As chairman of the US Senate Finance Committee at the turn of the twentieth century, Nelson W. Aldrich played a pivotal role in the creation of the Federal Reserve System.
Aldrich was born in Foster, Rhode Island, in 1841. He attended East Greenwich Academy, took his first job as a clerk for the largest wholesale grocer in Providence, and worked to become a firm partner. He enlisted as a private in Company D in the Civil War and married Abigail Pearce Chapman Greene upon his return home.
Aldrich began his political career in 1869 in Foster. He served as a city council member until 1871 before becoming council president for 1872 and 1873. Aldrich was elected to the Rhode Island state legislature in 1875, becoming speaker in 1876. He then won election to the US House of Representatives as a Republican in 1879. He resigned from this position in 1881 only to fill the vacancy in the US Senate created by the death of Ambrose E. Burnside. Aldrich won all of his reelections and served in the Senate until March 3, 1911.
Aldrich was one of the most powerful senators of his time. From 1898 to 1911 he chaired the finance committee, which established currency policy and set tariff rates, studying financial matters closely and becoming an influential expert on the economy. After the Panic of 1907 roiled the American economy, Americans wanted banking reform. The next year Congress passed the Aldrich-Vreeland Act, which sought to make the money supply more elastic and was meant to temporarily alleviate the stresses during emergency currency shortages. It also created the National Monetary Commission, chaired by Aldrich, which undertook a broad and exhaustive study of America’s financial needs and resources.
In November 1910, under the ruse of a duck hunt, Aldrich and a small group of experts on banking reform held a private conference on Jekyll Island, Georgia, to come up with a plan to restructure America’s banking system and eliminate the possibility of future panics. Among the attendees were A. Piatt Andrew, assistant secretary of the Treasury; Henry Davison, a partner at J.P Morgan and Co.; Frank Vanderlip, president of National City Bank; and Paul Warburg, a partner at Kuhn, Loeb and Co.
The Aldrich Plan called for the creation of one central institution, the National Reserve Association, that would have branches across the country and that would have the power to issue currency. It would be controlled by a board of directors, primarily composed of bankers. The US Treasury would also hold a seat on the board but would not be able to exercise significant oversight. The plan was widely condemned in Congress, with many contending it would enhance the power of the larger banks and the influence of Wall Street.
Aldrich left the political world in 1911, retiring to Providence, but his plan laid the groundwork for what eventually became the Federal Reserve Act. In 1913, Congress approved a decentralized central bank, a highly inventive structure that combines twelve regional Reserve Banks with a central Federal Reserve Board.
Aldrich died in New York City in 1915 and is buried in Swan Point Cemetery in Providence. He and his wife had ten children, including a son, Winthrop, who became president of Chase National Bank, and a daughter, Abby, who married John D. Rockefeller Jr. Rockefeller’s son, Nelson Aldrich Rockefeller, became governor of New York and vice president to Gerald Ford (1974-77). Aldrich’s great-grandson, John D. Rockefeller IV, is the senior US senator from West Virginia.
Written by the Board of Governors of the Federal Reserve System. See disclaimer.