Today, with the stumbling economy needing all the help it can get, many eyes are on the Federal Reserve System. Chairman Benjamin Bernanke now holds the hot seat occupied by the likes of Alan Greenspan, Paul Volcker, Arthur Burns, and many more. And that was also the case for bankers in December 1913, when President Woodrow Wilson signed the Fed into life as he approved the Federal Reserve Act. Present at the signing was Representative Carter Glass, frequently called the father of the Fed, and later, as a senator, the father of the Glass-Steagall Act.
For many decades since the nation’s founding, the need for something like the Fed had been the subject of controversial debate, and, now, it had been born. It has remained controversial for 95 years.
In the January 1914 edition, the ABA opined:
“The bill in its entirety is not perfect or what was desired or demanded by the banking and business interests of the country. It has been pronounced, however, by bankers and economists to be from 60 per cent. to 80 per cent. good.”
The ABA went on to comment on the legislation in much the same way that association officials comment on newly passed banking bills today:
“When the Glass bill was first brought out—and before any action was taken by Congress—it was a crude measure, incomplete, and lacking in many important features and with four fundamental principles that seemed vitally opposed to sound economic principles. Some of these objectionable fundamental features of the bill have been overcome entirely; and others have been so modified that they now appear in much more desirable form.”
A little later, however, was a paragraph today’s ABA couldn’t have uttered:
“It necessarily follows that in the evolution of a measure of this nature—giving the country a new banking law, where there has been no banking legislation of any account for fifty years—the development of a suitable law demanded time, careful thought, and deliberation.” [Emphasis added.] BJ
C-Notes
The January 1914 edition suggested that after the Journal of the ABA was read by bank officers, it should “be given to the Paying Teller with instructions that he carefully look over the pictures and autographs of bank crooks; familiarize himself with their doings and strengthen his own position as to the danger of receiving forged checks, and be able to identify these criminals should they present themselves at his cage.”
The process of setting up the young Fed’s infrastructure continued, with the February 1914 issue reporting on a traveling series of field hearings that the Reserve Bank Organization Committee held, to determine where the Fed district banks ought to be based. The committee comprised the Treasury Secretary, the Agriculture Secretary, and the Comptroller of the Currency. The number of those banks was expected to be between 8 and 12. Today there are 12 Reserve Banks. Many cities that never saw a Fed district bank—New Orleans, Omaha, Denver, Memphis, and Baltimore among them—were among those proposed.
Also in that issue, the association announced that Arthur Reynolds, president of ABA—the top staff position—was “as has been his custom for many years, … taking his winter vacation in Pasadena, Calif.”
Feb. 08
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