when washington shut down wall - silber, william l_

[...].. .When Washington Shut Down Wall Street INTRODUCTION The Legacy of 1914 THE GREAT WAR threatened the United States with nancial disaster During the last week of July 1914, Europeans began to liquidate their Wall Street investments and transfer gold to Europe to pay for the war Foreign investors owned more... the convertibility of their deposits into currency when they could not meet depositor demands for cash during October 1907 Banks avoided suspending their obligations in 1914 by o ering depositors the emergency currency dispensed under McAdoo’s orders.† William McAdoo knew, however, that these nger-in-the-dike measures could not remain in place forever Shutting the stock exchange immobilized the capital... New York Stock Exchange remained shut from July 31 until December 12, 1914, longer by four months than any other suspension in the Big Board’s 200-year history According to Henry Noble, president of the New York Stock Exchange, “If at any time up to July, 1914, any Wall Street man had asserted that the stock exchange could be kept closed continually for four and one-half months he would have been laughed... dealing with gold coin and bullion.”67 Shutting the exchange on July 31 was a lot easier than keeping it shut The Panic of 1873 had closed the New York Stock Exchange for the longest period to date—ten days.68 McAdoo would need more time than that to organize the Federal Reserve System Determined opposition to a quick opening would arise from Benjamin Strong, soon-to-be named rst governor (chief executive... Russia McAdoo went to Washington with a subcommittee to present the resolution to Congress and to President Taft McAdoo’s subcommittee included Jacob Schi , the senior partner of Kuhn, Loeb and Paul Warburg’s brother-in-law On July 29, ve days after Warburg had sent his note to Senator Hitchcock, with the Machiavellian copy to McAdoo, Hitchcock stopped in New York on his way back to Washington from his... August 10, 1914 From left to right, standing: Paul M Warburg, John Skelton Williams (comptroller of the currency), W.P.G Harding, Adolph C Miller; seated: Charles S Hamlin (governor), William G McAdoo (chairman), and Frederic A Delano McAdoo is wearing a mourning armband to commemorate the death, four days earlier, of his mother-in-law, Ellen Axson Wilson McAdoo had to improvise * In 1878 the Treaty of... expected to show that the Government does not look kindly upon the reopening of the exchange at this time.”44 Why did Treasury Secretary McAdoo shut the exchange on July 31 and keep it closed for an unprecedented four and one-half months? HONORING THE GOLD STANDARD William G McAdoo learned the value of silence early in his career Three months after he was admitted to the bar at Chattanooga in January 1885,... nancing was a success and the tunnels opened for business on February 25, 1908.46 McAdoo took Judge Trewitt’s advice to Washington On August 1, 1914, his press release approved the closing of the New York Stock Exchange but said no more.47 Most people assumed he approved the shutdown to avoid a crash.* He did not want to reveal his main concern McAdoo did not care about stock prices He worried only... Austria-Hungary.”35 Prices fell by half of 1 percent on July 23 and by 1 percent the following day When Austria declared war on Serbia on Tuesday, July 28, stock prices registered the largest setback of the year to date—a decline of 3.5 percent.* The declaration of war triggered reports of German and Russian troop mobilization On Thursday, July 30, prices sank another 6 percent, the biggest one-day drop... independent central bank When McAdoo launched his plan in mid-1913 to make the central bank a division of the Treasury, Warburg undermined the e ort He denounced the scheme in the “Mauretania Memorandum,” and showed it to Wilson’s adviser, Colonel Edward House, who happened to be sailing to Europe with Warburg on the Mauretania.89 The New York Times o ered the following headline when trouble over the .