America's Money Machine

A Measure of Expediency 33
any changes in the currency should be in the direction of an "intimate
connection between the currency and legitimate trade"-that is, an "elastic"
currency fluctuating in accordance with the commercial demand for
circulating media.
It was Senator Nelson W. Aldrich of Rhode Island, as head of the
Senate Finance Committee, who came forward with a concrete legislative
proposal for debate. Senator Aldrich was the accepted leader of the
conservative wing of the Republican Party in Congress. He was then
sixty-seven years of age and had been a Senator for twenty-seven years.
He had started life as a poor boy whose parents had been able to give him
no more than a common school education and a year in the East Greenwich
Academy. He went to work at the age of seventeen, starting in the
grocery business, but soon entered politics as a local councilman. He
happily married into wealth, acquired more from shrewd operations in
spinning and railways, and became allied with the Rockefeller interests
through the marriage ofhis daughter Abby to john D. Rockefeller,jr. In
Washington his influence was identified with tariff and silver legislation
-though, paradoxically, his tariff views were more liberal than those of
many Democrats. He seems to have had only a cursory knowledge of
monetary matters, however, until the subject was forced upon him by the
Panic of 19°7. The story is told that in the fall of 1907 Aldrich called on
jacob Schiff, of the noted firm of Kuhn, Loeb & Company, to inquire
about certain technicalities ofGerman note issue and that Mr. Schiff, not
being familiar with the matter, introduced a younger partner who had
only come to this country from Germany six years before. This was Paul
Warburg who was to have important influence later in shaping the Federal
Reserve Act. The German was impressed with the Senator, and when
the Senator walked out ofthe office is said to have commented to himself,
"There marches national bank currency and there goes currency reform."
Warburg had strong convictions on currency matters and he asked
his senior partner whether he might write a personal letter to the Senator
on the disadvantages ofnote issues secured by government bonds. Schiff,
aware of Aldrich's opposite convictions, warned his partner to be cautious
and not to precipitate that issue. 3
The bill which Aldrich introduced called for the appointment of a
national monetary commission to examine into the whole monetary and
banking question and to bring in recommendations. As an interim measure
it authorized a currency to replace the clearing house certificates that
were still outstanding. The bill would, in effect, replace these certificates
by national bank notes. It would authorize an emergency issue of currency
to the total of $250 million secured by bonds approved by a Trea-