The Unknown Financial SuperheroThe amazing story of William McAdoo, and how he saved the American economy.
Posted Thursday, March 22, 2007, at 1:51 PM ET
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StumbleUponBy the late fall of 1914, things were falling into place. The Federal Reserve Banks formally opened in November 1914. The dollar rallied against the British pound. Shipping traffic revived, and foreign buyers paid in gold, which allowed American banks to start phasing out the emergency currency. The New York Stock Exchange reopened on Dec. 12, 1914. And as the United States stuck to the gold standard and emerged as a peaceful hub of trade, the dollar gained greater, um, currency and respect. The United States, for so many years a global borrower, was well on the way to becoming a global lender. In October 1915, J.P. Morgan & Co. sold a landmark $500 million bond issue for Britain and France to U.S. investors.
It's possible to make too much of this four-month period. The final transfer of power from London to New York wouldn't come until after the war, when Great Britain suspended the gold standard. And the performance of the Federal Reserve and economic policy-makers in the 1920s and 1930s showed that the United States was hardly ready for global leadership (see: Great Depression). It's also possible to make too much of the role played by any single person in this process. The flow of financial leadership westward had been underway for several centuries. Events in the fall of 1914 may have helped speed the process, but the transfer of economic power from Europe to the Americas had its own massive inertia.
Why did McAdoo triumph? Silber argues that it's because the former railroad executive, who had no formal economics education, thought like a businessman. He acted quickly and decisively, and focused on an exit strategy. Of course, McAdoo could not have succeeded without the support of President Woodrow Wilson, who happened to be his father-in-law. In March 1914, McAdoo had made one of the smartest career moves any executive can make: He got engaged to the boss's daughter.
(Disclosure: I'm the editor of the bi-annual magazine Sternbusiness, published by the New York University Stern School of Business, where Silber is on the faculty.)
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