America's Money Machine

Collapse ofa Theory 99
plete control ofits receipts and disbursements as a further check on the
reserve banks by the government."7
The bill, as finally passed, failed to meet all of Warburg's ideas, as we
have seen, but it left enough vagueness as to the ultimate power and
influence of government to provide a handle for a firm and aggressive
administrator to guide the agency in that direction, and bring it under
authoritarian domination.
Warburg was such a personality, and he was now in a strategic position
to mould the institution to his ideas.
Unfortunately for the complete success ofhis theories, Warburg's loyalties
had led him to maintain his German connections, and in 1913, only
a year before the outbreak of the war in Europe, he had accepted the
Order of the Cross, second class, from the Emperor Wilhelm.
When the U. S. entered the war, in 1917, all things German were
suspect. Public feeling against Germany was much more fanatic than in
World War II. The Metropolitan Opera, for instance, dropped German
operas from its repertory (some said because this country had no singers
capable ofthe demands ofGerman opera), and many persons ofGerman
extraction found it convenient to anglicize their names.
Warburg, because of the importance of the Federal Reserve in war
finance, also came under a cloud, and resigned from the board on August
9, 19 18.
Warburg's influence did not end, however. He continued as chairman
of the influential Federal Advisory Council* and what he urged and
counselled the necessities of war seemed to confirm.
*The group of advisers created by Sec. 12 of the Federal Reserve Act.