an important voice on banking in Wilson’s cabinet and he argued strenuously
that any representation from the business
community on the Federal Reserve board
was inappropriate.
Wilson was eventually brought in as a
tie-breaker to make the final decision on
the composition of the board. In a meeting
convened to win over Wilson’s support for
a balanced board, Glass summoned prominent members from the American Bankers Association to visit with the president
in the White House for the purpose of
reinforcing Glass’s arguments. Each had
his say, with an approving Glass looking
on. But at the end of their presentations
Wilson asked: “Will one of you gentlemen tell me in what civilized country on
the earth there are important government boards of control on which private
interests are represented?” There being no
effective rejoinder from the bankers, the
progressive arm of the Democratic Party
carried the day and the Federal Reserve
wound up with a board composed entirely
of presidential appointees — and with its
headquarters in Washington, DC.
Glass and Bryan remained at loggerheads over other issues during the crafting
of the Federal Reserve Act, and Wilson
was again brought in as a tie-breaker.
When Senator Robert Owen, heading
the Senate’s legislative efforts, sided with
Bryan on the matter of a US backing of
the currency, as opposed to relying on the
inherent security of the proposed Federal
Reserve notes, the issue wound up on
President Wilson’s desk.
Glass believed that Bryan’s stance
showed a profound lack of understanding about the more than ample safety of
the proposed Federal Reserve note, and
he pleaded earnestly with the president to
withhold his support for formal government backing. Wilson listened attentively
to Glass’s argument and concurred with
his reasoning, but, in a nod to Bryan’s
intransience on the issue, suggested that
the congressman “surrender the shadow
but save the substance” by preserving the
full faith and credit government guaranty.
Glass was not happy on this issue but
ultimately agreed to go along with the
“innocuous camouflage.”
Even with these changes, the Federal
Reserve Act still owed much to the structure that Warburg and the Republicans had
shaped as the Aldrich Plan. And the gentlemanly Warburg would have likely lived
out the rest of his life comfortable in the
knowledge that he had made significant, if
not widely appreciated, contributions to his
adopted country through his early work in
the creation of the Federal Reserve.
But in 1927, 14 years after the passage
of the Federal Reserve Act, Glass wrote
An Adventure in Constructive Finance,
a memoir that recalled the behind-thescenes politics required to craft the legislation creating the Federal Reserve System.
Glass, who is better known today as one of
the two sponsors of the 1933 Glass-Steagall
Act, opened his book by stating, “It’s not
especially important to have it precisely
determined who was the author of what
is known as the Federal Reserve Act.”
But in the following chapters of the book
he laid out a highly charged argument
for himself — or, alternatively, in a polite
demurer, for Woodrow Wilson — as the
rightful father of the Federal Reserve.
Warburg found it galling to read Glass’s
rhapsodic and self-aggrandizing account
of the Federal Reserve’s creation without
ascribing any contribution from others. So
in rebuttal to Glass’s slapdash and hyperbolic Adventure, Warburg spent much of
the following three years writing a massive
and scholarly retort titled, The Federal
Reserve System: Its Origin and Growth.
He created a two-volume tome, with each
volume exceeding 800 pages, and there is
little doubt what motivated his writing it:
“Miss Clio, the Muse of History,” Warburg wrote, “is a stubborn lady, entirely
devoid of a sense of humor, and once she
has made up her mind, it is exasperatingly
difficult to alter her verdict. It is inadvisable, therefore, to delay too long the
correction of inaccuracies, particularly in
cases where silence might fairly be construed as assent.”
In Warburg’s Federal Reserve System
he sought to set the record straight. Taking on Glass’s assertion that the Act was a
one year, Democratic creation, Warburg
made a more expansionary case, stating,
“In order to be accorded its proper place,
the reserve system must be looked upon as
a national monument, like the old cathedrals of Europe, which were the work of
many generations and of many masters,
and are treasured as symbols of national
achievement.”
Warburg traced the origins of the Federal Reserve to the seminal November 1910
Jekyll Island meeting at which the Aldrich
Plan was hatched. Then in a methodical
style much like an extended lawyer’s bri Y