America's Money Machine

74 PART I / THE ROOTS OF REFORM
House, on the ground that banking was a subject with which he was
not familiar.*
Meantime, Senator Owen, smarting no doubt under the loss ofprestige
from his inability to control his Committee, began to feel the need of
accommodating his Wall Street antipathies for the sake ofaction. He now
showed a refreshing willingness to accept amendments suggested by
bankers, and within the next few days the Committee made a number of
changes to mollify their opposition. Among them was one to open the
regional reserve banks to public ownership-though not at the expense
of government control. There was still no agreement on the main issues
of the composition of the governing board-whether government or
banker controlled-and the character of the note issue.
On November 7 a major concession was made to banking opinion when
the words, "or lawful money" were deleted from the references to redemption
ofthe note issue. The effect ofthis was to require that whether
the notes were issued, redeemed, or guaranteed by the banks or by the
Treasury, they would be redeemable in gold, and hence would be a gold
backed currency. This was a major defeat for the. Bryan wing of the
Democratic Party.
In waving the editorial flag over this triumph the New York Times, which
in those days was pretty much the spokesman for Wall Street, fell into the
error ofdisputing the popular view that "government money" was better
than "bank money."
"This is an American idea," the Times announced, "due to the traditional
belief that our government is better than our banks, whereas the
experience of the world is that banks as good as ours will be more stable
than governments." It went on to cite the experience of the Bank of
France, which continued to make payments after the Germans had captured
Paris. 8
It was the view ofthe Times that a currency backed by gold, even to the
extent of only one-third, along with commercial assets was intrinsically
sounder than a currency backed by government bonds, since the latter
reduced the currency to the status of a fiat money, the value of which
rested entirely on the good faith and credit of the government. The
deeper issue eluded discussion-namely, the quality of the commercial
*New York Times, Oct. 24-26,1913. There may have been an element ofpique in Wilson's
reluctance to see Vanderlip. As a trustee of the Carnegie Foundation, Vanderlip had been
one of a committee that had rejected Wilson's application for a pension, and though
Vanderlip had been in favor of the grant, he was accused of having gossiped about the
matter to Wilson's discredit.