CHAPTER XXIV. WOODROW WILSON

Greater elasticity was given to the currency supply through the issuance of federal reserve notes, at the discretion of the Federal Reserve Board, to the several regional Federal Reserve Banks. These notes were to be obligations of the government and were expected to replace the former national bank notes. When a local bank requires more currency it may deposit with the Federal Reserve Bank such valuable commercial paper as may be acceptable - for example, promissory notes of reliable business firms - and receive at once a supply of federal reserve notes. When business is brisk and large supplies of currency are demanded, the local banks will deposit whatever paper may be necessary to meet their needs; when the emergency has passed they will withdraw notes from circulation, return them to the reserve bank and receive their paper again.[2] The second great purpose of the new system was to supply central reservoirs for the storage of the reserves of the member banks. Each local bank is required to keep certain prescribed balances in the reserve bank of its district, and the federal government may also deposit funds in it. In conformity with strict regulations the reserves thus accumulated in a Federal Reserve Bank may be directed here and there in the district as needed, and even from district to district, under the control of the Federal Reserve Board. Moreover they are not available for those speculative ventures which have caused so much trouble in the past.[3] The operation of the law has apparently more than met the expectation of its friends. It had hardly been established when a war broke out in Europe, but the unusual financial situation which resulted in America was cared for without great strain.

The third major plank in the Democratic platform of 1912 called for legislation concerning trusts, and the President accordingly turned his attention to that topic in his address to Congress on January 20, 1914. He declared that there was no intent to hamper business as conducted by enlightened men, but that, on the contrary, the antagonism between business and government had passed. He recommended the prohibition of interlocking directorates by which railroads, banks and industrial corporations became allied in one monopolistic group, and he suggested that the processes and methods of harmful restraint of trade be forbidden item by item in order that business men might know where they stood in relation to the law. Finally, he believed that the country demanded a commission which should act as a clearing house for facts relating to industry and which should do justice to business where the processes of the courts were inadequate. The results of this undertaking were the Federal Trade Commission act of September 26, 1914, and the Clayton Anti-trust act of October 15.

The former of these laws created a Commission of five persons to administer the anti-trust laws and to prevent the use of unfair methods by any persons or corporations which were subject to the anti-trust laws. Whenever it had reason to believe that such expedients were being used, the Commission was to issue an order requiring the cessation of the practice. If the order was not obeyed, the Commission was to apply for assistance to the circuit court of appeals in the district where the offense was alleged to have been committed. The purpose of the provision was evidently to prevent unfair practices rather than to punish them. Another section of the law empowered the Commission to gather information concerning the practices of industrial organizations, to require them to file reports in regard to their affairs, and to investigate the manner in which decrees of the Courts against them were carried out. Under direction of the president or Congress, the Commission could investigate alleged violations of the law, and on its own initiative it might report recommendations to Congress for additional legislation.[4]

The Clayton act specifically prohibited many of the practices common to industrial enterprises. Sellers of commodities were forbidden to discriminate in price between different purchasers - after making due allowance for differences in transportation costs; corporations were forbidden to acquire any of the stock of other similar industries, where the effect would be substantially to lessen competition; and directors of banks and corporations were prohibited, with stated exceptions, from serving in two or more competing organizations. The Clayton act also settled, at least for the time, several of the complaints raised by the labor interests, especially at the time of the Pullman strike. Labor and agricultural organizations were specifically declared not to be conspiracies in restraint of trade; injunctions were not to be granted in labor disputes unless necessary to prevent irreparable injury; and trials for contempt of court were to be by jury, except when the offense was committed in the presence of the court. The law also prohibited the railroads from dealing with concerns in which their directors were interested, except under specified conditions.

The success of the President in pushing his party program made his prestige the outstanding fact in politics. His leadership was indisputable and it was evident that he regarded a party platform as a serious program, to the fulfilment of which the party was committed by its election. While the trust legislation was under discussion, however, he asked for an act which required all the strength that he could muster.