Government To Control US Banking System
BANKS FIGHT BILL TO CREATE FEDERAL RESERVE BOARD
The Economist, 12th July 1913
WASHINGTON, DC — In spite of a fruitless effort to keep the measure secret until such time as the President's Message could be read to Congress and a Bill formally introduced, the terms of the new Administration Bill on currency and banking have within the past few days been made public and have received elaborate discussion.
The new Bill has been introduced, as well as framed, by Representative Carter Glass, the Chairman of the House Banking and Currency Committee, and his associates. It is, therefore, properly called the Glass Bill.
In substance it provides for the establishment of 12 local or district reserve banks, each of which is to exercise local powers of rediscount, and is to do business solely with its stockholders, who are to be the banks of the district in which it is situated.The 12 banks are to be presided over and controlled by a general board, entitled the Federal Reserve Board.
The Federal Reserve Board would consist of three ex officio Cabinet members, and four appointees directly named by the President, and removable by him at pleasure, of whom one should be named Governor, and a second Deputy-Governor, of the Federal Reserve.
In its original form the Glass Bill provided for making this board up of banking representatives chosen by stockholding institutions, with three Government representatives merely to insure good faith and publicity of the action taken.
The change made in the type of control was forced after the Bill had practically been completed and agreed upon. President Wilson directly interposed, at the urgent request of Secretary Bryan, to demand the modification of the measure in this respect.
The Glass Bill in its present form, as altered upon the direction of President Wilson, has been received with very mixed feelings by the banking and business community.
Experts recognise that the Bill does many things that have long been desired, and would improve the banking system of the United States in numerous respects that have heretofore seemed to be out of reach. On the other hand, return to a system of Government issue is far from satisfactory to any conservative mind.
The political prospects of the Bill cannot definitely be predicted thus far. President Wilson probably has a sufficient amount of political prestige to force it through the House of Representatives.
The banking fraternity, however, controls so much and varied political power in the United States to-day that there is much reason to believe it may succeed in stopping the Bill when it leaves the House of Representatives, if not sooner.
The Committees on banking and currency in both House and Senate today are a set of dummies, the large majority of the members having no conception whatever of the subject they have to deal with.
They will either report the President's Banking Bill favourable, as a result of direct pressure from him, or else they will refuse to report it, as a result of direct pressure from the bankers in their own district.