Interview with Woodrow Wilson

The New York Times, June 24, 1913.
Page 2, columns 2 and 3.
Indirect interview with Woodrow Wilson in regard to the currency bill, June 23. President Wilson made it clear to visitors at the White House that he believed the idea of complete Executive control, as proposed by the Administration bill, was perfectly safe. He indicated that the only choice was between giving the control to the bankers or the Government, and he favored the Government. There might be a middle ground by which the national banks might participate in the management of the monetary system, but to the President’s mind it was not decisive. The President has no patience with the suggestion that under the proposed plan –– with all the seven members of the Federal Reserve Board appointed by the President –– politics might dominate the monetary system. He said he could not imagine anybody in a political office being audacious enough to play politics to that extent. He admitted that there had been some such cases, but they never had been tried out with regard to financial operations.
Taking an example from his own experiences, Mr. Wilson referred to the fact that in New Jersey the Governor appointed all the Judges. But, he said, no Governor, even the worst Governor that New Jersey ever had –– and he mentioned that his State had elected some pretty bad Governors –– never dared to play politics with the Supreme Court or the Court of Errors and Appeals. There had been, he said, a uniform quality of Judges with far from a uniform quality of Governors in New Jersey. That, he explained, was because justices touched the whole community. The minute politics was played with justice the whole community knew it, and the party that dared do it, would be “chucked”, and deservedly “chucked”, forever.
The President indicated that he could not fancy a man acting in this way even upon grounds of expediency. He would be a man without principle. The banking system of the country touched everybofdy, he said, and he could not imagine anyone playing politics with it.
Someone suggested to Mr. Wilson that danger might arise at some future time through the election of a President whose views on the subject of inflation of the currency were very extreme one way or the other. It was suggested that fixing discount rate and controlling the issue of Federal reserve notes amounted to a mere matter of economic theory, and that entirely apart from politics the President’s power would be enormous, with no check on it. Theory of Inflation.
In responding to this suggestion the President said there was the same extreme difference among economists as to the theory of inflation. In his view, the minute there was progress beyond definite assets, bills of lading and all the other things that were extremely definite, not only liquid credits were reached, but what he should call fluid credits. The line, he said, was a line of judgment.Mr. Wilson indicated that he could not follow the interpretation that before there was nothing in the bill that would prevent the Federal Reserve Board from placing the entire currency issue of $500,000,000 in one regional bank. The board, he contended, had not the power to apportion in teh sense that the entire issue should go to one place, because the only power the board has was to judge whether the credits offered were legal and sound. Any member of the regional association, he held, had the right to call for the circulating notes upon furnishing proper collateral, and there must be some special reason of unsoundness to justify keeping this member from getting them.
Elasticity of Currency.
This raised the questions of whether$500,000,000 was sufficient to give the desired elasticity to the currency. He admitted that it was an arbitrary limit –– a guess based upon statistics. It was his recollection that in the panic of 1907 the amount of Clearing House certificates rose to$260,000,000, and while he was not sure as to the exact figures, he was certain that the amount did not approach anything like the proposed limit of$500,000,000. It was a debatable question, Mr. Wilson admitted, whether or not the rigid limit should be set, but aside from the supposition that the entire issue might be taken up in one part of the country, he did not see any danger of any power of discrimination between one section of the country and another.
The President explained why the three sections that provided for the gradual retirement of the bond–secured national banknotes over a period of twenty years and the refunding of the 2 per cent. bonds which secured this currency into three per cent. bonds, had been stricken from the bill. All that the proposed bill provided for, was additional. It was his recollection that there was$712,000,000 of national bank currency based upon the 2 per cent. bonds. The bill gave the Government no control over the notes, and they formed a permanent bank issue, remaining at the same volume, no matter what the volume of business might be. The new bill, he said, contemplated that if $712,000,000 were not enough, then additional Treasury notes should be issued upon specified terms to a sum not exceeding $500,000,000. But in respect to the additional issue the Federal board could determine the terms of discount and could control the volume by the amount of discount. It also would have a general power, enabling it to retire these notes after they had done the temporary work to which they had been assigned.
In the last examination of the bill it was apparent, the President explained, that if provision were made for refunding 2 per cents the volume of the permanent currency would be reduced below $712,000,000. Therefore, just as fast as that reduction occurred all the bond secured currency would be made into emergency currency, because all of it would be placed under the control of the Federal board with power to fix rates of discount. This would be so unless it was arranged so as to provide another body of currency based upon new terms after the 2 per cents had disappeared. This would be a permanent volume of currency and not subject to the same regulations as the emergency currency. In other words, he said, provision had not been arranged by which a perfect substitution could be made below the $712,000,000 limit, and rather than work the bill out with great elaboration, the framers thought it best to segregate that phase and regard it as a seperate thing to be treated independently.
Might Need Changes.
The President said the proposed bill was an Administration measure in exactly the same sense as he hoped the Underwood Tariff bill would be an Administration bill. He thought the general principles of the bill were thoroughly defensible, but, of course, there were details which might have to be recast. However, he said, certain points in the bill were built on definite principle, which, in his opinion, would not be a subject of compromise. He made it clear that he did not want to appear to be shutting the doors on the consideration of anything that was reasonable.
The President did not agree with the suggestion that the bill prohibited the national banks from having any say in the ultimate government of the new system. He pointed out that this was not the case, because the regional banks would determine what should be done with the money invest7ed.
The regional banks, he said, would not be obliged to rediscount commercial paper that they did not approve. The framers of the bill, he said, were trying to mobilize the reserve and make all the resources of the country available to every part of the country. One of the things they were bent upon correcting was the present concentration of reserve and control by a single group of bankers, or by localized banking interests.
As to the composition of the Federal Reserve Board, the President expressed the opinion that the exercise of better judgment on the part of the board could not be obtained by including in its membership a number of bankers. All that was needed was expert advice. He felt that when the bill had been enacted there would be just the same sort of opinion as to the Federal Reserve Board as there had been about the Interstate Commerce Commission and Public Utilities Commissions of the States. They were vigorously opposed, he said, on very much such misgivings as were being presented now in regard to the central control over banking and currency. At last, however, they were more than welcome because they guaranteed that things would be done in such a way that no single interest or group of interests was represented. President Wilson expressed the opinion that, in the long run, the bankers would be glad of the direction of the Federal Reserve Board over which they had no control.