American Bank: Roger Lowenstein

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The banking industry is one of the most sensitive sectors of the economy. Economic scholars have investigated the involvement of the banking sector in the overall health of the economy. A country's vulnerability to multiple disasters, such as the financial crisis, is cause for concern. In this light, it is critical to protect the state from internal and external challenges and risks that could damage the banking sector. Roger Lowenstein, author of the nonfiction book America's Bank: The Epic Struggle to Establish the Federal Reserve, is one of these academics. The book gives the background and the justification of the formation of the federal bank the events from 1907 to 1914 that led to the need for the bank, and the resistance therein.

About the Author

Roger Lowenstein was born in 1954 and attended Cornell University. He worked as a financial journalist and reported for the Wall Street Journal for more than ten years. He has published six books and has prepared major columns for the New York Times. Magazine. In his books, Roger Lowenstein has the ability to prepare complex literature and present it in a language that a layman can understand. He is without doubt a seasoned writer in the financial industry.

America’ Bank: The Epic Struggle to Create the Federal Reserve

In the beginning of the 20th century, the US found itself in a vulnerable position of being the only industrialized country that did not have a single central bank. This was partly due to the fact that, Americans (especially the ones in the rural area) had a deep mistrust not only to the banks, but to the federal government as well. In addition to that, Sen. Nelson Aldrich, the then senator of Rhode Island, featured prominently in the debates. Paul Warburg, a German immigrant, was one of the greatest proponents of the Fed proposal. In fact, much of the working formula and ideas of the Fed emanated from his ideas, though they were diluted or modified.

In particular, a lot of credit was given to Nelson Aldrich in the years 1908-1912. Other advocates of centralization includes President Wilson and Carter Glass, the Virginia Democrat.

The individuals exploited the effect of the panic that was hitherto witnessed in order to push their agenda in a highly polarized American society. Bankers in both small and large banks had sentiments for reforms but these sentiments did not reach and influence congress. The proponents of the Fed proposal got some sympathy from the large banks in New York.

The government, the banks, and the public were conscious about the harsh reality of another panic, and therefore, it was easier, though not easy per se, to sail the agenda through despite dissident voices. Thus, it was a time of negotiations and compromise.

The initiatives would benefit immensely from the contribution of Woodrow Wilson. Having assumed office in March 1914, the stage was set for a favorable legislation and implementation. Woodrow Wilson was not an ordinary Democrat. He was a secret Hamiltonian. It was not uncommon for Woodrow Wilson to have secret ideas and push for them, and this was no exception.

Another author, Kennedy, states that Wilson had a strong belief that the formation of the Fed bank was a manifestation of the old liberalism school of thought (Kennedy 8). Wilson compared the concept of a centralized bank to free trade which would benefit everyone including the small traders. Moreover, Wilson felt that a centralized bank would be more responsive and effective to the demands of democracy. The Fed bank would pass as a great legacy for Wilson more so with the failure of the League of Nations which was one of the most intimate acts of idealism advocated by him.

Notably, Nelson Aldrich, was one of the most conservative senators who did not welcome anything that would bring radical changes to the existing economic model. However, he went through a transformation when he was educated about the European model of banking. Consequently, he changed the goalposts from a bitter foe to a staunch supporter advocate of the system.

Lowenstein notes that even though the final draft of the Fed proposal was not exactly what the masterminds of the bank had envisioned, it was not far from the point, and it served the purpose. He believed that the destruction of the US centralized bank by Andrew Jackson was a poor economic policy and there was a need for a status quo ante.


Lowenstein gives a vivid account of the disagreements and the concerns that the people voiced during the early debates on the fed bank. Again, he points out the critical role of the progressive movement and the machination and compromise that played part in having the issue of the fed bank pass through congress.

He gives chronological events such as the Panic of 1907 and President Wilson’s campaign more so in his passionate appeal to the joint of congress. It is a story of how the US established a federal bank. He looks at the complex financial landscape of that time and gives the implication of each decision that would have been taken.

The author uses a bipolar comparison of the antagonism between the various groups of people and their support for the fed bank or lack of it thereof. These opposite groups include – the Wall Street vs Main Street, urban Americans vs the rural Americans, the interior vs East Coast, mercantilists’ vs the agrarian interests,

The reader cannot help but notice the high level of vivid description depicted in the book. For example, the key personalities in the book are well described. In particular, he vividly explains the distrust that many Americans had on any central financial authority. In particular, Warburg benefits from this from the onset and he becomes the hero of the book.

The writing of the author comes from examining the key personalities in the negotiations through their diaries, memoirs, letters, congressional hearings, and the early Fed proposal. It is worth noting that the author has de-emphasized the significance of the social movement in favor of focusing on the individuals, their philosophy, and their contribution.

Constructive Criticism

Much to the disappointment of the reader, the book did not mention 1918 major event which amended the 1913 Federal Reserve Act. The amendment as well as subsequent amendments magnified the role of the Fed bank in the American economic policies. The aim was to improve the contentious issues that needed attention.

The book does not give much emphasize to the fact that the fed bank evolved to become a policy making body and is not subject to much scrutiny like the other arms of the government. Lowenstein bypasses the need to make sure that key institutions in a country’s economy enjoy some autonomy either in their day to day operations as well as the holders of key offices.

Closely connected to this, Lowenstein ignores the fact that the World War I broke out when the fed bank was young in age. The country went to debt just as it is a common phenomenon to such times. Therefore, the government turned to the fed bank in order to manage the situation, for example, by having a policy of keeping the interest as low as possible. This point does not receive any recognition and coverage in the book.

Whereas the book is keen to detail, the reader gets lost in the back and forth coverage of legislation. This is mostly on the process of negotiation bills and the issues thereof. However, the reader can forgive Lowenstein because he is capturing an epic struggle that happened years ago when almost everything was different from the present day political phenomena. For instance, the technology used that time was far different from today’s one.

Lastly, Lowenstein gives a strong emphasis to the contribution of individuals. It is true that political science recognizes the profound impact of the idiosyncratic variables. However, groups and the greater society matter too. The author would have given equal emphasis to the group much as he has given it to individuals.

According to Apel, much as the formation of the Fed bank benefited from the contribution of the individuals, the progressive movement played a great role (18). The movement represented a time of a paradigm shift from the status quo. For example, it brought about changes to better labor conditions. Similarly, one of the outcomes of the movement was the financial reforms.

The Verdict and Conclusion

Despite a few challenges, the book vividly captures the practical obstacles that stood in the way of the federal bank. The book is a reliable reference in the American monetary policy. It demystifies the Fed bank which the public does not have much understanding about. It should be noted that Lowenstein, through a commentary, gives an account of the evolution of the bank over the course of time. Again, the debate about the Fed still goes on until today. Anyone wishing to make a contribution to this debate, whether in favor or otherwise, should start with reading this book in order to make an informed decision.

Much as the events of this book took place years ago, its financial principles are still relevant even in the modern environment. In fact, students of economics and key professionals in the finance industry ought to read this historical account in order to make decisions which are more informed and more rational. For example, the events leading to the founding of the Fed bank mirrors the Panic of 2008 which lead to calls for a more efficient consumer protection method. Consequently, the Consumer Protection Act was formed.

Lowenstein gives the picture of the evolution of a centralized banking system- from a time of pessimism on the fed bank, to the fruition of the dream of the creation of such a bank. He looks at the complex financial landscape of that time and gives the implication of each decision that would have been taken.

Overall, the book is a successful attempt in explaining the challenges to the formation of the fed bank to the actual founding of the bank. It is not only a book for the professional, but a book of the laymen too. The book is highly recommended.


Apel, Melanie. The Federal Reserve Act: Making the American Bank Stronger. New York,

Rosen Publications, 2006.

Kennedy, Ross. A Companion to Woodrow Wilson. Wiley-Blackwell, 2013.

Lowenstein, Roger. America’s Bank: The Epic Struggle to Create the Federal Reserve. Penguin,


November 23, 2022

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