Good afternoon. Good afternoon and welcome to the American Enterprise institute. I am a resident scholar and Financial Service organizer of todays event. This afternoon im pleased to host matthew to discuss his new biography one of the most influential politicians of his time in an architect of key legislation that shaped the American Financial system. Carter glass was born in 1858 in lynchburg virginia and grew up in the reconstruction south. The philosophy on the role of government was shaped by it the views of Thomas Jefferson a fellow virgin and born just 70 miles north of the virgin upon. From 1903 until the early 1940s, carter glass played a key role in every important financial legislative debate. His colleagues in the house and later in the senate, both the democrat and therefore can recognized glass is to go to expert when it cam comes to bang issues. Carter glass was a politician meaning he was an expert when it came to reading the political tea leaves and crafting compromises that could be passed into law. Never an ideologue is willing to empower the federal government is in his judgment, circumstances warranted. While not a principled progressive, he shepherded the most important progressive reforms through to the senate. Carter glass had his fault. He could be grumpy, but mostly in private. He wasnt a proponent of racial equal to the end of that is putting it mildly, and he was a democrat. That was a joke. Times were differenthe times wen and his conservative and legislation would probably be out of place in todays government party. After serving more than 35 years in the house and as the secretary of treasury and in the senate he sat for an interview with the tools of tribune and in the interview, hes quoted as saying effective in the way that i felt i should end with the people decide for themselves if they approved of my actions. I never considered what effect my actions would have upon my public career. Ive done what i thought was best for the country. We could make use of the politicians have acted like that today. In his new biography, he does a tremendous job of recounting the lifetimes and accomplishment ofr this outstanding and colorful space. In the end, i came to believe that the polls of tribune ring true. Im now happy to introduce the featured author. Before he became a celebrated author, he worked out the Investment Company institute, the national association. He not only worked there from 1971 to 2004, he was the president of the institution from 1991 to 2004 and is directed at ththedirector of thr mutual fund and member of the Investment Company companies ce and director of the Retirement Income industry association. Hes authored several articles on the Mutual Fund Industry and the rise of mutual funds and insiders view published by Oxford University press in 2 208 was such a success it went on to the second edition and was updated to cover the 2008 financial crisis. An undergraduate from Brown University harvard law school, and like mick jagger he also attended the school of economics. Please join me in welcoming matthew fink. [applause] thanks so much for having me. I see friends from all parts of my life here. Its amazing. I started the book on glass because i kept running into him in my career when i joined the Investment Company institute that represent its mutual fund account they were regulated by 80 sec and then i asked everybody where did the fcc come from and it was a roosevel whatw deal reform agency. I did a little research. Roosevelt opposed the creation and it was carter glass got it into someone and so forth so i was interested. The six years agabout six yearsd doing research and found it was before interesting than just the things he had done because there is a paradox and that is why my book is entitled the unlikely reformer, because generally he was a racist and highly conservative reactionary. He made his fame in virginia the turnofthecentury getting in the virginia constitution amended to the 95 . It was a hard thing to do and he did it and stayed that way his whole life. Very conservative, he opposed it with the leading democratic opponent of the new deal. He had an 80 antinew deal record that he was a democrat. And his personal life a as you alluded to, he also was a reactionary, hated the modern age, the perfect curmudgeon or stuffy old man or whatever the angry old man, grumpy old man. He grew up with forces and when the automobile came he wanted to go back to horses. The senate a telephone system when you call the operator and give the number and it switched to dial phones and he insisted that he go back to operators, so it went back. The glasssteagall act of 1933 and portions of this sec act of 1934. Now that is a paradox know i will give you the conclusion of me in my research and thinking and writing the three points number one he generally opposed any federal action. Number two he made an exception when it occurred with wall street. Number three he did not believe the way to address wall street was a regulation because like brandeis and others thought regulation always failed and never worked so he believed in breaking up concentrations of financial and political power. Those of the three main points. Born right before the civil war and had to quit at age 14 he read shakespeare the ancient poets like lincoln was self educated and very welleducated. He started to sell newspapers on the corner and then became a printers assistant and a reporter for the paper than an editor that the editor when the owner wanted to sell it he arranged it so he could buy it. Given the state that drafted very well a very successful businessman in the context of reconstruction devastated south. So he went into politics but there is only one party to join, the democratic party. He made his fame as a virginia senator coming up with a way to amend the constitution to deprive all blacks of the right to vote and that made him a hero to white virginia so a 19 oh two he was elected to the United States congress. That is at a time when the republicans dominate the federal government largely since the civil war Teddy Roosevelt in the white house and the young democrat was very much of a nonentity. Elected on the Foreign Relations committee but instead they stick him on the Banking Committee for go there had not been a major banking bill since a National Banking act passed during the civil war so he is sent to a no mans land but being very bright and studios want a studious he reads everything he can about banking and finance and becomes an expert with anybody knows that i dont know but he read everything. s at that time the only Major Industrial country that did not have a central bank to manage the currency and fighter panic. Nobody thought about it. There were a few professors and reformers that said we should have a National Bank but things are going along pretty well republicans who control the government wasnt too interested Teddy Roosevelt found banking boring so nobody paid attention that we have a major panic in 19 oh seven the biggest cup until 1929 banks failed left and right Insurance Companies or threatened Brokerage Firms are about to go down the New York Stock Exchange is threatened with no federal or state authority to address the panic. It is addressed by jp morgan who controlled an Investment Firm and then he goes around to his buddies and puts together rescue packages on the voluntary basis to bailout those institutions that we get through that now people in washington say maybe we do need a central bank we havent had one in this crisis shows morgan will not be here forever. So republicans who are in firm control named the most powerful republican senator Nelson Aldrich of rhode island. Very powerful i cannot think of a comparable person today maybe Lyndon Johnson but very strong. He has developed the republican version of a central bank. He consults the committees and hire experts like all over the us and europe meet with english central bankers and the french bankers and as you read about it it looks like they have forever thinking they would be in power for the next 100 years so there was no rush 1911 he introduces a plan calling for a National Bank a very powerful National Bank, a single bank and it was to be owned and run by private bankers and private banks a typical conservative oldfashioned good old republican bank. In 19 oh eight or 1910 he would have been the hero but he waited too long. He missed an opportunity because because of populism in the country democrats take the house in november 1810 so in 1911 the bill comes out in the democrats and liberal republicans have no interest in the aldrich plan the pinnacle of central banking dies. The democrats are in control they have to name somebody to come up with their version and glass is the only guy in the whole congress that knows anything about banking so they pick him to draft the democratic version of a central bank. And he comes up with something that very few people had ever thought about but he comes to it pretty quickly he does not want a single central bank in new york but several reserve banks in different cities around the country so those reserve banks will help the local banks who help the local economy and local merchants. It is a big country we just dont want all the money to go to new york he wants to centralize blood decentralize the system. Wilson is elected president he has to come up with this before he even knows who the president will be that famous threeway election of taft thenpresident and wilson and roosevelt comes back from the new Progressive Party so when glass comes out with a plan to a decentralized reserve system he doesnt know who the president will be it turns out it is wilson so he meets with wilson and they love each other. They never met each other but theyre both racist they both dont like a powerful government both jeffersonians but yet reformers and wilson loves his plan its right up his alley. Over time he makes a few changes. The two big ones that he had the reserve banks he would give them control of the currency to make sure they were coordinated. Wilson says the control is too busy why dont we trade board and altruistic board of people who will oversee the system the Federal Reserve board. And also the governors of the Federal Reserve board that most will be chosen by the president and approved by the senate. But if you will be picked by the private bankers and wilson and bright brand i said no private bank control its only chosen by the president. So that is the Federal Reserve act that glass comes out with. It morphs into a giant political tangle of monumental proportions. First of all the republicans hate it because they want a Strong Central Bank like the aldrich plan this is a screw weed democratic populist with hate coming out of his ears with a centralized system and then the radical democrats from the midwest largely dont want any kind of bank for go all banks are evil thats why the cover of my book has a cartoon so he is hit from the left and the right plus everybody wants to get into the act the treasury secretary of state William Jennings brya bryan, brandeis at wilsons advisor and glass find themselves negotiating with the bigcity bank or small country bankers he makes 100 compromises below of the hold he gets the bill through the house of representatives and now goes to the senate glass gets it through the senate. So we end up in 1913 Christmas Day wilson signing the Federal Reserve act using the decentralized system that glass came up with. This is the first illustration of glass not liking regulation or fragmentation he doesnt want one powerful central bank but a series to end up with 12 reserve banks now hes a National Figure to the few people who care about this wilson names him secretary of treasury and then hes name to the seat and hes elected former times to the senate so now he is a senator of great accomplishment and people think a lot of him. Now in the 19 twenties in the late twenties we have a roaring stock market fueled largely by people buying securities on margin. No federal or state limits on how much a bank it on a big could lead then typically they bought stock with 20 percent down 10000 with 2000. This was terrific when the market is going up like 27 through 29 terrific leverage on the upside. Not remember the Banking Committee looks at things and sees that is a river of gold according to wall street the banks around the country in wichita kansas or Sacramento California are not lending to local merchants and farmers earning 5 percent but thinks banks in new york because then they can get 8 percent and then they let that to Merrill Lynch who lends that to my wife and grandfather and uncle to be marginalized so it pours across the country to local banks using deposits and other funds to lend to the new york brokers. Glass is outraged and digs deeper and it gets worse these 12 reserve banks are lending to the banks and their areas to lend it to the new york city banks to lend it to Merrill Lynch and the reserve banks are buying the paper that the commercial banks in the cities so now they are funding the huge flow of money to wall street. There was a system and created to decentralized to have the local economy supported is now a mechanism to get money to the countryside to wall street and he is outraged he writes editorials and gets to the floor of the senate and above all goes to the Federal Reserve board which he had created and said this is outrageous this is not why the system was created. You have power stop it. The fed says we will think about it. Good point basically does nothing. Glass gets more and more outraged and he becomes a stick in the side to the fed and the Banking Industry because he is out there alone screaming that this is happening so they get a professor at princeton to write a book called wall street and washington published may 1929 saying the stock market is terrific and very efficient. Its making a great economy and the state of the economy like darwin and publishes may of 29. Then to add insult to injury that is the home of Woodrow Wilson so he really gets dissed but now we know what happens a couple months later october is a huge stock market crash my wife grandfather and my uncle all get wiped out along with people across the country people were allegedly jumping out of skyscrapers and people said by god that idiot was right. He predicted this. The senate was still lopsided the controlled by republicans in 1929 and guess who they pick to run a committee to look into this and come up with legislations that wont happen again . The democrat glass out of this is ever happened in history but one party selects somebody else very deeply in the other party for a subcommittee now he has a subcommittee to develop the glasssteagall act we know it for other reasons but the main goal is to prevent the Federal Reserve banks from lending for speculation to limit how much commercial banks can lend for speculation doing so with the first draft of the bill at that time he was ready to go home. He addressed his main concern but two other things happen now looking back that overshadow that. First was fdic. In the late twenties and early thirties five or 6000 banks fail around the country. Mostly rural agricultural states in the midwest local banks are lending to farmers a big agriculture depression and there is a public outcry for the federal government to ensure deposits from those depositors that got wiped out also the local communities theres no source of money anymore and also from federal bankers and they all demand federal deposit insurance so everybody in the country thinks its the worst idea ever president hoove hoover, glass, people on the Federal Reserve board people at the big banks they think it is a crazy system to have all the powerful wellrun banks pay premiums to shore up badly managed small banks that could go out of business. But there is a tidal wave as the depression gets worse and worse of public demand and glass hates the idea. But he learns unless he puts it in the bill he will not get the bill to restrict lending for speculation so reluctantly he puts deposit insurance in his bill. So third, what we all think about is anything anybody thinks of the banks being in the securities business. It is technical but the beginning of the 20th century large commercial banks in new york mostly citibank want to get into securities underwriting. But the lawyers look at the National Banking act law passed that says National Banks can do and it doesnt say you can do security so they cannot do it. But they are small lawyers so they come up with a Sister Company called a securities affiliate and tie that to the bank to have the same officers and directors as the bank and have for 300 shares of citibank or chase manhattan and if you turn in your certificate now you will evidence ownership of the bank and the security affiliate so they are a big thing in the twenties using this device and they are the big