part of the reserve fund they controlled-fiscal experts estimated the percentage as three-fourths-was being loaned by these big banks day after day on "call loans" for Wall Street operations. The same fund aided in the underwriting of the trusts, and facilitated all the operations of organized capital. The funds themselves were, to be sure, returnable to the local national banks, but the profits on their use remained with the great banking companies, with the interest on the use going to the local banker. It was a system which diverted capital from local constructive building to Wall Street speculation and the promotion of vast monopolies. The statement of the Comptroller of the Currency on November 24, 1912, showed that two hundred and forty million dollars belonging to the depositors of the 7,473 national banks in the United States were on that date in the custody of the few big banks of the central reserve cities.

The Aldrich plan, correcting many mistakes and abuses in the old system, in no way changed its essence. "The heart of the Aldrich plan," President Wilson said of it in 1914, "was a single central bank which was susceptible of being controlled by the very men who have always dictated the financial policy of the Republican party, whereas, the heart of our system (the Federal Reserve) is not a great central bank, but a body appointed by and responsible to the Government, and, by the same token, responsible to the people of the United States. The hand is the hand of Esau, but the heart is the heart of Jacob, and that heart is the heart of the Democratic party, the control by representatives of the people of the things that concern the whole people."

The Democratic platform of 1912, expressive of the

sustained battle of the party against special financial privilege, pledged the incoming administration to provide against a central reserve bank. The issue was, with the revision of the tariff, the immediate business of the Wilson forces. The peculiar power given the Secretary of the Treasury by the provision of 1800, establishing his duty as an appearance before Congress with a report of the finances at the beginning of each session, as well as McAdoo's own particular fitness for the consummation of the task, led the President to entrust him with the campaign for the passage of a law that would overthrow the barons of Wall Street.

If Wilson was the Bonaparte of the attack, McAdoo was the Marshal Ney. He brought to the battleground a knowledge of the enemy remarkable to a man in political office. He had already met their leaders in personal conflict. He had already taken issue with one of their inner council by flinging out its representative in the office of the Comptroller of the Currency. He had rearranged Government deposits in national banks in such a way as to minimize the danger of favoritism, and had required interest on such deposits from the banks with which they were made. He had already served notice of intention and ability to give battle, and he made ready for the fray with characteristic energy and action.

He had for support the sympathy, the approval and the power of the President in his struggle against vested financial interest. He had the resources-not often used in such action-of the Treasury. He had the ability to handle men. Most of all, he had unlimited courage. He had no allegiance to any one but Woodrow Wilson, no responsibility except to the

people of the nation. He did not love a fight for its own sake, but, once in combat, he swung his pike as lustily as any other Gael.

Clear-cut as was the issue, the battle-ground was in its way as deep a jungle as had been the great Okefinokee Swamp where McAdoo's grandfather had routed the Indians. The power of private gain at public expense is a hydra-headed monster, and the ramifications of the money power of the country were quite naturally thickest and strongest at the point where they could do that power the most adequate service, Washington. As the President said, "Wall Street controlled the Treasury of the United States." The group so nominated controlled more than the Treasury. Until the actual revolution of 1913 its directing brains controlled-in some cases by class feeling, in others by eventual interest, in a few by actual purchase-human levers in every branch of the Government. Practically all the social life of the capital was impregnated by the idea that government was operated for the benefit of the few. The thought of the American public-at all times one of the vaguest of generalities-is nowhere more vague than in Washington. It is the duty of the executive officer, however, to see beyond the capital to the country, but the man who does this accomplishes the result only by conscious struggle against the sapping atmosphere of his immediate environment. Progress toward real reform was like walking over quicksands to a dim beacon. The fighter must bear his own lantern of courage, and McAdoo, treading on ground that was not less dangerous because he refused to acknowledge its dangers, carried no flickering gleam but a searchlight.

First of all, he knew what he wanted, and, second,

he knew what he was likely to win. One of his first measures in public office was a securing of a comparison between the monetary system of England, France, Germany and the United States. It is significant that one of his earliest memoranda of the Federal Reserve legislation, attached to a comprehensive review of the foreign systems, reads, "Government chief depositor in Reserve Bank therefore ought to look after its own," a succinct enough declaration of a fact that seemed in danger of being hidden under a mass of argument concerning technicalities of finance.

On April 7, 1913, President Wilson called an extra session of Congress for consideration of tariff legislation. The need of currency legislation, although considered by the President equally vital with the tariff measures, was not stressed but was pressed forward by all other means in the power of the administration.

Currency reform, clamored for by the public from the time when expert investigation had shown that the panic of 1907, precipitated by the refusal of the National Bank of Commerce to clear for the Knickerbocker Trust Company of New York and the subsequent failure of the latter bank, was altogether a banker's panic, had progressed in Congress only to the point of the adoption of the Aldrich-Vreeland Bill and the appointment of the National Monetary Commission. The Aldrich-Vreeland was nothing but an emergency measure, and due to expire in June, 1914. The gain of a certain degree of Congressional control by the Democrats in 1910 forced the monetary commission to close its investigations and bring in its report. While Pujo, of Louisiana, who had been a member of the National Monetary Commission, was conducting his sensational but instructive inquiry into money combinations Car

1

ter Glass, a Democratic Congressman from Virginia, with a sub-committee from the House Committee on Banking and Currency, was making a study of banking legislation, examining witnesses, and delving into financial conditions.

In April, 1913, with the entrance of the Democratic party into real power, Glass was made chairman of the House Committee on Banking, and, with the aid of H. Parker Willis, a student of economics, drafted a currency measure which was to become the groundwork of the Federal Reserve. This measure, coming to the President and the Secretary of the Treasury for their consideration, was the foundation upon which McAdoo built the fiscal reforms of his time in office.

It was inevitable that the draft of the measure, as it came to the Secretary, should require revisions, and it was into consideration of these revisions that he put a large part of his constructive labors. He had to call conferences for study of the proposed legislation, had to study and revise its provisions, had to summon its cohorts, and to defeat its enemies. His work for the passage of the Federal Reserve Act falls into three divisions: the choice of the best measure of currency reform; the fight against banking interests striving to prevent the passage of a measure that would interfere with their profits and advantages from the existing system; and the direction of the legislative battle for the passage of the bill.

The choice of the measure was attained only by most careful consideration, by extensive conferences and by constant recognition of the needs and rights of the great body national. Throughout records of conferences and letters of inquiry and statement the Secretary's remarkable gift for visualizing the average