What came to be known as the Aldrich Plan was drafted by these men during this conference. The plan was written in secrecy, as the public would never approve of a banking reform bill written by bankers -- much less of a plan for a central bank. In addition, the bankers involved were prominent New York City bankers. Not only had the U.S. public been anti-banker since the Panic of 1907, but New York City bankers were particularly distrusted in Western and Southern states. Thus, members of Congress from these states would find it hard to support a plan drawn up by New York City bankers. The Aldrich Plan carefully avoided calling its proposed new organization a “central bank,” hoping to reduce concerns about central control. Warburg and others had warned against this. It instead carefully worded its proposal as the establishment of a National Reserve Association. The bankers’ plan (although not its origin) was publicized on January 16, 1911 as the Aldrich Plan. The Aldrich Plan was submitted to Congress on January 9, 1912. However, it was not popular among those who wanted a public-controlled plan, or who opposed the concept of a central bank in any form. Thus, it was followed by much debate, but never came to a vote. In the November 1912 elections, Democrats won in a landslide at the national level -- Woodrow Wilson won as president and Democrats gained control of both houses of Congress. The Democratic Party platform favored a public-controlled plan. Thus, the Aldrich banker-controlled plan was effectively dead. Wilson made the issue one of his top priorities even before he took office. He asked Carter Glass of Virginia, one of the leading Democratic representatives on the House Committee on Banking and Currency, to work with banking experts and develop a compromise bill. Glass worked with Robert Latham Owen and they introduced the Glass-Owens bill in December 1912. To implement Democrats’ desire for a public-controlled plan, the bill proposed a central public-appointed body in control. To address the Western and Southern distrust about powerful New York City banks, the bill decentralized the system into districts to limit the power of the New York City banks. However, the bill also had many features of the banker-controlled plan to broaden its political appeal. Thus, the general outline of the Aldrich Plan did eventually serve as the model upon which the Federal Reserve System was based. However, there were significant changes. A degree of public control was exerted (via the Federal Reserve Board, the equivalent of todays Board of Governors, selected by the President of the United States). Also, the role of professional bankers was, to some extent, limited by confining their overt control to the operation of the Federal Reserve banks of the various regions. The Aldrich Plan met with Warburgs satisfaction, as he said that minor changes could be adjusted administratively later. After much debate, Congress passed this bill (with some minor modifications) as the Federal Reserve Act on December 23, 1913. en.wikipedia.org/wiki/Benjamin_Strong,_Jr.
Posted on: Mon, 01 Dec 2014 18:38:16 +0000
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