page_title: Robert Latham Owen
section_title: Banking issues and formation of the Federal Reserve
hierarchical_section_title: Robert Latham Owen / Political career / Banking issues and formation of the Federal Reserve
caption_attribution_description: English: The Robert Latham Owen Park, located beside the Federal Reserve Annex at 20th &amp; C Streets, NW in the Foggy Bottom neighborhood of Washington, D.C. The Eccles Building is visible in the background.
context_page_description: Robert Latham Owen Jr. was one of the first two U.S. senators from Oklahoma. He served in the Senate between 1907 and 1925.
  Born into affluent circumstances in antebellum Lynchburg, Virginia, the son of a railroad company president, Owen suffered an almost Dickensian reversal of fortune when his family was ruined financially by the Panic of 1873 and his father died while he was still in his teens.
  Owen, who was part-Cherokee on his mother's side, responded by heading west to Indian Territory, where he built a new life as, in turn, a schoolteacher working with Cherokee orphans; a lawyer, administrator and journalist; a federal Indian agent; and the founder and first president of a community bank. Among the achievements that brought him to wider public notice, and helped pave the way for his election to the U.S. Senate in 1907 when Oklahoma achieved statehood, was his success as a lawyer in 1906 in winning a major court case on behalf of the Eastern Cherokees seeking compensation from the U.S. Government for eastern lands the Cherokees had lost at the time of the Indian removals.
context_section_description: Owen entered the Senate at a time of heightened concern over the volatility of the U.S. financial system, as exemplified by the Panic of 1907, during which, in the absence of a central bank, J. Pierpont Morgan had felt obliged to intervene personally to lead a rescue of the U.S. financial and banking system.  Owen had taken a close personal interest in financial sector issues since his days at the First National Bank of Muscogee.  Inter alia, he had traveled to Europe in the summer of 1898 to study the operation of major European central banks, including meeting senior officials at the Bank of England and Germany's Reichsbank. He made banking issues the subject of a pugnacious maiden speech in the Senate, which — unusually — was interrupted extensively by senators such as Reed Smoot, Nelson Aldrich and Charles Curtis, who did not appreciate his attack on the power of the larger banks. During his early years in the Senate, Owen proposed a range of financial reforms, including several unsuccessful efforts to institute at the national level a system of insurance for bank deposits parallel to those operated in several states, including — from 1908 onward — Oklahoma (in the event, federal deposit insurance was not adopted until 1933).
  The 1912 elections saw the Democrats take control of the White House and the Senate (they already held the House). Owen lobbied successfully for the creation of a new Senate Committee on Banking and Currency, and then became its first chairman (a position he was to retain throughout 1913-1919). In this capacity, and working with the administration of President Woodrow Wilson, Owen was to be the Senate sponsor of the Federal Reserve Act of 1913, also known as the Glass-Owen Act, which created the Federal Reserve System.  A series of financial panics had convinced many that the United States needed an effective lender of last resort comparable to the central banks found in European countries and other advanced economies.  Many, too, saw a need for what was then described as a more "elastic" currency.  This concept had multiple dimensions, including: (i) a money supply that could respond over time to the development of the real economy, and (ii) given that the U.S. economy was still heavily dependent on agricultural production, monetary arrangements able to handle the seasonal bulge in demand for credit as the yearly harvest worked its way through the distribution system, without draining money from the industrial and commercial sectors of the economy. This said, many Americans retained an almost visceral fear of the concept of a central bank as such.
  Informed debate at the time focused to a significant degree on issues of governance and control.  In common with other congressional Progressives, Owen opposed a proposal from Senator Aldrich for a system explicitly controlled by the large banks.   Owen countered, in the words of an early biographer, that "the remedy presented in the form of the 'Aldrich Plan of 1912' was not satisfactory because it provided for private control of what should be a great public utility banking system."
  In the months following his election and subsequent assumption of office, President Wilson held meetings with the authors of three competing proposals for the Federal Reserve:
  Rep. Carter Glass proposed a decentralized and private sector-dominated system, with a board made up primarily of private bankers, 20 or more regional reserve banks, and with currency a private bank liability.  Glass, a southern Democrat with a marked antipathy to centralized power, intended his proposal to be differentiated from the (similarly private sector-dominated) Aldrich Plan largely by the absence of a central institution, but to Glass's horror, Wilson told him to add a central agency (in Wilson's own word, a "capstone") to his model.
  U.S. Treasury Secretary William Gibbs McAdoo (soon to become Wilson's son-in-law) proposed the most centralized model, featuring a Government central bank within the Treasury Department, no regional reserve system, and currency a government liability.
  
  Owen's 
caption: Robert Latham Owen Park, located behind the Federal Reserve's 1937 Eccles Building and next to the 1974 Martin Building in Washington, D.C.
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