterly stroke.
Glass was horrified. As he left, he tried to reassure himself that Wilson wanted merely a supervisory “capstone,” but he feared that Wilson had in mind an active, operating body that would resemble a central bank.*
Two days later, on Wilson’s birthday, the president-elect was honored with a parade and a reception, in Staunton, Virginia, his birthplace. Glass attended the festivities, hoping for “perhaps, an hour with Mr. Wilson on currency matters.” This was exceedingly myopic of Glass. The president-elect was in no mood for currency questions, and so Glass wrote to him asking for a follow-up meeting. Although Glass intended to sound reassuring, he betrayed his anxiety with a signature note of uncertainty—“We may ourselves have in readiness such a ‘capstone’ as I understand you to suggest,” he awkwardly wrote to the president-elect. Glass was more frank when he recorded his thoughts to Willis. “It is clear to me,” Glass began, adopting a conspiratorial tone, “that Mr. Wilson has been written to and talked to by those who are seeking to mask the Aldrich plan and give us dangerous centralization; but we shall have to keep quiet on this point for the present.” In the next breath, Glass attempted to downplay the “tentative views expressed by the President-elect”—although Wilson had not been tentative at all—and advised Willis it would be well to prepare a capstone as an “emergency,” in other words, as a feature he hoped would not be implemented. “Speaking for myself,” the congressman added, “I would cheerfully go with the President-elect for some body of central supervisory control, if such a body can be . . . divested of the practical attributes of a central bank. In my judgment,” he went on, “this is the point of danger.” Not the point of disagreement, but of “danger.” A few days later, Glass worried that he had already ceded too much ground. “I am not entirely convinced that we need any ‘capstone,’” he wrote to Willis, though he acknowledged they should have the “mechanism” ready.
Willis immediately began to revise the plan to include a capstone and to reflect other points discussed at Princeton, and he and Glass mounted a campaign to win the support of bankers. The pair focused not on Wall Street but on the (mostly midwestern) bankers who dominated the councils of the American Bankers Association—and, through it, the small-town bankers who were influential across the country. A prime target was Barton Hepburn, the chairman and retired president of the Chase National Bank. Although presiding over a New York institution, Hepburn, who had been born on a farm and was chairman of the ABA’s currency commission, carried weight with bankers whose support Glass considered vital, such as George Reynolds and James Forgan of Chicago and the St. Louis banker Festus J. Wade.
Chicago bankers had warmed toward the central bank idea, but they remained mistrustful of any plan that smacked of New York dominance. Even though they were open to a regional approach, they had come to appreciate the Warburg argument for centralization. Willis’s talks with Hepburn resembled a minuet, in which Willis probed to see how much decentralization Hepburn and his colleagues would tolerate, and Hepburn delicately pushed back. Forgan, the leader of the Chicago faction, was particularly insistent that control be centralized.
Glass used his subcommittee hearings to persuade the industry that its best—probably only—hope for reform was to rally behind him. Willis later called the hearings an exercise in “testing public opinion,” which is exactly what they were not. Glass and Willis did not even disclose they had written a draft, presumably so that witnesses would not be tempted to offer criticisms. Rather, they stage-managed the proceedings to mold public opinion. As early as December 31, 1912, Willis assured Glass that both Hepburn and Warburg were “in good humor toward the hearings” and disposed “to assist by giving moderate and reasonable testimony.”
Hepburn led off, and while he admitted a preference for the Aldrich Plan, he generously allowed that “no one would claim that the Aldrich bill is the last word of wisdom.” This was the “reasonable” middle ground that Glass aimed to exploit. Bankers had their own reasons for rejecting a European-style central bank—namely, central banks in Europe did business with ordinary customers. American bankers were afraid of the competition from a central bank (when their self-interest was threatened, staid commercial bankers could sound downright populist).
However, the bankers also rejected the Bryan alternatives of government fiat money or federal deposit guarantees. Bryan’s approach represented a contrary philosophy—rather than a strong network of private banks, a strong hand of government. The bankers feared that either of Bryan’s remedies would lead to inflation. Their pushback was useful to Glass, who shied away from either extreme and who needed leverage to resist the committee members loyal to Bryan.
The one witness who did not play along was Warburg. He had come too far to muzzle his convictions now. Warburg testified that a regional system would perpetuate the flaws in the existing order. He vividly recounted to the subcommittee his horror at the money shortages when he first arrived in New York, in 1902. Now emboldened by his status as a U.S. citizen, he accused his adopted country of ignoring what worked in banking elsewhere. The country’s most pressing need, he said, was to centralize reserves—without which the currency would never be truly elastic. “Elastic currency” was a buzzword among Americans of the day; Warburg used it knowing that it resonated, but went on to define it in vivid terms. America, he noted, was hostage to the “stupid condition” whereby each of the country’s seventy-five hundred national banks had to freeze a quarter of its funds “and put them into a safe-deposit box, where they are of no use.”
Glass attempted to frame Warburg as an absolutist.
THE CHAIRMAN: Would you say that we should do nothing if we can not at this time get a central reserve association?
Warburg refused to accept Glass’s all-or-nothing formulation, but he pointed out that in a system with multiple reserve banks, those in New York and Chicago would surely dominate—precisely the outcome Glass wanted to avoid. And Warburg doubted that regional banks would cooperate with one another any more than individual clearinghouses had in 1907. Nonetheless, he tried to offer the subcommittee a face-saving compromise by insisting it could achieve a centralization of reserves without establishing, in formal terms, a “central bank.”
THE CHAIRMAN: That is what you are trying to arrive at, the centralization of reserves?
WARBURG: It is not that I am trying to arrive at it, Mr. Chairman. It is to my mind—and I have studied this thing very, very carefully for a great many years—the only way, the fundamental way, in which every other country in the world has been treating this.
Victor Morawetz provided a counterweight to Warburg, offering a cogent case for regional reserves. Presumably, regional banks would respond more nimbly to local credit conditions, particularly in an era when distances loomed so large. And as Morawetz pointed out, the individual banks could always be merged later.
Glass repeatedly trotted out the Democratic Party platform restrictions, which he said “confronted” the subcommittee and “precluded” it from pursuing a central bank. He referred to the party’s “traditional hostility” to central banking as though it were a perhaps-regrettable—but unbreakable—chain about his neck; this was also the tone of his memoir, in which he referred to the memory of Jackson, who had abolished the Second Bank, as a ghost that “stalked” and “haunted” him. Because these arguments did not address the substance, they raised the question of why a central bank so terrified Glass. Although he shared with Bryan a vague aversion to bigness, it is hard not to think that Glass’s primary concerns were political.
They were, in any case, effective. The hearings convinced bankers, as Warburg put it, that “no scheme would be considered seriously by Mr. Glass and his colleagues unless it embraced the regional reserve bank principle.” Prominent bankers such as Hepburn and Wade, and even Forgan, agreed to back a regional framework, even though they intended to keep pushing to make the individual parts cohesive.
Warburg recast his latest plan so that it comprised four regional banks (many fewer than in Glass’s plan), mutually responsible for one another. This version was delivered to Henry Morgenthau, and also to Willis, who shared its thesis with Glass. Warburg’s point was that with too many banks, the system would suffer a lack of coordination and, in the weaker regions, a lack of capital.* But a quartet of closely knit banks could preserve the principle of collective security. “The tantalizing puzzle,” Warburg offered, was how to unify the system for the purposes of fluidity of reserves while nonetheless endowing the individual banks with sufficient independence—“otherwise they will be nothing but [glorified] safe-deposit vaults.” Although Warburg’s criticisms were constructive, Glass didn’t trust him as he did other bankers, perhaps because the perfectionist Warburg was so difficult to satisfy; he suspected that Warburg’s true purpose was resurrecting the Aldrich Plan. Warburg returned the favor, regarding Glass as a mere politician who did not have the business mind of Aldrich.
Wilson was eager to have a bill when he took office (presidents in that era were inaugurated on March 4). Willis completed a draft on January 15. As the hearings progressed, he continued to tinker with it, still taking extraordinary precautions to keep its provisions secret. In one series of letters, Willis painstakingly queried of Glass how many people should be allowed to see the draft; agonized over whether to exclude James Laughlin, who was still advising him; and finally suggested they show the bill only to a small group in executive session after which they would “call in all copies.” In their way, Glass and Willis were as conspiratorial as the bankers on Jekyl Island. Laughlin desperately sought to procure a copy, but now that Glass had the ear of Wilson, he no longer needed Laughlin. At the end of January, Glass presented Wilson with a formal draft, this time at the governor’s office in Trenton. At this meeting, Wilson endorsed Glass’s basic regional design. Laughlin miserably concluded he had been left “outside the breastworks.”
The document Glass took to New Jersey had been softened to mollify bankers; for instance, deposit guarantees were out and the Reserve Banks were limited to taking deposits from other banks, not from ordinary citizens. Thus, the Trenton plan envisioned a “banker’s bank.” Nonetheless, the Reserve Banks were permitted to conduct open market operations such as buying bonds, later to become a favorite tool of Ben Bernanke. Contrary to what bankers sought, membership was to be compulsory, and Glass blithely ignored Warburg’s admonition to reduce the number of Reserve Banks—Glass specified “not less than fifteen.”
In other respects, the Trenton draft bore a striking resemblance to the much renounced Aldrich Plan. Both bills proposed a new currency backed by bank assets and a gold reserve. Each envisioned a new institution (or multiple institutions) to hold bank reserves, governed by local boards of bankers and a supreme board in Washington. Where Glass wanted fifteen or more banks, Aldrich envisioned fifteen branches. And notwithstanding the frequent charge that the Aldrich Plan was elitist, the bills were similar in providing for democratic governance and local representation.
The bills were also similar in scope. Each proposed a new agency to become the fiscal arm of the United State government. Each set up a system of bank examinations and check clearing. Willis even mimicked the Aldrich bill’s phraseology.
Of course, the plans also differed in important respects. The biggest was that Aldrich and Warburg had conceived of “branches” around the country subservient to a central organ. Glass was proposing regional “banks” with greater local independence—although arguably, this was a matter of degree. Another distinction was that Glass-Willis compelled the banks to shift their reserves to the new Reserve Banks, ending the perilous “pyramiding” of reserves from the farm to the city to New York. Aldrich, not wanting to offend his banker colleagues, had been mum on this important point.
As the Glass legislation evolved, other significant differences would emerge. Willis would contend in his memoir that the Federal Reserve Act was the product of many bills and ideas from which its authors selected, revised, sifted, and so forth. It is true that few transformative ideas emerge from thin air; nonetheless, Willis was on shaky ground in asserting that the Act “was not derived from, or modeled after, or influenced even in the most remote way by other bills or proposals currently put forward.” In fact, the Aldrich Plan was its direct and recognizable forebear. But for political reasons, as well as the desire to inflate their own roles, Glass and Willis each felt compelled to disown the connection to Aldrich.
• • •
AS INAUGURATION DAY NEARED, Wilson agonized over whether to give a cabinet role to Bryan; ultimately, he reckoned that Bryan would pose less trouble inside the tent than out. The Commoner was given State—a relief to bankers, whose worst nightmare would have been to see Bryan at the Treasury. Colonel House, who had great influence on the selections, discouraged the inclusion of another corporate critic—Louis Brandeis—probably because Wilson clearly admired Brandeis, and House saw him as a threat. With reluctance, Wilson acquiesced. (House cannily turned down a cabinet role for himself, preferring the offscreen role of adviser at large.)
The most important slot for banking legislation was Treasury. At the suggestion of House, Wilson made an inspired choice—William Gibbs McAdoo, a businessman and one of the managers of Wilson’s campaign. A southerner—as were over half of Wilson’s choices—McAdoo was born in Georgia, into “bitter poverty” during the Civil War. His family moved to Tennessee, where McAdoo studied law, set up a practice, and invested his meager resources in a venture to electrify streetcar lines in Knoxville (the industry that had led to Nelson Aldrich’s fortune). When the venture failed, he moved to New York. With few resources, and six young children to feed, he attempted to resurrect an abandoned project to dig a rail tunnel under the Hudson River, linking New Jersey and Manhattan. The project faced high hurdles, engineering and financial; improbably, McAdoo succeeded. (The tunnels today serve the heavily trafficked PATH trains to midtown and downtown New York.) Although Morgan provided financing, McAdoo was not a Wall Street insider, and his battles with bankers left him with a jaundiced view of the financial world. He fancied himself a public-service-minded executive and adopted the motto “The public be pleased” (a clever inversion on the infamous saying of the railroad tycoon William Vanderbilt, “The public be damned”). McAdoo’s slogan was certainly calculated to further his political ambitions. But he backed it by operating clean, well-lit cars, instituting a box for customer complaints, and—unusually for that era—paying equal wages to women.
As a businessman reformer and a southerner to boot, McAdoo was perfect for Wilson. The country had been governed by Republicans for so long that business was unsettled by the prospect of a Democrat; McAdoo was a Democrat whom business could tolerate, while also clearly aligned with progressive ideals. He firmly believed that government should have a say over the economy—not leave it to the moguls with whom he had formerly crossed swords. Wiry with a dark complexion, derby hat, and black suit, he moved with quickness and vitality and, unlike the president-elect, preferred action to theorizing.
Wilson decided to begin his legislative assault with the tariff, a simpler issue than banking reform. Shortly before he took office, the Sixteenth Amendment (sanctioning an income tax) was ratified; this provided a further rationale for tariff cuts, since Wilson could now seek to replace lost tariff revenue with taxes. However, tariff cuts were a partisan cause, pleasing to the South but perceived as anti-business. Wilson did not want to be seen as a “southern” president. Putting a progressive gloss on his agenda, he made a point, in an address in January to the Southern Society of New York, of rejecting sectionalism.
Partly for this reason, the Democrats were eager to move on banking reform, which appealed to businesses irrespective of geography. Wilson saw the Glass bill as a program to benefit banking customers, not just the narrow universe of banks. His goal was to unshackle business by establishing new centers of credit. Wilson was also licking his chops over the prospect of bringing Wall Street to heel; he imagined that if the Glass bill was enacted, the new Reserve Banks would level the influence of the New York financial houses. According to Joseph Tumulty, soon to be Wilson’s White House secretary, the president-elect said he wanted “to take away from certain financial interests in the country the power they had unjustly exercised of ‘hazing’ the Democratic Party at every Presidential election.”
As if another rationale were needed, days before the inauguration Samuel Untermyer submitted the final report of the Money Trust investigation. It was a scorching indictment of the old-boy network that dominated American finance. Untermyer’s relentless cross-examinations and eye-catching charts had documented the web of interlocking directorships that knit Wall Street and corporate America. (Frank Vanderlip testified, to his embarrassment, that he held directorships in thirty-five corporations.) Just as damning, Untermyer proved that competition in securities was a farce. None other than George Baker, Morgan’s friend, supplied the crucial testimony.
UNTERMYER: Have you ever competed for any securities with Morgan & Co. in the last five years?
BAKER: I do not know that we have competed with them.
UNTERMYER: You divide with them, do you not? You give them a part of the issues when you have it?
BAKER: We are very apt to.
UNTERMYER: And if they take a security, they give you a part of the issue, do they not?
BAKER: Yes.
Untermyer affirmed that a Money Trust did exist—assuming, he wrote in the report’s most quoted section, that the term was taken to mean a “well-defined identity and community of interest between a few leaders of finance which has . . . resulted in a vast and growing concentration of control of money and credit in the hands of a comparatively few men.” Untermyer identified J. P. Morgan, James Stillman, and George Baker as the “inner circle.” To his credit, he admitted that no conspiracy had been found—no price-fixing or plot. It was enough to say that the Money Trust existed—Wilson and the Democrats rightly regarded even the potential for abuse as serious.
Public revulsion was nearly uniform; even The Wall Street Journal grudgingly acknowledged that concentration on Wall Street was excessive. The hearings, as much as anything, convinced progressives that banking reform demanded immediate action. The increasingly influential Brandeis further galvanized public opinion with a widely read series, “Breaking the Money Trust,”* which was published in Harper’s Weekly as Congress debated the Glass bill.
Surprisingly few observers noticed that Untermyer’s description of a trust applied more to securities than to ordinary banking. America, after all, had twenty-five thousand individual banks—roughly half of them founded since 1900. Nor was the industry particularly profitable; net earnings of the national banks totaled only $161 million (about $3.8 billion in today’s money), and a return on assets of less than 2 percent. Moreover, banks in New York City held a smaller share of the country’s banking resources in 1912 than they had in 1900. It is true that within New York, assets were more concentrated than previously, and that the boards of the biggest banks were decidedly cozy. But on balance, conventional banking did not exhibit the cartel pattern of Wall Street. In this sense, the “Money Trust” was merely a convenient label to sell reform to the public.
Untermyer was on more substantive ground when he attacked the lopsided distribution of power to marshal reserves in a crisis. Regarding the market turmoil of 1907, he bore in on R. H. Thomas, the retired president of the New York Stock Exchange:
UNTERMYER: When Mr. Morgan gave the word, did that change the panic conditions?
THOMAS: It certainly had a very decided effect upon relieving the situation.
UNTERMYER: Then, it rested with one man to say whether the panic should go on or should end, did it?
Spurred by Untermyer, the journalist Ida Tarbell zeroed in on one of the system’s weakest links: the New York Clearing House. Tarbell claimed that this private bankers’ club was “exercising power which it had been gradually gathering to itself.” It was ill equipped to provide security. Its authority was citywide, not national; it was not even universally subscribed to within New York and it dispensed its powers arbitrarily. “If Congress . . . had given us any good, wholesome currency legislation, such as they have in other commercial nations of the world,” Tarbell fairly screamed, recalling the desperate attempts to furnish paper IOUs in the last panic, “there would never have been any question of issuing Clearing House certificates.” Such arguments did not escape the attention of Congress.
On March 4, 1913, Woodrow Wilson rode to the Capitol alongside William Howard Taft, a gracious loser. Soldiers had pushed the crowd away from the speaker’s platform, where they were nearly out of earshot. Wilson sent an aide with the instruction that the people could come forward: thus did progressivism govern. The biographer John Milton Cooper noted that Wilson was one of the last presidents to write his own speeches. His address, though brief, was full of fire and brimstone. Inveighing against the ruthlessness of business tycoons, he thundered, “We have been proud of our industrial achievements, but we have not hitherto stopped thoughtfully enough to count the human cost.” There has been, he added, “something crude and heartless and unfeeling in our haste to succeed and be great.” But with regard to his actual policies, the new president was reassuringly moderate. He wanted no draconian upheaval, just a “sober second thought.” Bankers in particular were soothed when he declared, “We shall restore, not destroy. We shall deal with our economic system as it is and as it may be modified, not as it might be if we had a clean sheet of paper to write upon.”
Wilson was the first (and thus far, the only) president with a Ph.D. He entered office with a well-conceived agenda and a sure sense of the powers of the presidency. The Sixty-second Congress having expired, he opted to convene a special session, in April, to attack the tariff; the timing of bank reform was up for grabs.* Wilson was at least mildly distracted by the arrest and, quickly following it, the murder of the president of Mexico barely a week before he entered the White House. The violent revolution south of the border would dog him throughout 1913, as he tried to focus on his domestic program—a harbinger of the attention he would later devote to foreign affairs, specifically Europe. However, in March, Wilson put Mexico to the side and received Glass, together with McAdoo, and urged Glass to deliver a bill promptly. The congressman exited excitedly. “The prospect,” he reported to Willis, “is that the President, Mr. McAdoo and I will be in frequent consultation within the next few weeks, and I shall want to be well up on every detail of our bill.”
Glass then urged Willis, who was revising their draft, to work in haste. For Glass, the interlude between legislative sessions was blessed. He did not have to consult with other members (his committee had yet to be reconstituted) and he could focus on the mechanics of how the system would work. He corresponded with the director of the U.S. Mint, who had a useful suggestion (urging that private banks be integrated into the new system through an exchange of their gold for reserve notes) and who became an ally of Glass within the administration.
As usual, Glass and Willis were busy fending off perceived threats. Willis warned Glass that McAdoo, when building his Hudson River tunnels, had received financing from Kuhn, Loeb (Warburg’s firm) and was said to be in Warburg’s pocket. There is no evidence that this was true. Untermyer represented a darker shadow. The attorney attempted to relaunch the Money Trust inquiry; when this failed, Untermyer tried to get to Wilson by cultivating a relationship with Colonel House, who shared his taste for intrigue. Untermyer insinuated to House that the Glass bill would not solve the “vast” problem of concentration of credit—only, naturally, a bill that Untermyer had in mind would do that.
House took an interest in the banking bill, and his diary refers to repeated meetings not only with Untermyer but with Wall Street bankers such as Jack Morgan, Warburg, and Vanderlip. He also took Glass on a carriage ride to discuss the legislation. All were eager to meet with House, as his intimacy with Wilson was well known.* But closeness did not necessarily translate to influence. At a “family affair” at the White House at which the Colonel shared fish, veal cutlets, rice, peas and potatoes, and ice cream with the Wilsons, he casually suggested that he and McAdoo “whip the Glass measure into final shape.” There is no evidence that Wilson endorsed this idea. House also conveyed a request from Henry Frick, the steel mogul, that the administration quietly resolve the government suit against U.S. Steel out of court. Wilson brusquely rejected this plea for corporate favoritism, replying that U.S. Steel should receive “the same consideration as any other, neither more nor less.” The President was at ease with the Colonel and relied on him for emotional support, but on banking and other financial matters McAdoo carried far more weight.
Wall Street bankers, who had been spoiled by their warm relations with Taft, sensed that their influence in the White House was diminished. Vanderlip sourly complained that his “friendship” with Wilson did not seem to count for much. Jack Morgan opted to sell much of his firm’s stake in National City to forestall public criticism. It was a sign that, under the new administration, banks were on a shorter leash, particularly on matters where they might be suspected of wielding undue influence. As Morgan put it, “We all feel that it behooves us to pay more or less attention to public feeling of that kind.”
Pierpont, the elder Morgan, had dropped from view since his appearance in Congress, embarking on a trip with family and friends to Egypt, where he was supporting archaeological treasure hunting. Nelson Aldrich and his family departed on the same boat as the Morgans. Lucy, the senator’s eldest daughter, reported, “We have been practically one party [with the Morgans] since we left New York and we have gone about seeing the ruins together.” Aldrich always had a taste for antiquities, perhaps never more than in his own twilight. In Cairo, the senator and Pierpont lunched with Lord Kitchener, the conqueror of Sudan. The families, glittering relics of the Gilded Age, traveled the Nile in a pair of private steamers, “stop[ping] at the same places.” However, Morgan was fatigued and depressed. By March, each family was in Rome. Aldrich bought a pair of marble sphinxes and two Persian bowls and proceeded to Monte Carlo. From his art dealer, he heard, along with details relating to the packing of his art, disquieting news. Morgan, who had remained at the Grand Hotel in Rome, was seriously ill. On March 31, updating Aldrich on his sphinxes, the dealer added: “Sorry to say that Mr. Morgan is not at all well and all sorts of rumors are afloat.” He died that day.
Morgan’s passing symbolized the end of the era in which a single financier could hope to rescue the banking system. Walter Hines Page, Wilson’s new ambassador to Great Britain, immediately observed that “a revision of the currency and banking laws, if a wise revision be made, will prevent any other such career.” For one man to hold such power, Page correctly judged, “does not fit into the American scheme of life or business.” Vanderlip, too, sensed the portent in Morgan’s passing. “The king is dead,” began his letter to Stillman. “There are no cries of, ‘Long life the king,’ for the general verdict seems to be that there will be no other king; that Mr. Morgan, typical of the time in which he lived, can have no successor, for we are facing other days.”