Creature From Jekyll Island by G. Edward

Vanderlip warned against the evils of fiat money and rampant inflation. Aldrich charged that the Glass-Owen Bill was inimical to sound banking and good government. Vanderlip predicted speculation and instability in the stock market. Aldrich sourly complained that the bill was 'revolutionary in its character' (implying Bolshevistic) and 'will be the first and most important step toward changing our form of government from a democracy to an autocracy.

THE PRETENSE IS DROPPED

That all of this was merely high-level showmanship was made clear when Vanderlip accepted a debate with Congressman Glass before the New York Economic Society on November 13. There were eleven hundred bankers and businessmen present, and Vanderlip was under pressure to make a good showing before this impressive group. The debate was going badly for him and, in a moment of desperation, he finally dropped the pretense. 'For years,' he said, 'bankers have been almost the sole advocates of just this sort of legislation that it is now hoped we will have, and it is unfair to accuse them of being in opposition to sound legislation.'3 Twenty-two years later, when the need for pretense had long passed, Vanderlip was even more candid. Writing in the 1. Quoted by Mullins, p. 13.

2. Aldrich to John A. Sleicher, July 16, 1913; Aldrich to William Howard Taft, Oct. 3,1913, Nelson Aldrich Papers, Library of Congress.

3. Frank A- Vanderlip, Address Before the Economics Club of New York, November 13, 1913, (New York: 1913), pp. 6,11 ff. Also see Glass, pp. 125,168-76.

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THE CREATURE FROM JEKYLL ISLAND

Saturday Evening Post, he said: 'Although the Aldrich Federal Reserve Plan was defeated when it bore the name Aldrich, nevertheless its essential points were all contained in the plan that finally was adopted.'1

In his autobiography, Treasury Secretary William McAdoo offers this view:

Bankers fought the Federal Reserve legislation—and every

provision of the Federal Reserve Act—with the tireless energy of men fighting a forest fire. They said it was populistic, socialistic, half-baked, destructive, infantile, badly conceived, and unworkable....

These interviews with bankers led me to an interesting conclusion.

1 perceived gradually, through all the haze and smoke of controversy, that the banking world was not really as opposed to the bill as it pretended to be.

That is the key to this entire episode: mass psychology. Since Aldrich was recognized as associated with the Morgan interests and Vanderlip was President of Rockefeller's National City Bank, the public was skillfully led to believe that the 'Money Trust' was mortally afraid of the proposed Federal Reserve Act. The Nation was the only prominent publication to point out that every one of the horrors described by Aldrich and Vanderlip could have been equally ascribed to the Aldrich Bill as well. But this lone voice was easily drowned by the great cacophony of deception and propaganda.

The Glass Bill was a flexible document which was designed from the beginning to be altered in non-essential matters in order to appear as though compromises were being made to satisfy the various political factions. Since very few understood central-bank technicalities, the ploy was easy to execute. The basic strategy was to focus debate on such relatively unimportant items as the number of regional banks, the structure of the governing board, and the process by which that board was to be selected. When truly crucial matters could not be avoided, the response was to agree to almost anything but to write the provisions in vague language. In that way, the back door would be left ajar for later implementation of 1. 'From Farm Boy to Financier,' by Frank A. Vanderlip, Saturday Evening Post, February 9,1935, p. 72.

2. McAdoo, pp. 213,225-26.

THE CREATURE SWALLOWS CONGRESS

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the original intent. The goal was to get the bill passed and perfect it later.

House and Warburg feared that, if they waited until they had everything they wanted, they would get nothing at all or, worse, that opponents of a central bank would be able to muster their forces and pass a reform bill of their own; a real one. Willis was quick to agree. In a letter to his former professor, he wrote: 'It is much better to take a half a loaf rather than to be absolutely deprived of a chance of getting any bread whatsoever.... The so-called 'progressive' element—such as Lindbergh and his supporters—will be encouraged to enact dangerous legislation.'1 Glass echoed the sentiment. Directing his remarks at those smaller banks which were resisting domination by the New York banks, he said: