William graduated from the University of Alabama in 1880.
In 1880, William Harding entered business as bookkeeper in a private bank, subsequently becoming cashier of the Berney National Bank of Birmingham, Alabama, then vice-president and afterward president of the National Bank of Birmingham. His knowledge of banking and his judgment of trade conditions brought him to the presidency of the Alabama State Bankers’ Association in 1908 and of the Birmingham Chamber of Commerce in 1913, and appointment as Southern member of the newly organized Federal Reserve Board in 1914. In 1916 he was made governor of the Board. At that time it was believed that American intervention in the European war could not be long postponed. The first step taken under Harding’s administration was the “mobilizing” with the Federal Reserve of all the gold previously held by private member banks as part of their own lawful reserve.
After the declaration of war in April 1917, permission to export gold from the United States was made contingent on the assent of the Reserve Board. That proviso placed heavy responsibilities on Harding and his colleagues - responsibilities which were greatly increased when, in 1918, he became managing director of the government’s War Finance Corporation, formed to lend public funds to industries whose products should be judged “necessary or contributory to the prosecution of the war. ” In these activities he won recognition as an efficient organizer, a tireless worker, and a sound though perhaps not brilliant, war-time executive.
On the return of peace, the immense requisitions on the Reserve banks’ credit facilities were presently diverted into speculation of great magnitude which caused a rise in staple prices to an average of 20 per cent, above the highest of wartime and 147 per cent, above the pre-war level. As early as April 1919, Harding expressed his own belief that this misuse of credit should be checked by advancing the Reserve banks’ discount rate, but such action was opposed at the time by the Treasury, in view of pending operations to reduce the government’s floating debt, and no change in rate was made until November.
Credit inflation was by that time wholly out of hand and, despite the moderate advance in the official discount rate, the ratio of the system’s gold reserve to its note and deposit liabilities fell virtually to the legal minimum; in the New York Reserve bank, below it. To control the market’s inroads on the system’s credit fund, the Reserve bank rate was raised to 6 per cent; then, in June 1920, to 7, though caution was observed by Harding, to avoid curtailing credit actually needed by industry when the inevitable “deflation” of the markets occurred. Even after the raising of the rate to 7 per cent. , the Reserve banks increased by $485, 000, 000 in the subsequent five months their rediscount of purely commercial obligations.
With the collapse of speculation in commodities, the crash in staple prices, and the reaction in general trade, a great part of the industrial community angrily laid the responsibility on the Federal Reserve. Harding had publicly described the high prices of 1920 as artificial, and had boldly declared to agricultural associations that the Reserve system did not recognize maintenance of existing prices as its duty. These utterances were widely misinterpreted and misquoted; the governor and his colleagues on the board were charged in agricultural conferences with having promoted a policy of forcing down prices to “the pre-war basis” and with engaging deliberately in “a drive to force wheat from $2. 55 to $1. 60. ”
Harding himself was assailed with special malignity, even to the extent of allegation, on the floor of the United States Senate, that he had personally been speculating in cotton and had pursued the “deflation policy” with his own interests in view. It was partly with the purpose of answering the charges of misjudgment made against his official policies that he wrote his book, The Formative Period of the Federal Reserve System (1925), which is primarily a careful historical sketch of the evolution of the system’s policies in its earlier years but also a vigorous though good-tempered defense of the controverted policies of the author’s own administration. When his official term expired in August 1922 the banking and conservative business community urged, unsuccessfully, that he be reappointed.
After his retirement from the Board, Harding served for a time as special financial adviser to the Cuban government (1922) and declined an invitation (1924) from the League of Nations to become the financial administrator for Hungary, although he visited and gave unofficial aid to that country.
On October 22, 1893, Harding married Amanda Perrine Moore.