McAdoo’s amendment stirred the anti–New York sentiment among midwesterners in the House of Representatives. Congressman Victor Murdock of Kansas derided the legislation: “As the bill passed the Senate … it was unmistakably giving aid to the investment bankers, principally in New York City, at the expense of the discount bankers over the country. … Ordinarily [it] would not pass Congress without days of debate, if it could pass at all.”310 Representative Charles A. Lindbergh of Minnesota, father of the famed aviator and creator of the family isolationist philosophy, added: “It is rather strange that Congress acts so quickly to help out the speculators in emergencies, when neither the farmers nor the wage earners can secure legislation, however urgent it may be. We probably have an emergency … but it is one created by the speculators having put themselves in a position to be a ected by a foreign war; and if they can get this act passed they will dare to speculate more on the results of the war.”311
Carter Glass’s Banking and Currency Committee reported the Senate bill to the House oor at noon on Monday, August 3. Glass worried that the emergency measure might delay his main priority, the birth of the Federal Reserve System. His committee added a provision “to extend the bene ts of this Act to all quali ed state banks and trust companies which have joined the Federal Reserve System or which may contract to join within 15 days after the passage of this act.”312 Thus Carter Glass transformed McAdoo’s amendment into a vehicle for promoting system membership.
Congressman Murdock refused to support even Glass’s more inclusive version of the amendment but still predicted that “this bill will pass against an unavailing protest here, as it passed one time previously when the camel was getting his nose in the ap of the tent. … It will be only a few months until the camel will be entirely in the tent.”313
Murdock was right about the passage of the bill. The Congressional Record reported a vote of 231 in favor and 6 against in the House of Representatives
on the evening of August 3.314 Both Murdock and Lindbergh voted against.
The Congressional Record remained silent, however, about the camel.
The nal bill that passed on August 4, after a conference between the House and the Senate, suspended the 40 percent requirement, extended emergency currency to state-charted banks and trust companies, and eliminated the $500 million ceiling on the total amount of emergency currency contained in the original legislation. Under the amended bill, each bank could issue emergency currency up to 125 percent of its capital.
In the end, Carter Glass had joined forces with Treasury Secretary McAdoo to push the legislation amending the Aldrich-Vreeland Act through Congress.
He had emphasized the sense of urgency before the House: “I too could wish that we had more time for consideration of so grave a subject as amendment of this Federal statute. … But we have not the time. … This [circumstance] is more than an emergency. It is a di culty of such stupendous nature … the like never before confronted the world. … Congress should not hesitate one moment.” He then drew on the support he had garnered for the Federal Reserve Act by explaining: “There is nothing extraordinary about the legislation aside from the fact that we are proposing to lodge with one public o cial—the Secretary of the Treasury—discretionary power, such as under the Federal Reserve Act we have lodged with the Federal Reserve Board.”315
Carter Glass did not want to put everything under McAdoo’s control. He said: “If the Federal Reserve System were fully organized there would be no earthly necessity for the action proposed here today.”316 Glass backed McAdoo’s amended version of the Aldrich-Vreeland Act because he had no choice.
Carter Glass thought that the Federal Reserve would have been best equipped to combat the crisis because he had watched Treasury Secretary Cortelyou try and fail to defeat the Panic of 1907. Glass had no way of knowing that America’s central bank would fail to prevent a banking crisis in the 1930s. He did not recognize that America was probably better o in August 1914 with McAdoo dispensing Aldrich-Vreeland emergency currency than it would have been with a fully organized Federal Reserve.* And neither did anyone else, except perhaps for William Gibbs McAdoo.
McAdoo had already mobilized emergency currency on Monday, August 3, 1914, the day before Congress passed the amendment. The New York Times described the arrival of the currency as though the cavalry had come to the rescue: “The new currency arrived at [New York’s] sub-Treasury in twenty big mail trucks. … it attracted a great deal of attention from the crowds which quickly gathered.” The Times added a sobering note: “John Skelton Williams, Comptroller of the Currency, spent the day at the sub-Treasury … to facilitate the delivery of Aldrich-Vreeland notes, of which $46,000,000 arrived here, but the banks were unable to complete their end of the arrangements. … They expected to call for a large amount of the notes today [August 4].”317
The original Aldrich-Vreeland Act, passed in May 1908 to guard against a replay of the previous year’s panic, anticipated the importance of speed in containing a crisis. It had stipulated that the $500 million emergency currency that had been authorized be printed immediately after the passage of the act. Each national bank’s allotment of notes, embossed with the bank’s name and decorative logo, had been prepared for distribution by the end of 1908. The entire supply, including the $46 million delivered to New York on August 3, 1914, had been stored in an underground vault especially constructed for this purpose in Washington, D.C., under the supervision of Watson Eldridge, chief of the division of issues in the Currency Bureau.318 But the congressional amendment suspending the 40 percent requirement, passed to accommodate the large New York City banks in August 1914, created a bottleneck. It altered the amount of emergency national bank notes that could be issued by each institution.
McAdoo’s public display in delivering emergency currency to the New York subtreasury on August 3, 1914, similar to his armed escort for gold delivered to the same place four days earlier, was designed to reassure the public that each bank would get all the currency it needed.* Meanwhile Joseph E. Ralph, director of the Bureau of Engraving and Printing, hired one hundred extra men and women and ran the printing presses around the clock to meet the anticipated demand.319 District of Columbia municipal commissioner, Oliver P. Newman, ruled that Ralph’s twelve-hour shifts for treasury employees did not violate the “eight hour maximum law for women.”320 President Wilson suspended the Saturday half-holiday normally granted to bureau employees during the summer.321
During the rst week of August 1914, the Treasury Department shipped
$140,697,230 in Aldrich-Vreeland notes to the subtreasuries in New York, Chicago, St. Louis, Boston, Baltimore, Philadelphia, Cincinnati, New Orleans, and San Francisco.322 As of Saturday, August 8, individual banks had drawn more than $100 million of that currency by depositing commercial paper and other securities with their national currency associations.323 By the middle of August the comptroller began delivering the emergency currency directly to the issuing banks, and by month’s end the total exceeded $200 million. The
$200 million in emergency currency represented an increase of more than 25 percent in national bank notes outstanding during the month. National bank notes had been virtually unchanged during the previous year and had increased by an average of $15 million per year since 1910.324
McAdoo had clearly anticipated the need to amend the Aldrich-Vreeland Act. He had also started the distribution process before formal congressional approval. Yet McAdoo had not thought about the Aldrich-Vreeland Act since it had been superseded by the Federal Reserve Act, passed on December 23, 1913. Since then, as chairman of the Federal Reserve Organizing Committee, McAdoo had been preoccupied with getting the Federal Reserve System up and running. He had presided over hearings throughout the country to
determine the precise number of Federal Reserve districts. After the Organizing Committee had divided the country into twelve regions, McAdoo had been lobbied by cities within those districts for the right to house a regional Federal Reserve Bank. And since the middle of June 1914 McAdoo himself had to lobby members of Congress on behalf of Woodrow Wilson’s nominations to the Federal Reserve Board. When did he learn the details of the emergency currency legislation that, absent an eleventh-hour amendment to the Federal Reserve Act, would have expired on June 30, 1914?325