Federal Reserve Act - Legislative History

Legislative History

The banking and currency reform plan advocated by President Wilson in 1913 was sponsored by the chairmen of the House and Senate Banking and Currency committees, Representative Carter Glass, a Democrat of Virginia and Senator Robert Latham Owen, a Democrat of Oklahoma. According to the House committee report accompanying the Currency bill (H.R. 7837) or the Glass-Owen bill, as it was often called during the time, the legislation was drafted from ideas taken from various proposals, including the Aldrich bill. However, unlike the Aldrich plan, which gave controlling interest to private bankers with only a small public presence, the new plan gave an important role to a public entity, the Federal Reserve Board, while establishing a substantial measure of autonomy for the (regional) Reserve Banks which, at that time, were allowed to set their own discount rates. Also, instead of the proposed currency being an obligation of the private banks, the new Federal Reserve note was to be an obligation of the U.S. Treasury. In addition, unlike the Aldrich plan, membership by nationally chartered banks was mandatory, not optional. The changes were significant enough that the earlier opposition to the proposed reserve system from Progressive Democrats was largely assuaged; instead, opposition to the bill came largely from the more business-friendly Republicans instead of from the Democrats.

After months of hearings, debates, votes and amendments, the proposed legislation, with 30 sections, was enacted as the Federal Reserve Act. The House, on December 22, 1913, agreed to the conference report on the Federal Reserve Act bill by a vote of 298 yeas to 60 nays, with 76 not voting. The Senate, on December 23, 1913, agreed to it by a vote of 43 yeas to 25 nays with 27 not voting. The record shows that there were no Democrats voting "nay" in the Senate and only two in the House. The record also shows that almost all of those not voting for the bill had previously declared their intentions and were paired with members of opposite intentions.