Credited with crowning the United States' reign as a global leader and lender, Secretary of the Treasury William Gibbs McAdoo kept the dollar on the U.S. gold standard by shutting down the New York Stock Exchange for 4 1/2 months, beginning this week on July 31, 1914.

With the panicky advent of World War I, European stock and bondholders liquidated their U.S. holdings at an alarming rate, exchanging their dollar proceeds for gold, and then repatriating their haul overseas. American banks were overwhelmed with trying to fulfill their obligations to hand over the precious metal for the paper currency...while the values of the U.S. markets and dollar took a dive.

Wishing to avoid the bank suspensions that led to the Panic Of 1907, McAdoo (who was also President Wilson's son-in-law) quickly enacted the emergency currency powers granted by the Aldrich Vreeland Act of 1908...and made headlines by ordering armed vans, loaded with gold and dollars, to deliver their cargo to the Sub-Treasury Building across from the street from NYSE on Wall Street. Fortunately McAdoo's decisive actions and re-actions calmed the system.

Floor traders -- no doubt -- were furious but American exporters thrived…as the country's "neutrality" resulted in a boom time for U.S. products.

This Week in Wall Street History

7/27/08