Decker on Naclerio, 'The Federal Reserve and its Founders: Money, Politics, and Power'

Richard A. Naclerio
Jefferson Decker

Richard A. Naclerio. The Federal Reserve and its Founders: Money, Politics, and Power. Newcastly upon Tyne, UK: Agenda Publishing, 2018. ix + 226 pp. $25.00 (paper), ISBN 978-1-78821-078-2.

Reviewed by Jefferson Decker (Rutgers University) Published on H-FedHist (April, 2019) Commissioned by Caryn E. Neumann (Miami University of Ohio Regionals)

Printable Version:

In November 1910, six men met quietly at a duck-hunting retreat owned by J. P. Morgan on Jekyll Island, Georgia, to develop a proposal for a new US central bank. The group—which included Sen. Nelson Aldrich of Rhode Island, banker Paul Warburg of Kuhn & Loeb, and Assistant Secretary of the Treasury A. Piatt Andrew—had lived through the disastrous Panic of 1907, when the failure of a high-profile banking trust sparked a financial crisis. The six men believed that a new central bank was required to avoid a repeat of the crisis in the future. The following year, Aldrich introduced legislation drawn up at Jekyll Island into the Senate; two years later, Congress passed the Federal Reserve Act, which created the framework for central banking still in use today.

Ricard A. Naclerio’s The Federal Reserve and its Founders is a collective biography of the Jekyll Island group, on the theory that “giv[ing] insight into the men who created the Fed” will help us “better understand their creation” (p. 2). Each gets a biographical chapter. (In addition to Aldrich, Warburg, and Andrew, the attendees included Benjamin Strong of Bankers Trust, Henry Davidson of J. P. Morgan and Co., and Frank Vanderlip of National City Bank.) Those profiles are sandwiched between a short history of central banking and the institutional function of the Fed (at the beginning of the book) and chapters on the politics of banking and American finance during World War I (at the end). There is also a final chapter, which is essentially an interview with financial journalist Bob Ivry about the Federal Reserve’s performance during the financial crisis of 2008-09.

Naclerio bases the profiles on archival research in the papers of his six protagonists. He covers the full lives that each man lived, before and after the Jekyll Island retreat, so he does not simply reduce each biography to that one, pivotal moment. This makes the book genuinely informative, especially about the social and professional networks that linked bankers and policymakers, though it also means that the book ranges at times pretty far from the subject of monetary policy or the political and financial events of the 1910s.

Some odd narrative choices make this book difficult to follow at times. Naclerio puts the congressional debate over the Federal Reserve Act in chapter 2 while saving the events of the Panic of 1907 for chapter 10, so we learn about the putative response to the panic long before being reminded about the panic itself. The six main protagonists are also introduced in a backward way, with Naclerio mentioning “these men and the banking system they built” (p. 4) without immediately telling the reader anything more than their names. The reader is expected to figure out the significance of these figures as the book unfolds.

Readers can decide for themselves whether the Jekyll Island sextet should really be considered the “founders” of the Federal Reserve. The Aldrich proposal failed to gain significant traction in Congress in 1911, and the plan that ultimately passed Congress two years later had been amended in various ways—for example, by replacing a single central bank with a number of regional Federal Reserve Banks. Naclerio insists, without much of an explanation, that these changes were ultimately “minor” (p. 25), though they seem to have been of significant importance to many people at the time. According to political scientist Elizabeth Sanders, Aldrich and Vanderlip openly opposed the Federal Reserve Act, as it was ultimately rewritten by Democrats Robert Owen and Carter Glass, as an “embodiment of populist schemes, a generator of ‘fiat’ money, and a step toward socialism.”[1] There certainly is a case to be made that those concerns were overblown, and that populist-progressive influence on the Fed structure was far less significant than many works on the subject have advertised. But Naclerio does not really make that case so much as ignore the changes and accommodations that set the bankers and their congressional champions off.

And even if one were to accept that the Jekyll Island group “founded” the Federal Reserve, is that enough to conclude that the institution was, as Nacliero claims, “born in darkness, created by dark men, and has remained a dark instrument of control and power ever since” (p. 197)? Not every public policy is a zero-sum contest between competing interest groups; it is possible for an institution to simultaneously benefit bankers and the general public, say by reducing the likelihood of financial panics and liquidity crises that spill over into the non-financial economy. Nacliero is right to fault the Fed for failing to prevent the Great Depression or the Great Recession. But it is harder to know with certainty how many crises have been averted or mitigated because the Fed was available to inject liquidity into the financial system. And, while the Fed’s independence from popular control—its governors are appointed by the president, but it is operationally independent of the Federal Government—is undemocratic, Nacliero never pauses to consider the costs and benefits of alternative institutional arrangements. That makes the sharp critique of the existing structure less persuasive than it could have been.


[1]. Elizabeth Sanders, Roots of Reform: Farmers, Workers, and the American States, 1877-1917 (Chicago: University of Chicago Press, 1999), 249.

Citation: Jefferson Decker. Review of Naclerio, Richard A., The Federal Reserve and its Founders: Money, Politics, and Power. H-FedHist, H-Net Reviews. April, 2019. URL:

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