Saturday, January 05, 2013

Carter Glass Could Be Father of the Federal Reserve System and the SEC

In 2013, we note the 100th year of federal banking law (Federal Reserve Act of 1913) and the 80th year of federal securities law (Securities Act of 1933). Senator Carter Glass of Virginia (D-VA) is widely known as the father of the Federal Reserve System, but it is not so widely know that he could arguably and rightly be called the father of the SEC.

In 1913, as Chair of the House Banking Committee, Rep. Glass worked to pass the Glass-Owen Federal Reserve Act, which created the Federal Reserve System. He was appointed Secretary of the Treasury by President Wilson and later left that post to become a US Senator from Virginia. In 1933, he worked to pass the Glass-Steagall Act, separating commercial from investment banking, essentially separating the banking and securities industries. Interestingly, earlier, Senator Glass has turned down an offer from President Franklin Roosevelt to become Secretary of the Treasury again.


In 1934, the Securities Exchange Act was moving through Congress, the Administration favored retaining the FTC (named as federal securities regulator in the 1933 Act) as regulator. But Senator Carter Glass preferred a new agency solely dedicated to securities regulation. (see Crisis, Scandal and Financial Reform during the New Deal, Professor Michael Perino, St. John’s Law School, Legal Studies Research Paper Series, p. 22).
Senator Glass offered an amendment to the legislation to create the SEC. (see 431 Days, Joseph P. Kennedy and the Creation of the SEC, SEC Historical Society). Professor Perino notes that the Glass Amendment was a compromise in that SEC Commissioners would be selected by the President, with the advice and consent of the Senate, and there would be no industry representatives on the Commission as had originally been proposed.

The SEC Historical Society paper notes that the compromise turned out for the better since securities and exchange regulatory power held by the FTC would have been just one of many concerns of that agency and not the tightly focused agency that was envisioned.

An interesting note is that Carter Glass was born in Lynchburg, VA and Senator Robert Owen (D-OK), Chair of the Senate Banking Committee in 1913, and who worked with Chairman Glass to pass the Glass-Owen Federal Reserve Act, was also born in Lynchburg, VA.



2 comments:

Jason Parsont said...

Dear Jim,

I am the Editor-At-Large of a new blog beginning started at Columbia Law School called the CLS Blue Sky Blog, Columbia Law School's Blog on Corporations and the Capital Markets. We have a feature called the "Filter" where we link to the top 5 blog posts / new stories each day in the corporate/securities world. We featured your blog many times, including today with respect to this article: Have a look: http://clsbluesky.law.columbia.edu/.

It would be great to discuss more at your convenience. Please reach out to me at jparso1@law.columbia.edu.

Best,

Jason Parsont

Brock Whisenhunt said...

Jason:

In regard to your response to the post by Jim Hamilton, I just started the process of trying to find out what recognitions were to be observed regarding the 100th anniversary of the signing of the Federal Reserve Act on December 23, 1913. I ran across the post and your response. I don't know if you have gotten a response from Jim. My wife's great grandfather was Carter Glass (her name is also Carter, as is her mother, who is from Danville, VA). Carter Glass' secretary during his tenure in DC was Rixey Smith, who, along with Norman Beasley, authored A Biography of Carter Glass published in 1939. I do not think that an anniversary of the events of 1913 would be complete without an acknowledgement of the contributions of Carter Glass. I don't think the history as gathered by the archivists at the Fed is fully adequate without mention of this biography. It covers a lot of personal interactions that are probably not reflected in the official documents of the Fed, or Woodrow Wilson. I would recommend reading this if you can. If you or Jim do not have access to a copy (I purchase an extra online), then I would be glad to provide a copy if this is the most appropriate starting point for it to be pointed out to those who are in charge of the anniversary. Their web site does request anyone who has information to send it to them. I will also follow that dark hole and see if it leads anywhere. I do believe that Senator Glass would be spinning in his grave at the actions that have taken place over the last several decades. This is not your great-grandfather's FED.

Regards,
Brock Whisenhunt
brock@janetjones.com
Little Rock, AR