100 Years Ago Today

A History Of Events And Happenings From Exactly One Hundred Years Ago

Plans For A US Central Bank Discussed In Congress

The Warburg family had it’s roots in Venice, Italy and moved to Germany in the 16th century. In 1798 the M M Warburg Company was founded establishing one of the oldest banks in Europe. In 1895 Paul Warburg became a partner in MM Warburg in Hamburg, Germany. He traveled around the world and involved himself in world finance. After frequent business trips to New York Warburg settled there in 1902 as a partner in Kuhn, Loeb & Company.

Warburg wrote a critique of American banking and advocated a central banking system in 1902. “Defects and Needs of our Banking System” was published in 1906.“The United States is in fact at about the same point that had been reached by Europe at the time of the Medicis and by Asia, in all likelihood, at the time of Hammurabi.”The lack of a central institution that could readjust the rate of bank promissory notes was a disadvantage to US banking. An institution was needed to facilitate the exchange of promises of future payment for cash. A central bank constructed along the lines of the Reichsbank could fulfill this role and make it easier for the excess reserves of one bank to be used to bolster the insufficient reserves of another. The Panic of 1907 engulfed the country’s financial system and Warburg published “A Plan for a Modified Central Bank”and “A United Reserve Bank of the United States.”

In 1908 Nelson Aldrich, Republican senator from Rhode Island, chaired the National Monetary Commission. By 1910 Aldrich consulted Warburg on multiple occasions and invited him and other bankers to a secretive meeting on Jekyll Island in Georgia where the draft of a bill to establish a central bank was developed. In 1912 a bill was put forth in Congress by Virginia representative Carter Glass detailing a Federal Reserve system for the United States basically embracing the ideas of a central bank.

On December 7, 1912 Paul Warburg presented the blueprint for the Federal Reserve System to Congress and to President-Elect Woodrow Wilson. The plan calls for 20 reserve banks under control of a central board.

Paul Warburg

Paul Warburg

Single Post Navigation

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: