Money Power and the People

417 Pages·2020·2.38 MB·English

Money, Power, and the People

MONEY, POWER,
and THE PEOPLE

The American Struggle to Make Banking Democratic

CHRISTOPHER W. SHAW

The University of Chicago Press

Chicago and London

The University of Chicago Press, Chicago 60637
The University of Chicago Press, Ltd., London
© 2019 by The University of Chicago
All rights reserved. No part of this book may be used or reproduced in any
manner whatsoever without written permission, except in the case of brief
quotations in critical articles and reviews. For more information, contact
the University of Chicago Press, 1427 E. 60th St., Chicago, IL 60637.
Published 2019
Printed in the United States of America

28 27 26 25 24 23 22 21 20 19 1 2 3 4 5

ISBN-13: 978-0-226-63633-7 (cloth)
ISBN-13: 978-0-226-63647-4 (e-book)
DOI: https://doi.org/10.7208/chicago/9780226636474.001.0001

Library of Congress Cataloging-in-Publication Data

Names: Shaw, Christopher W., author.
Title: Money, power, and the people: the American struggle to make banking
democratic / Christopher W. Shaw.
Description: Chicago: The University of Chicago Press, 2019. | Includes
bibliographical references and index.
Identifiers: LCCN 2018059623 | ISBN 9780226636337 (cloth: alk. paper) |
ISBN 9780226636474 (e-book)
Subjects: LCSH: Banks and banking—Social aspects—United States. | Banks
and banking—United States—Citizen participation. | Banks and banking—
Government policy—United States—History—20th century. | Banks and
banking—United States—History—20th century.
Classification: LCC HG2481 .S49 2019 | DDC 332.10973—dc23
LC record available at https://lccn.loc.gov/2018059623

♾ This paper meets the requirements of ANSI/NISO Z39.48-1992
(Permanence of Paper).

v

CONTENTS

Introduction
1

1
The Bankers’ Panic of 1907
13

2
The Emergency Currency Act
39

3
Financial Heterodoxy Gains Ground
57

4
Central Banking and Agricultural Credit
87

5
From Armistice to Depression
109

6
The 1930s Banking Crisis
135

7
The Emergency Banking Act
159

8
The Banking Act of 1933
181

9
Government Programs and Mutual Aid
201

10
The New Deal for Farmers and Workers
221

11
The Banking Act of 1935
237

12
The Decline of Banking Politics
257

13
The Fall of Banking Politics
275

Epilogue
299

Acknowledgments
305
Notes
309
Index
393

1

Introduction

Some will rob you with a six-gun,

And some with a fountain pen.1

O

n April 14, 1913, a horse-drawn hearse solemnly transported the
body of J. Pierpont Morgan from the splendor of the private library
adjacent to his mansion, through the streets of Manhattan, to the
Romanesque edifice popularly referred to as “Morgan’s church.” As
the bell of St. George’s Episcopal Church tolled overhead, one thou-
sand spectators stood alongside the railing of Stuyvesant Square and
watched the funeral cortege’s approach. Inside the church, the pews
were full, and the chancel was lavishly decorated with floral displays.
These included a wreath of roses from the king of Italy and a spray of
palm leaves decorated with golden tasseled silk streamers from the
emperor of Germany. Among the prominent attendees were bearers
of surnames that evoked the passing heroic age of American business:
Harriman, Rockefeller, Vanderbilt. No less than three prelates of the
Episcopal Church—to which Morgan had been a great benefactor
over the years—were on hand to assist with the service. The bishops

2 Introduction

of New York, Massachusetts, and Connecticut all trailed dutifully be-
hind the Jacqueminot rose-blanketed coffin.2
Morgan’s death provoked a different reaction at a modest brick
Episcopal church in the City of Brotherly Love that served a largely
working-class congregation. The Reverend George Chalmers Rich-
mond took to the pulpit of his parish church in Philadelphia’s North-
ern Liberties section to reprove “men on Wall Street [who] have
made a god out of Morgan for years.” “Now let them read the gos-
pel of Jesus,” he admonished, “and see how far short of God did Mr.
Morgan really appear to be.” The Reverend Richmond’s sermon fol-
lowed from his censure of the very endeavor that had made Morgan’s
fame and fortune possible—namely, finance. “Mr. Morgan was a great
financier,” he instructed his parishioners, “but not a great man.” “The
country will get on much better without him.” The men and women
who heard these words would have left church that day with a sense
of affirmation rather than revelation. “In all the tributes paid to his
memory just now,” Richmond observed, “we cannot find a single note
of admiration from the American workingman.” Thus, from within
the Christian denomination that the preeminent figure of American
finance had invested much of himself in—and a not-inconsequential
amount of his fortune—arose a declaration of dissent, a condemna-
tion of all that Morgan represented.3
The Reverend Richmond was not a voice crying in the wilderness.
His challenge to the private financial system was merely one of many
in the early twentieth century. In Boston, the ever-colorful James
Michael Curley aggressively engaged in a decades-long struggle with
his city’s leading bankers. During his first term as mayor, from 1914
to 1918, he excoriated them as “insolent, arrogant sharpies, swindling
the city of all they can get away with.” Much to the displeasure of the
big banks, Curley not only was elected mayor again in 1922, but he
also immediately embarked on an ambitious public works program.
And when the bankers refused to allow the city to borrow against
future taxes, Curley declared war. He apprised one banker of “a water
main with floodgates right under your building.” “You’d better get
that money up by three o’clock this afternoon,” he advised, “or those

Introduction 3

gates will be opened, pouring thousands of gallons of water right into
your vaults.” The banker duly complied, but subsequently decided to
again withhold funds from the city. This time Curley informed him
that he would send a mass of municipal employees and contractors to
the bank with payroll checks in hand and instructions to move their
money to other institutions. “You don’t want a run on your bank, do
you?” he cautioned. Once again the banker complied.4
Curley was elected to four terms as mayor of Boston, four terms
as a U.S. congressman, and one term as governor of Massachusetts.
He possessed an intimate knowledge of the people he represented:
remarkably, every year Curley tirelessly met, shook hands with, and
individually spoke to 50,000 voters. He knew his constituents, and
he knew what they thought about the power that bankers wielded.
Opposed by this same banker for a third time, Curley did not pull any
punches. “I have a nice picture of you,” he informed his foe, “and I
have a good picture of that beautiful estate you have.” Unless money
that the mayor needed to meet the city’s payroll was forthcoming, he
explained, he would make these pictures publicly available. “When a
man gets hungry,” Curley counseled, “he’s likely to do something des-
perate. I’d keep away from that house if I were you.” The banker re-
treated yet again.5
The dominant figure in Boston politics for half a century opposed
the power that a handful of bankers exercised over the city through
their control of money and credit. He considered leading bankers to
be effete charlatans whose haughty manner, presumptuous attitude,
and underhandedness warranted defiance. Curley proudly recalled
keeping New England’s foremost banker waiting for two hours while
he was enjoying the aboveboard legerdemain of noted magician Harry
Blackstone. “I can learn something from Mr. Blackstone, but I assure
you that I never learn anything from bankers,” he declared. Curley was
confident that voters shared his viewpoint—and the bankers them-
selves evidently understood that there was no use in publicly con-
fronting Curley, because he would prevail.6
Discontent with the banking system found sensational expres-
sion far to the west of the cheek-by-jowl wood-frame triple-deckers