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system, a Federal Reserve Board was to be established at Washington, directed by the Secretary of the Treasury and the Comptroller of the Currency, together with five members nominated by the President and approved by the Senate. Each regional Reserve Bank is controlled by nine directors, six chosen by its member banks and three by the Federal Reserve Board at Washington. The twelve regional banks are purely bankers' banks, doing no business direct with the public. Their main function is issuing notes against commercial paper for the benefit of their member banks, and they must maintain a minimum gold reserve of 40 per cent. against such issues. In addition they are expected to act as clearing-houses for their member banks.

The effect of the system is to prevent the accumulation of money power at any single centre or in the hands of any group of financiers; and the network of conduit-pipes linking up every local bank with a regional Federal Reserve Bank, and through it with the Federal Reserve Board at Washington, gives every solvent banking house an absolute guarantee against stoppage of payment through inability to liquidate its assets; for a panic resulting in a run so severe as to paralyze even the Reserve Board at the centre is hardly to be imagined. On the power conferred on the Reserve Board to do business in foreign markets it is not possible to dwell here, though it may in the course of time make a new place for America in the field of international finance. It was significant that certain national banks imme

diately took advantage of the Act by opening branches at Buenos Aires and other South American centres.

No measure so revolutionary could look for an easy passage through Congress. It was opposed from the first by the bankers, who wanted a new Central Bank under their own control, and by conservatives like Senator Root and Senator Lodge, who feared an inflation of the currency, with resultant high prices. The Senate was almost evenly divided for and against the measure, but the President refused to countenance concession on any point of principle, and in the end the Bill, modified in certain unimportant particulars by agreement between the two Houses, was sent forward for his signature, which was affixed on December 23, 1913. The Federal Reserve Board, with its twelve regional banks, came into being in the following year. It has as yet undergone no very exacting test, but the soundness of the scheme has been definitely vindicated. A typical verdict was that of Dr. C. W. Eliot, President Emeritus of Harvard, who wrote of it that "no American administration has ever before accomplished so great a contribution to the stability and efficiency of American credit and financial enterprise. Business men of all sorts-financial, manufacturing, and commercial-recognize the high value of this remarkable achievement." I The prospect of facing the problems raised by the European War with no better system of currency and reserve than the outworn legacy of

1 Atlantic Monthly, October 1915.

system, a Federal Reserve Board was to be established at Washington, directed by the Secretary of the Treasury and the Comptroller of the Currency, together with five members nominated by the President and approved by the Senate. Each regional Reserve Bank is controlled by nine directors, six chosen by its member banks and three by the Federal Reserve Board at Washington. The twelve regional banks are purely bankers' banks, doing no business direct with the public. Their main function is issuing notes. against commercial paper for the benefit of their member banks, and they must maintain a minimum gold reserve of 40 per cent. against such issues. In addition they are expected to act as clearing-houses for their member banks.

The effect of the system is to prevent the accumulation of money power at any single centre or in the hands of any group of financiers; and the network of conduit-pipes linking up every local bank with a regional Federal Reserve Bank, and through it with the Federal Reserve Board at Washington, gives every solvent banking house an absolute guarantee against stoppage of payment through inability to liquidate its assets; for a panic resulting in a run so severe as to paralyze even the Reserve Board at the centre is hardly to be imagined. On the power conferred on the Reserve Board to do business in foreign markets it is not possible to dwell here, though it may in the course of time make a new place for America in the field of international finance. It was significant that certain national banks imme

diately took advantage of the Act by opening branches at Buenos Aires and other South American centres.

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No measure so revolutionary could look for easy passage through Congress. It was opposed from the first by the bankers, who wanted a new Central Bank under their own control, and by conservatives like Senator Root and Senator Lodge, who feared an inflation of the currency, with resultant high prices. The Senate was almost evenly divided for and against the measure, but the President refused to countenance concession on any point of principle, and in the end the Bill, modified in certain unimportant particulars by agreement between the two Houses, was forward for his signature, which was affixed on December 23, 1913. The Federal Reserve Board, with its twelve regional banks, came into being in the following year. It has as yet undergone no very exacting test, but the soundness of the scheme has been definitely vindicated. A typical verdict was that of Dr. C. W. Eliot, President Emeritus of Harvard, who wrote of it that "no American administration has ever before accomplished so great a contribution to the stability and efficiency of American credit and financial enterprise. Business men of all sorts-financial, manufacturing, and commercial-recognize the high value of this remarkable achievement." I The prospect of facing the problems raised by the European War with no better system of currency and reserve than the outworn legacy of Atlantic Monthly, October 1915.

Civil War days would have been impossible to contemplate.

With the Currency Act is to be associated a measure on which Mr. Wilson had laid much stress in his pre-election speeches, the Rural Credits Act, though the measure embodying his views did not actually become law till more than two years later. The purpose of the Bill, first mentioned in the President's message as part of the programme of 1914, was to facilitate advances to farmers. It was finally passed in July 1916.1

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The anti-trust legislation on which Mr. Wilson had laid constant stress in his campaign speeches was commended to Congress in the Presidential message of January 20, 1914. To estimate its importance the nature of the restrictions already in force needs to be appreciated. The instrument on which the Administration relied in its perpetual conflict with the trusts was the Sherman Act of 1890. The operative passage of that measure consists of the enactment that every contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal." Important as the Sherman Act was, it had many defects, chief of them the vagueness of its language. The question of whether a particular corporation represented "a combination in restraint of trade opened the door to endless forensic argument and conflicting legal decisions, while the Act was for a time emasculated through the verdict of the 1 See p. 218.

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