ABSTRACT
During October and November of 1907, a banking panic centered in New York demonstrated the weaknesses and shortcomings of the National Banking System more forcefully than years of agitation on the part of banking reformers. The panic focused attention on the concentration of banking resources on Wall Street and on the failure of the largest New York bankers and the government to prevent a suspension of banking payments that rippled across the nation. The severe but brief financial downturn had an enormous political impact. Banking reform, long confined to a small number of bankers, economists and politicians, now captured the attention of the entire nation. In the 1908 election year, Democrats were quick to blame the panic on the Republicans and Wall Street and supported a movement to guaranty bank deposits that emerged in the West and South. Republicans scrambled to disassociate themselves with the financial status quo by passing an election “make-shift,” the Aldrich-Vreeland Act, that created the National Monetary Commission with a mandate to investigate the nation's banking ills and recommend solutions. The congressional debate over the Aldrich-Vreeland Act revealed increasingly sharp divisions among Republican Wall Street, La Salle Street and Main Street factions that would pose serious obstacles to reform for the newly-elected president, William Howard Taft. While the monetary commission conducted its investigation, Taft and the Republicans tried to counter the popularity of deposit guaranty and to appeal to the their party's western Main Street constituency by passing the Postal Savings Bank Act of 1910.
