SECRETS OF THE FEDERAL RESERVE
The
Dedicated to two of the finest scholars of the
twentieth century GEORGE STIMPSON and
EZRA POUND who generously gave of their vast knowledge to a young writer to
guide him in a field which he could not have managed alone.
ACKNOWLEDGEMENTS I wish to thank my former
fellow members of the staff of the Library of Congress whose very kind
assistance, cooperation and suggestions made the early versions of this book
possible. I also wish to thank the staffs of the Newberry Library, Chicago, the
New York City Public Library, the Alderman Library of the
About the Author Eustace Mullins is a veteran
of the United States Air Force, with thirty-eight months of active service
during World War II. A native Virginian, he was educated at
The original book, published under the title
Mullins On The Federal Reserve, was commissioned by the poet Ezra Pound in
1948. Ezra Pound was a political prisoner for thirteen and a half years at St.
Elizabeth’s Hospital,
Published in 1952 by Kasper and
During the intervening years, the author
continued to gather new and more startling information about the backgrounds of
the people who direct the Federal Reserve policies. New information gathered
over the years from hundreds of newspapers, periodicals, and books give
corroborating insight into the connections of the international banking houses.
While researching this material, Eustace
Mullins was on the staff of the Library of Congress. Mullins later was a
consultant on highway finance for the American Petroleum Institute, consultant
on hotel development for Institutions Magazine, and editorial director for the
Chicago Motor Club’s four publications.
The
London Acceptance Council is limited to seventeen international banking houses
authorized by the Bank of England to handle foreign exchange.
ABOUT
THE COVER
The
cover reproduces the outline of the eagle from the red shield, the coat of arms
of the city of
Table of
Contents
Forward
Introduction
Chapter One:
Chapter Two: The Aldrich Plan
Chapter Three: The Federal Reserve
Act
Chapter Four: The Federal Advisory
Council
Chapter Five: The House of
Rothschild
Chapter Six: The
Chapter Seven: The Hitler Connection
Chapter Eight: World War One
Chapter Nine: The Agricultural
Depression
Chapter Ten: The Money Creators
Chapter Eleven: Lord Montagu Norman
Chapter Twelve: The Great Depression
Chapter Thirteen: The 1930's
Chapter Fourteen: Congressional
Expose
Foreword
In 1949,
while I was visiting Ezra Pound who was a political prisoner at St. Elizabeth’s
Hospital,
I had no interest in money or banking as a
subject, because I was working on a novel. Pound offered to supplement my
income by ten dollars a week for a few weeks. My initial research revealed
evidence of an international banking group which had secretly planned the
writing of the Federal Reserve Act and Congress’ enactment of the plan into
law. These findings confirmed what Pound had long suspected. He said, "You
must work on it as a detective story." I was fortunate in having my
research at the Library of Congress directed by a prominent scholar, George
Stimpson, founder of the National Press Club, who was described by The New York
Times of September 28, 1952: "Beloved by Washington newspapermen as ‘our
walking Library of Congress’, Mr. Stimpson was a highly regarded reference
source in the Capitol. Government officials, Congressmen and reporters went to
him for information on any subject." I did research four hours each day at
the Library of Congress, and went to St. Elizabeth’s Hospital in the afternoon.
Pound and I went over the previous day’s notes. I then had dinner with George
Stimpson at Scholl’s Cafeteria while he went over my material, and I then went
back to my room to type up the corrected notes. Both Stimpson and Pound made
many suggestions in guiding me in a field in which I had no previous
experience. When Pound’s resources ran low, I applied to the Guggenheim
Foundation, Huntington Hartford Foundation, and other foundations to complete
my research on the Federal Reserve. Even though my foundation applications were
sponsored by the three leading poets of
This was devastating news, coming after two
years of intensive work. I reported back to Pound, and we tried to find a
publisher in other parts of the country. After two years of fruitless
submissions, the book was published in a small edition in 1952 by two of
Pound’s disciples, John Kasper and David Horton, using their private funds,
under the title Mullins on the Federal Reserve. In 1954, a second edition, with
unauthorized alterations, was published in
The burning of the book was upheld
I had collaborated on several books with Mr.
H.L. Hunt and he suggested that I should continue my long-delayed research on
the Federal Reserve and bring out a more definitive version of this book. I had
just signed a contract to write the authorized biography of Ezra Pound, and the
Federal Reserve book had to be postponed. Mr. Hunt passed away before I could
get back to my research, and once again I faced the problem of financing
research for the book.
My original book had traced and named the
shadowy figures in the
This research is substantiated by citations
and documentation from hundreds of newspapers, periodicals and books and charts
showing blood, marriage, and business relationships. More than a thousand
issues of The New York Times on microfilm have been checked not only for
original information, but verification of statements from other sources.
It is a truism of the writing profession that a
writer has only one book within him. This seems applicable in my case, because
I am now in the fifth decade of continuous writing on a single subject, the
inside story of the Federal Reserve System. This book was from its inception
commissioned and guided by Ezra Pound. Four of his protégés have previously
been awarded the Nobel Prize for Literature, William Butler Yeats for his later
poetry, James Joyce for "Ulysses", Ernest Hemingway for "The Sun
Also Rises", and T.S. Elliot for "The Waste Land". Pound played
a major role in the inspiration and in the editing of these works--which leads
us to believe that this present work, also inspired by Pound, represents an
ongoing literary tradition.
Although this book in its inception was
expected to be a tortuous work on economic and monetary techniques, it soon
developed into a story of such universal and dramatic appeal that from the
outset, Ezra Pound urged me to write it as a detective story, a genre which was
invented by my fellow Virginian, Edgar Allan Poe. I believe that the continuous
circulation of this book during the past forty years has not only exonerated
Ezra Pound for his much condemned political and monetary statements, but also
that it has been, and will continue to be, the ultimate weapon against the
powerful conspirators who compelled him to serve thirteen and a half years
without trial, as a political prisoner held in an insane asylum a la KGB. His
earliest vindication came when the government agents who represented the
conspirators refused to allow him to testify in his own defense; the second
vindication came in 1958 when these same agents dropped all charges against
him, and he walked out of St. Elizabeth’s Hospital, a free man once more. His
third and final vindication is this work, which documents every aspect of his
exposure of the ruthless international financiers to whom Ezra Pound became but
one more victim, doomed to serve years as the Man in the Iron Mask, because he
had dared to alert his fellow-Americans to their furtive acts of treason
against all people of the United States.
In my lectures throughout this nation, and in
my appearances on many radio and television programs, I have sounded the toxin
that the Federal Reserve System is not Federal; it has no reserves; and it is
not a system at all, but rather, a criminal syndicate. From November, 1910,
when the conspirators met on
American history in the twentieth century has
recorded the amazing achievements of the Federal Reserve bankers. First, the
outbreak of World War I, which was made possible by the funds available from
the new central bank of the
Because of the depth and the importance of the
information which I had developed at the Library of Congress under the tutelage
of Ezra Pound, this work became the happy hunting ground for many other
would-be historians, who were unable to research this material for themselves.
Over the past four decades, I have become accustomed to seeing this material
appear in many other books, invariably attributed to other writers, with my
name never mentioned. To add insult to injury, not only my material, but even
my title has been appropriated, in a massive, if obtuse, work called
"Secrets of the
After my initial shock at discovering that the
most influential literary personality of the twentieth century, Ezra Pound, was
imprisoned in "the Hellhole" in Washington, I immediately wrote for
assistance to a Wall Street financier at whose estate I had frequently been a
guest. I reminded him that as a patron of the arts, he could not afford to
allow Pound to remain in such inhuman captivity. His reply shocked me even
more. He wrote back that "your friend can well stay where he is." It
was some years before I was able to understand that, for this investment banker
and his colleagues, Ezra Pound would always be "the enemy". Eustace
Mullins Jackson Hole, Wyoming 1991 Introduction Here are the simple facts of
the great betrayal. Wilson and House knew that they were doing something
momentous. One cannot fathom men’s motives and this pair probably believed in what
they were up to. What they did not believe in was representative government.
They believed in government by an uncontrolled oligarchy whose acts would only
become apparent after an interval so long that the electorate would be forever
incapable of doing anything efficient to remedy depredations.
EZRA POUND (St. Elizabeth’s Hospital,
Washington, D.C. 1950) (AUTHOR’S NOTE: Dr. Pound wrote this introduction for
the earliest version of this book, published by Kasper and Horton, New York,
1952. Because he was being held as a political prisoner without trial by the
Federal Government, he could not afford to allow his name to appear on the book
because of additional reprisals against him. Neither could he allow the book to
be dedicated to him, although he had commissioned its writing. The author is
gratified to be able to remedy these necessary omissions, thirty-three years
after the events.)
JEFFERSON’S
OPINION ON THE CONSTITUTIONALITY OF THE BANK February 15, 1791 (The Writings of
Thomas Jefferson, ed. by H. E. Bergh, Vol. III, p. 145 ff.)
The bill
for establishing a national bank, in 1791, undertakes, among other things,--
1. To form the subscribers into a
corporation.
2. To enable them, in their
corporate capacities, to receive grants of lands; and, so far, is against the
laws of mortmain.
3. To make alien subscribers capable
of holding lands; and so far is against the laws of alienage.
4. To transmit these lands, on the
death of a proprietor, to a certain line of successors; and so far, changes the
course of descents.
5. To put the lands out of the reach
of forfeiture, or escheat; and so far, is against the laws of forfeiture and
escheat.
6. To transmit personal chattels to
successors, in a certain line; and so far, is against the laws of distribution.
7. To give them the sole and
exclusive right of banking, under the national authority; and, so far, is
against the laws of monopoly.
8. To communicate to them a power to
make laws, paramount to the laws of the states; for so they must be construed,
to protect the institution from the control of the state legislatures; and so
probably they will be construed.
I consider the foundation of the Constitution
as laid on this ground--that all powers not delegated to the United States, by
the Constitution, nor prohibited by it to the states, are reserved to the
states, or to the people (12th amend.). To take a single step beyond the
boundaries thus specially drawn around the powers of Congress, is to take
possession of a boundless field of power, no longer susceptible of any
definition. The incorporation of a bank, and the powers assumed by this bill,
have not, in my opinion, been delegated to the United States by the
Constitution.
CHAPTER ONE
Jekyll Island
"The matter of a uniform discount rate
was discussed and settled at Jekyll Island."--Paul M. Warburg1 On the
night of November 22, 1910, a group of newspaper reporters stood disconsolately
in the railway station at Hoboken, New Jersey. They had just watched a
delegation of the nation’s leading financiers leave the station on a secret
mission. It would be years before they discovered what that mission was, and
even then they would not understand that the history of the United States
underwent a drastic change after that night in Hoboken.
The delegation had left in a sealed railway
car, with blinds drawn, for an undisclosed destination. They were led by
Senator Nelson Aldrich, head of the National Monetary Commission. President
Theodore Roosevelt had signed into law the bill creating the National Monetary
Commission in 1908, after the tragic Panic of 1907 had resulted in a public
outcry that the nation’s monetary system be stabilized. Aldrich had led the
members of the Commission on a two-year tour of Europe, spending some three
hundred thousand dollars of public money. He had not yet made a report on the
results of this trip, nor had he offered any plan for banking reform.
Accompanying Senator Aldrich at the Hoboken
station were his private secretary, Shelton; A. Piatt Andrew, Assistant
Secretary of the Treasury, and Special Assistant of the National Monetary
Commission; Frank Vanderlip, president of the National City Bank of New York,
Henry P. Davison, senior partner of J.P. Morgan Company, and generally regarded
as Morgan’s personal emissary; and Charles D. Norton, president of the
Morgan-dominated First National Bank of New York. Joining the group just before
the train left the station were Benjamin Strong, also known as a lieutenant of
J.P. Morgan; and Paul Warburg, a recent immigrant from Germany who had joined
the banking house of Kuhn, Loeb and Company, New York as a partner earning five
hundred thousand dollars a year.
Six years later, a financial writer named
Bertie Charles Forbes (who later founded the Forbes Magazine; the present
editor, Malcom Forbes, is his son), wrote: "Picture a party of the
nation’s greatest bankers stealing out of New York on a private railroad car
under cover of darkness, stealthily hieing hundred of miles South, embarking on
a mysterious launch, sneaking onto an island deserted by all but a few
servants, living there a full week under such rigid secrecy that the names of
not one of them was once mentioned lest the servants learn the identity and
disclose to the world this strangest, most secret expedition in the history of
American finance. I am not romancing; I am giving to the world, for the first
time, the real story of how the famous Aldrich currency report, the foundation
of our new currency system, was written . . . . The utmost secrecy was enjoined
upon all. The public must not glean a hint of what was to be done. Senator
Aldrich notified each one to go quietly into a private car of which the
railroad had received orders to draw up on an unfrequented platform. Off the
party set. New York’s ubiquitous reporters had been foiled . . . Nelson
(Aldrich) had confided to Henry, Frank, Paul and Piatt that he was to keep them
locked up at Jekyll Island, out of the rest of the world, until they had
evolved and compiled a scientific currency system for the United States, the
real birth of the present Federal Reserve System, the plan done on Jekyll
Island in the conference with Paul, Frank and Henry . . . . Warburg is the link
that binds the Aldrich system and the present system together. He more than any
one man has made the system possible as a working reality."
The official biography of Senator Nelson
Aldrich states: "In the autumn of 1910, six men went out to shoot ducks,
Aldrich, his secretary Shelton, Andrews, Davison, Vanderlip and Warburg.
Reporters were waiting at the Brunswick (Georgia) station. Mr. Davison went out
and talked to them. The reporters dispersed and the secret of the strange
journey was not divulged. Mr. Aldrich asked him how he had managed it and he
did not volunteer the information."
Davison had an excellent reputation as the
person who could conciliate warring factions, a role he had performed for J.P.
Morgan during the settling of the Money Panic of 1907. Another Morgan partner,
T.W. Lamont, says: "Henry P. Davison served as arbitrator of the Jekyll
Island expedition."
From these references, it is possible to piece
together the story. Aldrich’s private car, which had left Hoboken station with
its shades drawn, had taken the financiers to Jekyll Island, Georgia. Some
years earlier, a very exclusive group of millionaires, led by J.P. Morgan, had
purchased the island as a winter retreat. They called themselves the Jekyll
Island Hunt Club, and, at first, the island was used only for hunting expeditions,
until the millionaires realized that its pleasant climate offered a warm
retreat from the rigors of winters in New York, and began to build splendid
mansions, which they called "cottages", for their families’ winter
vacations. The club building itself, being quite isolated, was sometimes in
demand for stag parties and other pursuits unrelated to hunting. On such
occasions, the club members who were not invited to these specific outings were
asked not to appear there for a certain number of days. Before Nelson Aldrich’s
party had left New York, the club’s members had been notified that the club
would be occupied for the next two weeks.
The Jekyll Island Club was chosen as the place
to draft the plan for control of the money and credit of the people of the
United States, not only because of its isolation, but also because it was the
private preserve of the people who were drafting the plan. The New York Times
later noted, on May 3, 1931, in commenting on the death of George F. Baker, one
of J.P. Morgan’s closest associates, that "Jekyll Island Club has lost one
of its most distinguished members. One-sixth of the total wealth of the world
was represented by the members of the Jekyll Island Club." Membership was
by inheritance only.
The Aldrich group had no interest in hunting.
Jekyll Island was chosen for the site of the preparation of the central bank
because it offered complete privacy, and because there was not a journalist
within fifty miles. Such was the need for secrecy that the members of the party
agreed, before arriving at Jekyll Island, that no last names would be used at
any time during their two week stay. The group later referred to themselves as
the First Name Club, as the last names of Warburg, Strong, Vanderlip and the
others were prohibited during their stay. The customary attendants had been
given two week vacations from the club, and new servants brought in from the
mainland for this occasion who did not know the names of any of those present.
Even if they had been interrogated after the Aldrich party went back to New
York, they could not have given the names. This arrangement proved to be so
satisfactory that the members, limited to those who had actually been present
at Jekyll Island, later had a number of informal get-togethers in New York.
Why all this secrecy? Why this thousand mile
trip in a closed railway car to a remote hunting club? Ostensibly, it was to
carry out a program of public service, to prepare banking reform which would be
a boon to the people of the United States, which had been ordered by the
National Monetary Commission. The participants were no strangers to public
benefactions. Usually, their names were inscribed on brass plaques, or on the
exteriors of buildings which they had donated. This was not the procedure which
they followed at Jekyll Island. No brass plaque was ever erected to mark the
selfless actions of those who met at their private hunt club in 1910 to improve
the lot of every citizen of the United States.
In fact, no benefaction took place at Jekyll
Island. The Aldrich group journeyed there in private to write the banking and
currency legislation which the National Monetary Commission had been ordered to
prepare in public. At stake was the future control of the money and credit of the
United States. If any genuine monetary reform had been prepared and presented
to Congress, it would have ended the power of the elitist one world money
creators. Jekyll Island ensured that a central bank would be established in the
United States which would give these bankers everything they had always wanted.
As the most technically proficient of those
present, Paul Warburg was charged with doing most of the drafting of the plan.
His work would then be discussed and gone over by the rest of the group.
Senator Nelson Aldrich was there to see that the completed plan would come out
in a form which he could get passed by Congress, and the other bankers were
there to include whatever details would be needed to be certain that they got
everything they wanted, in a finished draft composed during a onetime stay.
After they returned to New York, there could be no second get together to
rework their plan. They could not hope to obtain such secrecy for their work on
a second journey.
The Jekyll Island group remained at the club
for nine days, working furiously to complete their task. Despite the common
interests of those present, the work did not proceed without friction. Senator
Aldrich, always a domineering person, considered himself the chosen leader of
the group, and could not help ordering everyone else about. Aldrich also felt
somewhat out of place as the only member who was not a professional banker. He
had had substantial banking interests throughout his career, but only as a
person who profited from his ownership of bank stock. He knew little about the
technical aspects of financial operations. His opposite number, Paul Warburg,
believed that every question raised by the group demanded, not merely an
answer, but a lecture. He rarely lost an opportunity to give the members a long
discourse designed to impress them with the extent of his knowledge of banking.
This was resented by the others, and often drew barbed remarks from Aldrich.
The natural diplomacy of Henry P. Davison proved to be the catalyst which kept
them at their work. Warburg’s thick alien accent grated on them, and constantly
reminded them that they had to accept his presence if a central bank plan was
to be devised which would guarantee them their future profits. Warburg made
little effort to smooth over their prejudices, and contested them on every
possible occasion on technical banking questions, which he considered his
private preserve.
"In all conspiracies there must be great
secrecy."
The "monetary reform" plan prepared
at Jekyll Island was to be presented to Congress as the completed work of the
National Monetary Commission. It was imperative that the real authors of the
bill remain hidden. So great was popular resentment against bankers since the
Panic of 1907 that no Congressman would dare to vote for a bill bearing the
Wall Street taint, no matter who had contributed to his campaign expenses. The
Jekyll Island plan was a central bank plan, and in this country there was a
long tradition of struggle against inflicting a central bank on the American
people. It had begun with Thomas Jefferson’s fight against Alexander Hamilton’s
scheme for the First Bank of the United States, backed by James Rothschild. It
had continued with President Andrew Jackson’s successful war against Alexander
Hamilton’s scheme for the Second Bank of the United States, in which Nicholas
Biddle was acting as the agent for James Rothschild of Paris. The result of
that struggle was the creation of the Independent Sub-Treasury System, which
supposedly had served to keep the funds of the United States out of the hands
of the financiers. A study of the panics of 1873, 1893, and 1907 indicates that
these panics were the result of the international bankers’ operations in
London. The public was demanding in 1908 that Congress enact legislation to
prevent the recurrence of artificially induced money panics. Such monetary
reform now seemed inevitable. It was to head off and control such reform that
the National Monetary Commission had been set up with Nelson Aldrich at its
head, since he was majority leader of the Senate.
The main problem, as Paul Warburg informed his
colleagues, was to avoid the name "Central Bank". For that reason, he
had decided upon the designation of "Federal Reserve System". This
would deceive the people into thinking it was not a central bank. However, the
Jekyll Island plan would be a central bank plan, fulfilling the main functions
of a central bank; it would be owned by private individuals who would profit
from ownership of shares. As a bank of issue, it would control the nation’s
money and credit.
In the chapter on Jekyll Island in his
biography of Aldrich, Stephenson writes of the conference: "How was the
Reserve Bank to be controlled? It must be controlled by Congress. The
government was to be represented in the board of directors, it was to have full
knowledge of all the Bank’s, affairs, but a majority of the directors were to
be chosen, directly or indirectly, by the banks of the association."
Thus the proposed Federal Reserve Bank was to
be "controlled by Congress" and answerable to the government, but the
majority of the directors were to be chosen, "directly or indirectly"
by the banks of the association. In the final refinement of Warburg’s plan, the
Federal Reserve Board of Governors would be appointed by the President of the
United States, but the real work of the Board would be controlled by a Federal
Advisory Council, meeting with the Governors. The Council would be chosen by
the directors of the twelve Federal Reserve Banks, and would remain unknown to
the public.
The next consideration was to conceal the fact
that the proposed "Federal Reserve System" would be dominated by the
masters of the New York money market. The Congressmen from the South and the
West could not survive if they voted for a Wall Street plan. Farmers and small
businessmen in those areas had suffered most from the money panics. There had
been great popular resentment against the Eastern bankers, which during the
nineteenth century became a political movement known as "populism".
The private papers of Nicholas Biddle, not released until more than a century
after his death, show that quite early on the Eastern bankers were fully aware
of the widespread public opposition to them.
Paul Warburg advanced at Jekyll Island the
primary deception which would prevent the citizens from recognizing that his
plan set up a central bank. This was the regional reserve system. He proposed a
system of four (later twelve) branch reserve banks located in different
sections of the country. Few people outside the banking world would realize
that the existing concentration of the nation’s money and credit structure in
New York made the proposal of a regional reserve system a delusion.
Another proposal advanced by Paul Warburg at
Jekyll Island was the manner of selection of administrators for the proposed
regional reserve system. Senator Nelson Aldrich had insisted that the officials
should be appointive, not elected, and that Congress should have no role in
their selection. His Capitol Hill experience had taught him that congressional
opinion would often be inimical to the Wall Street interests, as Congressmen
from the West and South might wish to demonstrate to their constituents that
they were protecting them against the Eastern bankers.
Warburg responded that the administrators of
the proposed central banks should be subject to executive approval by the
President. This patent removal of the system from Congressional control meant
that the Federal Reserve proposal was unconstitutional from its inception,
because the Federal Reserve System was to be a bank of issue. Article 1, Sec.
8, Par. 5 of the Constitution expressly charges Congress with "the power
to coin money and regulate the value thereof.". Warburg’s plan would
deprive Congress of its sovereignty, and the systems of checks and balances of
power set up by Thomas Jefferson in the Constitution would now be destroyed.
Administrators of the proposed system would control the nation’s money and
credit, and would themselves be approved by the executive department of the
government. The judicial department (the Supreme Court, etc.) was already
virtually controlled by the executive department through presidential
appointment to the bench. Paul Warburg later wrote a massive exposition of his
plan, The Federal Reserve System, Its Origin and Growth7 of some 1750 pages,
but the name "Jekyll Island" appears nowhere in this text. He does
state (Vol. 1, p. 58): "But then the conference closed, after a week of
earnest deliberation, the rough draft of what later became the Aldrich Bill had
been agreed upon, and a plan had been outlined which provided for a ‘National
Reserve Association,’ meaning a central reserve organization with an elastic
note issue based on gold and commercial paper."
On page 60, Warburg writes, "The results
of the conference were entirely confidential. Even the fact there had been a
meeting was not permitted to become public." He adds in a footnote,
"Though eighteen [sic] years have since gone by, I do not feel free to
give a description of this most interesting conference concerning which Senator
Aldrich pledged all participants to secrecy." B.C. Forbes’ revelation 8 of
the secret expedition to Jekyll Island, had had surprisingly little impact. It
did not appear in print until two years after the Federal Reserve Act had been
passed by Congress, hence it was never read during the period when it could
have had an effect, that is, during the Congressional debate on the bill.
Forbes’ story was also dismissed, by those "in the know," as preposterous,
and a mere invention. Stephenson mentions this on page 484 of his book about
Aldrich.
"This curious episode of Jekyll Island
has been generally regarded as a myth. B.C. Forbes got some information from one
of the reporters. It told in vague outline the Jekyll Island story, but made no
impression and was generally regarded as a mere yarn." The coverup of the
Jekyll Island conference proceeded along two lines, both of which were
successful. The first, as Stephenson mentions, was to dismiss the entire story
as a romantic concoction which never actually took place. Although there were
brief references to Jekyll Island in later books concerning the Federal Reserve
System, these also attracted little public attention. As we have noted,
Warburg’s massive and supposedly definite work on the Federal Reserve System
does not mention Jekyll Island at all, although he does admit that a conference
took place. In none of his voluminous speeches or writings do the words "Jekyll
Island" appear, with a single notable exception. He agreed to Professor
Stephenson’s request that he prepare a brief statement for the Aldrich
biography. This appears on page 485 as part of "The Warburg
Memorandum". In this excerpt, Warburg writes, "The matter of a
uniform discount rate was discussed and settled at Jekyll Island." Another
member of the "First Name Club" was less reticent. Frank Vanderlip
later published a few brief references to the conference. In the Saturday Evening
Post, February 9, 1935, p. 25, Vanderlip wrote:
"Despite my views about the value to
society of greater publicity for the affairs of corporations, there was an
occasion near the close of 1910, when I was as secretive, indeed, as furtive,
as any conspirator. . . . Since it would have been fatal to Senator Aldrich’s
plan to have it known that he was calling on anybody from Wall Street to help
him in preparing his bill, precautions were taken that would have delighted the
heart of James Stillman (a colorful and secretive banker who was President of
the National City Bank during the Spanish-American War, and who was thought to
have been involved in getting us into that war) . . .I do not feel it is any
exaggeration to speak of our secret expedition to Jekyll Island as the occasion
of the actual conception of what eventually became the Federal Reserve
System."
In a Travel feature in The Washington Post,
March 27, 1983, "Follow The Rich to Jekyll Island", Roy Hoopes
writes: "In 1910, when Aldrich and four financial experts wanted a place
to meet in secret to reform the country’s banking system, they faked a hunting
trip to Jekyll and for 10 days holed up in the Clubhouse, where they made plans
for what eventually would become the Federal Reserve Bank." Vanderlip
later wrote in his autobiography, From Farmboy to Financier: "Our secret
expedition to Jekyll Island was the occasion of the actual conception of what
eventually became the Federal Reserve System. The essential points of the
Aldrich Plan were all contained in the Federal Reserve Act as it was
passed." Professor E.R.A. Seligman, a member of the international banking
family of J. & W. Seligman, and head of the Department of Economics at
Columbia University, wrote in an essay published by the Academy of Political
Science, Proceedings, v. 4, No. 4, p. 387-90: "It is known to a very few
how great is the indebtedness of the United States to Mr. Warburg. For it may
be said without fear of contradiction that in its fundamental features the
Federal Reserve Act is the work of Mr. Warburg more than any other man in the
country.
The
existence of a Federal Reserve Board creates, in everything but in name, a real
central bank. In the two fundamentals of command of reserves and of a discount
policy, the Federal Reserve Act has frankly accepted the principle of the
Aldrich Bill, and these principles, as has been stated, were the creation of
Mr. Warburg and Mr. Warburg alone. It must not be forgotten that Mr. Warburg
had a practical object in view. In formulating his plans and in advancing in
them slightly varying suggestions from time to time, it was incumbent on him to
remember that the education of the country must be gradual and that a large
part of the task was to break down prejudices and remove suspicion. His plans
therefore contained all sorts of elaborate suggestions designed to guard the
public against fancied dangers and to persuade the country that the general
scheme was at all practicable. It was the hope of Mr. Warburg that with the
lapse of time it might be possible to eliminate from the law a few clauses
which were inserted largely at his suggestion for educational purposes."
Now that the public debt of the United States
has passed a trillion dollars, we may indeed admit "how great is the
indebtedness of the United States to Mr. Warburg." At the time he wrote
the Federal Reserve Act, the public debt was almost nonexistent.
Professor Seligman points out Warburg’s
remarkable prescience that the real task of the members of the Jekyll Island
conference was to prepare a banking plan which would gradually "educate
the country" and "break down prejudices and remove suspicion".
The campaign to enact the plan into law succeeded in doing just that.
CHAPTER TWO
The Aldrich Plan
"Finance and the tariff are reserved by
Nelson Aldrich as falling within his sole purview and jurisdiction. Mr. Aldrich
is endeavoring to devise, through the National Monetary Commission, a banking
and currency law. A great many hundred thousand persons are firmly of the
opinion that Mr. Aldrich sums up in his personality the greatest and most
sinister menace to the popular welfare of the United States. Ernest Newman
recently said, ‘What the South visits on the Negro in a political way, Aldrich
would mete out to the mudsills of the North, if he could devise a safe and
practical way to accomplish it.’"--Harper’s Weekly, May 7, 1910."
The participants in the Jekyll Island
conference returned to New York to direct a nationwide propaganda campaign in
favor of the "Aldrich Plan". Three of the leading universities,
Princeton, Harvard, and the University of Chicago, were used as the rallying
points for this propaganda, and national banks had to contribute to a fund of
five million dollars to persuade the American public that this central bank
plan should be enacted into law by Congress.
Woodrow Wilson, governor of New Jersey and
former president of Princeton University, was enlisted as a spokesman for the
Aldrich Plan. During the Panic of 1907, Wilson had declared, "All this
trouble could be averted if we appointed a committee of six or seven
public-spirited men like J.P. Morgan to handle the affairs of our
country."
In his biography of Nelson Aldrich in 1930,
Stephenson says: "A pamphlet was issued January 16, 1911, ‘Suggested Plan
for Monetary Legislation’, by Hon. Nelson Aldrich, based on Jekyll Island
conclusions." Stephenson says on page 388, "An organization for
financial progress has been formed. Mr. Warburg introduced a resolution
authorizing the establishment of the Citizens’ League, later the National Citizens
League . . . Professor Laughlin of the University of Chicago was given charge
of the League’s propaganda."
It is notable that Stephenson characterizes
the work of the National Citizens League as "propaganda", in line
with Seligman’s exposition of Warburg’s work as "the education of the
country" and "to break down prejudices".
Much of the five million dollars of the
bankers slush fund was spent under the auspices of the National Citizens’
League, which was made up of college professors. The two most tireless
propagandists for the Aldrich Plan were Professor O.M. Sprague of Harvard, and
J. Laurence Laughlin of the University of Chicago.
Congressman Charles A. Lindbergh, Sr., notes:
"J. Laurence Laughlin, Chairman of the Executive Committee of the National
Citizens’ League since its organization, has returned to his position as
professor of political economics in the University of Chicago. In June, 1911,
Professor Laughlin was given a year’s leave from the university, that he might
give all of his time to the campaign of education undertaken by the League . .
. He has worked indefatigably, and it is largely due to his efforts and his
persistence that the campaign enters the final stage with flattering prospects
of a successful outcome . . . The reader knows that the University of Chicago
is an institution endowed by John D. Rockefeller, with nearly fifty million
dollars." In his biography of Nelson Aldrich, Stephenson reveals that the
Citizens’ League was also a Jekyll Island product.
In
chapter 24 we find that: The Aldrich Plan was represented to Congress as the
result of three years of work, study and travel by members of the National
Monetary Commission, with expenditures of more than three hundred thousand
dollars. Testifying before the Committee on Rules, December 15, 1911, after the
Aldrich plan had been introduced in Congress, Congressman Lindbergh stated,
"Our financial system is a false one and a huge burden on the people . . .
I have alleged that there is a Money Trust. The Aldrich plan is a scheme
plainly in the interest of the Trust . . . Why does the Money Trust press so
hard for the Aldrich Plan now, before the people know what the money trust has
been doing?" Lindbergh continued his speech, "The Aldrich Plan is the
Wall Street Plan. It is a broad challenge to the Government by the champion of
the Money Trust. It means another panic, if necessary, to intimidate the
people. Aldrich, paid by the Government to represent the people, proposes a
plan for the trusts instead. It was by a very clever move that the National
Monetary Commission was created. In 1907 nature responded most beautifully and
gave this country the most bountiful crop it had ever had. Other industries
were busy too, and from a natural standpoint all the conditions were right for
a most prosperous year. Instead, a panic entailed enormous losses upon us. Wall
Street knew the American people were demanding a remedy against the recurrence
of such a ridiculously unnatural condition. Most Senators and Representatives fell
into the Wall Street trap and passed the Aldrich Vreeland Emergency Currency
Bill. But the real purpose was to get a monetary commission which would frame a
proposition for amendments to our currency and banking laws which would suit
the Money Trust. The interests are now busy everywhere educating the people in
favor of the Aldrich Plan.
It is
reported that a large sum of money has been raised for this purpose. Wall
Street speculation brought on the Panic of 1907. The depositors’ funds were
loaned to gamblers and anybody the Money Trust wanted to favour. Then when the
depositors wanted their money, the banks did not have it. That made the
panic." Edward Vreeland, co-author of the bill, wrote in the August 25,
1910 Independent (which was owned by Aldrich), "Under the proposed
monetary plan of Senator Aldrich, monopolies will disappear, because they will
not be able to make more than four percent interest and monopolies cannot
continue at such a low rate. Also, this will mark the disappearance of the Government
from the banking business." Vreeland’s fantastic claims were typical of
the propaganda flood unleashed to pass the Aldrich Plan. Monopolies would
disappear, the Government would disappear from the banking business. Pie in the
sky. Nation Magazine, January 19, 1911, noted, "The name of Central Bank
is carefully avoided, but the ‘Federal Reserve Association’, the name given to
the proposed central organization, is endowed with the usual powers and
responsibilities of a European Central Bank." After the National Monetary
Commission had returned from Europe, it held no official meetings for nearly
two years. No records or minutes were ever presented showing who had authored
the Aldrich Plan. Since they held no official meetings, the members of the
commission could hardly claim the Plan as their own. The sole tangible result
of the Commission’s three hundred thousand dollar expenditure was a library of
thirty massive volumes on European banking. Typical of these works is a
thousand page history of the Reichsbank, the central bank which controlled
money and credit in Germany, and whose principal stockholders, were the
Rothschilds and Paul Warburg’s family banking house of M.M. Warburg Company.
The Commission’s records show that it never functioned as a deliberative body.
Indeed, its only "meeting" was the secret conference held at Jekyll
Island, and this conference is not mentioned in any publication of the
Commission. Senator Cummins passed a resolution in Congress ordering the
Commission to report on January 8, 1912, and show some constructive results of
its three years’ work. In the face of this challenge, the National Monetary
Commission ceased to exist.
With their five million dollars as a war
chest, the Aldrich Plan propagandists waged a no-holds barred war against their
opposition. Andrew Frame testified before the House Banking and Currency
Committee of the American Bankers Association. He represented a group of
Western bankers who opposed the Aldrich Plan: CHAIRMAN CARTER GLASS: "Why
didn’t the Western bankers make themselves heard when the American Bankers
Association gave its unqualified and, we are assured, unanimous approval of the
scheme proposed by the National Monetary Commission?"
ANDREW FRAME: "I’m glad you called my
attention to that. When that monetary bill was given to the country, it was but
a few days previous to the meeting of the American Bankers Association in New
Orleans in 1911. There was not one banker in a hundred who had read that bill.
We had twelve addresses in favor of it. General Hamby of Austin, Texas, wrote a
letter to President Watts asking for a hearing against the bill. He did not get
a very courteous answer. I refused to vote on it, and a great many other
bankers did likewise." MR. BULKLEY: "Do you mean that no member of
the Association could be heard in opposition to the bill?" ANDREW FRAME:
"They throttled all argument." MR. KINDRED: "But the report was
given out that it was practically unanimous." ANDREW FRAME: "The bill
had already been prepared by Senator Aldrich and presented to the executive
council of the American Bankers Association in May, 1911. As a member of that
council, I received a copy the day before they acted upon it. When the bill
came in at New Orleans, the bankers of the United States had not read it."
MR. KINDRED: "Did the presiding officer simply rule out those who wanted
to discuss it negatively?" ANDREW FRAME: "They would not allow anyone
on the program who was not in favor of the bill." CHAIRMAN GLASS:
"What significance has the fact that at the next annual meeting of the
American Bankers Association held at Detroit in 1912, the Association did not
reiterate its endorsement of the plan of the National Monetary Commission,
known as the Aldrich scheme?" ANDREW FRAME: "It did not reiterate the
endorsement for the simple fact that the backers of the Aldrich Plan knew that
the Association would not endorse it. We were ready for them, but they did not
bring it up."
Andrew Frame exposed the collusion which in
1911 procured an endorsement of the Aldrich Plan from the American Bankers
Association but which in 1912 did not even dare to repeat its endorsement, for
fear of an honest and open discussion of the merits of the plan.
Chairman Glass then called as witness one of
the ten most powerful bankers in the United States, George Blumenthal, partner
of the international banking house of Lazard Freres and brother-in-law of
Eugene Meyer, Jr. Carter Glass effusively welcomed Blumenthal, stating that
"Senator O’Gorman of New York was kind enough to suggest your name to
us." A year later, O’Gorman prevented a Senate Committee from asking his
master, Paul Warburg, any embarrassing questions before approving his
nomination as the first Governor of the Federal Reserve Board.
George Blumenthal stated, "Since 1893 my firm
of Lazard Freres has been foremost in importations and exportations of gold and
has thereby come into contact with everybody who had anything to do with
it."
Congressman Taylor asked, "Have you a
statement there as to the part you have had in the importation of gold into the
United States?" Taylor asked this because the Panic of 1893 is known to
economists as a classic example of a money panic caused by gold movements.
"No," replied George Blumenthal,
"I have nothing at all on that, because it is not bearing on the
question."
A banker from Philadelphia, Leslie Shaw,
dissented with other witnesses at these hearings, criticizing the much vaunted
"decentralization" of the System. He said, "Under the Aldrich
Plan the bankers are to have local associations and district associations, and
when you have a local organization, the centered control is assured. Suppose we
have a local association in Indianapolis; can you not name the three men who
will dominate that association? And then can you not name the one man
everywhere else. When you have hooked the banks together, they can have the
biggest influence of anything in this country, with the exception of the
newspapers."
To promote the Democratic currency bill,
Carter Glass made public the sorry record of the Republican efforts of Senator
Aldrich’s National Monetary Commission. His House Report in 1913 said,
"Senator MacVeagh fixes the cost of the National Monetary Commission to
May 12, 1911 at $207,130. They have since spent another hundred thousand dollars
of the taxpayer’s money. The work done at such cost cannot be ignored, but,
having examined the extensive literature published by the Commission, the
Banking and Currency Committee finds little that bears upon the present state
of the credit market of the United States. We object to the Aldrich Bill on the
following points:
Its entire lack of adequate government or
public control of the banking mechanism it sets up.
Its tendency to throw voting control into the
hands of the large banks of the system.
The extreme danger of inflation of currency
inherent in the system. The insincerity of the bond-funding plan provided for
by the measure, there being a barefaced pretense that this system was to cost
the governmentnothing.
The dangerous monopolistic aspects of the
bill. Our Committee at the outset of its work was met by a well-defined
sentiment in favor of a central bank which was the manifest outgrowth of the
work that had been done by the National Monetary Commission."
Glass’s denunciation of the Aldrich Bill as a
central bank plan ignored the fact that his own Federal Reserve Act would
fulfill all the functions of a central bank. Its stock would be owned by
private stockholders who could use the credit of the Government for their own
profit; it would have control of the nation’s money and credit resources; and
it would be a bank of issue which would finance the government by
"mobilizing" credit in time of war. In "The Rationale of Central
Banking," Vera C. Smith (Committee for Monetary Research and Education,
June, 1981) writes, "The primary definition of a central bank is a banking
system in which a single bank has either a complete or residuary monopoly in
the note issue. A central bank is not a natural product of banking development.
It is imposed from outside or comes into being as the result of Government
favors."
Thus a central bank attains its commanding
position from its government granted monopoly of the note issue. This is the key
to its power. Also, the act of establishing a central bank has a direct
inflationary impact because of the fractional reserve system, which allows the
creation of book-entry loans and thereby, money, a number of times the actual
"money" which the bank has in its deposits or reserves.
The Aldrich Plan never came to a vote in
Congress, because the Republicans lost control of the House in 1910, and
subsequently lost the Senate and the Presidency in 1912.
CHAPTER THREE
The Federal Reserve Act
"Our financial system is a false one and
a huge burden on the people . . . This Act establishes the most gigantic trust
on earth."--Congressman Charles Augustus Lindbergh, Sr.
The speeches of Senator LaFollette and
Congressman Lindbergh became rallying points of opposition to the Aldrich Plan
in 1912. They also aroused popular feeling against the Money Trust. Congressman
Lindbergh said, on December 15, 1911, "The government prosecutes other
trusts, but supports the money trust. I have been waiting patiently for several
years for an opportunity to expose the false money standard, and to show that
the greatest of all favoritism is that extended by the government to the money
trust."
Senator LaFollette publicly charged that a
money trust of fifty men controlled the United States. George F. Baker, partner
of J.P. Morgan, on being queried by reporters as to the truth of the charge,
replied that it was absolutely in error. He said that he knew from personal
knowledge that not more than eight men ran this country.
The Nation Magazine replied editorially to
Senator LaFollette that "If there is a Money Trust, it will not be
practical to establish that it exercises its influence either for good or for
bad."
Senator LaFollette remarks in his memoirs that
his speech against the Money Trust later cost him the Presidency of the United
States, just as Woodrow Wilson’s early support of the Aldrich Plan had brought
him into consideration for that office.
Congress finally made a gesture to appease
popular feeling by appointing a committee to investigate the control of money
and credit in the United States. This was the Pujo Committee , a subcommittee
of the House Banking and Currency Committee, which conducted the famous
"Money Trust" hearings in 1912, under the leadership of Congressman
Arsene Pujo of Louisiana, who was regarded as a spokesman for the oil
interests. These hearings were deliberately dragged on for five months, and
resulted in six-thousand pages of printed testimony in four volumes. Month
after month, the bankers made the train trip from New York to Washington,
testified before the Committee and returned to New York.
The
hearings were extremely dull, and no startling information turned up at these
sessions. The bankers solemnly admitted that they were indeed bankers, insisted
that they always operated in the public interest, and claimed that they were
animated only by the highest ideals of public service, like the Congressmen
before whom they were testifying. The paradoxical nature of the Pujo Money
Trust Hearings may better be understood if we examine the man who
single-handedly carried on these hearings, Samuel Untermyer. He was one of the
principal contributors to Woodrow Wilson’s Presidential campaign fund, and was
one of the wealthiest corporation lawyers in New York. He states in his
autobiography in "Who’s Who" of 1926 that he once received a $775,000
fee for a single legal transaction, the successful merger of the Utah Copper
Company and the Boston Consolidated and Nevada Company, a firm with a market
value of one hundred million dollars. He refused to ask either Senator
LaFollette or Congressman Lindbergh to testify in the investigation which they
alone had forced Congress to hold. As Special Counsel for the Pujo Committee,
Untermyer ran the hearings as a one-man operation. The Congressional members,
including its chairman, Congressman Arsene Pujo, seemed to have been struck
dumb from the commencement of the hearings to their conclusion. One of these
silent servants of the public was Congressman James Byrnes, of South Carolina,
representing Bernard Baruch’s home district, who later achieved fame as
"Baruch’s man", and was placed by Baruch in charge of the Office of
War Mobilization during the Second World War.
Although he was a specialist in such matters,
Untermyer did not ask any of the bankers about the system of interlocking
directorates through which they controlled industry. He did not go into
international gold movements, which were known as a factor in money panics, or
the international relationships between American bankers and European bankers.
The international banking houses of Eugene Meyer, Lazard Freres, J. & W.
Seligman, Ladenburg Thalmann, Speyer Brothers, M. M. Warburg, and the
Rothschild Brothers did not arouse Samuel Untermyer’s curiosity, although it
was well known in the New York financial world that all of these family banking
houses either had branches or controlled subsidiary houses in Wall Street. When
Jacob Schiff appeared before the Pujo Committee, Mr. Untermyer’s adroit
questioning allowed Mr. Schiff to talk for many minutes without revealing any
information about the operations of the banking house of Kuhn Loeb Company, of
which he was senior partner, and which Senator Robert L. Owen had identified as
the representative of the European Rothschilds in the United States.
The aging J.P. Morgan, who had only a few more
months to live, appeared before the Committee to justify his decades of
international financial deals. He stated for Mr. Untermyer’s edification that
"Money is a commodity." This was a favorite ploy of the money
creators, as they wished to make the public believe that the creation of money
was a natural occurrence akin to the growing of a field of corn, although it
was actually a bounty conferred upon the bankers by governments over which they
had gained control.
J.P. Morgan also told the Pujo Committee that,
in making a loan, he seriously considered only one factor, a man’s character;
even the man’s ability to repay the loan, or his collateral, were of little
importance. This astonishing observation startled even the blasé members of the
Committee.
The farce of the Pujo Committee ended without
a single well-known opponent of the money creators being allowed to appear or testify.
As far as Samuel Untermyer was concerned, Senator LaFollette and Congressman
Charles Augustus Lindbergh had never existed. Nevertheless, these Congressmen
had managed to convince the people of the United States that the New York
bankers did have a monopoly on the nation’s money and credit. At the close of
the hearings, the bankers and their subsidized newspapers claimed that the only
way to break this monopoly was to enact the banking and currency legislation
now being proposed to Congress, a bill which would be passed a year later as
the Federal Reserve Act. The press seriously demanded that the New York banking
monopoly be broken by turning over the administration of the new banking system
to the most knowledgeable banker of them all, Paul Warburg.
The Presidential campaign of 1912 records one
of the more interesting political upsets in American history. The incumbent,
William Howard Taft, was a popular president, and the Republicans, in a period
of general prosperity, were firmly in control of the government through a
Republican majority in both houses. The Democratic challenger, Woodrow Wilson,
Governor of New Jersey, had no national recognition, and was a stiff, austere
man who excited little public support. Both parties included a monetary reform
bill in their platforms: The Republicans were committed to the Aldrich Plan,
which had been denounced as a Wall Street plan, and the Democrats had the
Federal Reserve Act. Neither party bothered to inform the public that the bills
were almost identical except for the names. In retrospect, it seems obvious
that the money creators decided to dump Taft and go with Wilson. How do we know
this? Taft seemed certain of reelection, and Wilson would return to obscurity.
Suddenly, Theodore Roosevelt "threw his hat into the ring." He
announced that he was running as a third party candidate, the "Bull
Moose". His candidacy would have been ludicrous had it not been for the
fact that he was exceptionally well-financed. Moreover, he was given unlimited
press coverage, more than Taft and Wilson combined. As a Republican
ex-president, it was obvious that Roosevelt would cut deeply into Taft’s vote.
This
proved the case, and Wilson won the election. To this day, no one can say what
Theodore Roosevelt’s program was, or why he would sabotage his own party. Since
the bankers were financing all three candidates, they would win regardless of
the outcome. Later Congressional testimony showed that in the firm of Kuhn Loeb
Company, Felix Warburg was supporting Taft, Paul Warburg and Jacob Schiff were
supporting Wilson, and Otto Kahn was supporting Roosevelt. The result was that
a Democratic Congress and a Democratic President were elected in 1912 to get
the central bank legislation passed. It seems probable that the identification
of the Aldrich Plan as a Wall Street operation predicted that it would have a
difficult passage through Congress, as the Democrats would solidly oppose it,
whereas a successful Democratic candidate, supported by a Democratic Congress,
would be able to pass the central bank plan. Taft was thrown overboard because
the bankers doubted he could deliver on the Aldrich Plan, and Roosevelt was the
instrument of his demise. The final electoral vote in 1912 was Wilson - 409;
Roosevelt - 167; and Taft - 15.
To further confuse the American people and
blind them to the real purpose of the proposed Federal Reserve Act, the
architects of the Aldrich Plan, powerful Nelson Aldrich, although no longer a
senator, and Frank Vanderlip, president of the National City Bank, set up a hue
and cry against the bill. They gave interviews whenever they could find an
audience denouncing the proposed Federal Reserve Act as inimical to banking and
to good government. The bugaboo of inflation was raised because of the Act’s
provisions for printing Federal Reserve notes. The Nation, on October 23, 1913,
pointed out, "Mr. Aldrich himself raised a hue and cry over the issue of
government "fiat money", that is, money issued without gold or
bullion back of it, although a bill to do precisely that had been passed in
1908 with his own name as author, and he knew besides, that the ‘government’
had nothing to do with it, that the Federal Reserve Board would have full
charge of the issuing of such moneys." Frank Vanderlip’s claims were so
bizarre that Senator Robert L. Owen, chairman of the newly formed Senate
Banking and Currency Committee, which had been formed on March 18, 1913,
accused him of openly carrying on a campaign of misrepresentation about the
bill. The interests of the public, so Carter Glass claimed in a speech on
September 10, 1913 to Congress, would be protected by an advisory council of
bankers. "There can be nothing sinister about its transactions. Meeting
with it at least four times a year will be a bankers’ advisory council representing
every regional reserve district in the system. How could we have exercised
greater caution in safeguarding the public interests?"
Glass claimed that the proposed Federal
Advisory Council would force the Federal Reserve Board of Governors to act in
the best interest of the people. Senator Root raised the problem of inflation,
claiming that under the Federal Reserve Act, note circulation would always
expand indefinitely, causing great inflation. However, the later history of the
Federal Reserve System showed that it not only caused inflation, but that the
issue of notes could also be restricted, causing deflation, as occurred from
1929 to 1939. One of the critics of the proposed "decentralized"
system was a lawyer from Cleveland, Ohio, Alfred Crozier: Crozier was called to
testify for the Senate Committee because he had written a provocative book in
1912, U.S. Money vs. Corporation Currency. He attacked the Aldrich-Vreeland Act
of 1908 as a Wall Street instrument, and he pointed out that when our government
had to issue money based on privately owned securities, we were no longer a
free nation. Crozier testified before the Senate Committee that, "It
should prohibit the granting or calling in of loans for the purpose of
influencing quotation prices of securities and the contracting of loans or
increasing interest rates in concert by the banks to influence public opinion
or the action of any legislative body.
Within
recent months, William McAdoo, Secretary of the Treasury of the United States
was reported in the open press as charging specifically that there was a
conspiracy among certain of the large banking interests to put a contraction
upon the currency and to raise interest rates for the sake of making the public
force Congress into passing currency legislation desired by those interests.
The so-called administration currency bill grants just what Wall Street and the
big banks for twenty-five years have been striving for, that is, PRIVATE INSTEAD OF PUBLIC CONTROL OF
CURRENCY. It does this as completely as the Aldrich Bill. Both measures rob
the government and the people of all effective control over the public’s money,
and vest in the banks exclusively the dangerous power to make money among the
people scarce or plenty. The Aldrich Bill puts this power in one central bank.
The Administration Bill puts it in twelve regional central banks, all owned
exclusively by the identical private interests that would have owned and
operated the Aldrich Bank. President Garfield shortly before his assassination
declared that whoever controls the supply of currency would control the
business and activities of the people. Thomas Jefferson warned us a hundred
years ago that a private central bank issuing the public currency was a greater
menace to the liberties of the people than a standing army."
It is interesting to note how many
assassinations of Presidents of the United States follow their concern with the
issuing of public currency; Lincoln with his Greenback, non-interest-bearing
notes, and Garfield, making a pronouncement on currency problems just before he
was assassinated.
We now begin to understand why such a lengthy
campaign of planned deception was necessary, from the secret conference at
Jekyll Island to the identical "reform" plans proposed by the Democratic
and Republican parties under different names. The bankers could not wrest
control of the issuance of money from the citizens of the United States, to
whom it had been designated through its Congress by the Constitution, until the
Congress granted them their monopoly for a central bank. Therefore, much of the
influence exerted to get the Federal Reserve Act passed was done behind the
scenes, principally by two shadowy, non-elected persons: The German immigrant,
Paul Warburg, and Colonel Edward Mandell House of Texas. Paul Warburg made an
appearance before the House Banking and Currency Committee in 1913, in which he
briefly stated his background: "I am a member of the banking house of
Kuhn, Loeb Company. I came over to this country in 1902, having been born and
educated in the banking business in Hamburg, Germany, and studied banking in
London and Paris, and have gone all around the world. In the Panic of 1907, the
first suggestion I made was ‘Let us get a national clearing house.’ The Aldrich
Plan contains some things which are simply fundamental rules of banking. Your
aim in this plan (the Owen-Glass bill) must be the same--centralizing of
reserves, mobilizing commercial credit, and getting an elastic note
issue."
Warburg’s phrase, "mobilization of credit"
was an important one, because the First World War was due to begin shortly, and
the first task of the Federal Reserve System would be to finance the World War.
The European nations were already bankrupt, because they had maintained large
standing armies for almost fifty years, a situation created by their own
central banks, and therefore they could not finance a war. A central bank
always imposes a tremendous burden on the nation for "rearmament" and
"defense", in order to create inextinguishable debt, simultaneously
creating a military dictatorship and enslaving the people to pay the
"interest" on the debt which the bankers have artificially created.
In the Senate debate on the Federal Reserve
Act, Senator Stone said on December 12, 1913, "The great banks for years
have sought to have and control agents in the Treasury to serve their purposes.
Let me quote from this World article, ‘Just as soon as Mr. McAdoo came to
Washington, a woman whom the National City Bank had installed in the Treasury
Department to get advance information on the condition of banks, and other
matters of interest to the big Wall Street group, was removed. Immediately the
Secretary and the Assistant Secretary, John Skelton Williams, were criticized
severely by the agents of the Wall Street group.’" "I myself have
known more than one occasion when bankers refused credit to men who opposed
their political views and purposes. When Senator Aldrich and others were going
around the country exploiting this scheme, the big banks of New York and
Chicago were engaged in raising a munificent fund to bolster up the Aldrich
propaganda. I have been told by bankers of my own state that contributions to
this exploitation fund had been demanded of them and that they had contributed
because they were afraid of being blacklisted or boycotted.
There
are bankers of this country who are enemies of the public welfare. In the past,
a few great banks have followed policies and projects that have paralyzed the
industrial energies of the country to perpetuate their tremendous power over
the financial and business industries of America." Carter Glass states in
his autobiography that he was summoned by Woodrow Wilson to the White House,
and that Wilson told him he intended to make the reserve notes obligations of
the United States. Glass says, "I was for an instant speechless. I
remonstrated. There is not any government obligation here, Mr. President.
Wilson said he had had to compromise on this point in order to save the
bill."
The term "compromise" on this point
came directly from Paul Warburg. Col. Elisha Ely Garrison, in Roosevelt, Wilson
and the Federal Reserve Law wrote, "In 1911, Lawrence Abbot, Mr.
Roosevelt’s private officer at ‘The Outlook’ handed me a copy of the so-called
Aldrich Plan for currency reform. I said, I could not believe that Mr. Warburg
was the author. This plan is nothing more than the Aldrich-Vreeland legislation
which provided for currency issue against securities. Warburg knows that as
well as I do. I am going to see him at once and ask him about it. All right,
the truth. Yes, I wrote it, he said. Why? I asked. It was a compromise,
answered Warburg."
Garrison says that Warburg wrote him on
February 8, 1912. "I have no doubt that at the end of a thorough
discussion, either you will see it my way or I will see it yours--but I hope
you will see it mine."
This was another famous Warburg saying when he
secretly lobbied Congressmen to support his interest, the veiled threat that
they should "see it his way". Those who did not found large sums
contributed to their opponents at the next elections, and usually went down in
defeat.
Col. Garrison, an agent of Brown Brothers
bankers, later Brown Brothers Harriman, had entree everywhere in the financial
community. He writes of Col. House, "Col. House agreed entirely with the
early writing of Mr. Warburg." Page 337, he quotes Col. House: "I am
also suggesting that the Central Board be increased from four members to five
and their terms lengthened from eight to ten years. This would give stability
and would take away the power of a President to change the personnel of the
board during a single term of office." House’s phrase, "take away the
power of a President" is significant, because later Presidents found
themselves helpless to change the direction of the government because they did
not have the power to change the composition of the Federal Reserve Board to
attain a majority on it during that President’s term of office.
Garrison
also wrote in this book, "Paul Warburg is the man who got the Federal
Reserve Act together after the Aldrich Plan aroused such nationwide resentment
and opposition. The mastermind of both plans was Baron Alfred Rothschild of
London." Colonel Edward Mandell House was referred to by Rabbi Stephen
Wise in his autobiography, Challenging Years as "the unofficial Secretary
of State". House noted that he and Wilson knew that in passing the Federal
Reserve Act, they had created an instrument more powerful than the Supreme
Court. The Federal Reserve Board of Governors actually comprised a Supreme
Court of Finance, and there was no appeal from any of their rulings.
In 1911, prior to Wilson’s taking office as
President, House had returned to his home in Texas and completed a book called
Philip Dru, Administrator. Ostensibly a novel, it was actually a detailed plan
for the future government of the United States, "which would establish
Socialism as dreamed by Karl Marx", according to House. This
"novel" predicted the enactment of the graduated income tax, excess
profits tax, unemployment insurance, social security, and a flexible currency
system. In short, it was the blueprint which was later followed by the Woodrow
Wilson and Franklin D. Roosevelt administrations. It was published
"anonymously" by B. W. Huebsch of New York, and widely circulated
among government officials, who were left in no doubt as to its authorship.
George Sylvester Viereck, who knew House for years, later wrote an account of
the Wilson-House relationship, The Strangest Friendship in History.14 In 1955,
Westbrook Pegler, the Hearst columnist from 1932 to 1956, heard of the Philip
Dru book and called Viereck to ask if he had a copy. Viereck sent Pegler his
copy of the book, and Pegler wrote a column about it, stating:
"One of the institutions outlined in
Philip Dru is the Federal Reserve System. The Schiffs, the Warburgs, the Kahns,
the Rockefellers and Morgans put their faith in House. The Schiff, Warburg,
Rockefeller and Morgan interests were personally represented in the mysterious
conference at Jekyll Island. Frankfurter landed on the Harvard law faculty,
thanks to a financial contribution to Harvard by Felix Warburg and Paul
Warburg, and so we got Alger and Donald Hiss, Lee Pressman, Harry Dexter White
and many other protégés of Little Weenie."
House’s openly Socialistic views were forthrightly expressed in Philip Dru, Administrator; on pages 57-58, House wrote: "In a direct and forceful manner, he pointed out that our civilization was fundamentally wrong, inasmuch, among other things, as it restricted efficiency; that if society were properly organized, there would be none who were not sufficiently clothed and fed. The result, that the laws, habits and ethical training in vogue were alike responsible for the inequalities in opportunity and the consequent wide difference between the few and the many; that the results of such conditions was to render inefficient a large part of the population, the percentage d