William Gibbs McAdoo

William Gibbs McAdoo was the first of three Treasury Secretaries appointed by President Woodrow Wilson. Born near Marietta, Georgia in 1863, McAdoo graduated from the University of Tennessee, where his father was a professor. He was admitted to the Tennessee bar in 1885 and practiced law there until moving in 1892 to New York City, where he was a partner in an investment firm until returning to Tennessee in an unsuccessful attempt to run a streetcar company in Knoxville. After returning to New York, he served as president of the Hudson and Manhattan Railroad Company, which successfully completed its subway from New Jersey to Manhattan in 1908. (The lines are still in operation today as part of the PATH system.)

McAdoo was vice chairman of the Democratic National Committee in 1912 and, despite the death of his first wife in February of that year, was active in the Wilson campaign. Wilson appointed McAdoo Treasury Secretary in 1913 and the following year allowed him to marry his daughter, Eleanor, without seeking his resignation.

As Treasury Secretary, McAdoo played a pivotal role in the establishment of the new Federal Reserve System, which just started operations as Europe found itself embroiled in what would soon be called the Great War (World War I). After the US entered the conflict in 1917, McAdoo was directly responsible for financing the government’s growing budget, which jumped from $.7 billion, or about 1.5% of GDP, in 1916 to almost $12.7 billion, or almost 17% of GDP, in 1918. About a third of the funds came from taxes, especially estate taxes and “excess profits” taxes on corporations, while borrowing covered the other two-thirds. Despite his best efforts to combat it, however, inflation ran at an average of about 15% from 1916 to 1920.

McAdoo resigned about a month after the November 1918 armistice. He returned to his law practice, made two unsuccessful bids for the presidency, and served California in the Senate for one term. He divorced Eleanor in 1934, soon after married a much younger woman, and died in 1941.