Free Currency Wars: The Making of the Next Global Crisis by James Rickards Page B

himself. A central bank to act as an unlimited lender of last resort to private banks was needed before the next panic arose.
    America had a long history of antipathy to central banks. There had been two efforts at something like a central bank in U.S. history prior to 1913. The first of these, the Bank of the United States, was chartered by Congress at the urging of Alexander Hamilton in 1791, but its charter expired in 1811 during the presidency of James Madison and a bill to recharter the bank failed by a single vote. Five years later, Madison steered the chartering of a Second Bank of the United States through Congress. But this second charter had a limited life of twenty years and would be up for renewal in 1836.
    When the time for renewal came, the Second Bank ran into opposition not only in Congress but from the White House. President Andrew Jackson had based part of his 1832 presidential campaign on a platform of abolishing the bank. After a contentious national debate, which included Jackson pulling all U.S. Treasury deposits out of the Second Bank of the United States and placing them in state-chartered banks, the rechartering did pass Congress. Jackson vetoed it, and the charter was not renewed.
    The political opposition to both national banks was based on a general distrust of concentrated financial power and a belief that the issuance of national banknotes contributed to asset bubbles that were inflated away by easy bank credit. From 1836 to 1913, an almost eighty-year period of unprecedented prosperity, innovation and strong economic growth, the United States had no central bank.
    Now, literally in the rubble of the 1906 San Francisco earthquake and the financial rubble of the Panic of 1907, a concerted effort began to create a new central bank. Given the popular distrust of the idea of central banking, the bank sponsors, led by representatives of J. P. Morgan, John D. Rockefeller, Jr., and Jacob H. Schiff of the Wall Street firm Kuhn, Loeb & Company, knew that an education campaign to build popular support would need to be conducted. Their political patron, Senator Nelson W. Aldrich, Republican of Rhode Island, who was head of the Senate Finance Committee, sponsored legislation in 1908 creating the National Monetary Commission. Over the next several years, the National Monetary Commission was the platform for numerous research studies, sponsored events, speeches and affiliations with prestigious professional associations of economists and political scientists, all with a view to promoting the idea of a powerful central bank.
    In September 1909, President William H. Taft publicly urged the country to consider supporting a central bank. That same month, the Wall Street Journal launched a series of editorials favoring the central bank under the heading “A Central Bank of Issue.” By the summer of the following year, the popular and political foundations had been laid and it was now time to move toward a concrete plan for the new bank. What followed was one of the most bizarre episodes in the history of finance. Senator Aldrich was to be the primary sponsor of the legislation setting up the bank, but it would have to be drafted in accordance with a plan that satisfied the wishes of New York bankers still reeling from the Panic of 1907 and still searching for a lender of last resort to bail them out the next time a panic arose. A committee of bankers was needed to draft the plan for the central bank.
    In November 1910, Aldrich convened a meeting to be attended by himself, several Wall Street bankers and Abram Piatt Andrew, the recently appointed assistant secretary of the Treasury. The bankers included Paul Warburg of Kuhn, Loeb; Frank A. Vanderlip of the Rockefeller-controlled National City Bank of New York; Charles D. Norton of the Morgan-controlled First National Bank of New York; and Henry P. Davison, the most senior and powerful partner at J. P. Morgan & Company after Morgan himself. Andrew was a Harvard