papers are being filled with paid advertisements calculated to mislead, not only the judgment of the public men but also the public opinion of the country itself. There is every evidence that money without limit is being spent to maintain this lobby, and to create the appearance of a pressure of public opinion antagonistic to some of the chief items of the Tariff Bill." The appeal to the ultimate authority had its effect. The Senate passed the Bill at the end of September and President Wilson signed it, substantially in the form in which it was first introduced, on October 3rd. The first of his three measures of reform was safe in harbour.

In 1916 the Underwood Tariff Act was supplemented by a useful measure constituting a standing Tariff Commission. The President, who had not in the first instance favoured the appointment of such a Commission, came to recognize the value of the work it might perform, and in January 1916, in a letter to the Chairman of the Ways and Means Committee of the House, he outlined the proper functions of the proposed Board whose creation he advocated.

66

"It should," he wrote, investigate the ad

ministrative and fiscal effects of the customs laws now in force or hereafter enacted; the relations between the rates of duty on raw materials and those on finished or half-finished products; the effects of ad valorem and specific duties, and the classifications of the articles of the several schedules; the provisions of law and the rates and regulations of the Treasury Department re

garding entry, appraisement, invoices, and collection; and in general the working of the customs tariff laws in economic effect and administrative method."

A Bill framed on these lines was in due course passed into law, and at the end of 1916 the President offered the chairmanship of the newly constituted Commission to Professor Taussig, the distinguished Harvard economist, an appointment that made an excellent impression.

The legislation to which the remainder of the special session of 1913 was devoted, the passage of a Currency Bill, was in one aspect an attack on privilege, in that it effectively mitigated the danger of the concentration of credit in the hands of a Money Trust. But its purpose was much broader than that. For fifty years the banking and currency system of the United States had been unequal to its financial needs. It dated back to the Civil War, when, in order to secure a market for Government bonds, Chase, the Secretary of the Treasury, practically vetoed the issue of notes by all banks failing to invest a third of their capital in such bonds. Banks complying with this condition could issue notes up to 90 per cent. of the face value of the bonds. The effect of that restriction was to stereotype a note issue which was not merely incapable of expanding to meet commercial needs, but in recent years had been steadily contracting; for as the Government bonds increased in price (and notes could only be issued against the face value, not the current value, of the bonds) the banks preferred to sur

render their right of issue, realize on their bonds, and employ their capital more profitably elsewhere. The artificial rigidity of the currency was a serious drag on commercial and industrial enterprise, and repeated attempts had been made to substitute a more efficient system. None had proved successful, and it was left to Mr. Wilson to introduce a comprehensive measure of reform that revolutionized the whole banking system of the United States.

The President's success in carrying the Currency Bill through Congress is the more striking in that, as he frankly admitted, he possessed no expert knowledge of finance. In his speech of acceptance to the delegates of the Democratic Convention that nominated him for the Presidency he had declined to commit himself to dogmatic proposals, but laid it down that at least the system established should be designed to to meet the requirements of merchants and farmers as well as bankers, and to frustrate that " concentration of the control of credit which may at any time become infinitely dangerous to free enterprises."

But if Mr. Wilson had not the necessary qualifications for drafting a programme of currency reform, he knew where to find the men who had. In his faculty for drawing on the knowledge and experience of authorities of recognized eminence in fields where his own knowledge is limited the President has a good deal in common with Mr. Lloyd George. Each of them is always ready to call in the expert. Neither is prepared to be And each has a gift for

subservient to him.

discussion and accommodation. In the case of the Currency Bill Mr. Wilson got the party leaders in the House early to work. As with the Tariff Bill, they were considering the form of the measure before the President was actually inaugurated. He himself took an active part in their conferences, and proposed to use the same personal influence in support of the Bill as he had exercised for the promotion of tariff revision.

66

The Tariff Bill had been transmitted from the House to the Senate early in May. On June 23rd the President, again addressing Congress in person, started the Currency Bill on its way. His message was, as always, terse and vigorous. He emphasized the relation of the second great measure of the session to the first. The Tariff Bill was designed to unfetter business, the Currency Bill to open up new paths of enterprise and offer practical incentives to industrial expansion. "It is absolutely imperative," he declared, that we should give the business men of this country a banking and currency system by means of which they can make use of the freedom of enterprise and of individual initiative which we are about to bestow upon them." The character of the new proposals was broadly indicated by the assertion that we must have a currency not rigid as now, but readily, elastically responsive to sound credit, the expanding and contracting credits of everyday transactions, the normal ebb and flow of personal and corporate dealings. Our banking laws must mobilize reserves, must not permit

66

the concentration anywhere in a few hands of the monetary resources of the country, or their use for speculative purposes in such volume as to hinder or impede or stand in the way of other more legitimate, more fruitful uses."

The Bill as finally passed by Congress differed in some details, none of them fundamental, from the form in which it was originally introduced by Mr. Carter Glass, of Virginia, in the House at the end of June. The system it instituted was singularly simple and symmetrical, its central purpose being to stimulate the fluidity of credit on a national scale. To that end every national bank (i.e. a bank incorporated under Federal as opposed to State laws) must, and every State bank might, link itself to a new Federal Reserve Bank, of which twelve were to be established in twelve defined areas into which the Union was for this purpose divided. Every bank must become a stockholder in the Federal Reserve Bank of its district up to 6 per cent. of its paid-up capital, and deposit its reserves with the Federal Bank, which would always be under obligation to rediscount for a local bank, making payment in Federal Reserve notes. These, in their turn, were to be convertible into gold at any of the twelve regional Reserve Banks or at the United States Treasury.

At the centre, and in control of the whole

The twelve banks are situated at Boston, New York, Philadelphia, Cleveland (Ohio), Richmond (Virginia), Atlanta (Georgia), Chicago, St. Louis, Minneapolis (Minnesota), Kansas City, Dallas (Texas), and San Francisco.