My Amazon Review of Roger Lowenstein's "America's Bank: The Epic Struggle to Create the Federal Reserve"

The Making of the Fed

The “money question” is as old as the Republic. In “America’s Bank” Roger Lowenstein tells the story as to how the United States in 1913 brought into being its first central bank since 1837. Recall that the Second Bank of the United States came to an end when President Andrew Jackson refused to renew its charter. This triumph of Jacksonian Democracy would come back to haunt the Democrats who supported the creation of the Federal Reserve.  

To be sure there were panics and crashes in those intervening years, but absent a central bank the U.S. still grew to become the largest economy in the world. What triggered the need for a central bank was the Panic of 1907 which nearly brought the economy to its knees and it required the rescue of a bankers syndicate led by one James Pierpont Morgan. In response to the panic, Congress passed the Aldrich-Vreeland Act which authorized the Secretary of the Treasury to issue emergency currency and it established a National Monetary Commission to investigate the causes of the panic and to recommend policy changes. Unlike the 2008 financial crash Congress acted first with the Dodd-Frank Law and then created a financial inquiry commission whose work is already forgotten.

It here where we begin to see the leading players involved in the creation of the Fed. First and foremost is Rhode Island Senator Nelson Aldrich who chairs the commission, studies European central banks and becomes convinced of the need for a central bank in the U.S. Next is Paul Warburg, a German immigrant and scion of the Warburg banking family who worked for their U.S. affiliate Kuhn Loeb. He is rightfully called by most historians and Lowenstein as the father of the Federal Reserve as he becomes the most knowledgeable and tireless advocate for a central bank.  It is Warburg and Aldrich who organize the famous Jekyll Island bankers’ retreat where all of the essential elements of the Federal Reserve Act are written in secret. Sometimes transparency isn’t such a good idea.

After the Democrats sweep the 1912 elections Republican Aldrich is moved to the sidelines and the new key players are President Wilson who deftly works around his party’s Jacksonian traditions and Representative Carter Glass of Richmond, Virginia, who though a Jacksonian becomes the leading advocate for a central bank. Glass would later as a Senator, be the coauthor of the Glass-Steagall Act separating commercial banking from investment banking. Lowenstein spends a great deal of time dealing with both Wilson’s and Glass’ maneuverings to bring about passage of the act. He tells a good story especially in regard to how the U.S., in deference to its Jacksonian traditions, doesn’t have one central bank but rather a national board with 12 district banks.

I have a few quibbles with this otherwise wonderful book. First he doesn’t’ really tell us why there is a district bank in Richmond, Virginia, perhaps it is Carter Glass’ hometown or why there are two district banks in Missouri. Is it because the Speaker of the House Champ Clark was from Missouri or was it out of concern with supplying credit to agriculture in the Midwest? Finally, although he mentions it in passing, he doesn’t really go into how successful the pre-Fed Aldrich Vreeland Act was in the summer of 1914 in supplying needed cash to the banking system after the outbreak of World War 1. Remember although enacted in 1913, the Fed did not open its doors until December 1914. Friedman and Schwartz note in their “Monetary History…” that the use of Aldrich-Vreeland money in 1914 did a far better job in protecting the banking system than what the Fed did in 1930-31. 

For the full Amazon URL see:

https://www.amazon.com/review/RNFCDSOKADSJH/ref=pe_1098610_137716200_cm_rv_eml_rv0_rv

My Amazon Review of Susan Dunn's, "1940: FDR, Willkie, Lindbergh, Hitler-the Election Amid the Storm"

Susan Dunn has written a wonderful follow-up to her "Roosevelt's Purge." We move from Roosevelt's intra-party fight of 1937-38 to his his preparations for war in 1940 and 1941. Her title, although flashy, is much more about Roosevelt than Willkie, Lindbergh and Hitler and the story extends beyond the election of 1940. Roosevelt and the internationalist Hamiltonian Republicans are the clear heroes and clear villains are Lindbergh and the isolationist majority in the Republican Party. Roosevelt dominates the action with his masterly setting up the politics for his unprecedented third term and his great speeches pushing the country towards war. However, Dunn gives too much credit to his speeches but fails to note the lack of immediate action thereafter. For example not much happened after his state of emergency speech in May 1941. In many respects Roosevelt feared that he was getting too far ahead of public opinion, when in fact, he very likely was lagging behind the popular will, at least in 1941.

Dunn's portrait of Willkie shows him clear eyed in the face of the Nazi menace and way ahead of his time with respect to civil rights. Unlike Roosevelt, who was too dependent on the racist southern Democrats, Willkie was a full thoated supporter of Negro rights in the early 1940s. It is here where I have my main quibble with Dunn's book. In order to keep her plot-line going she all but ignores the critical support given to Roosevelt's foreign policy by the very Jacksonian and very racist southern Democrats. Without internationalists like Georgia Senater Walter George, a target of the failed 1938 purge, Roosevelt's whole enterprise of aiding Britain in its time of desperation would have floundered on the rocks. For a full discussion of the South's role in the foreign policy of the period I would recommend Ira Katznelson's, "Fear Itself...."

I also have two other quibbles. She ignored the role of future Secretary of State Dean Acheson's legal opinion in support of the destroyer for bases deal of 1940 and while she mentions the role of German intelligence in aiding the isolationist forces, she completely ignored the the role Britain's agent, William Stephenson in pushing America into the war.

All told Susan Dunn has written a fine book which vividly captures an era where politics really mattered and the American people really cared.

My Amazon Book Review on Ira Katznelson's, "Fear Itself: The New Deal and the Origins of Our Time"

There have been thousands of books written on Franklin D. Roosevelt and the New Deal. Instead of focusing on the executive branch, Katznelson shifts the focus to the Congress, particularly the southern Democrats who dominated the caucus and chaired the major committees. The author convincingly demonstrates that when the southerners were with him, Presidents Roosevelt and Truman got what they wanted. Conversely when the southerners opposed the Adminstration, the New and Fair Deals floundered. It is here where Katznelson makes an important contribution to our understanding of the New Deal and the early postwar era.

With respect to domestic policy, Katznelson views the approach the southerner took through the prism of race. Specifically where the southerners feared the underpinnings of the Jim Crow south were under attackl they backed away from Roosevelt. Although I largely agree with that thesis, the major failing of the book in my opinion, is that Katznelson ignored the Jacksonian roots of the southern Democrats then sitting in Congress. At its founding the Jacksonian Democrats were both racist domestically and hawkish with respect to foreign policy. Thus while the southerners, opposed Roosevelt dometically after 1938, they stood by him and later Truman in supporting the foreign and defense polcies of the emerging national security state.

I would recommend "Fear Itself..." to both serious students of American history and the casual reader interested in how much the the institutions we now take for granted came into being.