William G. McAdoo
Education
- Graduated BA - University of Tennessee
Overview
William Gibbs McAdoo Jr. was an American lawyer and statesman. McAdoo was a leader of the Progressive movement and played a major role in the administration of his father-in-law President Woodrow Wilson. A member of the Democratic Party, he also represented California in the United States Senate.
Born in Marietta, Georgia, McAdoo moved to Knoxville, Tennessee, in his youth and graduated from the University of Tennessee. He established a legal practice in Chattanooga, Tennessee, before moving to New York City in 1892. He gained fame as the president of the Hudson and Manhattan Railroad Company and served as the vice chairman of the Democratic National Committee. McAdoo worked on Wilson's successful 1912 presidential campaign and served as the United States Secretary of the Treasury from 1913 to 1918. He married Wilson's daughter, Eleanor, in 1914. McAdoo presided over the establishment of the Federal Reserve System and helped prevent an economic crisis after the outbreak of World War I. After the U.S. entered the war, McAdoo also served as the Director General of Railroads. McAdoo left Wilson's Cabinet in 1919, co-founding the law firm of McAdoo, Cotton & Franklin.
McAdoo sought the Democratic presidential nomination at the 1920 Democratic National Convention but was opposed by his father-in-law, President Woodrow Wilson, who hoped to be nominated for a third term.[2] In 1922, McAdoo left his law firm and moved to California. He sought the Democratic presidential nomination again in 1924, but the 1924 Democratic National Convention nominated John W. Davis. He was elected to the Senate in 1932 but was defeated in his bid for a second term. McAdoo died of a heart attack in 1941 while traveling from the third inauguration of Franklin D. Roosevelt.
Secretary of the Treasury :
Woodrow Wilson lured McAdoo away from business after their meeting in 1910, and he worked for the Wilson presidential campaign in 1912. Once he was president, Wilson appointed McAdoo secretary of the Treasury, a post McAdoo held from 1913 to 1918.
He married the president's daughter Eleanor Randolph Wilson at the White House on May 7, 1914. They had two daughters, Ellen Wilson McAdoo (1915–1946) and Mary Faith McAdoo (1920–1988). Ellen married twice and had two children. Mary married three times, but had no children. McAdoo's second marriage ended in divorce in July 1935, and he married a third time at nearly 72, to 26 year old nurse Doris Isabel Cross (1909–2005), in September 1935.
McAdoo offered to resign after his wedding, but President Wilson urged him to complete his work of turning the Federal Reserve System into an operational central bank. The legislation establishing the System had been passed by Congress in December 1913.
As head of the Department of the Treasury, McAdoo confronted a major financial crisis on the eve and at the outbreak of World War I, in July and August 1914. At the time, the United States was still a net debtor nation (i.e., Americans' aggregate debt to foreigners was greater than foreigners' aggregate debt to Americans). The nations of Europe and their financial institutions held far more in debt of the United States, of many of the states of the Union, and of American private institutions of all kinds; than investors in the United States held in the debt of Europe's nations and institutions in all forms, both public and private. During the last week of July 1914, British and French investors began to liquidate their American securities holdings into U.S. currency. Many of these foreign investors then converted their dollars into gold, as was common practice in international monetary transactions at the time, in order to repatriate their holdings back to Europe. If continued, these actions would have depleted the gold backing for the dollar, possibly inducing a depression in American financial markets and in the American economy as a whole. Investors might then have been able to buy American goods and raw materials (for their war effort) at greatly depressed prices, which Americans would have had to accept in order to restart the economy from a consciously (albeit inadvertently) caused depression.
McAdoo's actions, then, were both bold and outrageous: keeping the U.S. currency on the gold standard, he arranged the closing of the New York Stock Exchange for an unprecedented four months to prevent Europeans from selling American securities and exchanging the proceeds for dollars and gold.
Investors in the warring countries thus had no access to their holdings of U.S. financial assets at the outset of the war. As a result, the treasuries of those countries more quickly exhausted all of their net foreign exchange holdings (those that were on hand and in their possession before McAdoo closed the markets), currency, and gold reserves. Some of them then issued sovereign bonded indebtedness (IOUs) to pay for the war materials they were buying on the American and other markets.
Economist William L. Silber wrote that the wisdom and historical impact of this action cannot be overemphasized. McAdoo's bold stroke, Silber writes, averted an immediate panic and collapse of the American financial and stock markets. It also laid the groundwork for a historic and decisive shift in the global balance of economic power, from Europe to the United States; a shift which occurred exactly at that time. More than this, McAdoo's actions both saved the American economy and its future allies from economic defeat in the early stages of the war.
Silber wrote that the intact and undamaged American financial system and its markets managed the flow and operation of this financing more easily than they would have without McAdoo's measures, and that U.S. industry swiftly built up to the scale needed to meet the allied war needs. The managed liquidation of foreign holdings of U.S. assets moved the United States to a net creditor position internationally and with Europe from the net debtor position it had held prior to 1915.
In order to prevent a replay of the bank suspensions that plagued America during the Panic of 1907, McAdoo also invoked the emergency-currency provisions of the 1908 Aldrich–Vreeland Act. Silber credits his actions for having turned America into a world financial power, in his book When Washington Shut Down Wall Street.
Like President Wilson, McAdoo was a segregationist. During his tenure as Secretary, he broke with long-standing policy and ordered implementation of Jim Crow in all Treasury facilities, even in the north where they had previously not existed. McAdoo told reporter Oswald Garrison Villard that racial segregation was needed in the Treasury to prevent friction.
Early Life
McAdoo was born October 31, 1863 during the middle of the Civil War in the historic William Gibbs McAdoo House in Marietta, Georgia. He was the son of author Mary Faith Floyd (1832–1913) and attorney William Gibbs McAdoo (1820–1894). His uncle, John David McAdoo, was a Confederate general and a justice of the Texas Supreme Court. McAdoo attended rural schools until his family moved to Knoxville, Tennessee, in 1877, when his father became a professor at the University of Tennessee.
He graduated from the University of Tennessee and was a member of the Lambda chapter of Kappa Sigma fraternity. He was appointed deputy clerk of the United States District Court for the Eastern District of Tennessee in 1882. He married his first wife, Sarah Hazelhurst Fleming, on November 18, 1885. They had seven children: Harriet Floyd McAdoo, Francis Huger McAdoo, Julia Hazelhurst McAdoo, Nona Hazelhurst McAdoo, William Gibbs McAdoo III, Robert Hazelhurst McAdoo, and Sarah Fleming McAdoo.
He was admitted to the bar in Tennessee in 1885 and set up a practice in Chattanooga, Tennessee. In the early 1890s, he lost most of his money trying to electrify the Knoxville Street Railroad system. In 1892 he moved to New York City, where he met Francis R. Pemberton, son of the Confederate General John C. Pemberton. They formed a firm, Pemberton and McAdoo, to sell investment securities.
In 1895, McAdoo returned to Knoxville and regained control of part of his bankrupt streetcar company, which had been auctioned off. In subsequent months, he engaged in a struggle with Ohio businessman C.C. Howell over control of the city's streetcar system, culminating in a bizarre incident known as the Battle of Depot Street. Litigation in the aftermath of this incident favored Howell, and McAdoo abandoned his streetcar endeavors in 1897 and returned to New York.
Around 1900, McAdoo took on the leadership of a project to build the Uptown Hudson Tubes, a pair of railroad tunnels under the Hudson River connecting Manhattan with New Jersey. A tunnel had been partially constructed during the 1880s by Dewitt Clinton Haskin. With McAdoo as president of the Hudson and Manhattan Railroad Company, two passenger tubes were completed and opened in 1908. The popular McAdoo told the press that his motto was "Let the Public be Pleased." The tunnels are now part of the PATH train system.
His first wife died in February 1912. That year, he served as vice chairman of the Democratic National Committee.
Career
- United States - Former Secretary of the Treasury