America's Money Machine

186 PART III / DEBACLE OF AN IDEA
control would mean abandonment ofthe gold standard, but he was vague
as to just what his policy would be beyond maintenance of a "sound"
currency, and he did not dispel fears of his radical leanings even among
his own party. Carter Glass, as remarked, declined the Secretaryship of
the Treasury. Nor were these fears allayed by Roosevelt's inaugural address,
in which he seemed to outdo the earlier Roosevelt in condemning
the bankers as "money changers in the temple."* Roosevelt's ambivalence
came out in his second message to Congress, on March 10, 1933,
the day after Congress convened to grant him emergency powers, in
which he requested authority to balance the budget by reducing veterans'
payments and government salaries by a total Of$I/2 billion. The bill was
strongly opposed in his own party, with ninety dissenting Democrats in
the House, but it carried under the influence of the crisis.
The Emergency Banking Act was followed by the Banking Act ofJune
16, 1933, which appeared to be directed toward establishing more conservative
banking and monetary practices. It was, in major respects, a
revision of an earlier bank bill which Glass had introduced inJanuary of
the year before. Early in 1931 he had begun drafting reform bank legislation,
but his bill, which he had eventually succeeded in getting reported
out by the Senate Banking and Currency Committee, proposed such
stringent controls on the use of bank credit that it met with a flood of
protests, and it was sent back to the Committee. Again reported, the
Federal Reserve Board entered a formal protest, and it eventually was
lost by removing it from the Senate calendar. The objections ofthe Board
are ofinterest, since they are an excellent statement of the philosophy of
the System at that time. The pertinent paragraphs follow:
It was the original intention of the Federal Reserve Act to decentralize the
banking power of this country by establishing 12 autonomous regional Federal
Reserve banks. The Federal Reserve Board itselfwas originally planned
to be largely a supervisory and coordinating body. The proposed act, however,
tends to increase radically the power of the Federal Reserve Board at
the expense of the individual Federal Reserve banks and to make of the
Federal ReserveSystem in effect a centralized banking institution. In support
of this statement attention is called to the following sections:
Sec. 3 delegates, the power of direct action to the Federal Reserve Board
which even if practical would result in so embarrassing the operations of
*"It seems a pity that he [Roosevelt] let slip the opportunity to utter some assurance of
the fundamental soundness and safety ofour financial system...." (New York Times, March
5, 1933)