The Aldrich Bill never came to a vote. When the Republicanslost control of the House in 1910 and then lost the Senate and thePresidency in 1912, any hope there may have been of puttingthrough a Republican bill was lost. Aldrich had been voted out ofthe Senate by his constituents, and the ball was now squarely in thecourt of the Democrats and their new president, Woodrow Wilson.
How this came to pass is an interesting lesson on realitypolitics, and we shall turn to that part of the story next.
SUMMARY
Banking in the period immediately prior to passage of theFederal Reserve Act was subject to a myriad of controls, regulations, subsidies, and privileges at both the federal and state levels.
Popular history portrays this period as one of unbridled competition and free banking. It was, in fact, a half-way house to centralbanking. Wall Street, however, wanted more government participation. The New York bankers particularly wanted a "lender of lastresort" to create unlimited amounts of fiat money for their use inthe event they were exposed to bank runs or currency drains. Theyalso wanted to force all banks to follow the same inadequatereserve policies so that more cautious ones would not draw downthe reserves of the others. An additional objective was to limit thegrowth of new banks in the South and West.
This was a time of growing enchantment with the idea of trustsand cartels. For those who had already made it to the top,competition was considered chaotic and wasteful. Wall Street wassnowballing into two major banking groups: the Morgans and theRockefellers, and even they had largely ceased competing witheach other in favor of cooperative financial structures. But to keepthese cartel combines from flying apart, a means of discipline wasneeded to force the participants to abide by the agreements. Thefederal government was brought in as a partner to serve thatfunction.
To sell the plan to Congress, the cartel reality had to be hiddenand the name "central bank" had to be avoided. The word
THE CREATURE FROM JEKYLL ISLAND
