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White to move and mate in two #684 - America's Bank [1]
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Date: 2025-06-26
The Epic Struggle to Create the Federal Reserve
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Historians regard Woodrow Wilson’s first term as one of the most successful ever, and the Federal Reserve Act as its crowning achievement. Wilson’s fear that early success would be followed by controversy proved prophetic. In 1916, widowed and already happily remarried, he narrowly won reelection, campaigning on the slogan “He kept us out of war.” A month into his second term. America joined the fight. Full of postwar ideals, Wilson negotiated the Treaty of Versailles and earnestly sought its approval by the senate. Then he suffered a debilitating stroke. Senator James Reed, beaten by Wilson during the Federal Reserve legislation, helped to thwart his dream of an American-led League of Nations—a bitter disappointment. Wilson died in1924.
Carter Glass,who as a junior representative had studied banking in his hotel room at nights, became a Senate authority on finance. He sponsored an amendment to create the Securities and Exchange Commission as a stand-alone agency rather than, as had been proposed, part of the Federal Trade Commission. Thus, he played a pivotal role in the three major financial reforms—the Fed, the SEC, and the Glass-Steagall Act—of the twentieth century. Within the upper chamber, he oversaw the Banking Act of 1935, which strengthened the Reserve Board—the little “capstone” that had once appalled him. The 1935 act divorced the board from the executive branch, removing the Treasury secretary and the comptroller of the currency from the directors’ table, and lengthened terms to fourteen years (all as Vanderlip had proposed in 1913). Otherwise, Glass was a persistent thorn in the New Deal’s side. He remained committed to states’ rights and helped to block federal efforts to lift the poll tax. When he died in 1946, he was the last member of Congress born in the antebellum South. The New York Times eulogized, “He is generally regarded as the father of the Federal Reserve Act.”
For as long as they lived, the framers fought bitterly over this assessment. Eight of the founding generation wrote memoirs or accounts of the creation of the Federal Reserve. Owen and Glass got into a nasty scrap over who was entitled to the lion’s share of the credit for the bill’s passage. Owen hit the press first, with a slim volume in 1919. He later denounced the Fed, which he said had become a tool of the big banks. Glass was less bothered by Owen than by Charles Seymour, a Yale professor who got access to the files of Colonel House, from which he stitched a sensational narrative, The Intimate Papers of Colonel House, exaggerating House’s role in the Fed’s enactment. Glass’s own memoir, An Adventure in Constructive Finance, published in 1927, devoted nearly fifty pages to refuting Seymour, whose book he termed “an amusing fiction,” and which he did not find amusing at all.
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