Born in Virginia and raised in Georgia, Woodrow Wilson became the first southerner elected president since 1844 and only the second Democrat to occupy the White House since Reconstruction. A believer in states’ rights, Wilson nevertheless promised legislation to break the hold of the trusts. This lean, ascetic scholar was, as one biographer conceded, a man whose “political convictions were never as fixed as his ambition.” Building on the base built by Roosevelt in strengthening presidential power, Wilson exerted leadership to achieve banking reform and worked through his party in Congress to accomplish the Democratic agenda. Before he was finished, Wilson lent his support to many of the Progressive Party’s social reforms.

With the Democrats thoroughly in control of Congress Wilson immediately called for tariff reform. “The object of the tariff,” Wilson told Congress, “must be effective competition.” The Democratic House of Representatives hastily passed the Underwood tariff, which lowered rates by 15 percent. To compensate for lost revenue, the House approved a moderate federal income tax made possible by the ratification of the Sixteenth Amendment a month earlier. In the Senate, lobbyists for industries quietly went to work to get the tariff raised, but Wilson rallied public opinion by attacking the “industrious and insidious lobby.” In the harsh glare of publicity, the Senate passed the Underwood tariff.

Wilson next turned his attention to banking. The panic of 1907 led the government to turn once again to J. P. Morgan to avoid economic catastrophe. But by the time Wilson came to office, Morgan’s legendary power had come under close scrutiny. In 1913, a Senate committee investigated the “money trust,” calling Morgan himself to testify. The committee uncovered an alarming concentration of banking power. J. P. Morgan and Company and its affiliates held 341 directorships in 112 corporations, controlling assets of more than $22 million (billions in today’s dollars). The sensational findings led to reform.

The Federal Reserve Act of 1913 marked the most significant piece of domestic legislation of Wilson’s presidency. It established a national banking system composed of twelve regional banks, privately controlled but regulated and supervised by the Federal Reserve Board, appointed by the president. It gave the United States its first efficient banking and currency system and, at the same time, provided for a greater degree of government control over banking. The new system made currency more elastic and credit adequate for the needs of business and agriculture.

Wilson, flush with success, tackled the trust issue next. When Congress reconvened in January 1914, he supported the introduction and passage of the Clayton Antitrust Act to outlaw “unfair competition”—practices such as price discrimination and interlocking directorates (directors from one corporation sitting on the board of another). In the midst of the successful fight for the Clayton Act, Wilson changed course and threw his support behind the creation of the Federal Trade Commission (FTC), precisely the kind of federal regulatory agency that Roosevelt had advocated in his New Nationalism. The FTC, created in 1914, had not only wide investigatory powers but also the authority to prosecute corporations for “unfair trade practices” and to enforce its judgments by issuing “cease and desist” orders. Despite his campaign promises, Wilson’s antitrust program worked to regulate rather than to break up big business.