When Washington Shut Down Wall Street: The Great Financial Crisis of 1914 and the Origins of America's Monetary Supremacy

(Paperback)

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When Washington Shut Down Wall Street unfolds like a mystery story. It traces Treasury Secretary William Gibbs McAdoo's triumph over a monetary crisis at the outbreak of World War I that threatened the United States with financial disaster. The biggest gold outflow in a generation imperiled America's ability to repay its debts abroad. Fear that the United States would abandon the gold standard sent the dollar plummeting on world markets. Without a central bank in the summer of 1914, the United States resembled a headless financial giant. William McAdoo stepped in with courageous action, we read in Silber's gripping account. He shut the New York Stock Exchange for more than four months to prevent Europeans from selling their American securities and demanding gold in return. He smothered the country with emergency currency to prevent a replay of the bank runs that swept America in 1907. And he launched the United States as a world monetary power by honoring America's commitment to the gold standard. His actions provide a blueprint for crisis control that merits attention today. McAdoo's recipe emphasizes an exit strategy that allows policymakers to throttle a crisis while minimizing collateral damage. When Washington Shut Down Wall Street recreates the drama of America's battle for financial credibility. McAdoo's accomplishments place him alongside Paul Volcker and Alan Greenspan as great American financial leaders. McAdoo, in fact, nursed the Federal Reserve into existence as the 1914 crisis waned and served as the first chairman of the Federal Reserve Board.

Reviews

"An insightful new book by William L. Silber ... argues that the closing of the New York Stock Exchange at the outbreak of World War I played a critical role... The conventional view was that the exchange was closed to keep share prices from plunging. But the book, When Washington Shut Down Wall Street, asserts that the historians--and contemporary observers--had it wrong... By delaying the reopening of Wall Street and making sure that American grain was ready to be exported to Europe to bring in gold, the United States was able to stay on the gold standard and become an alternative to London as a financial capital."--Floyd Norris, New York Times "In his fascinating work of financial history, When Washington Shut Down Wall Street, William L. Silber recounts the heroics of Treasury Secretary William McAdoo, who closed the New York Stock Exchange for more than four months--four months!--in 1914 to avert a larger economic crisis... It was, as Silber explains, a brilliant exercise of arbitrary power that helped propel the United States toward global financial supremacy."--Carlos Lozada, Washington Post "It is an engaging story; part economic history, part how-to manual on dealing with financial crises... William Silber's main contention ... is well taken. It takes a lot to uproot an incumbent world financial leader. Potential rivals need to be smart enough to take advantage if and when a moment of opportunity arises--a moment that almost by definition will be one of global financial crisis."--Krishna Guha, Financial Times "[This] lively new book by New York University economist William Silber, When Washington Shut Down Wall Street, makes a convincing plea for the inclusion of William McAdoo in the Dollar Pantheon."--Daniel Gross, Slate.com "Reading Silber's tale of unintended consequences is as close as one gets to a historical 'thriller.' At the same time, one can't help but reflect on the challenges ahead. A 'rebalancing' of the world economy in today's environment will be much more complex than was the case in 1914. As then, the outcomes are unlikely to follow popular predictions. In this respect, as well as in providing a fascinating historical account of a major financial and political drama, Silber does any reader great service."--Edward Waitzer, Financial Regulator "More than just a ripping yarn--and it is that--[When Washington Shut Down Wall Street] is a cautionary tale of how humankind can get suckered into so believing economic myths that they take on a dangerous reality."--James Srodes, The Washington Times "When I first picked up this book, I wondered whether it described events so long ago that they were irrelevant today and whether it would be written in such an academic fashion as to be turgid and unreadable for the ordinary mortal interested in business and a good read. Well, I was wrong on both counts."--Richard Keatinge, Irish Times "This short volume tells the intriguing tale of how the financial crisis wrought by Europe's plunge into World War I opened the door to America's emergence as the world's dominant financial and economic power. Few writers have paid much attention to the closing of the Exchange, except as a curiosity exemplifying the shock experienced by Americans when the war came. Silber has done historians a favor by placing that event in a context that reveals its broader significance."--Maury Klein, Business History Review "When Washington Shut Down Wall Street is a thrilling yet compact financial history of events surrounding the crisis at the outbreak of the first world war... Overall, it's well-written and articulate, and one of the historical financial reads of the year that also offers a blueprint for the future, outlining Silber's words the legacy of 1913 and what that year can teach us about crisis management, even in today's gloomy economic outlook."--Paul O'Doherty, The Investor "Economist William L. Silber has written a fascinating account ... that may appeal to students of banking and finance interested in leadership and crisis control."--Alfred E. Eckes, International History Review "[A] wonderful book of financial history."--Christopher Farrell, Marketplace

Author Bio

William L. Silber is Marcus Nadler Professor of Finance and Economics at the Stern School of Business, New York University. The author or editor of eight books, he has served as Senior Economist with the President's Council of Economic Advisors and as a member of the Economic Advisory Panel of the Federal Reserve Bank of New York.