America's Money Machine

The Bill Considered 75
assets and the quality of the government promises to pay. Neither possesses
an intrinsic value above the other, but the value of each depends
upon factors deep in the economic and moral structure of society.
It was at this point that the question again emerged, which later was
resolved into settled policy of the monetary authorities, of the main and
basic function of the money system. The question appeared in an editorial
of the Times in the following reference: "The reason for looking at
the phrase 'lawful money' which is alternatively in and out ofthe pending
currency bill is that it is urged by those who think it a benevolent function
of government to regulate prices by regulating the amount of money in
circulation."9
As we shall note further on, the matter ofthe price level was to become
the preoccupation of the Federal Reserve authorities to the reduction, if
not actual exclusion, of almost every other issue.
By the end of November, the Senate was showing restiveness and also
threatening to recess, and only by making it an issue was Wilson able to
hold the body in session. There were now before that body three different
currency bills-the Glass version (the bill reported out by the House
committee ofwhich he was chairman and passed by the House); the Owen
bill, being the version which he and five of his colleagues on the Senate
Banking and Currency Committee favored; and a bill drafted by Senator
Gilbert M. Hitchcock, Democrat of Nebraska, and supported by the Republican
members ofthe Committee. The principal feature of the Hitchcock
bill was its elimination of the "lawful money" provision and a stipulation
for note redemption in gold. The Hitchcock bill also provided for
public ownership but government control of the regional reserve banks.
The Democratic caucuses continued to favor the Owen version.
Finally, on Sunday night, November 30, the Democratic caucus
reached agreement on the text of the bill, and the following day it was
presented to the Senate.
The bill, now on the Senate floor, was again subject to debate, and it
was not for two weeks, until December 15, that any vote was taken. This
was on an amendment by Senator Hitchcock to provide for popular
subscription to the capital stock of the proposed regional reserve banks,
rather than compulsory subscription as directed by the Owen bill, and to
reduce to four the number of regional reserve banks from the eight to
twelve fixed in the bill under debate. The amendment was tabled by a
vote of 40 to 35, the result indicating the sharpness of the division.
The bill now came under a devastating attack by Senator Elihu Root