Hard Money & Soft

(See front cover)

Shortly after the Civil War an undersized, red-headed youngster, son of a local newspaper editor and Confederate veteran, used to be known around Lynchburg, Va. as "Pluck" because, with eyes blacked and nose bloody, he had a dogged way of fighting on & on against awful odds. Last week the Senate paid handsome tribute to "Pluck," now a small hawk-nosed Senator of 75. By a vote of 54-to-9 it passed his bill to reform the national banking system and tighten up loose screws in the Federal Reserve machine.

For two years Senator Carter ("Pluck") Glass of Virginia worked to perfect his measure as a companion-piece to the Federal Reserve Act which he pushed through the House of Representatives 20 years ago. He had to battle a bankers' lobby dead set against further Federal restrictions. He had to overcome the Senate's colossal inertia to plow into a difficult and abstruse subject. He had to beat down a small but dogged opposition which filibustered against his bill for the better part of the three weeks it was before the Senate. He had to keep his temper and his tongue when abused by windy petti-foggers for whose intelligence he had only scorn and contempt. A man of smaller calibre might have given up the struggle-- but not "Pluck" Glass. For his reward he had a bill in which he boasted "not an 'i' had been dotted nor 't' crossed by its opponents" without his consent.

Half a Mouth. When Virginia took him out of its State Senate and sent him to the House in 1902, Carter Glass, a small-town editor like his father, was assigned to the Banking & Currency Committee. Of finance he knew nothing but was bent on learning all. Ten years later he emerged as the committee's chairman ready to make his maiden speech before the House. What he had to say on the Federal Reserve bill (then called the Owen-Glass measure) filled 14 newspaper columns. Thereafter he was silent for 30 months. This year in the Senate, where he is now recognized as the ablest legislator on banking matters, he talked for less than five newspaper columns. His words drawled out of the right corner of his severe mouth, his lips curling up into an expression of chronic ill humor. (Woodrow Wilson once remarked: "Think what Glass would say if he ever used both sides of his mouth!")

Reforms. Senator Glass's bill had its roots in the collapse of the Coolidge bull market. As he saw it, Federal Reserve credit had been perverted from legitimate commercial enterprises to the wildest stock speculation in history. As sponsor for the Federal Reserve, he felt it his legislative duty to see that such a thing could not happen again. The bill that he wrote and the Senate passed provided that:

1) Federal Reserve member banks may not use their spare funds to finance stock market operations.

2) Member banks must cut themselves loose from their security affiliates in five years.

3) A special $800,000,000 corporation, to which the Treasury will subscribe $125,000,000 and the Federal Reserve and member banks the balance, will help liquidate closed banks.

4) The Secretary of the Treasury will be removed from the Federal Reserve Board.

5) National banks, on the basis of capitalization and population, may establish branches in States permitting branch banking.*

6) Control of all foreign transactions must shift from the New York Federal Reserve Bank to the Federal Reserve Board in Washington.

7) Member banks may not put clients' spare cash into the call money market.

8) Holding companies may vote their group bank stock only on permission from the Federal Reserve Board.

"Dead as a Hammer." The Glass bill was still a long way from becoming law. In the House, whither it was sent, it lacked a powerful friend like Senator Glass to drive it through. Senator Huey Pierce ("Kingfish") Long who filibustered against it for two weeks, realistically exulted:

''Now that you take this carcass out of the Senate, you won't need to follow it to the House. It has no more chance to become law this session than I have to become Pope of Rome--and I'm a Baptist. It's dead as a hammer."

Whip-Crack? Yet the Glass bill could conceivably be passed by the House and made law before March 4. A resounding crack of the Party whip by President-elect Roosevelt would bring off that trick. But why should Mr. Roosevelt resort to whip-cracking for this legislation when he has consistently refused to lift a finger for any other? The answer might lie in the clear fact that he wants, above all other men, its author, Carter Glass, as his Secretary of Treasury. Nothing could put the crusty little old Virginian under deeper obligation to the next President than his intervention in behalf of the banking bill. And nothing would now make U. S. business feel more secure than to have this Democratic arch-champion of sound finance once more at the head of the Treasury Department.

Carter Glass, onetime printer's devil, was almost certain that he did not want to be Secretary of the Treasury again. He held the job for 14 months under Woodrow Wilson after the War and knows its nerve-racking onus as no other candidate can. At 75 he is getting old and tired. Last summer he suffered a nervous break-down that all but kept him out of the Presidential campaign. A Cabinet appointment would mean he would have to forego the rural delights of his Montview Farms outside Lynchburg, turn his two newspapers there, the News and Advance, over to his sons to run. He has given 30 years of his life to public service in Washington. The Federal Reserve, fruit of an earlier day. stands as his enduring monument. He is Virginia's Elder Statesman, sure of re-election if he feels like it in 1936.

"Astonishing & Alarming." And if Senator Glass does not consent to enter the Roosevelt Cabinet as Secretary of the Treasury, he will remain the ranking Democrat in Congress on money matters for the next four years. At the last Democratic convention he personally and proudly wrote the platform plank tying his party up tightly to a "sound currency to be preserved at all hazards." In or out of the Treasury during the next four years he is determined to see that the Roosevelt Administration keeps that primary pledge. His determination on the red-hot issue of Hard Money v. Soft was made vividly clear last week when wild waves of currency inflation beat in upon the Senate from the open spaces of Montana, Idaho, Texas and Oklahoma, when the silvery ghost of William Jennings Bryan stalked the Chamber and "16-to-1" once more became a rebel warwhoop. From the thick of what became a real oldtime money fight, the name of Carter Glass was carried to the country in headlines as the little knight who had, for a time at least, slain the radical dragon of currency inflation. As the smoke of debate finally lifted, "Pluck" Glass exclaimed: "This has been to me a most astonishing and alarming discussion."

"Bimetallism or Paper!" The money fight began when Senator Burton Kendall Wheeler of silver-producing Montana offered an amendment to the Glass bill for the free coinage of silver at the ratio of 16-to-1 to gold. As in all inflationary schemes the amendment's purpose was to cheapen the value of the dollar in relation to gold in the hope of starting an upward surge of commodity prices which in turn would free the debtor from bondage and, theoretically, start the country back to better times. Shouted Senator Wheeler: "A small revolution prevails in the Midwest and is spreading. Yet you sit here afraid! Afraid! AFRAID! . . . I've no pride of authorship. Bryan was not the originator of free silver. I'm not asking you to adopt the money of Bryan. I'm asking you to adopt the money of Hamilton, Jefferson and Madison--the money of our forefathers. . . . We'll take bimetallism or we'll come to paper currency in the coming sessions of Congress. I don't want to see the country accept fiat money that would wipe out the creditor classes. I want to establish a new primary money basis and stop the exploitation of the debtor class by the creditor class. What we need to do is to raise the purchasing power of other nations as well as our own."

"Honest Dollar." Without a specific plan of inflation, silver-producing Idaho's Senator Borah delivered himself as follows : "Insurance companies loaned farmers up to 1929 some $12,000,000,000. Measured by the wealth of the country the farmers are now indebted to the insurance companies for about $30,000,000,000. . . . A dollar which takes three times as much wheat to buy, four times as much cotton, three times as many hogs in 1933 as it did in 1929 is not an honest dollar. It is a dishonest dollar. . . .

"I'm not seeking to cheapen the American dollar. I'm not seeking inflation uncontrolled. I have no desire to destroy the gold standard. But I do believe it is within the power of the great minds of this country to devise a monetary system which will deal equitably and fairly between the debtor and creditor. . . .

"While we are on the gold standard, all the other nations of the world, except France, are on a managed currency basis. The result is that they are not only taking our foreign markets but, over a high tariff wall, they are taking our domestic markets."

"It's Like Stealing." Echoing the Republican arguments of 1896 against Bryanism, Pennsylvania's Senator Reed bitterly flayed the Wheeler silver amendment: "It would be giving a great cash bonus to India and perhaps China. . . . Panic and crisis would be precipitated. . . . We'd see a flight of capital that would take our breath away. . . . There would be such a catastrophic overturn of American business that all the benefits would be obviated. . . . It's like stealing from one class to help another. ... I don't believe that the people of the United States have gone dishonest overnight because we're having a spell of hard times."

It remained for Senator Glass to curl his lip scornfully, grip his desk with both hands and pronounce a final damnation of the Soft Money arguments. Drawled he out of the right corner of his mouth:

"Ruin! 'Wreckage!" "I totally dissent from the quantitative theory of money. I do not think depreciation of the dollar would permanently raise commodity prices. On the contrary it would so deprave our currency that it would bring ruin, particularly to the wage earners of the country and those on fixed salaries. . . .

"If views presented here are to prevail, this country is nearing the brink of absolute wreckage. If it be admitted for a moment that private contracts may be abrogated by a law of Congress or if the creditors may have their property confiscated by taxation, that would simply abrogate contractual relations in this country and there would be no more of them. . . .

"It was held that perhaps the Government would have to pay its obligations, already contracted, in the dollar of existing gold content but even that was regarded as doubtful. . . . If any such views are to obtain, may God have mercy upon the Secretary of the Treasury when he shall be compelled in a few months to refund $11,000,000,000 of government obligations.

"I should like to be told where he might expect to find his clients. What bank or investor of average intelligence would agree to buy a bond of the U. S. in such circumstances? . . .

"Arbitrarily reduce the content of the gold dollar? Very well. What is the moral difference between a 30% and a 50% repudiation of an obligation? . . . Why not go the whole length and authorize complete repudiation by the debtor class? Why not follow the example of Germany and start the printing presses without cease and then repudiate our own currency and use it for wallpaper. . . ?"

56-to-18 v. 16-to-1. Senator Glass pushed the Wheeler 16-to-1 silver amendment to a vote and the Senate resoundingly rejected it, 56-to-18. Six Republican progressives and twelve Democrats from the South and West plumped for silver. That did not indicate the full strength of the Senate inflationists because many a Soft Money man favors another method of devaluating the dollar. But for the time being the stalking ghost of William Jennings Bryan retired from the Senate chamber.

Old Magic. Many a historian has supposed that the Bryan notions of "cheap money" vanished from the national scene in the bitter election of 1896. But that the Great Commoner's magic still casts a spell was evident throughout the Senate debate. Texas' little old Morris Sheppard, father of the 18th Amendment, hopped up during the silver debate to confess that he did not understand monetary matters but endorsed the Wheeler amendment "out of enthusiasm for the late William J. Bryan who thought there was something to the quantitative theory of money."*

Nosepicker & Upstart. The first time Carter Glass saw Bryan was when, as a Virginia delegate, he attended the 1896 convention in Chicago. Though not a 16-to-1 silver man he voted for Bryan's nomination because the other leading candidate, Richard Parks ("Silver Dick") Bland, picked his nose at dinner table. In 37 years Carter Glass has lost none of his personal prejudices, his sensitiveness to individuals. About Washington last week it was being freely said that one good reason why he might accept the Treasury portfolio was to spite Senator Huey Long who was working hard to keep him out of the Cabinet. In a Virginia gentleman's mind, a Missouri nosepicker and a loud Louisiana upstart would be closely bracketed.

* Such States: Arizona, California, Delaware, Maryland, North Carolina, Rhode Island, South Carolina, Vermont, Virginia.

* At Chicago in 1896 Bryan won the Democratic nomination on the fifth ballot with his speech for free silver. Most famed excerpt: "Having behind us the producing masses of this nation and the world, supported by the commercial interests, the laboring interests and the toilers everywhere, we will answer their demand for a gold standard by saying: 'You shall not press down upon Labor this crown of thorns, you shall not crucify mankind upon a cross of gold!' " He lost the election to McKinley by only 600,000 votes. That year William Edgar Borah ran unsuccessfully for Congress as a free-silver Republican. He voted for Democrat Bryan. Morris Sheppard, a law school student, was just old enough to vote.

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