rally with the needs of trade. In the United States, in periods of business expansion, promissory notes crammed the vaults of our banks, a dead weight. To get additional cash to meet the greater current need, the banks were compelled to withdraw their call loans on the stock exchanges, thus causing shares to be flung on the market, with a consequent instability and shrinkage of values. Under our system, prosperity was a menace to itself.

These were, in general, Mr. Warburg's principal points. Naturally his revolutionary proposals caused a sensation among persons interested in banking and economics. Following on "The Times" article came an invitation to lecture at Columbia University on "American and European Banking Methods and Bank Legislation." Mr. Warburg was unutterably shocked at the idea of speaking in public. He declined. But the emissaries of the university persisted, and his message clamored to be heard. In the end he went to Columbia. By this time the panic had come, and with it a revival of interest in reforming our banking system, though we still called it "currency reform." Our wretchedly insolvent condition pointed a moral for Mr. Warburg, because Europe, under a similar stress of affairs, retained its balance through centralized banking systems founded on commercial needs.

After the Columbia speech the young propagandist was broken to the campaign. We find him speaking at a meeting of the American Economic Society at Atlantic City, where some leading economists opposed his ideas, and the lucidity of his logic overwhelmed objectors; addressing the Academy of Political Science at a national meeting held to discuss currency reform; giving his views at conferences of business men, at dinners, at a luncheon where he impressed with his ideas former President Roosevelt.

Mr. Warburg's crusade had opened to him a great field of public service, and this was the deciding factor that impelled him to become a citizen. "I felt that I had a distinct duty to perform here," he

explained recently. So in 1908 he took out his first papers. Three years later he was naturalized.

Meanwhile the National Monetary Commission had been formed in Congress to prepare a plan of legislation. The commission was composed of eighteen members, chosen equally from the Senate and the House, and its percentage of financial experts was extremely small. Senator Nelson W. Aldrich, its chairman, was a veteran of financial legislation, but at the time the commission was formed he was still trying to solve our problems by tinkering with bills to increase the note issue.

So the commission started out with the old-fashioned currency-reform ideas. Some meetings were held. Some experts were consulted. Then some one suggested that a young New York banker named Warburg had some interesting ideas about currency reform. The unsuspecting commission summoned young Mr. Warburg. The commission consulted him not once, but many times. Concerning his relations with the commission he is extremely reticent, but we know that in 1908, just after he decided to become a citizen, Mr. Warburg had drawn up a bill outlining a basis of reform, and this became essentially the basis of the Aldrich-Vreeland Bill. Somehow, between the time Mr. Warburg first came to the commission and the time a report was made to Congress the commission had been revolutionized. The old-fashioned "currency reform" ideas had gone for

ever.

Five years from the time Mr. Warburg had begun his single-handed crusade, his ideas were placed before Congress in the form of the Aldrich Bill. But the commission had delayed too long over its work. The Republicans in Congress were torn with internal dissensions, and the Democrats controlled the lower house. Moreover, the waning administration permitted a poorly drawn measure to be submitted. It had so many defects that it fell an easy prey to its critics, and failed of passage.

The Democratic administration, pledged to financial reform, set about the task of building up a workable law on the ruins of the old measure. But the party was also committed, in economic affairs, to the principle of decentralization and competition. Hence the party leaders proposed, instead of a central financial establishment with branches, after the pattern of the Aldrich Bill, a chain of thirty federal reserve banks, each independently serving a district. But as they developed the question, it was seen that this number must be reduced. Hence the banks were ultimately cut to twelve, and the Federal Reserve Board was added to the plan as a welding and coöperative agency. Thus the bill was reported to the Democratic caucus. The sacred principle of competition, which had been mutilated in these changes, was still nominally preserved.

As soon as Mr. Warburg learned of the abandonment of the centralization idea, he pointed out in a series of articles the weakness of the new plan. The greater the number of reserve banks, the more likelihood there was of one or more of them becoming subject to financial distress and impairing the stability of the whole machinery; the greater became the tendency to rivalry and factional squabbles between the banks. The only way to overcome these tendencies was to place in the hands of the Federal Reserve Board powers which might prove dangerous when wielded by a body subject to the vicissitudes of political change.

Despite Mr. Warburg, the Democrats persisted in their general plan, and his efforts toward a compromise by which the number of reserve banks was to be reduced from twelve to four failed. But while pounding the bill into shape the Democratic leaders were glad to consult him on details, and he made several trips to Washington. He emphasized the necessity of making the Reserve Board a long-term, non-political body and for giving it great executive powers. The board, he divined, was the crux of the whole system. It must have the broad initiative of a central bank.

In the end the Democrats made the best of their unwieldy system. In effect the Reserve Board was made supreme, and the political stigma was virtually removed by having it consist of five ten-year incumbents appointed by the President, with only the two additional ex-officio members, the Secretary of the Treasury and the Comptroller of the Currency, subject to quadrennial change. In many respects the bill was an improvement over the Aldrich measure, substituting government control (vested in the Reserve Board) for control by the bankers, and making possible different discount rates in the twelve districts, to meet different conditions, instead of a uniform rate for the entire country. It was not a perfect measure, but at least it systematized our banking affairs, ended the evils of unrestricted competition, and substituted order and coöperation.

With the passage of the bill, Mr. Warburg's work was ended. "I have had the success which comes to few people," he said, "of starting an idea so that the whole country has taken it up, and it has assumed some tangible form." The result was his reward. Of appointment to the Federal Reserve Board he had not the least expectation. He was a recent immigrant, a Hebrew, a Wall Street man. Any of these things, he believed, was sufficient to bar him. When, in the spring, President Wilson asked him if he would sacrifice his personal affairs by accepting a position on the Reserve Board, he was taken completely by surprise.

Mr. Warburg's income from his private business was at this time approximately half a million dollars a year. To become a member of the Reserve Board he would have to sacrifice this for a salary of $12,000. Those who know Mr. Warburg best declare that this sacrifice was one of the least considerations against his acceptance. The abandonment of old associates, of old business and social organizations, which he had helped to build and make successful, was the difficulty. But on the other hand there was the call of service and the chance to set an example

of patriotism to younger men in his adopted country. Incidentally the opportunity was offered to show that a Wall Street man could become a valuable public servant and to disprove "the prejudice that is rampant in this country," as he phrased it, "that a Wall Street man is a Wall Street man always, and that you have to be afraid of him." "One of the things that tempts me," he said, "is to show that a Wall Street man does deserve the country's confidence.'

Many of Mr. Warburg's business friends declared he would be quixotic to accept the nomination. But Mr. Warburg referred to it as a "wonderful opportunity" that he had no right to decline.

Mr. Warburg's appointment had to be confirmed by the Senate. Within fortyeight hours of the time President Wilson named him certain senators opened a sort of guerilla warfare upon his nomination. At intervals thereafter fresh outbreaks occurred. It was intimated that Mr. Warburg was the nominee of the "money trust," that he represented "the interests"; there were hints of a Wall Street conspiracy to control the Treasury and the currency system under the new law; and, by implication at least, Mr. Warburg's personal motives and his business habits and associations were constantly assailed. Only a corporal's guard of senators indulged in these attacks, but they Imade a great deal of noise. They were merely a few snipers, but they effected the uproar of a battle. Newspapers took up their criticisms.

Mr. Warburg's motives had been purely those of patriotic self-sacrifice. He had been asked by President Wilson to devote to the service of his country his remarkable banking training and experience and all his energy and time. He had accepted. His sacrifice was so obvious that he could not understand this greeting of derision and scorn. If he had been born an American, he would not have taken the senators so seriously. He would have smiled over being roughly handled by the senators, just as New Yorkers

smile over rough treatment from subway guards. The average good-natured American realizes that the ill manners of certain senators and certain subway guards are fixed and immutable, so he accepts this condition as one of the jocosities of life.

But Mr. Warburg did not. He felt acutely the humiliation of his position. It is said that he remarked one day that he would give a quarter of a million dollars if he had not permitted President Wilson to nominate him.

The senators insisted that he go to Washington and submit to a quiz before the Committee on Banking and Currency. Mr. Warburg refused. He said finally that he would withdraw his name. In this crisis President Wilson used his good offices to calm the overzealous senators and to soothe Mr. Warburg's injured feelings. Also members of rival banking firms urged Mr. Warburg to reconsider his threat of withdrawal. At last he consented to appear before the committee on the understanding that he would not be asked to criticize or reveal the private affairs of his business associates.

Accordingly, Mr. Warburg went to Washington, and on August 1 and 3, 1914, was put through a sort of political third degree, conducted by the committee in executive session.

Some of the committeemen would not respect Mr. Warburg's proviso about questions concerning his partners' affairs. In fact, most of the quiz was devoted to attempts to break through this reservation. His inquisitors, however, got as much satisfaction as so many bees attempting to sting the face of the Sphinx. Mr. Warburg was extremely courteous, but absolutely firm.

"You have got to take me as an individual, free from everything, if I become a member of this board," he insisted. "If I am confirmed, I shall be as free of Kuhn, Loeb & Company as I am of any other firm. That must be my attitude in answering questions. And I should like, Mr. Chairman, that the committee understand this attitude of mine, which I think everybody must approve; because I cannot

afford to take the affairs of my partners, who are not here as nominees, as a basis for discussion."

Through all the examination Mr. Warburg never dodged or quibbled or took refuge in evasions. All questions, even the most personal, outside the forbidden ground, he answered promptly and fully. A person who did not know him might read over the minutes of the two sessions and fancy Mr. Warburg had a fairly decent time. But those who are intimate with his highly strung, sensitive nature know that every minute he was on the rack. "You will see from the papers I am doing my duty," ran a note received from him by a friend in New York at this time. "God knows it's a hard one."

As soon as the Senate confirmed Mr. Warburg's nomination, he cabled his resignation to the Hamburg banking house of which he had been a member for twenty years.

Under the law he could have retained a nominal membership in the firm. of Kuhn, Loeb & Company, which is a private banking concern having no connection with the system of reserve banks, and continued virtually all his business interests. "But," he said, "I think a man who is on the Federal Reserve Board ought to be like Cæsar's wife: he ought to be above suspicion; he ought to be

without any entangling alliances." He not only severed himself completely from all business affairs, but also from the numerous charitable and social organizations in which he was interested. In effect, he stripped himself as naked of material interests as a Franciscan monk.

Then he moved to Washington.

A friend who looked him up last autumn found him a little paler, somewhat thinner. Every day he was at his desk in the Treasury Building by eight o'clock, and he seldom left it before six. His evenings were normally occupied until a late hour with conferences and the receiving of reports. He is a great lover of art and music, but such things had been swept aside. He is essentially a domestic man, but his home life had become a mere formality in the working routine. Nevertheless, except for a lurking dread of reporters and politicians, he seemed remarkably happy. He was serving his idea.

"You intend to go on this board, if you are confirmed, to represent what?" one of the senators asked, during Mr. Warburg's examination before the Senate committee.

"To represent the country and the future of the country," was his earnest reply.

He is doing just that.

I

IT

the first time in St. Petersburg, magical beneath its snow mantle, and I came as a simple tourist to see the country and to study the conditions of Russian life. I established myself in a hotel as a Spanish countess, feeling delighted that nobody knew who I actually was and reveling in the freedom of strict incognito. But I had not been in the hotel five hours before a grand master of ceremonies arrived and betrayed my secret. From that minute everybody knew that the countess was an infanta of Spain, and my liberty was gone. It is my usual experience. I arrive somewhere, believing that not a soul knows where I am, and, almost before I have taken possession of my rooms there is a whir of the telephone bell, and somebody at the other end saying: "Eulalia, how did you get here? You must come and see us."

The grand master of ceremonies brought me a message from the emperor and empress, telling me how delighted they were to know that they were going to see me soon, and suggesting that I should come to the Winter Palace the next morning for the Twelfth Day ceremony of the Blessing of the Waters.

"But I have nothing to wear!" I cried. It was absolutely true. I had never expected to figure at a court ceremony, and it had not occurred to me to bring a manteau de cour. Etiquette, however, is less severe in Russia than in Spain or in Prussia, as I soon discovered, and the next morning I put on my smartest frock and drove to the Winter Palace, a gigantic building, painted dull red, with rows of gods and goddesses standing on the cornice of its stupendous façade, looking cold and unhappy in the nipping air.

I had not seen the empress since we were girls, staying with Queen Victoria at Windsor or in the beautiful Isle of Wight. And what a charming girl she was! A simple English girl, despite her German title, in a skirt and blouse, utterly unaffected, warm-hearted, and as fresh as a rosebud touched with dew. I was thinking of the happy, careless days when we were in England together as I drove to the palace, forgetting the change that the passage of the years makes in the friends of one's youth, and when I went into the room where the empress was waiting to watch the Blessing of the Waters from the window, I felt startled to find, instead of