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
__________________________
1 Prof. Nathaniel Wright Stephenson, Paul Warburg’s
Memorandum, Nelson Aldrich A Leader in American Politics, Scribners, N.Y. 1930
1
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."2
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."3
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."4
__________________________
2 "CURRENT OPINION", December, 1916, p. 382.
3 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in American
Politics, Scribners, N.Y. 1930, Chap. XXIV "Jekyll Island"
4 T.W. Lamont, Henry P. Davison, Harper, 1933
2
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
3
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 pro-
4
fits. 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."5
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
__________________________
5 Clarendon, Hist. Reb. 1647
5
of the directors were to be chosen, directly or indirectly, by
the banks of the association."6
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
__________________________
6 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in
American Politics, Scribners, N.Y. 1930, Chap. XXIV "Jekyll Island" p. 379
6
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’ revelation8 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
__________________________
7 Paul Warburg, The Federal Reserve System, Its Origin and
Growth, Volume I, p. 58, Macmillan, New York, 1930
8 CURRENT OPINION, December, 1916, p. 382
7
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.9
"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."
__________________________
9 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in
American Politics, Scribners, N.Y. 1930, Chap. XXIV "Jekyll Island" p. 379
8
Vanderlip later wrote in his autobiography, From Farmboy to Financier:10
"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.
__________________________
10 Frank Vanderlip, From Farmboy to Financier
9
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."11
It is notable that Stephenson characterizes the work of the National
Citizens League as "propaganda", in line with Seligman’s exposition of
__________________________
11 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in
American Politics, Scribners, N.Y. 1930
10
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."12
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
__________________________
12 Charles A. Lindbergh, Sr., Banking, Currency and the Money
Trust, 1913, p. 131
* In 1911, the Aldrich Plan became part of the official platform of the
Republican Party.
11
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.
12
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."
13
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:
14
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 government nothing.
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.
15
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
16
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 occur-
17
rence 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 blas� 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 candi-
18
dates, 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
19
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
__________________________
* Crozier’s book exposed the financiers plan to substitute
"corporation currency" for the lawful money of the U.S. as guaranteed by Article
I, Sec. 8 Para. 5, of the Constitution.
20
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
21
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."13
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."
__________________________
* Theodore Roosevelt
13 Elisha Ely Garrison, Roosevelt, Wilson and the Federal Reserve Law,
Christopher Publications, Boston, 1931
22
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
__________________________
* See House note in "Biographies"
** See Viereck note in "Biographies"
14 George Sylvester Viereck, The Strangest Friendship in History, Woodrow
Wilson and Col. House, Liveright, New York, 1932
23
Warburg, and so we got Alger and Donald Hiss, Lee Pressman,
Harry Dexter White and many
other prot�g�s 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 differing
in each country in the ratio that education and enlightenment and unselfish laws bore to
ignorance, bigotry and selfish
laws."15
In his book, House (Dru) envisions himself becoming a dictator and forcing
on the people his radical views, page 148: "They recognized the fact that Dru
dominated the situation and that a master mind had at last risen in the Republic." He
now assumes the title of General. "General Dru announced his purpose of assuming the
powers of a dictator . . . they were assured that he was free from any personal ambition .
. . he proclaimed himself ‘Administrator of the Republic.’"*
This pensive dreamer who imagined himself a dictator actually managed to
place himself in the position of the confidential advisor to the President of the United
States, and then to have many of his desires enacted into law! On page 227, he lists some
of the laws he wishes to enact as dictator. Among them are an old age pension law,
laborers insurance compensation, cooperative markets, a federal reserve banking system,
cooperative loans, national employment bureaus, and other "social legislation",
some of which was enacted during Wilson’s administration, and others during the
Franklin D. Roosevelt’s administration. The latter was actually a continuation of the
Wilson Administration,
__________________________
* The present writer was with Viereck in his suite at the Hotel Belleclaire
when Pegler called and asked for the book. Viereck sent it over by his secretary. He
grinned and said Pegler seemed very excited. "He ought to get a good column out of
that," Viereck told me. Indeed Pegler did get a good column out of it. Unfortunately
for him, he had gone too far in mentioning the Warburgs. As long as he confined his
attacks to La Grand Bouche (Eleanor Roosevelt), and her spouse, he had been permitted to
continue, but now that he had exposed the Warburg connection with the Communist spy ring
in Washington, his column was immediately dropped by the big city dailies, and
Pegler’s long run was over.
15 Col. Edward M. House, Philip Dru, Administrator, B. W. Heubsch, New York,
1912.
* This quotation from Philip Dru, Administrator, written by Col. House in 1912,
is included here to show his totalitarian Marxist philosophy. House was to become for 8
years with Wilson, the President’s closest advisor. Later he continued his influence
in the Franklin D. Roosevelt administration. From his home in Magnolia, Mass., House
advised FDR through frequent trips of Felix Frankfurter to the White House. Frankfurter
was later appointed to the Supreme Court by F.D.R.
24
with many of the same personnel, and with House guiding the administration
from behind the scenes.
Like most of the behind-the-scenes operators in this book, Col. Edward
Mandell House had the obligatory "London connection". Originally a Dutch family,
"Huis", his ancestors had lived in England for three hundred years, after which
his father settled in Texas, where he made a fortune in blockade-running during the Civil
War, shipping cotton and other contraband to his British connections, including the
Rothschilds, and bringing back supplies for the beleaguered Texans. The senior House, not
trusting the volatile Texas situation, prudently deposited all his profits from his
blockade-running in gold with Baring banking house in London*. At the close of the Civil
War, he was one of the wealthiest men in Texas. He named his son "Mandell" after
one of his merchant associates. According to Arthur Howden Smith, when House’s father
died in 1880, his estate was distributed among his sons as follows: Thomas William got the
banking business; John, the sugar plantation; and Edward M. the cotton plantations, which
brought him an income of $20,000 a year.16
At the age of twelve, the young Edward Mandell House had brain fever, and
was later further crippled by sunstroke. He was a semi-invalid, and his ailments gave him
an odd Oriental appearance. He never entered any profession, but used his father’s
money to become the kingmaker of Texas politics, successively electing five governors from
1893 to 1911. In 1911 he began to support Wilson for president, and threw the crucial
Texas delegation to him which ensured his nomination. House met Wilson for the first time
at the Hotel Gotham, May 31, 1912.
In The Strangest Friendship In History, Woodrow Wilson and Col. House, by
George Sylvester Viereck, Viereck writes:
"What," I asked House, "cemented your friendship?"
"The identity of our temperaments and our
public policies," answered House. "What was your purpose and
his?" "To translate into
legislation certain liberal and progressive ideas."17
House told Viereck that when he went to Wilson at the White
__________________________
* Dope, Inc., identifies Barings as follows: "Baring Brothers, the premier
merchant bank of the opium trade from 1783 to the present day, also maintained close
contact with the Boston families . . . The group’s leading banker became, at the
close of the 19th century, the House of Morgan--which also took its cut in Eastern
opium traffic . . . Morgan’s Far Eastern operations were the officially conducted
British opium traffic . . . Morgan’s case deserves special scrutiny from American
police and regulatory agencies, for the intimate associations of Morgan Guaranty Trust
with the identified leadership of the British dope banks."
16 Arthur Howden Smith, The Real Col. House, Doran Company, New York, 1918
17 George Sylvester Viereck, The Strangest Friendship in History, Woodrow
Wilson and Col. House, Liveright, New York, 1932
25
House, he handed him $35,000. This was exceeded only by the $50,000 which
Bernard Baruch had given Wilson.
The successful enactment of House’s programs did not escape the
notice of other Wilson associates. In Vol. 1, page 157 of The Intimate Papers of Col.
House, House notes, "Cabinet members like Mr. Lane and Mr. Bryan commented upon the
influence of Dru with the President. ‘All that the book has said should be,’
wrote Lane, ‘comes about. The President comes to ‘Philip Dru’ in the
end.’"18
House recorded some of his efforts on behalf of the Federal Reserve Act in
The Intimate Papers of Col. House,
"December 19, 1912. I talked with Paul Warburg over the
phone concerning currency reform. I
told of my trip to Washington and what I had done there to get it in working
order. I told him
that the Senate and the Congressmen seemed anxious to do what he desired, and
that President-
elect Wilson thought straight concerning the issue."19
Thus we have Warburg’s agent in Washington, Col. House, assuring him
that the Senate and Congressmen will do what he desires, and that the President-elect
"thought straight concerning the issue." In this context, representative
government seems to have ceased to exist. House continues in his "Papers":
"March 13, 1913. Warburg and I had an intimate discussion
concerning currency reform.
March 27, 1913. Mr. J.P. Morgan, Jr. and Mr. Denny of his firm came promptly at
five.
McAdoo came about ten minutes afterward. Morgan had a currency plan already
printed. I suggested he have it typewritten, so it would not seem too prearranged, and
send it to Wilson and myself today.
July 23, 1913. I tried to show Mayor Quincy (of Boston) the folly of the
Eastern bankers taking
an antagonistic attitude towards the Currency Bill. I explained to Major Henry
Higginson* with what care the bill had been framed. Just before he arrived, I had finished
a review by Professor Sprague of Harvard of Paul Warburg’s criticism of the
Glass-Owen Bill, and will transmit it to Washington tomorrow. Every banker known to
Warburg, who knows the subject practically, has been called up about the making of the
bill.
October 13, 1913. Paul Warburg was my first caller today. He came to discuss
the currency measure. There are many features of the Owen-Glass Bill that he does not
approve. I promised to put him in touch with McAdoo and Senator Owen so that he might
discuss it with them.
November 17, 1913. Paul Warburg telephoned about his trip to Washington. Later,
he and Mr. Jacob Schiff came over for a few minutes.
__________________________
18 Col. Edward Mandell House, The Intimate Papers of Col. House, edited by
Charles Seymour, Houghton Mifflin Co., 1926-28, Vol. 1, p. 157
19 Ibid. Vol. 1, p. 163
* The most prominent banker in Boston.
26
Warburg did most of the talking. He had a new suggestion in
regard to grouping the regular reserve banks so as to get the units welded together and in
easier touch with the Federal Reserve Board."
George Sylvester Viereck in The Strangest Friendship in History, Woodrow
Wilson and Col. House wrote: "The Schiffs, the Warburgs, the Kahns, the Rockefellers,
the Morgans put their faith in House. When the Federal Reserve legislation at last assumed
definite shape, House was the intermediary between the White House and the
financiers."20
On page 45, Viereck notes, "Col. House looks upon the reform of the
monetary system as the crowning internal achievement of the Wilson Administration."21
The Glass Bill (the House version of the final Federal Reserve Act) had
passed the House on September 18, 1913 by 287 to 85. On December 19, 1913, the Senate
passed their version by a vote of 54-34. More than forty important differences in the
House and Senate versions remained to be settled, and the opponents of the bill in both
houses of Congress were led to believe that many weeks would yet elapse before the
Conference bill would be ready for consideration. The Congressmen prepared to leave
Washington for the annual Christmas recess, assured that the Conference bill would not be
brought up until the following year. Now the money creators prepared and executed the most
brilliant stroke of their plan. In a single day, they ironed out all forty of the disputed
passages in the bill and quickly brought it to a vote. On Monday, December 22, 1913, the
bill was passed by the House 282-60 and the Senate 43-23.
On December 21, 1913, The New York Times commented editorially on the act,
"New York will be on a firmer basis of financial growth, and we shall soon see her
the money centre of the world."
The New York Times reported on the front page, Monday, December 22, 1913
in headlines: MONEY BILL MAY BE LAW TODAY--CONFEREES HAD ADJUSTED NEARLY ALL DIFFERENCES
AT 1:30 THIS MORNING--NO DEPOSIT GUARANTEES--SENATE YIELDS ON THIS POINT BUT PUTS THROUGH
MANY OTHER CHANGES "With almost unprecedented speed, the conference to adjust the
House and Senate differences on the Currency Bill practically completed its labours early
this morning. On Saturday the Conferees did little more than dispose of the preliminaries,
leaving forty essential differences to be thrashed out Sunday. . . . No other legislation
of importance will be taken up in either House of Congress this week. Members of both
houses are already preparing to leave Washington."
__________________________
20 George Sylvester Viereck, The Strangest Friendship In History, Woodrow
Wilson and Col. House, Liveright, New York, 1932
21 Ibid.
27
"Unprecedented speed", says The New York Times. One sees the
fine hand of Paul Warburg in this final strategy. Some of the bill’s most vocal
critics had already left Washington. It was a long-standing political courtesy that
important legislation would not be acted upon during the week before Christmas, but this
tradition was rudely shattered in order to perpetrate the Federal Reserve Act on the
American people.
The Times buried a brief quote from Congressman Lindbergh that "the
bill would establish the most gigantic trust on earth," and quoted Representative
Guernsey of Maine, a Republican on the House Banking and Currency Committee, that
"This is an inflation bill, the only question being the extent of the
inflation."
Congressman Lindbergh said on that historic day, to the House:
"This Act establishes the most gigantic trust on earth. When the President
signs this bill, the
invisible government by the Monetary Power will be legalized. The people may
not know it
immediately, but the day of reckoning is only a few years removed. The trusts
will soon realize
that they have gone too far even for their own good. The people must make a
declaration of
independence to relieve themselves from the Monetary Power. This they will be
able to do by
taking control of Congress. Wall Streeters could not cheat us if you Senators
and Representatives
did not make a humbug of Congress. . . . If we had a people’s Congress,
there would be stability.
The greatest crime of Congress is its currency system. The worst legislative
crime of the ages is
perpetrated by this banking bill. The caucus and the party bosses have again
operated and
prevented the people from getting the benefit of their own government."
The December 23, 1913 New York Times editorially commented, in contrast to
Congressman Lindbergh’s criticism of the bill, "The Banking and Currency Bill
became better and sounder every time it was sent from one end of the Capitol to the other.
Congress worked under public supervision in making the bill."
By "public supervision", The Times apparently meant Paul
Warburg, who for several days had maintained a small office in the Capitol building, where
he directed the successful pre-Christmas campaign to pass the bill, and where Senators and
Congressmen came hourly at his bidding to carry out his strategy.
The "unprecedented speed" with which the Federal Reserve Act had
been passed by Congress during what became known as "the Christmas massacre" had
one unforeseen aspect. Woodrow Wilson was taken unaware, as he, like many others, had been
assured the bill would not come up for a vote until after Christmas. Now he refused to
sign it, because he objected to the provisions for the selection of Class B. Directors.
William L. White relates in his biography of Bernard Baruch that Baruch, a principal
contributor to Wilson’s campaign fund, was stunned when he was informed that Wilson
refused to sign the bill. He hurried
28
to the White House and assured Wilson that this was a minor matter, which
could be fixed up later through "administrative processes". The important thing
was to get the Federal Reserve Act signed into law at once. With this reassurance, Wilson
signed the Federal Reserve Act on December 23, 1913. History proved that on that day, the
Constitution ceased to be the governing covenant of the American people, and our liberties
were handed over to a small group of international bankers.
The December 24, 1913 New York Times carried a front page headline
"WILSON SIGNS THE CURRENCY BILL!" Below it, also in capital letters, were two
further headlines, "PROSPERITY TO BE FREE" and "WILL HELP EVERY
CLASS". Who could object to any law which provided benefits to everyone? The Times
described the festive atmosphere while Wilson’s family and government officials
watched him sign the bill. "The Christmas spirit pervaded the gathering,"
exulted The Times.
In his biography of Carter Glass, Rixey Smith states that those present at
the signing of the bill included Vice President Marshall, Secretary Bryan, Carter Glass,
Senator Owen, Secretary McAdoo, Speaker Champ Clark, and other Treasury officials. None of
the real writers of the bill, the draftees of Jekyll Island, were present. They had
prudently absented themselves from the scene of their victory. Rixey Smith also wrote,
"It was as though Christmas had come two days early." On December 24, 1913,
Jacob Schiff wrote to Col. House,
"My dear Col. House. I want to say a word to you for the
silent, but no doubt effective work you
have done in the interest of currency legislation and to congratulate you that
the measure
has finally been enacted into law. I am with good wishes, faithfully yours,
JACOB SCHIFF."
Representative Moore of Kansas, in commenting on the passage of the Act,
said to the House of Representatives:
"The President of the United States now becomes the absolute dictator of
all the finances of the
country. He appoints a controlling board of seven men, all of whom belong to
his political party,
even though it is a minority. The Secretary of the Treasury is to rule supreme
whenever there is
a difference of opinion between himself and the Federal Reserve Board. AND,
only one member
of the Board is to pass out of office while the President is in office."
The ten year terms of office of the members of the Board were lengthened
by the Banking Act of 1935 to fourteen years, which meant that these directors of the
nation’s finances, although not elected by the people, held office longer than three
presidents.
While Col. House, Jacob Schiff and Paul Warburg basked in the glow of a
job well done, the other actors in this drama were subject to later afterthoughts. Woodrow
Wilson wrote in 1916, National Economy and the Banking System, Sen. Doc. No. 3, No. 223,
76th Congress, 1st session, 1939: "Our system of credit is concentrated (in the
Federal Reserve
29
System). The growth of the nation, therefore, and all our activities, are
in the hands of a few men."
When he was asked by Clarence W. Barron whether he approved of the bill as
it was finally passed. Warburg remarked, "Well, it hasn’t got quite everything
we want, but the lack can be adjusted later by administrative processes."
Woodrow Wilson and Carter Glass are given credit for the Act by most
contemporary historians, but of all those concerned, Wilson had least to do with
Congressional action on the bill. George Creel, a veteran Washington correspondent, wrote
in Harper’s Weekly, June 26, 1915:
"As far as the Democratic Party was concerned, Woodrow Wilson was without
influence, save for
the patronage he possessed. It was Bryan who whipped Congress into line on the
tariff bill, on
the Panama Canal tolls repeal, and on the currency bill." Mr. Bryan later
wrote, "That is the one
thing in my public career that I regret--my work to secure the enactment of the
Federal Reserve
Law."
On December 25, 1913, The Nation pointed out that "The New York Stock
Market began to rise steadily upon news that the Senate was ready to pass the Federal
Reserve Act."
This belies the claim that the Federal Reserve Act was a monetary reform
bill. The New York Stock Exchange is generally considered an accurate barometer of the
true meaning of any financial legislation passed in Washington. Senator Aldrich also
decided that he no longer had misgivings about the Federal Reserve Act. In a magazine
which he owned, and which he called The Independent, he wrote in July, 1914: "Before
the passage of this Act, the New York bankers could only dominate the reserves of New
York. Now we are able to dominate the bank reserves of the entire country."
H.W. Loucks denounced the Federal Reserve Act in The Great Conspiracy of
the House of Morgan,
"In the Federal Reserve Law, they have wrested from the
people and secured for themselves the
constitutional power to issue money and regulate the value thereof." On
page 31, Loucks writes,
"The House of Morgan is now in supreme control of our industry, commerce
and political affairs.
They are in complete control of the policy making of the Democratic, Republican
and Progressive
parties. The present extraordinary propaganda for ‘preparedness’ is
planned more for home
coercion than for defense against foreign aggression."22
The signing of the Federal Reserve Act by Woodrow Wilson represented the
culmination of years of collusion with his intimate friend, Col. House, and Paul Warburg.
One of the men with whom House became acquainted in the Wilson Administration was Franklin
D.
__________________________
22 H.W. Loucks, The Great Conspiracy of the House of Morgan, Privately printed,
1916
30
Roosevelt, Assistant Secretary of Navy. As soon as he obtained the
Democratic nomination for President, in 1932, Franklin D. Roosevelt made a
"pilgrimage" to Col. House’s home at Magnolia, Mass. Roosevelt, after the
Republican hiatus of the 1920s, filled in the goals of Philip Dru, Administrator,23 which
Wilson had not been able to carry out. The late Roosevelt achievements included the
enactment of the social security program, excess profits tax, and the expansion of the
graduated income tax to 90% of earned income.
House’s biographer, Charles Seymour, wrote: "He was
wearied by the details of party politics
and appointments. Even the share he had taken in constructive domestic
legislation (the
Federal Reserve Act, tariff revision, and the Income Tax amendment) did not
satisfy him. From
the beginning of 1914 he gave more and more of his time to what he regarded as
the highest
form of politics and that for which he was particularly suited--international
affairs."24
In 1938, shortly before he died, House told Charles Seymour, "During
the last fifteen years I have been close to the center of things, although few people
suspect it. No important foreigner has come to the United States without talking to me. I
was close to the movement that nominated Roosevelt. He has given me a free hand in
advising him. All the Ambassadors have reported to me frequently."
A comparative print of the Federal Reserve Act of 1913 as passed by the
House of Representatives and amended by the Senate shows the following striking change:
The Senate struck out, "To suspend the officials of Federal Reserve
banks for cause, stated in writing with opportunity of hearing, require the removal of
said official for incompetency, dereliction of duty, fraud or deceit, such removal to be
subject to approval by the President of the United States." This was changed by the
Senate to read "To suspend or remove any officer or director of any Federal Reserve
Bank, the cause of such removal to be forthwith communicated in writing by the Federal
Reserve Board to the removed officer or director and to said bank." This completely
altered the conditions under which an officer or director might be removed. We no longer
know what the conditions for removal are, or the cause. Apparently incompetency,
dereliction of duty, fraud or deceit do not matter to the Federal Reserve Board. Also, the
removed officer does not have the opportunity of appeal to the President. In answer to
written inquiry, the Assistant Secretary of the Federal Reserve Board replied that only
one officer has been removed "for cause" in the thirty-six years, the name and
details of this matter being a "private concern" between the individual, the
Reserve Bank concerned, and the Federal Reserve Board.
__________________________
23 E.M. House, Philip Dru, Administrator, B. W. Heubsch, N.Y., 1912
24 Col. E.M. House, The Intimate Papers of Col. House, 4 v. 1926-1928, Houghton
Mifflin Co.
31
The Federal Reserve System began its operations in 1914 with the activity
of the Organization Committee, appointed by Woodrow Wilson, and composed of Secretary of
the Treasury William McAdoo, who was his son-in-law, Secretary of Agriculture Houston and
Comptroller of the Currency John Skelton Williams.
On January 6, 1914. J.P. Morgan met with the Organizing Committee in New
York. He informed them that there should not be more than seven regional districts in the
new system.
This committee was to select the locations of the
"decentralized" reserve banks. They were empowered to select from eight to
twelve reserve banks, although J.P. Morgan had testified he thought that not more than
four should be selected. Much politicking went into the selection of these sites, as the
twelve cities thus favored would become enormously important as centers of finance. New
York, of course, was a foregone conclusion. Richmond was the next selection, as a payoff
to Carter Glass and Woodrow Wilson, the two Virginians who had been given political credit
for the Federal Reserve Act. The other selections of the Committee were Boston,
Philadelphia, Cleveland, Chicago, St. Louis, Atlanta, Dallas, Minneapolis, Kansas City,
and San Francisco. All of these cities later developed important "financial
districts" as the result of this selection.
These local battles, however, paled in view of the complete dominance of
the Federal Reserve bank of New York in the system. Ferdinand Lundberg pointed out, in
America’s Sixty Families, that, "In practice, the Federal Reserve Bank of New
York became the fountainhead of the system of twelve regional banks, for New York was the
money market of the nation. The other eleven banks were so many expensive mausoleums
erected to salve the local pride and quell the Jacksonian fears of the hinterland.
Benjamin Strong, president of the Bankers Trust (J.P. Morgan) was selected as the first
Governor of the New York Federal Reserve Bank. Adept in high finance, Strong for many
years manipulated the country’s monetary system at the discretion of directors
representing the leading New York banks. Under Strong, the Reserve System was brought into
interlocking relations with the Bank of England and the Bank of France. Benjamin Strong
held his position as Governor of the Federal Reserve Bank of New York until his sudden
death in 1928, during a Congressional investigation of the secret meetings between Reserve
Governors and
32
heads of European central banks which brought on the Great Depression of
1929-31."25
Strong had married the daughter of the President of Bankers Trust, which
brought him into the line of succession in the dynastic intrigues which play such an
important role in the world of high finance. He also had been a member of the original
Jekyll Island group, the First Name Club, and was thus qualified for the highest position
in the Federal Reserve System, as the Governor of the Federal Reserve Bank of New York
which dominated the entire system.
Paul Warburg also is mentioned in J. Laurence Laughlin’s definitive
volume, The Federal Reserve Act, Its Origins and Purposes,
"Mr. Paul Warburg of Kuhn, Loeb Company offered in March, 1910 a fairly
well thought out
plan to be known as the United Reserve Bank of the United States. This was
published in The
New York Times of March 24, 1910. The group interested in the purposes of the
National
Monetary Commission met secretly at Jekyll Island for about two weeks in
December, 1910, and
concentrated on the preparation of a bill to be presented to Congress by the
National Monetary
Commission. The men who were present at Jekyll Island were Senator Aldrich, H.
P. Davison of
J.P. Morgan Company, Paul Warburg of Kuhn, Loeb Company, Frank Vanderlip of the
National
City Bank, and Charles D. Norton of the First National Bank. No doubt the
ablest banking mind
in the group was that of Mr. Warburg, who had had a European banking training.
Senator
Aldrich had no special training in banking."26
A mention of Paul Warburg, written by Harold Kelloch, and titled,
"Warburg the Revolutionist" appeared in the Century Magazine, May, 1915. Kelloch
writes:
"He imposed his ideas on a nation of a hundred million
people . . . Without Mr. Warburg there
would have been no Federal Reserve Act. The banking house of Warburg and
Warburg in
Hamburg has always been strictly a family business. None but a Warburg has been
eligible for it,
but all Warburgs have been born into it. In 1895 he married the daughter of the
late Solomon
Loeb of Kuhn Loeb Company. He became a member of Kuhn Loeb Company in 1902. Mr.
Warburg’s salary from his private business has been approximately a half
million a year. Mr.
Warburg’s motives had been purely those of patriotic self-sacrifice."
The true purposes of the Federal Reserve Act soon began to disillusion
many who had at first believed in its claims. W. H. Allen wrote in Moody’s Magazine,
1916,
"The purpose of the Federal Reserve Act was to prevent concentration of
money in the New York
banks by making it profitable for country bankers to use their funds at home,
but the
movement of currency shows
__________________________
25 Ferdinand Lundberg, America’s Sixty Families, 1937
26 J. Laurence Laughlin, The Federal Reserve Act, It’s Origins and
Purposes
33
that the New York banks gained from the interior in every month
except December, 1915, since
the Act went into effect. The stabilization of rates has taken place in New
York alone. In other
parts, high rates continue. The Act, which was to deprive Wall Street of its
funds for speculation,
has really given the bulls and the bears such a supply as they have never had
before. The truth is
that far from having clogged the channel to Wall Street, as Mr. Glass so
confidently boasted, it
actually widened the old channels and opened up two new ones. The first of
these leads directly
to Washington and gives Wall Street a string on all the surplus cash in the
United States
Treasury. Besides, in the power to issue bank-note currency, it furnishes an
inexhaustible supply
of credit money; the second channel leads to the great central banks of Europe,
whereby, through
the sale of acceptances, virtually guaranteed by the United States Government,
Wall Street is
granted immunity from foreign demands for gold which have precipitated every
great crisis in
our history."
For many years, there has been considerable mystery about who actually
owns the stock of the Federal Reserve Banks. Congressman Wright Patman, leading critic of
the System, tried to find out who the stockholders were. The stock in the original twelve
regional Federal Reserve Banks was purchased by national banks in those twelve regions.
Because the Federal Reserve Bank of New York was to set the interest rates and direct open
market operations, thus controlling the daily supply and price of money throughout the
United States, it is the stockholders of that bank who are the real directors of the
entire system. For the first time, it can be revealed who those stockholders are. This
writer has the original organization certificates of the twelve Federal Reserve Banks,
giving the ownership of shares by the national banks in each district. The Federal Reserve
Bank of New York issued 203,053 shares, and, as filed with the Comptroller of the Currency
May 19, 1914, the large New York City banks took more than half of the outstanding shares.
The Rockefeller Kuhn, Loeb-controlled National City Bank took the largest number of shares
of any bank, 30,000 shares. J.P. Morgan’s First National Bank took 15,000 shares.
When these two banks merged in 1955, they owned in one block almost one fourth of the
shares in the Federal Reserve Bank of New York, which controlled the entire system, and
thus they could name Paul Volcker or anyone else they chose to be Chairman of the Federal
Reserve Board of Governors. Chase National Bank took 6,000 shares. The Marine Nation Bank
of Buffalo, later known as Marine Midland, took 6,000 shares. This bank was owned by the
Schoellkopf family, which controlled Niagara Power Company and other large interests.
National Bank of Commerce of New York City took 21,000 shares. The shareholders of these
banks which own the stock of the Federal Reserve Bank of New York are the people who have
controlled our political and economic destinies since 1914. They are the Rothschilds, of
Europe, Lazard Freres (Eugene Meyer), Kuhn Loeb Company, Warburg Company, Lehman Brothers,
34
Goldman Sachs, the Rockefeller family, and the J.P. Morgan interests.
These interests have merged and consolidated in recent years, so that the control is much
more concentrated. National Bank of Commerce is now Morgan Guaranty Trust Company. Lehman
Brothers has merged with Kuhn, Loeb Company, First National Bank has merged with the
National City Bank, and in the other eleven Federal Reserve Districts, these same
shareholders indirectly own or control shares in those banks, with the other shares owned
by the leading families in those areas who own or control the principal industries in
these regions.* The "local" families set up regional councils, on orders from
New York, of such groups as the Council on Foreign Relations, The Trilateral Commission,
and other instruments of control devised by their masters. They finance and control
political developments in their area, name candidates, and are seldom successfully opposed
in their plans.
With the setting up of the twelve "financial districts" through
the Federal Reserve Banks, the traditional division of the United States into the
forty-eight states was overthrown, and we entered the era of "regionalism", or
twelve regions which had no relation to the traditional state boundaries.
These developments following the passing of the Federal Reserve Act proved
every one of the allegations Thomas Jefferson had made against a central bank in 1791:
that the subscribers to the Federal Reserve Bank stock had formed a corporation, whose
stock could be and was held by aliens; that this stock would be transmitted to a certain
line of successors; that it would be placed beyond forfeiture and escheat; that they would
receive a monopoly of banking, which was against the laws of monopoly; and that they now
had the power to make laws, paramount to the laws of the states. No state legislature can
countermand any of the laws laid down by the Federal Reserve Board of Governors for the
benefit of their private stockholders. This board issues laws as to what the interest rate
shall be, what the quantity of money shall be and what the price of money shall be. All of
these powers abrogate the powers of the state legislatures and their responsibility to the
citizens of those states.
The New York Times stated that the Federal Reserve Banks would be ready
for business on August 1, 1914, but they actually began operations on November 16, 1914.
At that time, their total assets were listed at $143,000,000, from the sale of shares in
the Federal Reserve Banks to stockholders of the national banks which subscribed to it.
The actual part of this $143,000,000 which was paid in for these shares
remains shrouded in mystery. Some historians believe that the shareholders only paid about
half of the amount in cash; others believe
__________________________
* See charts V through IX
35
that they paid in no cash at all, but merely sent in checks which they
drew on the national banks which they owned. This seems most likely, that from the very
outset, the Federal Reserve operations were "paper issued against paper", that
bookkeeping entries comprised the only values which changed hands.
The men whom President Woodrow Wilson chose to make up the first Federal
Reserve Board of Governors were men drawn from the banking group. He had been nominated
for the Presidency by the Democratic Party, which had claimed to represent the
"common man" against the "vested interests". According to Wilson
himself, he was allowed to choose only one man for the Federal Reserve Board. The others
were chosen by the New York bankers. Wilson’s choice was Thomas D. Jones, a trustee
of Princeton and director of International Harvester and other corporations. The other
members were Adolph C. Miller, economist from Rockefeller’s University of Chicago and
Morgan’s Harvard University, and also serving as Assistant Secretary of the Interior;
Charles S. Hamlin, who had served previously as an Assistant Secretary to the Treasury for
eight years; F.A. Delano, a Roosevelt relative, and railroad operator who took over a
number of railroads for Kuhn, Loeb Company, W.P.G. Harding, President of the First
National Bank of Atlanta; and Paul Warburg of Kuhn, Loeb Company. According to The
Intimate Papers of Col. House, Warburg was appointed because "The President accepted
(House’s) suggestion of Paul Warburg of New York because of his interest and
experience in currency problems under both Republican and Democratic
Administrations."27 Like Warburg, Delano had also been born outside the continental
limits of the United States, although he was an American citizen. Delano’s father,
Warren Delano, according to Dr. Josephson and other authorities, was active in Hong Kong
in the Chinese opium trade, and Frederick Delano was born in Hong Kong in 1863.
In The Money Power of Europe, Paul Emden writes that "The Warburgs
reached their outstanding eminence during the last twenty years of the past century,
simultaneously with the growth of Kuhn, Loeb Company in New York, with whom they stood in
a personal union and family relationship. Paul Warburg with magnificent success carried
through in 1913 the reorganization of the American banking system, at which he had with
Senator Aldrich been working since 1911, and thus most thoroughly consolidated the
currency and finances of the United States."28
__________________________
27 Charles Seymour, The Intimate Papers of Col. House, 4 v. 1926-1928, Houghton
Mifflin Co.
28 Paul Emden, The Money Power of Europe in the 19th and 20th Century, S. Low,
Marston Co., London, 1937
36
The New York Times* had noted on May 6, 1914 that Paul Warburg had
"retired" from Kuhn, Loeb Company in order to serve on the Federal Reserve
Board, although he had not resigned his directorships of American Surety Company,
Baltimore and Ohio Railroad, National Railways of Mexico, Wells Fargo, or Westinghouse
Electric Corporation, but would continue to serve on these boards of directors.
"Who’s Who" listed him as holding these directorships and in addition,
American I.G. Chemical Company (branch of I.G. Farben), Agfa Ansco Corporation,
Westinghouse Acceptance Company, Warburg Company of Amsterdam, chairman of the Board of
International Acceptance Bank, and numerous other banks, railways and corporations.
"Kuhn Loeb & Co. with Warburg have four votes or the majority of the Federal
Reserve Board."29
Despite his retirement from Kuhn, Loeb Company in May of 1914 to serve on
the Federal Reserve Board of Governors, Warburg was asked to appear before a Senate
Subcommittee in June of 1914 and answer some questions about his behind-the-scenes role in
getting the Federal Reserve Act through Congress. This might have meant some questions
about the secret conference in Jekyll Island, and Warburg refused to appear. On July 7,
1914 he wrote a letter to G.M. Hitchcock, Chairman of the Senate Banking and Currency
Committee, stating that it might impair his usefulness on the Board if he were required to
answer any questions, and that he would therefore withdraw his name. It seemed that
Warburg was prepared to bluff the Senate Committee into confirming him without any
questions asked. On July 10, 1914, The New York Times defended Warburg on the editorial
page and denounced the "Senatorial Inquisition". Since Warburg had not yet been
asked any questions, the term "Inquisition" seemed remarkably inappropriate, nor
was there any real danger that the Senators were preparing to use instruments of torture
on Mr. Warburg. The imbroglio was resolved when the Senate Committee, in abject surrender,
agreed that Mr. Warburg would be given a list of questions in advance of his appearance so
that he could go over them, and that he could be excused from answering any questions
which might tend to impair his service on the Board of Governors. The Nation reported on
July 23, 1914 that "Mr. Warburg finally had a conference with Senator O’Gorman
and agreed to meet the members of the Senate Subcommittee informally, with a view to
coming to an understanding, and to giving them any reasonable information they might
desire. The opinion in Washington is that Mr. Warburg’s confirmation is
assured." The Nation
__________________________
* The New York Times April 30, 1914, reported that the 12 districts had
subscriptions of $74,740,800 and that the subscribing banks would pay one-half of this sum
in six months.
29 Clarence W. Barron, More They Told Barron, Arno Press, New York Times, 1973,
June 12, 1914. p. 204
37
was correct. Mr. Warburg was confirmed, the way having been smoothed by
his "fixer", Senator O’Gorman of New York, more familiarly known as
"the Senator from Wall Street". Senator Robert L. Owen had previously charged
that Warburg was the American representative of the Rothschild family, but questioning him
about this would indeed have smacked of the mediaeval "Inquisition", and his
fellow Senators were too civilized to indulge in such barbarity*.
During the Senate Hearings on Paul Warburg before the Senate Banking and
Currency Committee, August 1, 1914, Senator Bristow asked, "How many of these
partners (of Kuhn, Loeb Company) are American citizens?" WARBURG: "They are all
American citizens except Mr. Kahn. He is a British subject." BRISTOW: "He was at
one time a candidate for Parliament, was he not?" WARBURG: "There was talk about
it, it had been suggested and he had it in his mind."
Paul Warburg also stated to the Committee, "I went to England, where
I stayed for two years, first in the banking and discount firm of Samuel Montague &
Company. After that I went to France, where I stayed in a French bank."
CHAIRMAN: "What French bank was that?" WARBURG: "It is the
Russian bank for foreign trade which has an agency in Paris."
BRISTOW: "I understand you to say that you were a Republican, but
when Mr. Theodore Roosevelt came around, you then became a sympathizer with Mr. Wilson and
supported him?" WARBURG: "Yes." BRISTOW: "While your brother (Felix
Warburg) was supporting Taft?" WARBURG: "Yes." Thus three partners of Kuhn,
Loeb Company were supporting three different candidates for President of the United
States. Paul Warburg was supporting Wilson, Felix Warburg was supporting Taft, and Otto
Kahn was supporting Theodore Roosevelt. Paul Warburg explained this curious situation by
telling the Committee that they had no influence over each other’s political beliefs,
"as finance and politics don’t mix."
Questions about Warburg’s appointment vanished in a hue and cry with
Wilson’s sole appointment to the Board of Governors, Thomas B. Jones. Reporters had
discovered that Jones, at the time of his appointment, was under indictment by the
Attorney General of the United States. Wilson leaped to the defense of his choice, telling
reporters that "The majority of the men connected with what we have come to call
‘big business’ are honest, incorruptible and patriotic." Despite
Wilson’s protestations, the Senate Banking and Currency Committee scheduled
__________________________
* Warburg was confirmed August 8, 1914, 38-11, and principally opposed by Sen.
Bristow of Kansas, who was denounced by The New York Times as a "radical
Republican", and whose excellent library of rare books on banking were acquired by
the present writer in 1983 for research on this work.
38
hearings on the fitness of Thomas D. Jones to be a member of the Board of
Governors. Wilson then wrote a letter to Senator Robert L. Owen, Chairman of that
Committee:
White House
June 18, 1914
Dear Senator Owen:
Mr. Jones has always stood for the rights of the people against the
rights of privilege. His connection with the Harvester Company was a
public service, not a private interest. He is the one man of the whole
number who was in a peculiar sense my personal choice.
Sincerely,
Woodrow Wilson
Woodrow Wilson said, "There is no reason to believe that the
unfavorable report represents the attitude of the Senate itself." After several
weeks, Thomas D. Jones withdrew his name, and the country had to do without his services.
The other members of the first Board of Governors were Secretary of the
Treasury, William McAdoo, Wilson’s son-in-law, and President of the Hudson-Manhattan
Railroad, a Kuhn, Loeb Company controlled enterprise, and Comptroller of the Currency John
Skelton Williams.
When the Federal Reserve Banks were opened for business on November 16,
1914, Paul Warburg said, "This date may be considered as the Fourth of July in the
economic history of the United States."
39
CHAPTER FOUR
The Federal Advisory Council
In steamrolling the Federal Reserve Act through the House of
Representatives, Congressman Carter Glass declared on September 30, 1913 on the floor of
the House that the interests of the public 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 interest?
Carter Glass neither then nor later gave any substantiation for his belief
that a group of bankers would protect the interests of the public, nor is there any
evidence in the history of the United States that any group of bankers has ever done so.
In fact, the Federal Advisory Council proved to be the "administrative process"
which Paul Warburg had inserted into the Federal Reserve Act to provide just the type of
remote but unseen control over the System which he desired. When he was asked by financial
reporter C.W. Barron, just after the Federal Reserve Act was enacted into law by Congress,
whether he approved of the bill as it was finally passed, Warburg replied, "Well, it
hasn’t got quite everything we want, but the lack can be adjusted later by
administrative processes." The council proved to be the ideal vehicle for
Warburg’s purposes, as it has functioned for seventy years in almost complete
anonymity, its members and their business associations, unnoticed by the public.
Senator Robert Owen, chairman of the Senate Banking and Currency
Committee, had said, as quoted in The New York Times, August 3, 1913 before passage of the
act:
"The Federal Reserve Act will furnish the bank and
industrial and commercial interests with the
discount of qualified commercial paper and thus stabilize our commercial and
industrial life. The
Federal Reserve banks are not intended as money making banks, but to serve a
great national
purpose of accommodating commerce and businessmen and banks, safeguard a fixed
market for
manufactured goods, for agricultural products and for labor. There is no reason
why the banks
should be in control of the Federal Reserve system. Stability will make our
commerce expand
healthfully in every direction."
40
Senator Owen’s optimism was doomed by the domination of the Jekyll
Island promoters over the initial composition of the Federal Reserve System. Not only did
the Morgan-Kuhn, Loeb alliance purchase the dominant control of stock in the Federal
Reserve Bank of New York, with almost half of the shares owned by the five New York banks
under their control, First National Bank, National City Bank, National Bank of Commerce,
Chase National Bank and Hanover National Bank, but they also persuaded President Woodrow
Wilson to appoint one of the Jekyll Island group, Paul Warburg, to the Federal Reserve
Board of Governors.
Each of the twelve Federal Reserve Banks was to elect a member of the
Federal Advisory Council, which would meet with the Federal Reserve Board of Governors
four times a year in Washington, in order to "advise" the Board on future
monetary policy. This seemed to assure absolute democracy, as each of the twelve
"advisors", representing a different region of the United States, would be
expected to speak up for the economic interests of his area, and each of the twelve
members would have an equal vote. The theory may have been admirable in its concept, but
the hard facts of economic life resulted in a quite different picture. The president of a
small bank in St. Louis or Cincinnati, sitting in conference with Paul Warburg and J.P.
Morgan to "advise" them on monetary policy, would be unlikely to contradict two
of the most powerful international financiers in the world, as a scribbled note from
either one of them would be sufficient to plunge his little bank into bankruptcy. In fact,
the small banks of the twelve Federal Reserve districts existed only as satellites of the
big New York financial interests, and were completely at their mercy. Martin Mayer, in The
Bankers, points out that "J.P. Morgan maintained correspondent relationships with
many small banks all over the country."30 The big New York banks did not confine
themselves to multi-million dollar deals with other great financial interests, but carried
on many smaller and more routine dealings with their "correspondent" banks
across the United States.
Apparently secure in their belief that their activities would never be
exposed to the public, the Morgan-Kuhn, Loeb interests boldly selected the members of the
Federal Advisory Council from their correspondent banks and from banks in which they owned
stock. No one in the financial community seemed to notice, as nothing was said about it
during seventy years of the Federal Reserve System’s operation.
To avoid any suspicion that New York interests might control the Federal
Advisory Council, its first president, elected in 1914 by the other members, was J.B.
Forgan, president of the First National Bank of
__________________________
30 Martin Mayer, The Bankers, Weybright and Talley, New York, 1974, p. 207.
41
Chicago. Rand McNally Bankers Directory for 1914 lists the principal
correspondents of the large banks. The principal correspondent bank of the Baker-Morgan
controlled First National Bank of New York is listed as the First National Bank of
Chicago. The principal correspondent listed by the First National Bank of Chicago is the
Bank of Manhattan in New York, controlled by Jacob Schiff and Paul Warburg of Kuhn, Loeb
Company. James B. Forgan also was listed as a director of Equitable Life Insurance
Company, also controlled by Morgan. However, the relationship between First National Bank
of Chicago and these New York banks was even closer than these listings indicate.
On page 701 of The Growth of Chicago Banks by F. Cyril James, we find
mention of "the First National Bank of Chicago’s profitable connection with the
Morgan interests. A goodwill ambassador was hastily sent to New York to invite George F.
Baker to become a director of the First National Bank of Chicago."31 (J.B. Forgan to
Ream, January 7, 1903.) In effect, Baker and Morgan had personally chosen the first
president of the Federal Advisory Council.
James B. Forgan (1852-1924) also shows the obligatory "London
Connection" in the operation of the Federal Reserve System. Born in St.
Andrew’s, Scotland, he began his banking career there with the Royal Bank of
Scotland, a correspondent of the Bank of England. He came to Canada for the Bank of
British North America, worked for the Bank of Nova Scotia, which sent him to Chicago in
the 1880’s, and by 1900 he had become president of the First National Bank of
Chicago. He served for six years as president of the Federal Advisory Council, and when he
left the council, he was replaced by Frank O. Wetmore, who had also replaced him as
president of the First National Bank of Chicago when Forgan was named chairman of the
board.
Representing the New York Federal Reserve district on the first Federal
Advisory Council was J.P. Morgan. He was named chairman of the Executive Committee. Thus,
Paul Warburg and J.P. Morgan sat in conference at the meetings of the Federal Reserve
Board during the first four years of its operation, surrounded by the other Governors and
members of the council, who could hardly have been unaware that their futures would be
guided by these two powerful bankers.
Another member of the Federal Advisory Council in 1914 was Levi L. Rue,
representing the Philadelphia district. Rue was president of the Philadelphia National
Bank. Rand McNally Bankers Directory of 1914 listed as principal correspondent of the
First National Bank of New York,
__________________________
31 F. Cyril James, The Growth of Chicago Banks, Harper, New York, 1938.
42
the Philadelphia National Bank. First National Bank of Chicago also listed
Philadelphia National Bank as its principal correspondent in Philadelphia. The other
members of the Federal Advisory Council included Daniel S. Wing, president of the First
National Bank of Boston, W.S. Rowe, president of the First National Bank of Cincinnati,
and C.T. Jaffray, president of the First National Bank of Minneapolis. These were all
correspondent banks of the New York "big five" banks who controlled the money
market in the United States.
Jaffray had an even closer connection with the Baker-Morgan interests. In
1908, to reinvest the large annual dividends from their First National Bank of New York
stock, Baker and Morgan set up a holding company, First Security Corporation, which bought
500 shares of the First National Bank of Minneapolis. Thus Jaffray was little more than a
wage-earning employee of Baker and Morgan, although he had been "selected" by
stockholders of the Federal Reserve Bank of Minneapolis to represent their interests.
First Security Corporation also owned 50,000 shares of Chase National Bank, 5400 shares of
National Bank of Commerce, 2500 shares of Bankers Trust, 928 shares of Liberty National
Bank, the bank of which Henry P. Davison had been president when he was tapped to join the
J.P. Morgan firm, and shares of New York Trust, Atlantic Trust and Brooklyn Trust. First
Security concentrated on bank stocks which rapidly appreciated in value, and paid handsome
annual dividends. In 1927, it earned five million dollars, but paid the shareholders eight
million, taking the rest from its surplus.
Another member of the initial Federal Advisory Council was E.F. Swinney,
president of the First National Bank of Kansas City. He was also a director of Southern
Railway, and lists himself in Who’s Who as "independent in politics".
Archibald Kains represented the San Francisco district on the Federal
Advisory Council, although he maintained his office in New York, as president of the
American Foreign Banking Corporation.
After serving as a Governor of the Federal Reserve Board from 1914-1918,
Paul Warburg did not request another term. However, he was not ready to sever his
connection with the Federal Reserve System which he had done so much to set up and put
into operation. J.P. Morgan obligingly gave up his seat on the Federal Advisory Council,
and for the next ten years, Paul Warburg continued to represent the Federal Reserve
district of New York on the Council. He was vice president of the council 1922-25, and
president 1926-27. Thus Warburg remained the dominant presence at Federal Reserve Board
meetings throughout the 1920s, when the European central banks were planning the great
contraction of credit which precipitated the Crash of 1929 and the Great Depression.
43
Although most of the Federal Advisory Council’s "advice" to
the Board of Governors has never been reported, on rare instances a few glimpses into its
deliberations were afforded by brief items in The New York Times. On November 21, 1916,
The Times reported that the Federal Advisory Council had met in Washington for its
quarterly conference.
"There was talk about absorbing Europe’s extension of
credit to South America and other
countries. Federal Reserve officials said that to maintain a position as one of
the world’s bankers
the United States must expect to be called upon to render a good deal of the
service performed
largely by England in the past, in extending short term credits necessary in
the production and
transportation of goods of all kinds in the world’s trade, and that
acceptances in foreign trade
require lower discounts and the freest and most reliable gold markets."
(The First World War
was at its zenith in 1916.)
In addition to his service on the Board of Governors and the Federal
Advisory Council, Paul Warburg continued to address bankers’ groups about the
monetary policies they were expected to follow. On October 22, 1915, he addressed the Twin
City Bankers Club, St. Paul, Minnesota during which speech he stated,
"It is to your interest to see the Federal Reserve banks as strong as they
possibly can be. It
staggers the imagination to think what the future may have in store for the
development of
American banking. With Europe’s foremost powers limited to their own
field, with the United
States turned into a creditor nation for all the world, the boundaries of the
field that lies open for
us are determined only by our power of safe expansion. The scope of our banking
future will
ultimately be limited by the amount of gold that we can muster as the
foundation of our banking
and credit structure."
The composition of the Federal Reserve Board of Governors and the Federal
Reserve Advisory Council, from its initial membership to the present day, shows links to
the Jekyll Island conference and the London banking community which offers
incontrovertible evidence, acceptable in any court of law, that there was a plan to gain
control of the money and credit of the people of the United States, and to use it for the
profit of the architects. Old Jekyll Island hands were Frank Vanderlip, president of the
National City Bank, which bought a large portion of the shares of the Federal Reserve Bank
of New York in 1914; Paul Warburg of Kuhn, Loeb Company; Henry P. Davison, J.P.
Morgan’s righthand man, and director of the First National Bank of New York and the
National Bank of Commerce, which took a large portion of Federal Reserve Bank of New York
stock; and Benjamin Strong, also known as a Morgan lieutenant,
44
who served as Governor of the Federal Reserve Bank of New York during the
1920’s.*
The selection of the regional members of the Federal Advisory Council from
the list of bankers who worked most closely with the "big five" banks of New
York, and who were their principal correspondent banks, proves that the much-touted
"regional safeguarding of the public interest" by Carter Glass and other
Washington proponents of the Federal Reserve Act was from its very inception a deliberate
deception. The fact that for seventy years this council was able to meet with the Federal
Reserve Board of Governors and to "advise" the Governors on decisions of
monetary policy which affected the daily lives of every person in the United States,
without the public being aware of their existence, demonstrates that the planners of the
central bank operation knew exactly how to achieve their objectives through
"administrative processes" of which the public would remain ignorant. The claim
that the "advice" of the council members is not binding on the Governors or that
it carries no weight is to claim that four times a year, twelve of the most influential
bankers in the United States take time from their work to travel to Washington to meet
with the Federal Reserve Board merely to drink coffee and exchange pleasantries. It is a
claim which anyone familiar with the workings of the business community will find
impossible to take seriously. In 1914, it was a four-day trip each way for bankers from
the Far West to come to Washington for a council meeting with the Federal Reserve Board.
These men had extensive business interests which demanded their time. J.P. Morgan was a
director of sixty-three corporations which held annual meetings, and
__________________________
* "The Federal Advisory Council has great influence with the Federal
Reserve Board. Conspicuously upon that council is J.P. Morgan, the leading member of J.P.
Morgan Company and son of the late J.P. Morgan. Every one of the twelve members of the
Advisory Council, as you well know, was educated in the same atmosphere. The Federal
Reserve Act is not only a special privilege act but privileged persons have been placed in
control and are its advisors in its administration. The Federal Reserve Board and the
Federal Advisory Council administer the Federal Reserve System as its head authority, and
no one of the lesser officials, even if they wished, would dare to cross swords with
them."
(FROM: "Why Is Your Country At War?" by Charles Lindbergh, published
in 1917). The above paragraph explains why Woodrow Wilson ordered government agents to
seize and destroy the printing plates and copies of this book in the spring of 1918.
45
could hardly be expected to travel to Washington to attend meetings of the
Federal Reserve Board if his advice was to be considered of no importance.**
__________________________
** The J.P. Morgan connection has remained predominant on the Federal Advisory
Council. For the past several years, the prestigious Federal Reserve District No. 2, the
New York District, has been represented on the Federal Advisory Council by Lewis Preston.
Preston is Chairman of J.P. Morgan Company and also Chairman and Chief Executive Officer
of Morgan Guaranty Trust, New York. An heir to the Baldwin fortune (a company controlled
by Morgan), Preston married the heiress to the Pulitzer newspaper fortune. On February 26,
1929, The New York Times noted that a merger had been effected between National Bank of
Commerce and Guaranty Trust, making them the largest bank in the United States, with a
capital of two billion dollars. The merger was negotiated by Myron C. Taylor, president of
U.S. Steel, a Morgan firm. The banks occupied adjoining buildings on Wall Street, and, as
The New York Times noted, "The Guaranty Trust Company long has been known as one of
‘the Morgan group’ of banks." The National Bank of Commerce has also been
identified with Morgan interests.
46
CHAPTER FIVE
The House of Rothschild
The success of the Federal Reserve Conspiracy will raise many questions in
the minds of readers who are unfamiliar with the history of the United States and finance
capital. How could the Kuhn, Loeb-Morgan alliance, powerful though it might be, believe
that it would be capable, first, of devising a plan which would bring the entire money and
credit of the people of the United States into their hands, and second, of getting such a
plan enacted into law?
The capability of devising and enacting the "National Reserve
Plan", as the immediate result of the Jekyll Island expedition was called, was easily
within the powers of the Kuhn, Loeb-Morgan alliance, according to the following from
McClure’s Magazine, August 1911, "The Seven Men" by John Moody:
"Seven men in Wall Street now control a great share of the
fundamental industry and resources
of the United States. Three of the seven men, J.P. Morgan, James J. Hill, and
George F. Baker,
head of the First National Bank of New York belong to the so-called Morgan
group; four of them,
John D. and William Rockefeller, James Stillman, head of the National City
Bank, and Jacob H.
Schiff of the private banking firm of Kuhn, Loeb Company, to the so-called
Standard Oil City Bank group... the central machine of capital extends its control over
the United States... The
process is not only economically logical; it is now practically
automatic."32
Thus we see that the 1910 plot to seize control of the money and credit of
the people of the United States was planned by men who already controlled most of the
country’s resources. It seemed to John Moody "practically automatic" that
they should continue with their operations.
What John Moody did not know, or did not tell his readers, was that the
most powerful men in the United States were themselves answerable to another power, a
foreign power, and a power which had been steadfastly seeking to extend its control over
the young republic of the United States since its very inception. This power was the
financial power of England, centered in the London Branch of the House of Rothschild. The
fact was that in 1910, the United States was for all practical purposes being ruled
__________________________
32 John Moody, "The Seven Men", McClure’s Magazine, August,
1911, p. 418
47
from England, and so it is today. The ten largest bank holding companies
in the United States are firmly in the hands of certain banking houses, all of which have
branches in London. They are J.P. Morgan Company, Brown Brothers Harriman, Warburg, Kuhn
Loeb and J. Henry Schroder. All of them maintain close relationships with the House of
Rothschild, principally through the Rothschild control of international money markets
through its manipulation of the price of gold. Each day, the world price of gold is set in
the London office of N.M. Rothschild and Company.
Although these firms are ostensibly American firms, which merely maintain
branches in London, the fact is that these banking houses actually take their direction
from London. Their history is a fascinating one, and unknown to the American public,
originating as it did in the international traffic in gold, slaves, diamonds, and other
contraband. There are no moral considerations in any business decision made by these
firms. They are interested solely in money and power.
Tourists today gape at the magnificent mansions of the very rich in
Newport, Rhode Island, without realizing that not only do these "cottages" stand
as a memorial to the baronial desires of our Victorian millionaires, but that their
erection in Newport represented a nostalgic memorialization of the great American
fortunes, which had their beginnings in Newport when it was the capital of the slave
trade.
The slave trade for centuries had its headquarters in Venice, until
Seventeenth Century Britain, the new master of the seas, used its control of the oceans to
gain a monopoly. As the American colonies were settled, its fiercely independent people,
most of whom did not want slaves, found to their surprise that slaves were being sent to
our ports in great numbers.
For many years, Newport was the capital of this unsavory trade. William
Ellery, the Collector of the Port of Newport, said in 1791:
"...an Ethiopian cld as soon change his skin as a Newport
merchant cld be induced to change so
lucrative a trade.... for the slow profits of any manufactory."
John Quincy Adams remarked in his Diary, page 459, "Newport’s
former prosperity was chiefly owing to its extensive employment in the African slave
trade."
The pre-eminence of J.P. Morgan and the Brown firm in American finance can
be dated to the development of Baltimore as the nineteenth century capital of the slave
trade. Both of these firms originated in Baltimore, opened branches in London, came under
the aegis of the House of Rothschild, and returned to the United States to open branches
in New York and to become the dominant power, not only in finance, but also in government.
In recent years, key posts such as Secretary of Defense have been held by Robert Lovett,
partner of Brown Brothers Harriman, and Thomas S. Gates, partner of Drexel and Company, a
J.P. Morgan sub-
48
sidiary firm. The present Vice President, George Bush, is the son of
Prescott Bush, a partner of Brown Brothers Harriman, for many years the senator from
Connecticut, and the financial organizer of Columbia Broadcasting System of which he also
was a director for many years.
To understand why these firms operate as they do, it is necessary to give
a brief history of their origins. Few Americans know that J.P. Morgan Company began as
George Peabody and Company. George Peabody (1795-1869), born at South Danvers,
Massachusetts, began business in Georgetown, D.C. in 1814 as Peabody, Riggs and Company,
dealing in wholesale dry goods, and in operating the Georgetown Slave Market. In 1815, to
be closer to their source of supply, they moved to Baltimore, where they operated as
Peabody and Riggs, from 1815 to 1835. Peabody found himself increasingly involved with
business originating from London, and in 1835, he established the firm of George Peabody
and Company in London. He had excellent entree in London business through another
Baltimore firm established in Liverpool, the Brown Brothers. Alexander Brown came to
Baltimore in 1801, and established what is now known as the oldest banking house in the
United States, still operating as Brown Brothers Harriman of New York; Brown, Shipley and
Company of England; and Alex Brown and Son of Baltimore. The behind the scenes power
wielded by this firm is indicated by the fact that Sir Montagu Norman, Governor of the
Bank of England for many years, was a partner of Brown, Shipley and Company.* Considered
the single most influential banker in the world, Sir Montagu Norman was organizer of
"informal talks" between heads of central banks in 1927, which led directly to
the Great Stockmarket Crash of 1929.
Soon after he arrived in London, George Peabody was surprised to be
summoned to an audience with the gruff Baron Nathan Mayer Rothschild. Without mincing
words, Rothschild revealed to Peabody, that much of the London aristocracy openly disliked
Rothschild and refused his invitations. He proposed that Peabody, a man of modest means,
be established as a lavish host whose entertainments would soon be the talk of London.
Rothschild would, of course, pay all the bills. Peabody accepted the offer, and soon
became known as the most popular host in London. His annual Fourth of July dinner,
celebrating American Independence, became extremely popular with the English aristocracy,
many of whom, while drinking Peabody’s wine, regaled each other with jokes about
Rothschild’s crudities and bad manners, without realizing that every drop they drank
had been paid for by Rothschild.
__________________________
* "There is an informal understanding that a director of Brown, Shipley
should be on the Board of the Bank of England, and Norman was elected to it in 1907."
Montagu Norman, Current Biography, 1940.
49
It is hardly surprising that the most popular host in London would also
become a very successful businessman, particularly with the House of Rothschild supporting
him behind the scenes. Peabody often operated with a capital of 500,000 pounds on hand,
and became very astute in his buying and selling on both sides of the Atlantic. His
American agent was the Boston firm of Beebe, Morgan and Company, headed by Junius S.
Morgan, father of John Pierpont Morgan. Peabody, who never married, had no one to succeed
him, and he was very favorably impressed by the tall, handsome Junius Morgan. He persuaded
Morgan to join him in London as a partner in George Peabody and Company in 1854. In 1860,
John Pierpont Morgan had been taken on as an apprentice by the firm of Duncan, Sherman in
New York. He was not very attentive to business, and in 1864, Morgan’s father was
outraged when Duncan, Sherman refused to make his son a partner. He promptly extended an
arrangement whereby one of the chief employees of Duncan, Sherman, Charles H. Dabney, was
persuaded to join John Pierpont Morgan in a new firm, Dabney, Morgan and Company. Bankers
Magazine, December, 1864, noted that Peabody had withdrawn his account from Duncan,
Sherman, and that other firms were expected to do so. The Peabody account, of course, went
to Dabney, Morgan Company.
John Pierpont Morgan was born in 1837, during the first money panic in the
United States. Significantly, it had been caused by the House of Rothschild, with whom
Morgan was later to become associated.
In 1836, President Andrew Jackson, infuriated by the tactics of the
bankers who were attempting to persuade him to renew the charter of the Second Bank of the
United States, said, "You are a den of vipers. I intend to rout you out and by the
Eternal God I will rout you out. If the people only understood the rank injustice of our
money and banking system, there would be a revolution before morning."
Although Nicholas Biddle was President of the Bank of the United States,
it was well known that Baron James de Rothschild of Paris was the principal investor in
this central bank. Although Jackson had vetoed the renewal of the charter of the Bank of
the United States, he probably was unaware that a few months earlier, in 1835, the House
of Rothschild had cemented a relationship with the United States Government by superseding
the firm of Baring as financial agent of the Department of State on January 1, 1835.
Henry Clews, the famous banker, in his book, Twenty-eight Years in Wall
Street33, states that the Panic of 1837 was engineered because the charter of the Second
Bank of the United States had run out in 1836. Not only did President Jackson promptly
withdraw government funds
__________________________
33 Henry Clews, Twenty-eight Years in Wall Street, Irving Company, New York,
1888, page 157
50
from the Second Bank of the United States, but he deposited these funds,
$10 million, in state banks. The immediate result, Clews tells us, is that the country
began to enjoy great prosperity. This sudden flow of cash caused an immediate expansion of
the national economy, and the government paid off the entire national debt, leaving a
surplus of $50 million in the Treasury.
The European financiers had the answer to this situation. Clews further
states, "The Panic of 1837 was aggravated by the Bank of England when it in one day
threw out all the paper connected with the United States."
The Bank of England, of course, was synonymous with the name of Baron
Nathan Mayer Rothschild. Why did the Bank of England in one day "throw out" all
paper connected with the United States, that is, refuse to accept or discount any
securities, bonds or other financial paper based in the United States? The purpose of this
action was to create an immediate financial panic in the United States, cause a complete
contraction of credit, halt further issues of stocks and bonds, and ruin those seeking to
turn United States securities into cash. In this atmosphere of financial panic, John
Pierpont Morgan came into the world. His grandmother, Joseph Morgan, was a well to do
farmer who owned 106 acres in Hartford, Connecticut. He later opened the City Hotel, and
the Exchange Coffee Shop, and in 1819, was one of the founders of the Aetna Insurance
Company.
George Peabody found that he had chosen well in selecting Junius S. Morgan
as his successor. Morgan agreed to continue the sub rosa relationship with N.M. Rothschild
Company, and soon expanded the firm’s activities by shipping large quantities of
railroad iron to the United States. It was Peabody iron which was the foundation for much
of American railroad tracks from 1860 to 1890. In 1864, content to retire and leave his
firm in the hands of Morgan, Peabody allowed the name to be changed to Junius S. Morgan
Company. The Morgan firm then and since has always been directed from London. John
Pierpont Morgan spent much of his time at his magnificent London mansion, Prince’s
Gate.
One of the high water marks of the successful Rothschild-Peabody Morgan
business venture was the Panic of 1857. It had been twenty years since the Panic of 1837:
its lessons had been forgotten by hordes of eager investors who were anxious to invest the
profits of a developing America. It was time to fleece them again. The stock market
operates like a wave washing up on the beach. It sweeps with it many minuscule creatures
who derive all of their life support from the oxygen and water of the wave. They coast
along at the crest of the "Tide of Prosperity". Suddenly the wave, having
reached the high water mark on the beach, recedes, leaving all of the creatures gasping on
the sand. Another wave may come in time to
51
save them, but in all likelihood it will not come as far, and some of the
sea creatures are doomed. In the same manner, waves of prosperity, fed by newly created
money, through an artificial contraction of credit, recedes, leaving those it had borne
high to gasp and die without hope of salvation.
Corsair, the Life of J.P. Morgan,34 tells us that the Panic of 1857 was
caused by the collapse of the grain market and by the sudden collapse of Ohio Life and
Trust, for a loss of five million dollars. With this collapse nine hundred other American
companies failed. Significantly, one not only survived, but prospered from the crash. In
Corsair, we learn that the Bank of England lent George Peabody and Company five million
pounds during the panic of 1857. Winkler, in Morgan the Magnificent35 says that the Bank
of England advanced Peabody one million pounds, an enormous sum at that time, and the
equivalent of one hundred million dollars today, to save the firm. However, no other firm
received such beneficence during this Panic. The reason is revealed by Matthew Josephson,
in The Robber Barons. He says on page 60:
"For such qualities of conservatism and purity, George
Peabody and Company, the old tree out of
which the House of Morgan grew, was famous. In the panic of 1857, when
depreciated securities
had been thrown on the market by distressed investors in America, Peabody and
the elder
Morgan, being in possession of cash, had purchased such bonds as possessed real
value freely,
and then resold them at a large advance when sanity was restored."36
Thus, from a number of biographies of Morgan, the story can be pieced
together. After the panic had been engineered, one firm came into the market with one
million pounds in cash, purchased securities from distressed investors at panic prices,
and later resold them at an enormous profit. That firm was the Morgan firm, and behind it
was the clever maneuvering of Baron Nathan Mayer Rothschild. The association remained
secret from the most knowledgeable financial minds in London and New York, although Morgan
occasionally appeared as the financial agent in a Rothschild operation. As the Morgan firm
grew rapidly during the late nineteenth century, until it dominated the finances of the
nation, many observers were puzzled that the Rothschilds seemed so little interested in
profiting by investing in the rapidly advancing American economy. John Moody notes, in The
Masters of Capital, page 27, "The Rothschilds were content to remain a close ally of
Morgan... as far as the American field was concerned.’37 Secrecy was more profitable
than valor.
__________________________
34 Corsair, The Life of Morgan
35 John K. Winkler, Morgan the Magnificent, Vanguard, N.Y. 1930
36 Matthew Josephson, The Robber Barons, Harcourt Brace, N.Y. 1934
37 John Moody, The Masters of Capital
52
The reason that the European Rothschilds preferred to operate anonymously
in the United States behind the facade of J.P. Morgan and Company is explained by George
Wheeler, in Pierpont Morgan and Friends, the Anatomy of a Myth, page 17:
"But there were steps being taken even now to bring him out
of the financial backwaters--and
they were not being taken by Pierpont Morgan himself. The first suggestion of
his name for a role
in the recharging of the reserve originated with the London branch of the House
of Rothschild,
Belmont’s employers."38
Wheeler goes on to explain that a considerable anti-Rothschild movement
had developed in Europe and the United States which focused on the banking activities of
the Rothschild family. Even though they had a registered agent in the United States,
August Schoenberg, who had changed his name to Belmont when he came to the United States
as the representative of the Rothschilds in 1837, it was extremely advantageous to them to
have an American representative who was not known as a Rothschild agent.
Although the London house of Junius S. Morgan and Company continued to be
the dominant branch of the Morgan enterprises, with the death of the senior Morgan in 1890
in a carriage accident on the Riviera, John Pierpont Morgan became the head of the firm.
After operating as the American representative of the London firm from 1864-1871 as Dabney
Morgan Company, Morgan took on a new partner in 1871, Anthony Drexel of Philadelphia and
operated as Drexel Morgan and Company until 1895. Drexel died in that year, and Morgan
changed the name of the American branch to J.P. Morgan and Company.
LaRouche39 tells us that on February 5, 1891, a secret association known
as the Round Table Group was formed in London by Cecil Rhodes, his banker, Lord
Rothschild, the Rothschild in-law, Lord Rosebery, and Lord Curzon. He states that in the
United States the Round Table was represented by the Morgan group. Dr. Carrol Quigley
refers to this group as "The British-American Secret Society" in Tragedy and
Hope, stating that "The chief backbone of this organization grew up along the already
existing financial cooperation running from the Morgan Bank in New York to a group of
international financiers in London led by Lazard Brothers (in 1901)."40
William Guy Carr, in Pawns In The Game states that, "In 1899, J.P.
Morgan and Drexel went to England to attend the International Bankers
__________________________
38 George Wheeler, Pierpont Morgan and Friends, the Anatomy of a Myth, Prentice
Hall, N.J. 1973
39 Lyndon H. LaRouche, Jr., Dope, Inc., The New Benjamin Franklin House
Publishing Company, N.Y. 1978
40 Dr. Carrol Quigley, Tragedy and Hope, Macmillan Co., N.Y.
53
Convention. When they returned, J.P. Morgan had been appointed head
representative of the Rothschild interests in the United States. As the result of the
London Conference, J.P. Morgan and Company of New York, Drexel and Company of
Philadelphia, Grenfell and Company of London, and Morgan Harjes Cie of Paris, M.M. Warburg
Company of Germany and America, and the House of Rothschild were all affiliated."41
Apparently unaware of the Peabody connection with the Rothschilds and the
fact that the Morgans had always been affiliated with the House of Rothschild, Carr
supposed that he had uncovered this relationship as of 1899, when in fact it went back to
1835.*
After World War I, the Round Table became known as the Council on Foreign
Relations in the United States, and the Royal Institute of International Affairs in
London. The leading government officials of both England and the United States were chosen
from its members. In the 1960s, as growing attention centered on the surreptitious
governmental activities of the Council on Foreign Relations, subsidiary groups, known as
the Trilateral Commission and the Bilderbergers, representing the identical financial
interests, began operations, with the more important officials, such as Robert Roosa,
being members of all three groups.
__________________________
41 William Guy Carr, Pawns In The Game, privately printed, 1956, pg. 60
* July 30, 1930 McFadden Basis of Control of Economic Conditions. This control
of the world business structure and of human happiness and progress by a small group is a
matter of the most intense public interest. In analyzing it, we must begin with the
internal group which centers itself around J.P. Morgan Company. Never before had there
been such a powerful centralized control over finance, industrial production, credit and
wages as is at this time vested in the Morgan group... The Morgan control of the Federal
Reserve System is exercised through control of the management of the Federal Reserve Bank
of New York.
George F. Peabody History of the Great American Fortunes, Gustavus Myers, Mod.
Lib. 537, notes that J.P. Morgan’s father, Junius S. Morgan, had become a partner of
George Peabody in the banking business. "When the Civil War came on, George Peabody
and Company were appointed the financial representatives in England of the U.S.
Government.... with this appointment their wealth suddenly began to pile up; where
hitherto they had amassed the riches by stages not remarkably rapid, they now added many
millions within a very few years." According to writers of the day, the methods of
George Peabody & Company were not only unreasonable but double treason, in that, while
in the act of giving inside aid to the enemy, George Peabody & Company were the
potentiaries of the U.S. Government and were being well paid to advance its interests.
"Springfield Republic", 1866: "For all who know anything on the subject
know very well that Peabody and his partners gave us no faith and no help in our struggle
for national existence. They participated to the fullest in the common English distrust of
our cause and our success, and talked and acted for the South rather than for our nation.
No individuals contributed so much to flooding our money markets and weakening financial
confidence in our nationality than George Peabody & Company, and none made more money
by the operation. All the money that Mr. Peabody is giving away so lavishly among our
institutions of learning was gained by the speculations of his house in our
misfortunes." Also, New York Times, Oct. 31, 1866: Reconstruction Carpetbaggers Money
Fund. Lightning over the Treasury Building, John Elson, Meador Publishing Co., Boston 41,
pg. 53, "The Bank of England with its subsidiary banks in America (under the
domination of J.P. Morgan) the Bank of France, and the Reichsbank of Germany, composed an
interlocking and cooperative banking system, the main objective of which was the
exploitation of the people."
54
According to William Guy Carr, in Pawns In The Game,42 the initial meeting
of these ex officio planners took place in Mayer Amschel Bauer’s Goldsmith Shop in
Frankfurt in 1773. Bauer, who adopted the name of "Rothschild" or Red Shield,
from the red shield which he hung over his door to advertise his business (the red shield
today is the official coat of arms of the City of Frankfurt), (See Cover) "was only
thirty years of age when he invited twelve other wealthy and influential men to meet him
in Frankfurt. His purpose was to convince them that if they agreed to pool their resources
they could then finance and control the World Revolutionary Movement and use it as their
Manual of Action to win ultimate control of the wealth, natural resources, and manpower of
the entire world. This agreement reached, Mayer unfolded his revolutionary plan. The
project would be backed by all the power that could be purchased with their pooled
resources. By clever manipulation of their combined wealth it would be possible to create
such adverse economic conditions that the masses would be reduced to a state bordering on
starvation by unemployment... Their paid propagandists would arouse feelings of hatred and
revenge against the ruling classes by exposing all real and alleged cases of extravagance,
licentious conduct, injustice, oppression, and persecution. They would also invent
infamies to bring into disrepute others who might, if left alone, interfere with their
overall plans... Rothschild turned to a manuscript and proceeded to read a carefully
prepared plan of action. 1. He argued that LAW was FORCE only in disguise. He reasoned it
was logical to conclude ‘By the laws of nature right lies in force.’ 2.
Political freedom is an idea, not a fact. In order to usurp political power all that was
necessary was to preach ‘Liberalism’ so that the electorate, for the sake of an
idea, would yield some of their power and prerogatives which the plotters could then
gather into their own hands. 3. The speaker asserted that the Power of Gold had usurped
the power of Liberal rulers.... He pointed out that it was immaterial to the success of
his plan whether the established governments were destroyed by external or internal foes
because the victor had to of necessity ask the aid of ‘Capital’ which ‘Is
entirely in our hands’. 4. He argued that the use of any and all means to reach their
final goal was justified on the grounds that the ruler who governed by the moral code was
not a skilled politician because he left himself vulnerable and in an unstable position.
5. He asserted that ‘Our right lies in force. The word RIGHT is an abstract thought
and proves nothing. I find a new RIGHT... to attack by the Right of the Strong, to
reconstruct all existing institutions, and to become the sovereign Lord of all those who
left to us the Rights to their powers by laying them down to us in their liberalism. 6.
The power of our resources must remain invisible until the very moment when it has gained
such
__________________________
42 William Guy Carr, Pawns In The Game, privately printed, 1956
55
strength that no cunning or force can undermine it. He went on to outline
twenty-five points. Number 8 dealt with the use of alcoholic liquors, drugs, moral
corruption, and all vice to systematically corrupt youth of all nations. 9. They had the
right to seize property by any means, and without hesitation, if by doing so they secured
submission and sovereignty. 10. We were the first to put the slogans Liberty, Equality,
and Fraternity into the mouths of the masses, which set up a new aristocracy. The
qualification for this aristocracy is WEALTH which is dependent on us. 11. Wars should be
directed so that the nations engaged on both sides should be further in our debt. 12.
Candidates for public office should be servile and obedient to our commands, so that they
may readily be used. 13. Propaganda--their combined wealth would control all outlets of
public information. 14. Panics and financial depressions would ultimately result in World
Government, a new order of one world government."
The Rothschild family has played a crucial role in international finance
for two centuries, as Frederick Morton, in The Rothschilds writes:
"For the last one hundred and fifty years the history of
the House of Rothschild has been to an amazing extent the backstage history of Western
Europe."38 (Preface)... Because of their success in making loans not to individuals,
but to nations, they reaped huge profits, although as Morton writes, p. 36, "Someone
once said that the wealth of Rothschild consists of the bankruptcy of nations."43
E.C. Knuth writes, in The Empire of the City, "The fact that the
House of Rothschild made its money in the great crashes of history and the great wars of
history, the very periods when others lost their money, is beyond question."44
The Great Soviet Encyclopaedia, states, "The clearest example of a
personal linkup (international directorates) on a Western European scale is the Rothschild
family. The London and Paris branches of the Rothschilds are bound not just by family ties
but also by personal link-ups in jointly controlled companies."45 The encyclopaedia
further described these companies as international monopolies.
The sire of the family, Mayer Amschel Rothschild, established a small
business as a coin dealer in Frankfurt in 1743. Although previously known as Bauer*, he
advertised his profession by putting up a sign depicting an eagle on a red shield, an
adaptation of the coat of arms of the City of Frankfurt, to which he added five golden
arrows extending from the talons, signifying his five sons. Because of this sign, he took
the
__________________________
43 Frederick Morton, The Rothschilds, Fawcett Publishing Company, N.Y., 1961
44 E.C. Knuth, Empire of the City, p. 71
45 Great Soviet Encyclopaedia, Edition 3, 1973, Macmillan, London, Vol. 14, pg.
691
* "The original name of Rothschild was Bauer." p. 397, Henry Clews,
Twenty-eight years in Wall Street.
56
name ‘Rothschild" or "Red Shield". When the Elector of
Hesse earned a fortune by renting Hessian mercenaries to the British to put down the
rebellion in the American colonies, Rothschild was entrusted with this money to invest. He
made an excellent profit both for himself and the Elector, and attracted other accounts.
In 1785 he moved to a larger house, 148 Judengasse, a five story house known as "The
Green Shield" which he shared with the Schiff family.
The five sons established branches in the principal cities of Europe, the
most successful being James in Paris and Nathan Mayer in London. Ignatius Balla in The
Romance of the Rothschilds46 tells us how the London Rothschild established his fortune.
He went to Waterloo, where the fate of Europe hung in the balance, saw that Napoleon was
losing the battle, and rushed back to Brussels. At Ostend, he tried to hire a boat to
England, but because of a raging storm, no one was willing to go out. Rothschild offered
500 francs, then 700, and finally 1,000 francs for a boat. One sailor said, "I will
take you for 2000 francs; then at least my widow will have something if we are
drowned." Despite the storm, they crossed the Channel.
The next morning, Rothschild was at his usual post in the London Exchange.
Everyone noticed how pale and exhausted he looked. Suddenly, he started selling, dumping
large quantities of securities. Panic immediately swept the Exchange. Rothschild is
selling; he knows we have lost the Battle of Waterloo. Rothschild and all of his known
agents continued to throw securities onto the market. Balla says, "Nothing could
arrest the disaster. At the same time he was quietly buying up all securities by means of
secret agents whom no one knew. In a single day, he had gained nearly a million sterling,
giving rise to the saying, ‘The Allies won the Battle of Waterloo, but it was really
Rothschild who won.’"*
In The Profits of War, Richard Lewinsohn says, "Rothschild’s war
profits from the Napoleonic Wars financed their later stock speculations. Under
Metternich, Austria after long hesitation, finally agreed to accept financial direction
from the House of Rothschild."47
__________________________
46 Ignatius Balla, The Romance of the Rothschilds, Everleigh Nash, London, 1913
* The New York Times, April 1, 1915 reported that in 1914, Baron Nathan Mayer
de Rothschild went to court to suppress Ignatius Balla’s book on the grounds that the
Waterloo story about his grandfather was untrue and libelous. The court ruled that the
story was true, dismissed Rothschild’s suit, and ordered him to pay all costs. The
New York Times noted in this story that "The total Rothschild wealth has been
estimated at $2 billion." A previous story in The New York Times (May 27, 1905) noted
that Baron Alphonse de Rothschild, head of the French house of Rothschild, possessed $60
million in American securities in his fortune, although the Rothschilds reputedly were not
active in the American field. This explains why their agent, J.P. Morgan, had only $19
million in securities in his estate when he died in 1913, and securities handled by Morgan
were actually owned by his employer, Rothschild."
47 Richard Lewinsohn, The Profits of War, E.P. Dutton, 1937
57
After the success of his Waterloo exploit, Nathan Mayer Rothschild gained
control of the Bank of England through his near monopoly of "Consols" and other
shares. Several "central" banks, or banks which had the power to issue currency,
had been started in Europe: The Bank of Sweden, in 1656, which began to issue notes in
1661, the earliest being the Bank of Amsterdam, which financed Oliver Cromwell’s
seizure of power in England in 1649, ostensibly because of religious differences. Cromwell
died in 1657 and the throne of England was re-established when Charles II was crowned in
1660. He died in 1685. In 1689, the same group of bankers regained power in England by
putting King William of Orange on the throne. He soon repaid his backers by ordering the
British Treasury to borrow 1,250,000 pounds from these bankers. He also issued them a
Royal Charter for the Bank of England, which permitted them to consolidate the National
debt (which had just been created by this loan) and to secure payments of interest and
principal by direct taxation of the people. The Charter forbade private goldsmiths to
store gold and to issue receipts, which gave the stockholders of the Bank of England a
money monopoly. The goldsmiths also were required to store their gold in the Bank of
England vaults. Not only had their privilege of issuing circulating medium been taken away
by government decree, but their fortunes were now turned over to those who had supplanted
them.*
In his "Cantos", 46; 27, Ezra Pound refers to the unique
privileges which William Paterson advertised in his prospectus for the Charter of the Bank
of England:
"Said Paterson
Hath benefit of interest on all
the moneys which it, the bank, creates out of nothing."
The "nothing" which is referred to, of course, is the
bookkeeping operation of the bank, which "creates" money by entering a notation
that it has "lent" you one thousand dollars, money which did not exist until the
bank made the entry.
By 1698, the British Treasury owed 16 million pounds sterling to the Bank
of England. By 1815, principally due to the compounding of interest, the debt had risen to
885 million pounds sterling. Some of this increase was due to the wars which had
flourished during that period, including the Napoleonic Wars and the wars which England
had fought to retain its American Colony.
__________________________
* NOTE: In the United States, after the stockholders of the Federal Reserve
System had consolidated their power in 1934, our government also issued orders that
private citizens could not store or hold gold.
58
William Paterson (1658-1719) himself benefited little from "the
moneys which the bank creates out of nothing", as he withdrew, after a policy
disagreement, from the Bank of England a year after it was founded. A later William
Paterson became one of the framers of the United States Constitution, while the name
lingers on, like the pernicious central bank itself.
Paterson had found himself unable to work with the Bank of England’s
stockholders. Many of them remained anonymous, but an early description of the Bank of
England stated it was "A society of about 1330 persons, including the King and Queen
of England, who had 10,000 pounds of stock, the Duke of Leeds, Duke of Devonshire, Earl of
Pembroke, and the Earl of Bradford."
Because of his success in his speculations, Baron Nathan Mayer de
Rothschild, as he now called himself, reigned as the supreme financial power in London. He
arrogantly exclaimed, during a party in his mansion, "I care not what puppet is
placed upon the throne of England to rule the Empire on which the sun never sets. The man
that controls Britain’s money supply controls the British Empire, and I control the
British money supply."
His brother James in Paris had also achieved dominance in French finance.
In Baron Edmond de Rothschild, David Druck writes, "(James) Rothschild’s wealth
had reached the 600 million mark. Only one man in France possessed more. That was the
King, whose wealth was 800 million. The aggregate wealth of all the bankers in France was
150 million less than that of James Rothschild. This naturally gave him untold powers,
even to the extent of unseating governments whenever he chose to do so. It is well known,
for example, that he overthrew the Cabinet of Prime Minister Thiers."48
The expansion of Germany under Bismarck was accompanied by his dependence
on Samuel Bleichroder, Court Bankers of the Prussian Emperor, who had been known as an
agent of the Rothschilds since 1828. The later Chancellor of Germany, Dr. von Bethmann
Hollweg, was the son of Moritz Bethmann of Frankfurt, who had intermarried with the
Rothschilds. Emperor Wilhelm I also relied heavily on Bischoffsheim, Goldschmidt, and Sir
Ernest Cassel of Frankfurt, who emigrated to England and became personal banker to the
Prince of Wales, later Edward VII. Cassel’s daughter married Lord Mountbatten, giving
the family a direct relationship to the present British Crown.
__________________________
48 David Druck, Baron Edmond de Rothschild, (Privately printed), N.Y. 1850
49 E.M. Josephson, The Strange Death of Franklin D. Roosevelt, pg. 39, Chedney
Press, N.Y. 1948
59
Josephson49 states that Philip Mountbatten was related through the Cassels
to the Meyer Rothschilds of Frankfurt. Thus, the English royal House of Windsor has a
direct family relationship to the Rothschilds. In 1901, when Queen Victoria’s son,
Edward, became King Edward VII, he re-established the Rothschild ties.
Paul Emden in Behind The Throne says,
"Edward’s preparation for his metier was quite different from that of
his mother, hence he ‘ruled’ less than she did. Gratefully, he retained around
him men who had been with him in the age of the building of the Baghdad Railway...there
were added to the advisory staff Leopold and Alfred de Rothschild, various members of the
Sassoon family, and above all his private financial advisor Sir Ernest Cassel."50
The enormous fortune which Cassel made in a relatively short time gave him an
immense power which he never misused. He amalgamated the firm of Vickers Sons with the
Naval Construction Company and the Maxim-Nordenfeldt Guns and Ammunition Company, a fusion
from which there arose the worldwide firm of Vickers Sons and Maxim. On an entirely
different capacity from Cassel were businessmen like the Rothschilds. The firm was run on
democratic principles, and the various partners all had to be members of the family. With
great hospitality and in a princely manner they led the lives of grand seigneurs, and it
was natural that Edward VII should find them congenial. Thanks to their international
family relationships and still more extended business connections, they knew the whole
world, were well informed about everybody, and had reliable knowledge of matters which did
not appear on the surface. This combination of finance and politics had been a trademark
of the Rothschilds from the very beginning. The House of Rothschild always knew more than
could be found in the papers and even more than could be read in the reports which arrived
at the Foreign Office. In other countries also the relations of the Rothschilds extended
behind the throne. Not until numerous diplomatic publications appeared in the years after
the war did a wider public learn how strongly Alfred de Rothschild’s hand affected
the politics of Central Europe during the twenty years before the war (World War I)."
With the control of the money came the control of the news media. Kent
Cooper, head of the Associated Press, writes in his autobiography, Barriers Down,
"International bankers under the House of Rothschild acquired an interest
in the three leading European agencies."51
Thus the Rothschilds bought control of Reuters International News Agency,
based in London, Havas of France, and Wolf in Germany, which controlled the dissemination
of all news in Europe.
__________________________
50 Paul Emden, Behind The Throne, Hoddard Stoughton, London, 1934
51 Kent Cooper, Barriers Down, pg. 21
60
In Inside Europe52, John Gunther wrote in 1936 that any French prime
minister, at the end of 1935, was a creature of the financial oligarchy, and that this
financial oligarchy was dominated by twelve regents, of whom six were bankers, and were
headed by Baron Edmond de Rothschild.
The iron grip of the "London Connection" on the media was
exposed in a recent book by Ben J. Bagdikian The Media Monopoly, described as "A
startling report on the 50 corporations that control what America sees, hears,
reads".53 Bagdikian, who edited the nation’s most influential magazine the
Saturday Evening Post until the monopoly suddenly closed it down, reveals the interlocking
directorates among the fifty corporations which control the news, but fails to trace them
back to the five London banking houses which control them. He mentions that CBS interlocks
with the Washington Post, Allied Chemical, Wells Fargo Bank, and others, but does not tell
the reader that Brown Brothers Harriman controls CBS, or that the Eugene Meyer family
(Lazard Freres) controls Allied Chemical and the Washington Post, and Kuhn Loeb Co. the
Wells Fargo Bank. He shows the New York Times interlocked with Morgan Guaranty Trust,
American Express, First Boston Corporation and others, but does not show how the banking
interlocks. He does not mention the Federal Reserve System in his entire book, which is
conspicuous by its absence.
Bagdikian documents that the media monopoly is steadily closing down more
newspapers and magazines. Washington D.C., with one paper, The Post, is unique among world
capitols. London has eleven daily newspapers, Paris fourteen, Rome eighteen, Tokyo
seventeen, and Moscow nine. He cites a study from the 1982 World Press Encyclopaedia that
the United States is at the bottom of industrial nations in the number of daily newspapers
sold per 1,000 population. Sweden leads the list with 572, the United States is at the
bottom with 287. There is universal distrust of the media by Americans, because of their
notorious monopoly and bias. The media unanimously urge higher taxes on working people,
more government spending, a welfare state with totalitarian powers, close relations with
Russia, and a rabid denunciation of anyone who opposes Communism. This is the program of
"the London Connection." It flaunts a maniacal racism, and has as its motto the
dictum of its high priestess, Susan Sontag, that "The white race is the cancer of
history." Everyone should be against cancer. The media monopoly deals with its
opponents in one of two ways; either frontal assault of libel which the average person
cannot afford to litigate, or an iron curtain of silence, the standard treatment for any
work which exposes its clandestine activities.
__________________________
52 John Gunther, Inside Europe, 1936
53 Ben H. Bagdikian, The Media Monopoly, Beacon Press, Boston 1983
61
Although the Rothschild plan does not match any single political or
economic movement since it was enunciated in 1773, vital parts of it can be discerned in
all political revolution since that date. LaRouche54 points out that the Round Tables
sponsored Fabian Socialism in England, while backing the Nazi regime through a Round Table
member in Germany, Dr. Hjalmar Schacht, and that they used the Nazi Government throughout
World War II through Round Table member Admiral Canaris, while Allen Dulles ran a
collaborating intelligence operation in Switzerland for the Allies.
__________________________
54 Lyndon H. LaRouche, Jr., Dope, Inc., New Benjamin Franklin House Publishing
Co., New York, 1978
62
CHAPTER SIX
The London Connection
"So you see, my dear Coningsby, that the world is governed
by very different personages from what is imagined by those who are not behind the
scenes."55--Disraeli, Prime Minister of England during Queen Victoria’s reign.
In 1775, the colonists of America declared their independence from Great
Britain, and subsequently won their freedom by the American Revolution. Although they
achieved political freedom, financial independence proved to be a more difficult matter.
In 1791, Alexander Hamilton, at the behest of European bankers, formed the first Bank of
the United States, a central bank with much the same powers as the Bank of England. The
foreign influences behind this bank, more than a century later, were able to get the
Federal Reserve Act through Congress, giving them at last the central bank of issue for
our economy. Although the Federal Reserve Bank was neither Federal, being owned by private
stockholders, nor a Reserve, because it was intended to create money, instead of to hold
it in reserve, it did achieve enormous financial power, so much so that it has gradually
superseded the popular elected government of the United States. Through the Federal
Reserve System, American independence was stealthily but invincibly absorbed back into the
British sphere of influence. Thus the London Connection became the arbiter of policy of
the United States.
Because of England’s loss of her colonial empire after the Second
World War, it seemed that her influence as a world political power was waning.
Essentially, this was true. The England of 1980 is not the England of 1880. She no longer
rules the waves; she is a second rate, perhaps third rate, military power, but
paradoxically, as her political and military power waned, her financial power grew. In
Capital City we find, "On almost any measure you care to take, London is the
world’s leading financial centre . . . In the 1960s London dominance increased . .
."56
A partial explanation of this fact is given:
"Daniel Davison, head of London’s Morgan Grenfell, said, ‘The
American banks have brought
the necessary money, customers, capital
__________________________
55 Coningsby, by Disraeli, Longmans Co., London, 1881, p. 252
56 McRae and Cairncross, Capital City, Eyre Methuen, London, 1963, p. 1
63
and skills which have established London in its present
preeminence . . . . only the American
banks have a lender of last resort. The Federal Reserve Board of the United
States can, and does,
create dollars when necessary. Without the Americans, the big dollar deals
cannot be put together.
Without them, London would not be credible as an international financial
centre.’"57
Thus London is the world’s financial center, because it can command
enormous sums of capital, created at its command by the Federal Reserve Board of the
United States. But how is this possible? We have already established that the monetary
policies of the United States, the interest rates, the volume and value of money, and
sales of bonds, are decided, not by the figurehead of the Federal Reserve Board of
Governors, but by the Federal Reserve Bank of New York. The pretended decentralization of
the Federal Reserve System and its twelve, equally autonomous "regional" banks,
is and has been a deception since the Federal Reserve Act became law in 1913. That United
States monetary policy stems solely from the Federal Reserve Bank of New York is yet
another fallacy. That the Federal Reserve Bank of New York is itself autonomous, and free
to set monetary policy for the entire United States without any outside interference is
especially untrue.
We might believe in this autonomy if we did not know that the majority
stock of the Federal Reserve Bank of New York was purchased by three New York City banks:
First National Bank, National City Bank, and the National Bank of Commerce. An examination
of the principal stockholders in these banks, in 1914, and today, reveals a direct London
connection.
In 1812, the National City Bank began business as the City Bank, in the
same room in which the defunct Bank of the United States, whose charter had expired, had
been doing business. It represented many of the same stockholders, who were now
functioning under a legitimate American charter. During the early 1800s, the most famous
name associated with City Bank was Moses Taylor (1806-1882). Taylor’s father had been
a confidential agent employed in buying property for the Astor interests while concealing
the fact that Astor was the purchaser. Through this tactic, Astor succeeded in buying many
farms, and also a great deal of potentially valuable real estate in Manhattan. Although
Astor’s capital was reputed to come from his fur trading, a number of sources
indicate that he also represented foreign interests. LaRouche58 states that Astor, in
exchange for providing intelligence to the British during the years before and after the
Revolutionary War, and for inciting Indians to attack
__________________________
57 Ibid, p. 225
58 Lyndon H. LaRouche, Dope, Inc., New Benjamin Franklin House Publishing Co.,
N.Y. 1978
64
and kill American settlers along the frontier, received a handsome reward.
He was not paid cash, but was given a percentage of the British opium trade with China. It
was the income from this lucrative concession which provided the basis for the Astor
fortune.
With his father’s connection with the Astors, young Moses Taylor had
no difficulty in finding a place as apprentice in a banking house at the age of 15. Like
so many others in these pages, he found his greatest opportunities when many other
Americans were going bankrupt during an abrupt contraction of credit. During the Panic of
1837, when more than half the business firms in New York failed, he doubled his fortune.
In 1855, he became president of City Bank. During the Panic of 1857, the City Bank
profited by the failure of many of its competitors. Like George Peabody and Junius Morgan,
Taylor seemed to have an ample supply of cash for buying up distressed stocks. He
purchased nearly all the stock of Delaware Lackawanna Railroad for $5 a share. Seven years
later, it was selling for $240 a share. Moses Taylor was now worth fifty million dollars.
In August, 1861, Taylor was named Chairman of the Loan Committee to
finance the Union Government in the Civil War. The Committee shocked Lincoln by offering
the government $5,000,000 at 12% to finance the war. Lincoln refused and financed the war
by issuing the famous "Greenbacks" through the U.S. Treasury, which were backed
by gold. Taylor continued to increase his fortune throughout the war, and in his later
years, the youthful James Stillman became his prot�g�. In 1882, when Moses Taylor died,
he left seventy million dollars.* His son-in-law, Percy Pyne, succeeded him as president
of City Bank, which had now become National City Bank. Pyne was paralyzed, and was barely
able to function at the bank. For nine years, the bank stagnated, nearly all its capital
being the estate of Moses Taylor. William Rockefeller, brother of John D. Rockefeller, had
bought into the bank, and was anxious to see it progress. He persuaded Pyne to step aside
in 1891 in favor of James Stillman, and soon the National City Bank became the principal
repository of the Rockefeller oil income. William Rockefeller’s son, William, married
Elsie, James Stillman’s daughter, Isabel. Like so many others in New York banking,
James Stillman also had a British connection. His father, Don Carlos Stillman, had come to
Brownsville, Texas, as a British agent and blockade runner during the Civil War. Through
his banking connections in New York, Don Carlos had been able to find a place for
__________________________
* The New York Times noted on May 24, 1882 that Moses Taylor was chairman of
the Loan Committee of the Associated Banks of New York City in 1861. Two hundred million
dollars worth of securities were entrusted to him. It is probably due to him more than any
other one man that the government in 1861 found itself with the means to prosecute the
war.
65
his son as apprentice in a banking house. In 1914, when National City Bank
purchased almost ten per cent of the shares of the newly organized Federal Reserve Bank of
New York, two of Moses Taylor’s grandsons, Moses Taylor Pyne and Percy Pyne, owned
15,000 shares of National City stock. Moses Taylor’s son, H.A.C. Taylor, owned 7699
shares of National City Bank. The bank’s attorney, John W. Sterling, of the firm of
Shearman and Sterling, also owned 6000 shares of National City Bank. However, James
Stillman owned 47,498 shares, or almost twenty percent of the bank’s total shares of
250,000. [See Chart I]
The second largest purchaser of Federal Reserve Bank of New York shares in
1914, First National Bank, was generally known as "the Morgan Bank", because of
the Morgan representation on the board, although the bank’s founder George F. Baker
held 20,000 shares, and his son G.F. Baker, Jr., had 5,000 shares for twenty-five percent
of the bank’s total stock of 100,000 shares. George F. Baker Sr.’s daughter
married George F. St. George of London. The St. Georges later settled in the United
States, where their daughter, Katherine St. George, became a prominent Congresswoman for a
number of years. Dr. E.M. Josephson wrote of her, "Mrs. St. George, a first cousin of
FDR and New Dealer, said, ‘Democracy is a failure’." George Baker,
Jr.’s daughter, Edith Brevoort Baker, married Jacob Schiff’s grandson, John M.
Schiff, in 1934. John M. Schiff is now honorary chairman of Lehman Brothers Kuhn Loeb
Company.
The third large purchase of Federal Reserve Bank of New York stock in 1914
was the National Bank of Commerce which issued 250,000 shares. J.P. Morgan, through his
controlling interest in Equitable Life, which held 24,700 shares and Mutual Life, which
held 17,294 shares of National Bank of Commerce, also held another 10,000 shares of
National Bank of Commerce through J.P. Morgan and Company (7800 shares), J.P. Morgan, Jr.
(1100 shares), and Morgan partner H.P. Davison (1100 shares). Paul Warburg, a Governor of
the Federal Reserve Board of Governors, also held 3000 shares of National Bank of
Commerce. His partner, Jacob Schiff had 1,000 shares of National Bank of Commerce. This
bank was clearly controlled by Morgan, who was really a subsidiary of Junius S. Morgan
Company in London and the N.M. Rothschild Company of London, and Kuhn, Loeb Company, which
was also known as a principal agent of the Rothschilds.
The financier Thomas Fortune Ryan also held 5100 shares of National Bank
of Commerce stock in 1914. His son, John Barry Ryan, married Otto Kahn’s daughter,
Kahn was a partner of Warburg and Schiff in Kuhn, Loeb Company, Ryan’s granddaughter,
Virginia Fortune Ryan,
__________________________
59 E.M. Josephson, The Strange Death of Franklin D. Roosevelt, Chedney Press,
N.Y. 1948
66
married Lord Airlie, the present head of J. Henry Schroder Banking
Corporation in London and New York.
Another director of National Bank of Commerce in 1914, A.D. Juillard, was
president of A.D. Juillard Company, a trustee of New York Life, and Guaranty Trust, all of
which were controlled by J.P. Morgan. Juillard also had a British connection, being a
director of the North British and Mercantile Insurance Company. Juillard owned 2000 shares
of National Bank of Commerce stock, and was also a director of Chemical Bank.
In The Robber Barons, by Matthew Josephson, Josephson tells us that Morgan
dominated New York Life, Equitable Life and Mutual Life by 1900, which had one billion
dollars in assets, and which had fifty million dollars a year to invest. He says,
"In this campaign of secret alliances he (Morgan) acquired
direct control of the National Bank of
Commerce; then a part ownership in the First National Bank, allying himself to
the very strong
and conservative financier, George F. Baker, who headed it; then by means of
stock ownership
and interlocking directorates he linked to the first named banks other leading
banks, the Hanover,
the Liberty, and Chase."60
Mary W. Harriman, widow of E.H. Harriman, also owned 5,000 shares of
National Bank of Commerce in 1914. E.H. Harriman’s railroad empire had been entirely
financed by Jacob Schiff of Kuhn, Loeb Company. Levi P. Morton also owned 1500 shares of
National Bank of Commerce stock in 1914. He had been the twenty-second vice-president of
the United States, was an ex-Minister from the U.S. to France, and president of L.P.
Morton Company, New York, Morton-Rose and Company and Morton Chaplin of London. He was a
director of Equitable Life Insurance Company, Home Insurance Company, Guaranty Trust, and
Newport Trust.
The astounding idea that the Federal Reserve System of the United States
is actually operated from London will probably be rejected at first hearing by most
Americans. However, Minsky has become famous for his theory of the "dominant
frame". He states that in any particular situation, there is a "dominant
frame" to which everything in that situation is related and through which it can be
interpreted. The "dominant frame" in the monetary policy decisions of the
Federal Reserve System is that these decisions are made by those who stand to benefit most
from them. At first glance, this would seem to be the principal stockholders of the
Federal Reserve Bank of New York. However, we have seen that these stockholders all have a
"London Connection". The "London Connection" becomes more obvious as
the dominant power when we find in The
__________________________
60 Matthew Josephson, The Robber Barons, p. 409
67
Capital City61 that only seventeen firms are allowed to operate as
merchant bankers in the City of London, England’s financial district. All of them
must be approved by the Bank of England. In fact, most of the Governors of the Bank of
England come from the partners of these seventeen firms. Clarke ranks the seventeen in
order of their capitalization. Number 2 is the Schroder Bank. Number 6 is Morgan Grenfell,
the London branch of the House of Morgan and actually its dominant branch. Lazard Brothers
is Number 8. N.M. Rothschild is Number 9. Brown Shipley Company, the London branch of
Brown Brothers Harriman, is Number 14. These five merchant banking firms of London
actually control the New York banks which own the controlling interest in the Federal
Reserve Bank of New York.
The control over Federal Reserve System decisions is also founded in
another unique situation. Each day, representatives of four other London banking firms
meet in the offices of N.M. Rothschild Company in London to fix the price of gold for that
day. The other four bankers are from Samuel Montagu Company, which ranks Number 5 on the
list of seventeen London merchant banking firms, Sharps Pixley, Johnson Matheson, and
Mocatta and Goldsmid. Despite the huge tide of paper pyramided currency and notes which
are now flooding the world, at some point, every credit extension must return to be based,
in however minuscule a fashion, on some deposit of gold in some bank somewhere in the
world. Because of this factor, the London merchant bankers, with their power to set the
price of gold each day, become the final arbiters of the volume of money and the price of
money in those countries which must bow to their power. Not the least of these is the
United States. No official of the Federal Reserve Bank of New York, or of the Federal
Reserve Board of Governors, can command the power over the money of the world which is
held by these London merchant bankers. Great Britain, while waning in political and
military power, today exercises the greatest financial power. It is for this reason that
London is the present financial center of the world.
__________________________
61 McRae and Cairncross, Capital City, Eyre Methuen, London, 1963
68
CHAPTER SEVEN
The Hitler Connection
J. Henry Schroder Banking Company is listed as Number 2 in capitalization
in Capital City62 on the list of the seventeen merchant bankers who make up the exclusive
Accepting Houses Committee in London. Although it is almost unknown in the United States,
it has played a large part in our history. Like the others on this list, it had first to
be approved by the Bank of England. And, like the Warburg family, the von Schroders began
their banking operations in Hamburg, Germany. At the turn of the century, in 1900, Baron
Bruno von Schroder established the London branch of the firm. He was soon joined by Frank
Cyril Tiarks, in 1902. Tiarks married Emma Franziska of Hamburg, and was a director of the
Bank of England from 1912 to 1945.
During World War I, J. Henry Schroder Banking Company played an important
role behind the scenes. No historian has a reasonable explanation of how World War I
started. Archduke Ferdinand was assassinated at Sarajevo by Gavril Princeps, Austria
demanded an apology from Serbia, and Serbia sent the note of apology. Despite this,
Austria declared war, and soon the other nations of Europe joined the fray. Once the war
had gotten started, it was found that it wasn’t easy to keep it going. The principal
problem was that Germany was desperately short of food and coal, and without Germany, the
war could not go on. John Hamill in The Strange Career of Mr. Hoover63 explains how the
problem was solved.* He quotes from Nordeutsche Allgemeine Zeitung, March 4, 1915,
"Justice, however, demands that publicity should be given to the preeminent part
taken by the German authorities in Belgium in the solution of this problem. The initiative
came from them and it was only due to their continuous relations with the American Relief
Committee that the provisioning question was solved." Hamill points out "That is
what the Belgian Relief Committee was organized for--to keep Germany in food."
The Belgian Relief Commission was organized by Emile Francqui, director of
a large Belgian bank, Societe Generale, and a London mining
__________________________
62 McRae and Cairncross, Capital City, Eyre Methuen, London, 1963
63 John Hamill, The Strange Career of Mr. Hoover, William Faro, New York, 1931
* Copies of Hamill’s book were systematically located and destroyed by
government agents, because it was published on the eve of President Hoover’s
re-election campaign.
69
promoter, an American named Herbert Hoover, who had been associated with
Francqui in a number of scandals which had become celebrated court cases, notably the
Kaiping Coal Company scandal in China, said to have set off the Boxer Rebellion, which had
as its goal the expulsion of all foreign businessmen from China. Hoover had been barred
from dealing on the London Stock Exchange because of one judgement against him, and his
associate, Stanley Rowe, had been sent to prison for ten years. With this background,
Hoover was called an ideal choice for a career in humanitarian work.
Although his name is unknown in the United States, Emile Francqui was the
guiding spirit behind Herbert Hoover’s rise to fortune. Hamill (on page 156)
identifies Francqui as the director of many atrocities committed against natives in the
Congo. "For every cartridge they spent, they had to bring in a man’s hand".
Francqui’s frightful record may have been the source for the charge later leveled
against German soldiers in Belgium, that they chopped off the hands of women and children,
a claim which proved to be groundless. Hamill also says that Francqui "tricked the
Americans out of the Hankow-Canton railroad concession in China in 1901, and at the same
time had ‘stood by’ in case Hoover needed any further help in the
‘taking’ of the Kaiping coal mines. This is the humanitarian who had sole charge
of the distribution of the Belgian ‘relief’ during the World War, for which
Hoover did the buying and shipping. Francqui was a director with Hoover, in the Chinese
Engineering and Mining Company (the Kaiping mines), through which Hoover transported
200,000 Chinese slave workers to the Congo to work Francqui’s copper mines."
Hamill says on page 311 that "Francqui opened the offices of the
Belgian Relief in his bank, Societe Generale, as a one-man show, with a letter of
permission from the German Governor General von der Goltz dated October 16, 1914.
The New York Herald Tribune of February 18, 1930, quoted by Congressman
Louis McFadden in the House on February 26, 1930, said, "One of Belgium’s two
directors on the Bank for International Settlements will be Emile Francqui of the Societe
Generale, a member of both the Young and Dawes Plan Committees. The board of directors of
the international bank will have no more colorful character than Emile Francqui, former
Minister of Finance, veteran of the Congo and China . . . he is rated as the richest man
in Belgium, and among the twelve richest men in Europe."
Despite his prominence, The New York Times Index mentions Francqui only a
few times during two decades before his death. On October 3, 1931, The New York Times
quoted Le Peuple of Brussels that Francqui would visit the United States. "As a
friend of President Hoover, Monsieur Francqui will not fail to pay a visit to the
President."
70
On October 30, 1931, The New York Times reported this visit with the
headline, "Hoover-Francqui Talk was Unofficial". "It was stated that Mr.
Francqui spent Tuesday night as a personal guest of the President, and that they talked of
world financial problems in general, strictly unofficial. Mr. Francqui was an associate of
President Hoover during the latters ministrations in Belgium during the war. Their visit
had no official significance. Mr. Francqui is a private citizen and not engaged in any
official mission."
No reference is made to the Hoover-Francqui business associations which
were the subject of huge lawsuits in London. The Francqui visit probably involved
Hoover’s Moratorium on German War Debts, which stunned the financial world. On
December 15, 1931, Chairman McFadden informed the House of a dispatch in the Public Ledger
of Philadelphia, October 24, 1931, "GERMAN REVEALS HOOVER’S SECRET. The American
President was in intimate negotiations with the German government regarding a year’s
debt holiday as early as December, 1930." McFadden continued, "Behind the Hoover
announcement there were many months of hurried and furtive preparations both in Germany
and in Wall Street offices of German bankers. Germany, like a sponge, had to be saturated
with American money. Mr. Hoover himself had to be elected, because this scheme began
before he became President. If the German international bankers of Wall Street--that is
Kuhn Loeb Company, J. & W. Seligman, Paul Warburg, J. Henry Schroder--and their
satellites had not had this job waiting to be done, Herbert Hoover would never have been
elected President of the United States. The election of Mr. Hoover to the Presidency was
through the influence of the Warburg Brothers, directors of the great bank of Kuhn Loeb
Company, who carried the cost of his election. In exchange for this collaboration Mr.
Hoover promised to impose the moratorium of German debts. Hoover sought to exempt
Kreuger’s loan to Germany of $125 million from the operation of the Hoover
Moratorium. The nature of Kreuger’s swindle was known here in January when he visited
his friend, Mr. Hoover, in the White House."
Not only did Hoover entertain Francqui in the White House, but also Ivar
Kreuger, the most famous swindler of the twentieth century.
When Francqui died on November 13, 1935, The New York Times memorialized
him as "the copper king of the Congo . . . Mr. Francqui, last year having gained
dictatorial powers over the belga, maintained it on the gold standard during a crisis. In
1891 he led an expedition into the Congo and gained it for King Leopold. A man of great
wealth, rated among the twelve richest men in Europe, he secured enormous copper deposits.
He was Minister of State in 1926 and Minister of Finance in 1934. It was his pride that he
never accepted a centime of remuneration for his services to the government. While consul
general at Shanghai, he secured valuable concessions, notably the Kaiping coal mines and
the
71
railway concession for the Tientsin Railroad. He was governor of the
Societe Generale de Belgique, Lloyd Royal Belge, and regent of La Banque Nationale de
Belgique."
The Times does not mention Francqui’s business partnerships with
Hoover. Like Francqui, Hoover also refused remuneration for "government
service", and as Secretary of Commerce and as President of the United States, he
turned his salary back to the government.
On December 13, 1932, Chairman McFadden introduced a resolution of
impeachment against President Hoover for high crimes and misdemeanors, which covers many
pages, including violation of contracts, unlawful dissipation of the financial resources
of the United States, and his appointment of Eugene Meyer to the Federal Reserve Board.
The resolution was tabled and never acted upon by the House.
In criticizing Hoover’s Moratorium of German War Debts, McFadden had
referred to Hoover’s "German" backers. Although all of the principals of
"the London Connection" did originate in Germany, most of them in Frankfurt, at
the time they sponsored Hoover’s candidacy for the Presidency of the United States,
they were operating from London, as Hoover himself had done for most of his career.
Also, the Hoover Moratorium was not intended to "help" Germany,
as Hoover had never been "pro-German". The Moratorium on Germany’s war
debts was necessary so that Germany would have funds for rearming. In 1931, the truly
forward-looking diplomats were anticipating the Second World War, and there could be no
war without an "aggressor".
Hoover had also carried out a number of mining promotions in various parts
of the world as a secret agent for the Rothschilds, and had been rewarded with a
directorship in one of the principal Rothschild enterprises, the Rio Tinto Mines in Spain
and Bolivia. Francqui and Hoover threw themselves into the seemingly impossible task of
provisioning Germany during the First World War. Their success was noted in Nordeutsche
Allgemeine Zeitung, March 13, 1915, which noted that large quantities of food were now
arriving from Belgium by rail. Schmoller’s Yearbook for Legislation, Administration
and Political Economy for 1916, shows that one billion pounds of meat, one and a half
billion pounds of potatoes, one and a half billion pounds of bread, and one hundred
twenty-one millions pounds of butter had been shipped from Belgium to Germany in that
year. A patriotic British woman who had operated a small hospital in Belgium for several
years, Edith Cavell, wrote to the Nursing Mirror in London, April 15, 1915, complaining
that the "Belgian Relief" supplies were being shipped to Germany to feed the
German army. The Germans considered Miss Cavell to be of no importance, and paid no
attention to her, but the British Intelligence Service in London was appalled by Miss
Cavell’s discovery, and demanded that the Germans arrest her as a spy.
72
Sir William Wiseman, head of British Intelligence, and partner of Kuhn
Loeb Company, feared that the continuance of the war was at stake, and secretly notified
the Germans that Miss Cavell must be executed. The Germans reluctantly arrested her and
charged her with aiding prisoners of war to escape. The usual penalty for this offense was
three months imprisonment, but the Germans bowed to Sir William Wiseman’s demands,
and shot Edith Cavell, thus creating one of the principal martyrs of the First World War.
With Edith Cavell out of the way, the "Belgian Relief" operation
continued, although in 1916, German emissaries again approached London officials with the
information that they did not believe Germany could continue military operations, not only
because of food shortages, but because of financial problems. More "emergency
relief" was sent, and Germany continued in the war until November, 1918. Two of
Hoover’s principal assistants were a former lumber shipping clerk from the West
Coast, Prentiss Gray, and Julius H. Barnes, a grain salesman from Duluth. Both men became
partners in J. Henry Schroder Banking Corporation in New York after the war, and amassed
large fortunes, principally in grain and sugar.
With the entry of the United States into the war, Barnes and Gray were
given important posts in the newly created U.S. Food Administration, which also was placed
under Herbert Hoover’s direction. Barnes became President of the Grain Corporation of
the U.S. Food Administration from 1917 to 1918, and Gray was chief of Marine
Transportation. Another J. Henry Schroder partner, G. A. Zabriskie, was named head of the
U.S. Sugar Equalization Board. Thus the London Connection controlled all food in the
United States through its grain and sugar "Czars" during the First World War.
Despite many complaints of corruption and scandal in the U.S. Food Administration, no one
was ever indicted. After the war, the partners of J. Henry Schroder Company found that
they now owned most of Cuba’s sugar industry. One partner, M.E. Rionda, was president
of Cuba Cane Corporation, and director of Manati Sugar Company, American British and
Continental Corporation, and other firms. Baron Bruno von Schroder, senior partner of the
firm, was a director of North British and Mercantile Insurance Company. His father, Baron
Rudolph von Schroder of Hamburg, was a director of Sao Paulo Coffee Ltd., one of the
largest Brazilian coffee companies, with F.C. Tiarks, also of the Schroder firm.*
__________________________
* The New York Times noted on October 11, 1923: "Frank C. Tiarks, Governor
of the Bank of England, will spend two weeks here to set up the opening of the banking
house branch of J. Henry Schroder of London."
73
After the war, Zabriskie, who had been sugar Czar of the United States by
presiding over the U.S. Sugar Equalization Board, became the president of several of the
largest baking corporations in the United States: Empire Biscuit, Southern Baking
Corporation, Columbia Baking, and other firms.
As his principal assistant in the U.S. Food Administration, Hoover chose
Lewis Lichtenstein Strauss, who was soon to become a partner in Kuhn Loeb Company,
marrying the daughter of Jerome Hanauer of Kuhn Loeb. Throughout his distinguished
humanitarian service with the Belgian Relief Commission, the U.S. Food Administration,
and, after the war, the American Relief Administration, Hoover’s closest associate
was one Edgar Rickard, born in Pontgibaud, France. In Who’s Who, he states that he
was "World War administrative assistant to Herbert Hoover in all war and post-war
organizations including the Commission For Relief in Belgium. He also served on the U.S.
Food Administration from 1914-1924." He remained one of Hoover’s closest
friends, and usually the Rickards and Hoovers took their vacations together. After Hoover
became Secretary of Commerce under Coolidge, Hamill tells us that Hoover awarded his
friend the Hazeltine Radio patents, which paid him one million dollars a year in
royalties.
In 1928, "the London Connection" decided to run Herbert Hoover
for president of the United States. There was only one problem; although Herbert Hoover
had been born in the United States, and was thus eligible for the office of the
presidency, according to the Constitution, he had never had a business address or a home
address in the United States, as he had gone abroad just after completing college at
Stanford. The result was that during his campaign for the presidency, Herbert Hoover
listed as his American address Suite 2000, 42 Broadway, New York, which was the office of
Edgar Rickard. Suite 2000 was also shared by the grain tycoon and partner of J. Henry
Schroder Banking Corporation, Julius H. Barnes.
After Herbert Hoover was elected president of the United States, he
insisted on appointing one of the old London crowd, Eugene Meyer, as Governor of the
Federal Reserve Board. Meyer’s father had been one of the partners of Lazard Freres
of Paris, and Lazard Brothers of London. Meyer, with Baruch, had been one of the most
powerful men in the United States during World War I, a member of the famous Triumvirate
which exercised unequalled power; Meyer as Chairman of the War Finance Corporation,
Bernard Baruch as Chairman of the War Industries Board, and Paul Warburg as Governor of
the Federal Reserve System.
A longtime critic of Eugene Meyer, Chairman Louis McFadden of the House
Banking and Currency Committee, was quoted in The New York Times, December 17, 1930, as
having made a speech on the floor of the House attacking Hoover’s appointment of
Meyer, and charging that "He
74
represents the Rothschild interest and is liaison officer between the
French Government and J.P. Morgan." On December 18, The Times reported that
"Herbert Hoover is deeply concerned" and that McFadden’s speech was
"an unfortunate occurrence." On December 20, The Times commented on the
editorial page, under the headline, "McFadden Again", "The speech ought to
insure the Senate ratification of Mr. Meyer as head of the Federal Reserve. The speech was
incoherent, as Mr. McFadden’s speeches usually are." As The Times predicted,
Meyer was duly approved by the Senate.
Not content with having a friend in the White House, J. Henry Schroder
Corporation was soon embarked on further international adventures, nothing less than a
plan to set up World War II. This was to be done by providing, at a crucial juncture, the
financing for Adolf Hitler’s assumption of power in Germany. Although any number of
magnates have been given credit for the financing of Hitler, including Fritz Thyssen,
Henry Ford, and J.P. Morgan, they, as well as others, did provide millions of dollars for
his political campaigns during the 1920s, just as they did for others who also had a
chance of winning, but who disappeared and were never heard from again. In December of
1932, it seemed inevitable to many observers of the German scene that Hitler was also
ready for a toboggan slide into oblivion. Despite the fact that he had done well in
national campaigns, he had spent all the money from his usual sources and now faced heavy
debts. In his book Aggression, Otto Lehmann-Russbeldt tells us that "Hitler was
invited to a meeting at the Schroder Bank in Berlin on January 4, 1933. The leading
industrialists and bankers of Germany tided Hitler over his financial difficulties and
enabled him to meet the enormous debt he had incurred in connection with the maintenance
of his private army. In return, he promised to break the power of the trade unions. On May
2, 1933, he fulfilled his promise."64
Present at the January 4, 1933 meeting were the Dulles brothers, John
Foster Dulles and Allen W. Dulles of the New York law firm, Sullivan and Cromwell, which
represented the Schroder Bank. The Dulles brothers often turned up at important meetings.
They had represented the United States at the Paris Peace Conference (1919); John Foster
Dulles would die in harness as Eisenhower’s Secretary of State, while Allen Dulles
headed the Central Intelligence Agency for many years. Their apologists have seldom
attempted to defend the Dulles brothers appearance at the meeting which installed Hitler
as the Chancellor of Germany, preferring to pretend that it never happened. Obliquely, one
biographer Leonard Mosley, bypasses it in Dulles when he states,
__________________________
64 Otto Lehmann-Russbeldt, Aggression, Hutchinson & Co., Ltd., London,
1934, p. 44
75
"Both brothers had spent large amounts of time in Germany,
where Sullivan and Cromwell had
considerable interest during the early 1930’s, having represented several
provincial governments,
some large industrial combines, a number of big American companies with
interests in the Reich,
and some rich individuals."65
Allen Dulles later became a director of J. Henry Schroder Company. Neither
he nor J. Henry Schroder were to be suspected of being pro-Nazi or pro-Hitler; the
inescapable fact was that if Hitler did not become Chancellor of Germany, there was little
likelihood of getting a Second World War going, the war which would double their profits.*
The Great Soviet Encyclopaedia states "The banking house Schroder
Bros. (it was Hitler’s banker) was established in 1846; its partners today are the
barons von Schroeder, related to branches in the United States and England."66**
The financial editor of "The Daily Herald" of London wrote on
Sept. 30, 1933 of "Mr. Norman’s decision to give the Nazis the backing of the
Bank (of England.)" John Hargrave, in his biography of Montagu Norman says,
"It is quite certain that Norman did all he could to assist
Hitlerism to gain and maintain political
power, operating on the financial plane from his stronghold in Threadneedle
Street." [i.e. Bank
of England.--Ed.]
Baron Wilhelm de Ropp, a journalist whose closest friend was Major F.W.
Winterbotham, chief
of Air Intelligence of the British Secret Service, brought the Nazi
philosopher, Alfred Rosenberg, to London and introduced him to Lord Hailsham, Secretary
for War, Geoffrey Dawson, editor of The Times, and Norman, Governor of the Bank of
England. After talking with Norman, Rosenberg met with the representative of the Schroder
Bank of London. The managing director of the Schroder Bank, F.C. Tiarks, was also a
director of the Bank of England. Hargrave says (p. 217), "Early in 1934 a select
group of City financiers gathered in Norman’s room behind the
windowless walls, Sir Robert Kindersley, partner of Lazard Brothers, Charles
Hambro, F.C.
Tiarks, Sir Josiah Stamp, (also a director of the Bank of England). Governor
Norman spoke of
the political situation in Europe. A new power had established itself, a great
‘stabilizing
__________________________
65 Leonard Mosley, Dulles, Dial Publishing Co., New York 1978, p. 88
* Ezra Pound, in an April 18, 1943 broadcast over Radio Rome stated, ". .
.and men in America, not content with this war are already aiming at the next one. The
time to object is now."
66 The Great Soviet Encyclopaedia, Macmillan, London, 1973, v.2, p. 620
** The New York Times noted on October 11, 1944: "Senator Claude Pepper
criticized John Foster Dulles, Gov. Dewey’s foreign relations advisor for his
connection with the law firm of Sullivan and Cromwell and having aided Hitler financially
in 1933. Pepper described the January 4, 1933 meeting of Franz von Papen and Hitler in
Baron Schroder’s home in Cologne, and from that time on the Nazis were able to
continue their march to power."
76
force’, namely, Nazi Germany. Norman advised his co-workers
to include Hitler in their plans
for financing Europe. There was no opposition."
In Wall Street and the Rise of Hitler, Antony C. Sutton writes "The
Nazi Baron Kurt von Schroeder acted as the conduit for I.T.T. money funneled to Heinrich
Himmler’s S.S. organization in 1944, while World War II was in progress, and the
United States was at war with Germany."67 Kurt von Schroeder, born in 1889, was
partner in the Cologne Bankhaus, J.H. Stein & Co., which had been founded in 1788.
After the Nazis gained power in 1933, Schroeder was appointed the German representative at
the Bank of International Settlements. The Kilgore Committee in 1940 stated that
Schroeder’s influence with the Hitler Administration was so great that he had Pierre
Laval appointed head of the French Government during the Nazi Occupation. The Kilgore
Committee listed more than a dozen important titles held by Kurt von Schroeder in the
1940’s, including President of Deutsche Reichsbahn, Reich Board of Economic Affairs,
SS Senior Group Leader, Council of Reich Post Office, Deutsche Reichsbank and other
leading banks and industrial groups. Schroeder served on the board of all International
Telephone and Telegraph subsidiaries in Germany.
In 1938, the London Schroder Bank became the German financial agent in
Great Britain. The New York branch of Schroder had been merged in 1936 with the
Rockefellers, as Schroder, Rockefeller, Inc. at 48 Wall Street. Carlton P. Fuller of
Schroder was president of this firm, and Avery Rockefeller was vice-president. He had been
a behind the scenes partner of J. Henry Schroder for years, and had set up the
construction firm of Bechtel Corporation, whose employees (on leave) now play a leading
role in the Reagan Administration, as Secretary of Defense and Secretary of State.
Ladislas Farago, in The Game of the Foxes,68 reported that Baron William
de Ropp, a double agent, had penetrated the highest echelons in pre-World War II days, and
Hitler relied upon de Ropp as his confidential consultant about British affairs. It was de
Ropp’s advice which Hitler followed when he refused to invade England.
Victor Perlo writes, in The Empire of High Finance:
"The Hitler government made the London Schroder Bank their
financial agent in Britain and
America. Hitler’s personal banking account was with J.M. Stein Bankhaus,
the German subsidiary
of the Schroder Bank. F.C. Tiarks of the British J. Henry Schroder Company
__________________________
67 Antony C. Sutton, WALL STREET AND THE RISE OF HITLER, 76 Press, Seal Beach,
California, 1976, p. 79
68 Ladislas Farago, The Game of the Foxes, 1973
77
was a member of the Anglo-German Fellowship with two other partners as members,
and a
corporate membership."69
The story goes much further than Perlo suspects. J. Henry Schroder WAS the
Anglo-German Fellowship, the English equivalent of the America First movement, and also
attracting patriots who did not wish to see their nation involved in a needless war with
Germany. During the 1930’s, until the outbreak of World War II, the Schroders poured
money into the Anglo-German Fellowship, with the result that Hitler was convinced he had a
large pro-German fifth column in England composed of many prominent politicians and
financiers. The two divergent political groups in the 1930’s in England were the War
Party, led by Winston Churchill, who furiously demanded that England go to war against
Germany, and the Appeasement Party, led by Neville Chamberlain. After Munich, Hitler
believed the Chamberlain group to be the dominant party in England, and Churchill a minor
rabble-rouser. Because of his own financial backers, the Schroders, were sponsoring the
Appeasement Party, Hitler believed there would be no war. He did not suspect that the
backers of the Appeasement Party, now that Chamberlain had served his purpose in duping
Hitler, would cast Chamberlain aside and make Churchill the Prime Minister. It was not
only Chamberlain, but also Hitler, who came away from Munich believing that it would be
"Peace in our time."
The success of the Schroders in duping Hitler into this belief explains
several of the most puzzling questions of World War II. Why did Hitler allow the British
Army to decamp from Dunkirk and return home, when he could have wiped them out? Against
the frantic advice of his generals, who wished to deliver the coup de grace to the English
Army, Hitler held back because he did not wish to alienate his supposed vast following in
England. For the same reason, he refused to invade England during a period when he had
military superiority, believing that it would not be necessary, as the Anglo-German
Fellowship group was ready to make peace with him. The Rudolf Hess flight to England was
an attempt to confirm that the Schroder group was ready to make peace and form a common
bond against the Soviets. Rudolf Hess continues to languish in prison today, many years
after the war, because he would, if released,
__________________________
69 Victor Perlo, The Empire of High Finance, International Publishers, 1957, p.
177
78
testify that he had gone to England to contact the members of the
Anglo-German Fellowship, that is, the Schroder group, about ending the war.*
If anyone supposes this is all ancient history, with no application to the
present political scene, we introduce the name of John Lowery Simpson of Sacramento,
California. Although he appears for the first time in Who’s Who in America for 1952,
Mr. Simpson states that he served under Herbert Hoover on the Commission for Relief in
Belgium from 1915 to 1917; U.S. Food Administration, 1917 to 1918, American Relief
Commission, 1919, and with P.N. Gray Company, Vienna, 1919 to 1921. Gray was the Chief of
Maritime Transportation for the U.S. Food Administration, which enabled him to set up his
own shipping company after the war. Like other Hoover humanitarians, Simpson also joined
the J. Henry Schroder Banking Company (Adolf Hitler’s personal bankers) and the J.
Henry Schroder Trust Company. He also became a partner of Schroder-Rockefeller Company
when that investment trust backed a construction company which became the world’s
largest, the firm of Bechtel Incorporated. Simpson was chairman of the finance committee
of Bechtel Company, Bechtel International, and Canadian Bechtel. Simpson states he was
consultant to the Bechtel-McCone interests in war production during World War II. He
served on the Allied Control Commission in Italy 1943-44. He married Margaret Mandell, of
the merchant family for whom Col. Edward Mandell House was named, and he backed a
California personality, first for Governor, then for President. As a result, Simpson and
J. Henry Schroder Company now have serving them as Secretary of Defense, former Bechtel
employee Caspar Weinberger. As Secretary of State they have serving them George Pratt
Schultz, also a Bechtel employee, who happens to be a Standard Oil heir, reaffirming the
Schroder-Rockefeller company ties. Thus the "conservative" Reagan Administration
has a Secretary of Defense from Schroder Company, a Secretary of State from
Schroder-Rockefeller, and a vice president whose father was senior partner of Brown
Brothers Harriman.
__________________________
* The following accounts are from The New York Times: October 21, 1945, "A
broadcast over the Luxembourg radio said tonight that Baron Kurt von Schroder, former
banker who helped finance the rise of the Nazi party, had been recognized in an American
prison camp and arrested." November 1, 1945, "British Army Headquarters: Baron
Kurt von Schroder, 55 year old banker and friend of Heinrich Himmler is being held in
Dusseldorf pending decision on his indictment as a war criminal, the Military Government
official announcement said today." February 29, 1948, "An immediate
investigation was demanded yesterday by the Society for the Prevention of World War III as
to why the German Nazi banker, Kurt von Schroder, was not tried as a war criminal by an
allied military tribunal. Noting that von Schroder was sentenced last November to three
months imprisonment and fined 1500 Reichsmarks by a German denazification court in
Bielefeld, in the British Zone, C. Monteith Gilpin, secretary for the society said the
question should be asked why von Schroder was allowed to escape allied justice, and why
our own officials have not demanded that von Schroder be tried by an Allied military
tribunal. ‘Von Schroder is as guilty as Hitler or Goering.’"
79
The Heritage Foundation has also been an important factor in the
policy-making of the Reagan Administration. Now we find that the Heritage Foundation is
part of the Tavistock Institute network, directed by British Intelligence. The financial
decisions are still made at the Bank of England, and who is head of the Bank of England?
Sir Gordon Richardson, chairman of J. Henry Schroder Co. of London and New York from 1962
to 1972, when he became Governor of the Bank of England. The "London Connection"
has never been more firmly in the saddle of the United States Government.
On July 3, 1983, The New York Times announced that Gordon Richardson,
Governor of the Bank of England for the past ten years, had been replaced by Robert
Leigh-Pemberton, Chairman of the National Westminster Bank. The list of directors of
National Westminster Bank reads like a Who’s Who of the British ruling class. They
include the Chairman, Lord Aldenham, who is also Chairman of Antony Gibbs & Son,
merchant bankers, one of the seventeen privileged firms chartered by the Bank of England;
Sir Walter Barrie, Chairman of the British Broadcasting System; F.E. Harmer, Governor of
the London School of Economics, the training school for the international bankers, and
chairman of New Zealand Shipping Company; Sir E.C. Mieville, private secretary to the King
of England 1937-45; Marquess of Salisbury, Lord Cecil, Lord Privy Seal (the Cecils have
been considered one of England’s three ruling families since the Middle Ages); Lord
Leathers, Baron of Purfleet, Minister of War Transport 1941-45, chairman of William Cory
group of companies; Sir W.H. Coates and W.J. Worboys of Imperial Chemical Industries (the
English DuPont); Earl of Dudley, chairman British Iron & Steel, Sir W. Benton Jones,
chairman United Steel and many other steel companies; Sir G.E. Schuster, Bank of New
Zealand; East India Coal Company; A. d’A. Willis, Ashanti Goldfields and many banks,
tea companies and other firms; V.W. Yorke, chairman of Mexican Railways Ltd.
Richardson, former chairman of Schroders with a New York subsidiary
holding Federal Reserve Bank of New York stock, was replaced by the chairman of National
Westminster, with a subsidiary in New York holding Federal Reserve Bank of New York stock.
Robert Leigh Pemberton, a director of Equitable Life Assurance Society (J.P. Morgan),
married the daughter of the Marchioness of Exeter, (the Cecil Burghley family). Thereby,
the control of the London Connection remains constantly in effect.
The list of the present directors of J. Henry Schroder Bank and Trust
shows the continuing international influence since the First World War. George A. Braga is
also director of Czarnikow-Rionda Company, vice-president of Francisco Sugar Company,
president of Manati Sugar Company, and vice-president of New Tuinicui Sugar Company. His
relative,
80
Rionda B. Braga, is president of Francisco Sugar Company and
vice-president of Manati Sugar Company. The Schroder control of sugar goes back to the
U.S. Food Administration under Herbert Hoover and Lewis L. Strauss of Kuhn, Loeb, Company
during World War I. Schroder’s attorneys are the firm of Sullivan and Cromwell. John
Foster Dulles of this firm was present during the historic agreement to finance Hitler,
and was later Secretary of State in the Eisenhower administration. Alfred Jaretzki, Jr.,
of Sullivan and Cromwell is also a director of Manati Sugar Company and Francisco Sugar
Company.
Another director of J. Henry Schroder is Norris Darrell, Jr., born in
Berlin, Germany, partner of Sullivan and Cromwell, and a director of Schroder Trust
Company. Bayless Manning, partner of the Wall Street law firm of Paul, Weiss, Rifkind and
Wharton, is also a director of J. Henry Schroder. He was president of the Council on
Foreign Relations from 1971-1977, and is editor in chief of the Yale Law Review.
Paul H. Nitze, the prominent "disarmament negotiator" for the
United States government, is a director of Schroder’s Inc. He married Phyllis Pratt,
of the Standard Oil fortune, whose father gave the Pratt family mansion as the building
which houses the Council on Foreign Relations.
81
CHAPTER EIGHT
World War One
"Money is the worst of all contraband."--William
Jennings Bryan
It is now apparent that there might have been no World War without the
Federal Reserve System. A strange sequence of events, none of which were accidental, had
occurred. Without Theodore Roosevelt’s "Bull Moose" candidacy, the popular
President Taft would have been reelected, and Woodrow Wilson would have returned to
obscurity.* If Wilson had not been elected, we might have had no Federal Reserve Act, and
World War One could have been avoided. The European nations had been led to maintain large
standing armies as the policy of the central banks which dictated their governmental
decisions. In April, 1887, the Quarterly Journal of Economics had pointed out:
"A detailed revue of the public debts of Europe shows
interest and sinking fund payments of
$5,343 million annually (five and one-third billion). M. Neymarck’s
conclusion is much like Mr.
Atkinson’s. The finances of Europe are so involved that the governments
may ask whether war,
with all its terrible chances, is not preferable to the maintenance of such a
precarious and costly
peace. If the military preparations of Europe do not end in war, they may well
end in the
bankruptcy of the States. Or, if such follies lead neither to war nor to ruin,
then they assuredly
point to industrial and economic revolution."
From 1887 to 1914, this precarious system of heavily armed but bankrupt
European nations endured, while the United States continued to be a debtor nation,
borrowing money from abroad, but making few international loans, because we did not have a
central bank or "mobilization of credit". The system of national loans developed
by the Rothschilds served to finance European struggles during the nineteenth century,
because they were spread out over Rothschild branches in several countries. By 1900, it
was obvious that the European countries could not afford a major war. They had large
standing armies, universal military service, and modern weapons, but their economies could
not support the enormous expenditures. The Federal Reserve System began operations in
__________________________
*NOTE: P.34. "House revealed to me in a confidential moment, ‘Wilson
was elected by Teddy Roosevelt.’" The Strangest Friendship in History, Woodrow
Wilson and Col. House, George Sylvester Viereck, Liveright, N.Y. 1932
82
1914, forcing the American people to lend the Allies twenty-five billion
dollars which was not repaid, although considerable interest was paid to New York bankers.
The American people were driven to make war on the German people, with whom we had no
conceivable political or economic quarrel. Moreover, the United States comprised the
largest nation in the world composed of Germans; almost half of its citizens were of
German descent, and by a narrow margin, German had been voted down as the national
language.* The German Ambassador to Turkey, baron Wangeheim asked the American Ambassador
to Turkey, Henry Morgenthau, why the United States intended to make war in Germany.
"We Americans," replied Morgenthau, speaking for the group of Harlem real estate
operators of which he was the head, "are going to war for a moral principle."
J.P. Morgan received the proceeds of the First Liberty Loan to pay off $400,000,000 which
he advanced to Great Britain at the outset of the war. To cover this loan, $68,000,000 in
notes had been issued under the provisions of the Aldrich-Vreeland Act for issuing notes
against securities, the only time this provision was employed. The notes were retired as
soon as the Federal Reserve Banks began operation, and replaced by Federal Reserve Notes.
During 1915 and 1916, Wilson kept faith with the bankers who had purchased
the White House for him, by continuing to make loans to the Allies. His Secretary of
State, William Jennings Bryan, protested constantly, stating that "Money is the worst
of all contraband." By 1917, the Morgans and Kuhn, Loeb Company had floated a billion
and a half dollars in loans to the Allies. The bankers also financed a host of
"peace" organizations which worked to get us involved in the World War. The
Commission for Relief in Belgium manufactured atrocity stories against the Germans, while
a Carnegie organization, The League to Enforce Peace, agitated in Washington for our entry
into war. This later became the Carnegie Endowment for International Peace, which during
the 1940s was headed by Alger Hiss. One writer* claimed that he had never seen any
"peace movement" which did not end in war.
The U.S. Ambassador to Britain, Walter Hines Page, complained that he
could not afford the position, and was given twenty-five thousand dollars a year spending
money by Cleveland H. Dodge, president of the National City Bank. H.L. Mencken openly
accused Page in 1916 of being a British agent, which was unfair. Page was merely a
bankers’ agent.
On March 5, 1917, Page sent a confidential letter to Wilson. "I think
that the pressure of this approaching crisis has gone beyond the ability of the Morgan
Financial Agency for the British and French Govern-
__________________________
* 1787 Constitutional Convention
* NOTE: Emmett Tyrell, Jr., Richmond Times Dispatch, Feb. 15, 1983 "Every
peace movement of this century has been followed by war."
83
ments . . . The greatest help we could give the Allies would be a credit.
Unless we go to war with Germany, our Government, of course, cannot make such a direct
grant of credit."
The Rothschilds were wary of Germany’s ability to continue in the
war, despite the financial chaos caused by their agents, the Warburgs, who were financing
the Kaiser, and Paul Warburg’s brother, Max, who, as head of the German Secret
Service, authorized Lenin’s train to pass through the lines and execute the Bolshevik
Revolution in Russia. According to Under Secretary of the Navy, Franklin D. Roosevelt,
America’s heavy industry had been preparing for war for a year. Both the Army and
Navy Departments had been purchasing war supplies in large amounts since early in 1916.
Cordell Hull remarks in his Memoirs:
"The conflict forced the further development of the
income-tax principle. Aiming, as it did, at the
one great untaxed source of revenue, the income-tax law had been enacted in the
nick of time to
meet the demands of the war. And the conflict also assisted the putting into
effect of the Federal
Reserve System, likewise in the nick of time."70
One may ask, in the nick of time for whom? Certainly not for the American
people, who had no need for "mobilization of credit" for a European war, or to
enact an income tax to finance a war. Hull’s statement affords a rare glimpse into
the machinations of our "public servants".
The Notes of the Journal of Political Economy, October, 1917, state:
"The effect of the war upon the business of the Federal
Reserve Banks has required an immense
development of the staffs of these banks, with a corresponding increase in
expenses. Without, of
course, being able to anticipate so early and extensive a demand for their
services in this
connection, the framers of the Federal Reserve Act had provided that the
Federal Reserve Banks
should act as fiscal agents of the Government."
The bankers had been waiting since 1887 for the United States to enact a
central bank plan so that they could finance a European war among the nations whom they
had already bankrupted with armament and "defense" programs. The most demanding
function of the central bank mechanism is war finance.
On October 13, 1917, Woodrow Wilson made a major address, stating:
"It is manifestly imperative that there should be a
complete mobilization of the banking reserves
of the United States. The burden and the privilege (of the Allied loans) must
be shared by every
banking institution in the country. I believe that cooperation on the part of
the banks is a patriotic
duty at this time, and that membership in the Federal Reserve System is a
distinct and
significant evidence of patriotism."
__________________________
70 Cordell Hull, Memoirs, Macmillan, New York, 1948, v. 1, page 76
84
E.W. Kemmerer writes that "As fiscal agents of the Government, the
federal reserve banks rendered the nations services of incalculable value after our
entrance into the war. They aided greatly in the conservation of our gold resources, in
the regulation of our foreign exchanges, and in the centralization of our financial
energies. One shudders when he thinks what might have happened if the war had found us
with our former decentralized and antiquated banking system."
Mr. Kemmerer’s shudders ignore the fact that if we had kept "our
antiquated banking system" we would not have been able to finance the World War or to
enter as a participant ourselves.
Woodrow Wilson himself did not believe in his crusade to save the world
for democracy. He later wrote that "The World War was a matter of economic
rivalry."
On being questioned by Senator McCumber about the circumstances of our
entry into the war, Wilson was asked, "Do you think if Germany had committed no act
of war or no act of injustice against our citizens that we would have gotten into this
war?"
"I do think so," Wilson replied.
"You think we would have gotten in anyway?" pursued McCumber.
"I do," said Wilson.
In Wilson’s War Message in 1917, he included an incredible tribute to
the Communists in Russia who were busily slaughtering the middle class in that unfortunate
country.
"Assurance has been added to our hope for the future peace of the world by
the wonderful and
heartening things that have been happening in the last few weeks in Russia.
Here is a fit partner
for a League of Honor."71
Wilson’s paean to a bloodthirsty regime which has since murdered
sixty-six million of its inhabitants in the most barbarous manner exposes his true
sympathies and his true backers, the bankers who had financed the blood purge in Russia.
When the Communist Revolution seemed in doubt, Wilson sent his personal emissary, Elihu
Root, to Russia with one hundred million dollars from his Special Emergency War Fund to
save the toppling Bolshevik regime.
The documentation of Kuhn, Loeb Company’s involvement in the
establishment of Communism in Russia is much too extensive to be quoted here, but we
include one brief mention, typical of the literature on this subject. In his book, Czarism
and the Revolution, Gen. Arsene de Goulevitch writes,
__________________________
71 Public Papers of Woodrow Wilson, Dodd & Baker, v.5, p. 12-13
85
"Mr. Bakmetiev, the late Russian Imperial Ambassador to the
United States, tells us that the
Bolsheviks, after victory, transferred 600 million roubles in gold between the
years 1918-1922 to
Kuhn, Loeb Company."
After our entry into World War I, Woodrow Wilson turned the government of
the United States over to a triumvirate of his campaign backers, Paul Warburg, Bernard
Baruch and Eugene Meyer. Baruch was appointed head of the War Industries Board, with life
and death powers over every factory in the United States. Eugene Meyer was appointed head
of the War Finance Corporation, in charge of the loan program which financed the war. Paul
Warburg was in control of the nation’s banking system*.
Knowing that the overwhelming sentiment of the American people during 1915
and 1916 had been anti-British and pro-German, our British allies viewed with some
trepidation the prominence of Paul Warburg and Kuhn, Loeb Company in the prosecution of
the war. They were uneasy about his high position in the Administration because his
brother, Max Warburg, was at that time serving as head of the German Secret Service. On
December 12, 1918, the United States Naval Secret Service Report on Mr. Warburg was as
follows:
"WARBURG, PAUL: New York City. German, naturalized citizen, 1911. was
decorated by the
Kaiser in 1912, was vice chairman of the Federal Reserve Board. Handled large
sums furnished
by Germany for Lenin and Trotsky. Has a brother who is leader of the espionage
system of
Germany."
Strangely enough, this report, which must have been compiled much earlier,
while we were at war with Germany, is not dated until December 12, 1918. AFTER the
Armistice had been signed. Also, it does not contain the information that Paul Warburg
resigned from the Federal Reserve Board in May, 1918, which indicates that it was compiled
before May, 1918, when Paul Warburg would theoretically have been open to a charge of
treason because of his brother’s control of Germany’s Secret Service.
Paul Warburg’s brother Felix in New York was a director of the
Prussian Life Insurance Company of Berlin, and presumably would not have liked to see too
many of his policyholders killed in the war. On September 26, 1920, The New York Times
mentioned in its obituary of Jacob Schiff in reference to Kuhn, Loeb and Company,
"During the world War certain of its members were in constant contact with the
Government in an advisory capacity. It shared in the conferences which were held regarding
the organization and formation of the Federal Reserve System."
__________________________
* NOTE: New York Times, August 10, 1918; "Mr. (Paul) Warburg was the
author of the plan organizing the War Finance Corporation."
86
The 1920 Schiff obituary revealed for the first time that Jacob Schiff,
like the Warburgs, also had two brothers in Germany during World War I, Philip and Ludwig
Schiff, of Frankfurt-on-Main, who also were active as bankers to the German Government!
This was not a circumstance to be taken lightly, as on neither side of the Atlantic were
the said bankers obscure individuals who had no influence in the conduct of the war. On
the contrary, the Kuhn, Loeb partners held the highest governmental posts in the United
States during World War I, while in Germany, Max and Fritz Warburg, and Philip and Ludwig
Schiff, moved in the highest councils of government. From Memoirs of Max Warburg,
"The Kaiser thumbed the table violently and shouted, ‘Must you always be
right?’ but then listened carefully to Max’s view on financial matters."72
In June, 1918, Paul Warburg wrote a private note to Woodrow Wilson,
"I have two brothers in Germany who are bankers. They naturally now serve their
country to their utmost ability, as I serve mine."73
Neither Wilson nor Warburg viewed the situation as one of concern, and
Paul Warburg served out his term on the Federal Reserve Board of Governors, while World
War I continued to rage.
The background of Kuhn, Loeb & Company had been exposed in "Truth
Magazine", edited by George Conroy:
"Mr. Schiff is head of the great private banking house of Kuhn, Loeb &
Co. which represents the
Rothschild interest on this side of the Atlantic. He has been described as a
financial strategist and
has been for years the financial minister to the great impersonal power known
as Standard Oil.
He was hand-in-glove with the Harrimans, the Goulds and the Rockefellers, in
all their railroad
enterprises and has become the dominant power in the railroad and financial
world in America.
Louis Brandeis, because of his great ability as a lawyer and for other reasons
which will appear
later, was selected by Schiff as the instrument through which Schiff hoped to
achieve his
ambition in New England. His job was to carry on an agitation which would
undermine public
confidence in the New Haven system and cause a decrease in the price of its
securities, thus
forcing them on the market for the wreckers to buy."74
We mention Schiff’s lawyer, Brandeis, here because the first
available appointment on the Supreme Court of the United States which Woodrow Wilson was
allowed to fill was given to the Kuhn, Loeb lawyer, Brandeis.
Not only was the U.S. Food Administration managed by Hoover’s
director, Lewis Lichtenstein Strauss, who married into the Kuhn Loeb Company by marrying
Alice Hanauer, daughter of partner Jerome
__________________________
72 Max Warburg, Memoirs of Max Warburg, Berlin, 1936
73 David Farrar, The Warburgs, Michael Joseph, Ltd., London, 1974
74 "Truth Magazine", George Conroy, editor, Boston, issue of December
16, 1912
87
Hanauer, but in the most critical field, military intelligence, Sir
William Wiseman, chief of the British Secret Service, was a partner of Kuhn, Loeb &
Company. He worked most closely with Wilson’s alter ego, Col. House. "Between
House and Wiseman there were soon to be few political secrets, and from their mutual
comprehension resulted in large measure our close cooperation with the British."75
One example of House’s cooperation with Wiseman was a confidential
agreement which House negotiated pledging the United States to enter into World War I on
the side of the Allies. Ten months before the election which returned Wilson to the White
House in 1916 ‘because he kept us out of war’, Col. House negotiated a secret
agreement with England and France on behalf of Wilson which pledged the United States to
intervene on behalf of the Allies. On March 9, 1916, Wilson formally sanctioned the
undertaking.76
Nothing could more forcefully illustrate the duplicity of Woodrow
Wilson’s nature than his nationwide campaign on the slogan, "He kept us out of
war", when he had pledged ten months earlier to involve us in the war on the side of
England and France. This explains why he was regarded with such contempt by those who
learned the facts of his career. H.L. Mencken wrote that Wilson was "the perfect
model of the Christian cad", and that we ought "to dig up his bones and make
dice of them."
According to The New York Times, Paul Warburg’s letter of resignation
stated that some objection had been made because he had a brother in the Swiss Secret
Service. The New York Times has never corrected this blatant falsehood, perhaps because
Kuhn, Loeb Company owned a controlling interest in its stock. Max Warburg was not Swiss,
and although he had probably come into contact with the Swiss Secret Service during his
term of office as head of the German Secret Service, no responsible editor at The New York
Times could have been unaware of the fact that Max Warburg was German, and that his family
banking house was in Hamburg, and that he held a number of high positions in the German
Government. He represented Germany at the Versailles Peace Conference, and remained
peacefully in Germany until 1939, during a period when persons of his religion were being
persecuted. To avoid injury during the approaching war, when bombs would rain on Germany,
Max Warburg was allowed to sail to New York, his funds intact.
At the outset of World War I, Kuhn, Loeb Company had figured in the
transfer of German shipping interests to other control. Sir Cecil
__________________________
75 Edward M. House, The Intimate Papers of Col. House, edited by Charles
Seymour, Vol. II, p. 399. Houghton, Mifflin Co.
76 George Sylvester Viereck, The Strangest Friendship in History, Woodrow
Wilson and Col. House, p. 106
88
Spring-Rice, British Ambassador to the United States, in a letter to Lord
Grey wrote:
"Another matter is the question of the transfer of the flag
to the Hamburg Amerika ships. The
company is practically a German Government affair. The ships are used for
Government
purposes, the Emperor himself is a large shareholder, and so is the great
banking house of Kuhn,
Loeb Company. A member of that house (Warburg) has been appointed to a very
responsible
position in New York, although only just naturalized. He is concerned in
business with the
Secretary of the Treasury, who is the President’s son-in-law. It is he who
is negotiating on behalf
of the Hamburg Amerika Shipping Company."77
On November 13, 1914, in a letter to Sir Valentine Chirol, Spring-Rice
wrote, (p. 241, v. 2)
"I was told today that The New York Times has been practically acquired by
Kuhn, Loeb and
Schiff, special prot�g� of the (German) Emperor. Warburg, nearly related to
Kuhn Loeb and
Schiff is a brother of the well known Warburg of Hamburg, the associate of
Ballin (Hamburg)
Amerika line), is a member of the Federal Reserve Board or rather THE member.
He practically
controls the financial policy of the Administration, and Paish & Blackett
(England) had mainly
to negotiate with him. Of course, it was exactly like negotiating with Germany.
Everything that
was said was German property."
Col. Garrison wrote in Roosevelt, Wilson and the Federal Reserve Law, that
"Through the banking House of the Kuhn Loeb Company, a powerful weapon would have
been placed in the hands of the German Kaiser over the destiny of American business and
American citizens."78
Garrison was referring to the Hamburg Amerika affair.
It seemed strange that Woodrow Wilson felt it necessary to place the
nation in the hands of three men whose personal history was one of ruthless speculation
and the quest for personal gain, or that during war with Germany, he found as persons of
supreme trust a German immigrant naturalized in 1911, the son of an immigrant from Poland,
and the son of an immigrant from France. Bernard Baruch first attracted attention on Wall
Street in 1890 while working for A.A. Housman & Co.
In 1896 he merged the six principal tobacco companies of the United States
into the Consolidated Tobacco Company, forcing James Duke and the American Tobacco Trust
to enter into this combination. The second great trust set up by Baruch brought the copper
industry into the hands
__________________________
77 Letters and Friendships of Sir Cecil Spring-Rice, p. 219-220
78 Col. Elisha Garrison, Roosevelt, Wilson and the Federal Reserve Law,
Christopher Publishing House, Boston, 1931, p. 260
89
of the Guggenheim family, who have controlled it ever since. Baruch worked
with Edward H. Harriman, who was Schiff’s front man in controlling America’s
railway system for the Rothschild family. Baruch and Harriman also combined their talents
to gain control over the New York City transit system, which has been in perilous
financial condition ever since.
In 1901, Baruch formed the firm of Baruch Brothers, bankers, with his
brother Herman, in New York. In 1917, when Baruch was appointed Chairman of the War
Industries Board, the name was changed to Hentz Brothers.
Testifying before the Nye Committee on September 13, 1937, Bernard Baruch
stated that "All wars are economic in their origin." So much for religious and
political disagreements, which had been specially touted as the cause of wars.*
A profile in the "New Yorker" magazine reported that Baruch made
a profit of seven hundred fifty thousand dollars in one day during World War I, after a
phony peace rumor was planted in Washington. In "Who’s Who", Baruch
mentions that he was a member of the Commission which handled all purchasing for the
Allies during World War I. In fact, Baruch WAS the Commission. He spent the American
taxpayer’s money at the rate of ten billion dollars a year, and was also the dominant
member of the Munitions Price-Fixing Committee. He set the prices at which the Government
bought war materials. It would be naive to presume that the orders did not go to firms in
which he and his associates had more than a polite interest.
dictator over American manufacturers.* At the Nye Committee hearings in
1935, Baruch testified,
"President Wilson gave me a letter authorizing me to take over any
industry or plant. There was
Judge Gary, President of United States Steel, whom we were having trouble with,
and when I
showed him that letter, he said, ‘I guess we will have to fix this
up’, and he did fix it up."
Some members of Congress were curious about Baruch’s qualifications
to exercise life and death powers over American industry in time of war. He was not a
manufacturer, and had never been in a factory. When he was called before a Congressional
Committee, Bernard Baruch stated that his profession was "Speculator". A Wall
Street gambler had been made Czar of American Industry.
__________________________
* NOTE: Baruch also stated in this testimony, "I carried through the war
three major investments, Alaska Juneau Gold Mining Company (with partner Eugene Meyer),
Texas Gulf Sulphur, and Atolia Mining Company (tungsten)." Rep. Mason, Illinois, told
the House on February 21, 1921 that Baruch made more than $50 million in copper during the
war.
* Baruch chose as Assistant Chairman of the War Industries Board a fellow Wall
Street speculator, Clarence Dillon (Lapowitz). See biographies.
90
@insert Facsimile of New York Times article
Facsimile of an article which appeared in The New York Times dated
September 23, 1914. Listed are major stockholders of the five New York City banks which
purchased 40% of the 203, 053 shares of the Federal Reserve Bank of New York when the
System was organized in 1914. They thus obtained control of that Federal Reserve Bank and
have held it ever since. As of Tuesday, July 26, 1983, the top five surviving New York
City banks have increased their ownership of the Federal Reserve Bank of New York to 53%
of the shares.
91
@insert CHART I
92
@CHART I cont.
93
CHART I
Chart I reveals the linear connection between the Rothschilds and the Bank
of England, and the London banking houses which ultimately control the Federal Reserve
Banks through their stockholdings of bank stock and their subsidiary firms in New York.
The two principal Rothschild representatives in New York, J.P. Morgan Co., and Kuhn, Loeb
& Co. were the firms which set up the Jekyll Island Conference at which the Federal
Reserve Act was drafted, who directed the subsequent successful campaign to have the plan
enacted into law by Congress, and who purchased the controlling amounts of stock in the
Federal Reserve Bank of New York in 1914. These firms had their principal officers
appointed to the Federal Reserve Board of Governors and the Federal Advisory Council in
1914.
In 1914 a few families (blood or business related) owning controlling
stock in existing banks (such as in New York City) caused those banks to purchase
controlling shares in the Federal Reserve regional banks.
Examination of the charts and text in the House Banking Committee Staff
Report of August, 1976 and the current stockholders list of the 12 regional Federal
Reserve Banks shows this same family control.
________________________________________________________________________
Baruch’s erstwhile partner, Eugene Meyer, (Alaska-Juneau Gold Mining
Co.), later claimed that Baruch was a nitwit, and that Meyer, with his family banking
connections (Lazard Freres), had guided Baruch’s investment career. These claims
appeared in the fiftieth anniversary edition of The Washington Post, editorial page, June
4, 1983, with a parting shot from Meyer’s editor, Al Friendly, that "Every
journalist in Washington, Meyer included, knew that Bernard M. Baruch was a
self-aggrandizing phony."
The third member of the Triumvirate, Eugene Meyer, was son of the partner
in the international banking house of Lazard Freres, of Paris and New York. In My Own
Story Baruch explains how Meyer became head of the War Finance Corporation. "At the
outset of World War One," he says, "I sought out Eugene Meyer, Jr. . . . who was
a man of the highest integrity with a keen desire to be of public service."79
The nation has suffered greatly from persons who desired to be of public
service, because their desires often went considerably beyond their passion for office. In
fact, Meyer and Baruch had operated an Alaska venture, Alaska-Juneau Gold Mining Company
in 1915, and had worked together on other financial schemes. Meyer’s family house of
Lazard Freres specialized in international gold movements.
__________________________
79 Bernard Baruch, My Own Story, Henry-Holt Company, New York, 1957, p. 194
94
Eugene Meyer’s stewardship of the War Finance Corporation comprises
one of the most amazing financial operations ever partially recorded in this country. We
say "partially recorded", because subsequent Congressional investigations
revealed that each night, the books were being altered before being brought in for the
next day’s investigation. Louis McFadden, Chairman of the House Banking and Currency
Committee, figured in two investigations of Meyer, in 1925, and again in 1930, when Meyer
was proposed as Governor of the Federal Reserve Board. The Select Committee to Investigate
the Destruction of Government Bonds, submitted, on March 2, 1925, "Preparation and
Destruction of Government Bonds--68th Congress, 2d Session, Report No. 1635:
p.2. "Duplicate bonds amounting to 2314 pairs and duplicate
coupons amounting to 4698 pairs
ranging in denominations from $50 to $10,000 have been redeemed to July 1,
1924. Some of
these duplications have resulted from error and some from fraud."
These investigations may explain why, at the end of World War One, Eugene
Meyer was able to buy control of Allied Chemical and Dye Corporation, and later on, the
nation’s most influential newspaper, The Washington Post. The duplication of bonds,
"one for the government, one for me" in denominations to the amount of $10,000
each, resulted in a tidy sum.
p. 6 of these Hearings. "These transactions of the Treasury
prior to June 20, 1920 (including
settlements for purchases and sales), executed by the War Finance Corporation
(Eugene Meyer,
managing director), were largely directed by the managing director of the War
Finance
Corporation, and settlements with the Treasury were made principally by him
with the Assistant Secretary of the Treasury, and the books show that the basis of the
price paid by the Government
for over $1,894 millions worth of bonds ($1,894,000,000.00), which the Treasury
purchased
through the War Finance Corporation was not the market price and was not the
cost of the bond
plus interest, and the elements entering into the settlement are not disclosed
by the correspondence. The managing director of the War Finance Corporation stated that he
and an
Assistant Secretary of the Treasury (Jerome J. Hanauer, partner of Kuhn, Loeb
Co. whose daughter married Lewis L. Strauss) agreed to the price, and it was simply an
arbitrary figure set by an Assistant Secretary of the Treasury as to the bonds so
purchased by the War Finance Corporation. During the period of these transactions and up
until quite a recent date the managing director of the War Finance Corporation, Eugene
Meyer, Jr., in his private capacity maintained an office at No. 14 Wall Street, New York
City, and through the War Finance Corporation sold about $70 millions in bonds to the
Government, and also bought through the War Finance Corporation about $10 millions in
bonds, and approved the bills for most, if not all, of these bonds in his official
capacity as managing director of the War Finance Corporation. When these transactions,
just referred to, were disclosed to the committee in open hearing, the managing director
95
96
CHART II
This chart shows the interlocking banking directorates which were revealed
by the backgrounds of the officials selected to be the original members of the Federal
Advisory Council in 1914. The principals were the same bankers who had been present or
represented at the Jekyll Island Conference in 1910, and during the campaign to have the
Federal Reserve Act enacted into law by Congress in 1913. These officials represented the
largest stock holdings in the New York banks which bought the controlling stock in the
Federal Reserve Bank of New York, and also were the principal correspondent banks of the
banks in other Federal Reserve districts who, in turn, selected their officials to
represent them on the Federal Advisory Council.
________________________________________________________________________
appeared before the committee and stated the fact that
commissions were paid on these
transactions, they were in turn paid over to the brokers, selected by the
managing director, who
executed the orders issued by his brokerage house, and immediately after this
disclosure to the
committee, the managing director employed Ernst and Ernst, certified public
accountants, to
audit the books of the War Finance Corporation, who did, upon completion of the
examination of
these books, report to the committee that all moneys received by the brokerage
house of the
managing director had been accounted for. While simultaneously with the
examination being
made by the committee, the certified public accountants, heretofore referred
to, were nightly
carrying on their examination, it was discovered by your committee that
alterations and changes
were being made in the books of record covering these transactions, and when
the same was
called to the attention of the treasurer of the War Finance Corporation, he
admitted to the
committee that changes were being made. To what extent these books have been
altered during
the process the committee have not been able to determine. After June, 1921,
about $10 billions
worth of securities were destroyed."
It was Eugene Meyer’s Washington Post, (under the direction of
his daughter, Katherine Graham) which was later to drive a President of the United States
from the White House on the grounds that he had knowledge of a burglary. What are we to
think of the revelations of duplications of hundreds of millions of dollars worth of bonds
during
97
@insert CHART III
98
CHART III
The J. Henry Schroder Banking Company chart encompasses the entire
history of the twentieth century, embracing as it does the program (Belgian Relief
Commission) which provisioned Germany from 1915-1918 and dissuaded Germany from seeking
peace in 1916; financing Hitler in 1933 so as to make a Second World War possible; backing
the Presidential campaign of Herbert Hoover; and even at the present time, having two of
its major executives of its subsidiary firm, Bechtel Corporation serving as Secretary of
Defense and Secretary of State in the Reagan Administration.
The head of the Bank of England since 1973, Sir Gordon Richardson,
Governor of the Bank of England (controlled by the House of Rothschild), was chairman of
J. Henry Schroder, New York, and Schroder Banking Corporation, New York, as well as
Lloyd’s Bank of London, and Rolls Royce. He maintains a residence on Sutton Place in
New York City, and as head of "The London Connection", can be said to be the
single most influential banker in the world.
________________________________________________________________________
Meyer’s directorship of the War Finance Corporation, the alteration
of the books during a Congressional investigation, and the fact that Meyer came out of
this situation with many millions of dollars with which he proceeded to buy Allied
Chemical Corporation, The Washington Post, and other properties? Incidentally,
Lazard Brothers, Meyer’s family banking house, personally manages the fortunes of
many of our political luminaries, including the Kennedy family fortune.
Besides these men, Warburg, Baruch, and Meyer, a host of J.P. Morgan Co.,
and Kuhn, Loeb Co., partners, employees, and satellites came to Washington after 1917 to
administer the fate of the American people.
The Liberty Loans, which sold bonds to our citizens, were nominally in the
jurisdiction of the United States Treasury, under the leadership of Wilson’s
Secretary of the Treasury, William G. McAdoo, whom Kuhn, Loeb Co. had placed in charge of
the Hudson-Manhattan Railway Co. in 1902. Paul Warburg had most of the Kuhn Loeb Co. firm
with him in Washington during the War. Jerome Hanauer, partner in Kuhn, Loeb Co., was
Assistant Secretary of the Treasury in charge of Liberty Loans. The two Under-secretaries
of the Treasury during the War were S. Parker Gilbert and Roscoe C. Leffingwell. Both
Gilbert and Leffingwell came to the Treasury from the law firm of Cravath and Henderson,
and returned
99
@insert CHART IV
100
CHART IV
The Peabody-Morgan chart shows the London Connection of these prominent
banking firms, which have been headquartered in London since their inception. The Peabody
fortune set up an Educational Fund in 1865, which was later absorbed by John D.
Rockefeller into the General Educational Board in 1905, which, in turn, was absorbed by
the Rockefeller Foundation in 1960.
________________________________________________________________________
to that firm when they had fulfilled their mission for Kuhn, Loeb Co. in
the Treasury. Cravath and Henderson were the lawyers for Kuhn Loeb Co. Gilbert and
Leffingwell subsequently received partnerships in J.P. Morgan Co.
Kuhn, Loeb Company, the nation’s largest owners of railroad
properties in this country and in Mexico, protected their interests during the First World
War by having Woodrow Wilson set up a United States Railroad Administration. The
Director-General was William McAdoo, Comptroller of the Currency. Warburg replaced this
set up in 1918 with a tighter organization which he called the Federal Transportation
Council. The purpose of both of these organizations was to prevent strikes against Kuhn,
Loeb Company during the War, in case the railroad workers should try to get in wages some
of the millions of dollars in wartime profits which Kuhn, Loeb received from the United
States Government.
Among the important bankers present in Washington during the War was
Herbert Lehman, of the rapidly rising firm of Lehman Brothers, Bankers, New York, Lehman
was promptly put on the General Staff of the Army, and given the rank of Colonel.
The Lehmans had had prior experience in "taking the profits out of
war", a double entendre and one of Baruch’s favorite phrases. In Men Who Rule
America, Arthur D. Howden Smith writes of the Lehmans during the Civil War, "They
were often agents, fixers for both sides, intermediaries for confidential communications
and handlers of the many illicit transactions in cotton and drugs for the Confederacy,
purveyors of information for the North. The Lehmans, with Mayer in Montgomery, the first
capital of the Confederacy, Henry in New Orleans, and Emanuel in New York were ideally
situated to take advantage of every opportunity for profit which appeared. They seem to
have missed few chances."80
__________________________
80 Arthur D. Howden Smith, Men Who Rule America, Bobbs Merrill, N.Y.
1935, p. 112
101
102
CHART V
The David Rockefeller chart shows the link between the Federal Reserve
Bank of New York, Standard Oil of Indiana, General Motors, and Allied Chemical Corporation
(Eugene Meyer family) and Equitable Life (J.P. Morgan).
________________________________________________________________________
Other appointments during the First World War were as follows:
J.W. McIntosh, director of the Armour meat-packing trust, who was made
chief of Subsistence for the United States Army in 1918. He later became Comptroller of
the Currency during Coolidge’s Administration, and ex-officio member of the Federal
Reserve Board. During the Harding Administration, he did his bit as Director of Finance
for the United States Shipping Board when the Board sold ships to the Dollar Lines for a
hundredth of their cost and then let the Dollar Line default on its payments. After
leaving public service, J.W. McIntosh became a partner in J.W. Wollman Co., New York
Stockbrokers.
W.P.G. Harding, Governor of the Federal Reserve Board, was also managing
director of the War Finance Corporation under Eugene Meyer.
George R. James, member of the Federal Reserve Board in 1923-24, had been
Chief of the Cotton Section of the War Industries Board.
Henry P. Davison, senior partner in J.P. Morgan Co., was appointed head of
the American Red Cross in 1917 in order to get control of the three hundred and seventy
million dollars cash which was collected from the American people in donations.
Ronald Ransom, banker from Atlanta, and Governor of the Federal Reserve
Board under Roosevelt in 1938-39, had been the Director in Charge of Personnel for Foreign
Service for the American Red Cross in 1918.
John Skelton Williams, Comptroller of the Currency, was appointed National
Treasurer of the American Red Cross.
President Woodrow Wilson, the great liberal who signed the Federal Reserve
Act and declared war against Germany, had an odd career for a man who is now enshrined as
a defender of the common people. His chief supporter in both his campaigns for the
Presidency was Cleveland H. Dodge, of Kuhn Loeb, who controlled National City Bank of New
York. Dodge was also President of the Winchester Arms Company and Remington Arms Company.
He was very close to President Wilson
103
104
CHART VI
This chart shows the interlocks between the Federal Reserve Bank of New
York, J. Henry Schroder Banking Corp., J. Henry Schroder Trust Co., Rockefeller Center,
Inc., Equitable Life Assurance Society (J.P. Morgan), and the Federal Reserve Bank of
Boston.
________________________________________________________________________
throughout the great democrat’s political career. Wilson lifted the
embargo on shipment of arms to Mexico on February 12, 1914, so that Dodge could ship a
million dollars worth of arms and ammunition to Carranza and promote the Mexican
Revolution. Kuhn, Loeb Co. which owned the Mexican National Railways System, had become
dissatisfied with the administration of Huerta and had him kicked out.
When the British naval auxiliary Lusitania was sunk in 1915, it was loaded
with ammunition from Dodge’s factories. Dodge became Chairman of the "Survivors
of Victims of the Lusitania Fund", which did so much to arouse the public against
Germany. Dodge also was notorious for using professional gangsters against strikers in his
plants, yet the liberal Wilson does not appear to have ever been disturbed by this.
Another clue to Wilson’s peculiar brand of liberalism is to be found
in Chaplin’s book Wobbly, which relates how Wilson scrawled the word
"REFUSED" across the appeal for clemency sent him by the aging and ailing Eugene
Debs, who had been sent to Atlanta Prison for "speaking and writing against
war". The charge on which Debs was convicted was "spoken and written
denunciation of war". This was treason to the Wilson dictatorship, and Debs was
imprisoned. As head of the Socialist Party, Debs ran for the Presidency from Atlanta
Prison, the only man ever to do so, and polled more than a million votes. It was ironic
that Debs’ leadership of the Socialist Party, which at that time represented the
desires of many Americans for an honest government, should fall into the sickly hands of
Norman Thomas, a former student and admirer of Woodrow Wilson at Princeton University.
Under Thomas’ leadership, the Socialist Party no longer stood for anything, and
suffered a steady decline in influence and prestige.
Wilson continued to be deeply involved in the Bolshevik Revolution, as
were House and Wiseman. Vol. 3, p. 421 of House Intimate Papers records a cable from Sir
William Wiseman to House from London, May 1, 1918, suggesting allied intervention at the
invitation of the Bolsheviki
105
@insert CHART VII
106
CHART VII
This chart shows the interlocks of the Federal Reserve Bank of New York
with Citibank, Guaranty Bank and Trust Co. (J.P. Morgan), J.P. Morgan Co., Morgan Guaranty
Trust Co., Alex Brown & Sons (Brown Brothers Harriman), Kuhn Loeb & Co., Los
Angeles and Salt Lake RR (controlled by Kuhn Loeb Co.), and Westinghouse (controlled by
Kuhn Loeb Co.).
________________________________________________________________________
to help organize the Bolshevik forces. Lt. Col. Norman Thwaites, in his
memoirs, Velvet and Vinegar says,
"Often during the years 1917-20 when delicate decisions had
to be made, I consulted with Mr.
(Otto) Kahn, whose calm judgment and almost uncanny foresight as to political
and economic
tendencies proved most helpful. Another remarkable man with whom I have been
closely
associated is Sir William Wiseman who was advisor on American affairs to the
British delegation
at the Peace Conference, and liaison officer between the American and British
government
during the war. He was rather more the Col. House of this country in his
relations with Downing
Street."81
In the summer of 1917, Woodrow Wilson named Col. House to head the
American War Mission to the Interallied War Conference, the first American mission to a
European council in history. House was criticized for naming his son-in-law, Gordon
Auchincloss, as his assistant on this mission. Paul Cravath, the lawyer for Kuhn, Loeb
Company, was third in charge of the American War Mission. Sir William Wiseman guided the
American War Mission in its conferences. In The Strangest Friendship in History, Viereck
writes,
"After America entered the War, Wiseman, according to
Northcliffe, was the only man who had
access at all times to the Colonel and to the White House. Wiseman rented an
apartment in the
house where the Colonel lived. David Lawrence referred to the Fifty-Third
Street house (New York City) jestingly as the American No. 10 Downing St. . . . Col. House
had a special code used only with Sir William Wiseman. Col. House was Bush, the Morgans
were Haslam, and Trotsky was Keble."82
Thus these two "unofficial" advisors to the British and American
governments had a code solely for each other, which no one else could understand. Even
stranger was the fact that the international Communist
__________________________
81 Lt. Col. Norman Thwaites, Velvet and Vinegar, Grayson Co., London, 1932
82 George Sylvester Viereck, The Strangest Friendship in History, Woodrow
Wilson and Col. House, Liveright, N.Y. 1932, p. 172
107
@insert CHART VIII
108
CHART VIII
This chart shows the link between the Federal Reserve Bank of New York,
Brown Brothers Harriman, Sun Life Assurance Co. (N.M. Rothschild and Sons), and the
Rockefeller Foundation.
________________________________________________________________________
espionage apparatus for many years used Col. House’s book, Philip
Dru, Administrator, as their official code book. Francois Coty writes,
"Gorodin, Lenin’s agent in China, was alleged to have
with him a copy of the book published by
Col. House, Philip Dru, Administrator and a code expert who lived in China told
this writer that
the purpose of having constant access to this book by Gorodin was to use it for
coding and
decoding messages."83
After the Armistice, Woodrow Wilson assembled the American Delegation to
the Peace Conference, and embarked for Paris. It was, on the whole, a most congenial
group, consisting of the bankers who had always guided Wilson’s policies. He was
accompanied by Bernard Baruch, Thomas W. Lamont of J.P. Morgan Co., Albert Strauss of J
& W Seligman bankers, who had been chosen by Wilson to replace Paul Warburg on the
Federal Reserve Board of Governors, J.P. Morgan, and Morgan lawyers Frank Polk and John W.
Davis. Accompanying them were Walter Lippmann, Felix Frankfurter, Justice Brandeis, and
other interested parties. Mason’s biography of Brandeis states that "In Paris in
June of 1919, Brandeis met with such friends as Paul Warburg, Col. House, Lord Balfour,
Louis Marshall, and Baron Edmond de Rothschild."
Indeed, Baron Edmond de Rothschild served as the genial host to the
leading members of the American Delegation, and even turned over his Paris mansion to
them, although the lesser members had to rough it at the elegant Hotel Crillon with Col.
House and his personal staff of 201 servants.
Baruch later testified before the Graham Committee of the Senate Foreign
Relations Committee, "I was economic advisor with the peace mission. GRAHAM: Did you
frequently advise the President while there? BARUCH: Whenever he asked my advice I gave
it. I had something to do with the reparations clauses. I was the American Commissioner in
charge of what they called the Economic Section. I was a
__________________________
83 Francois Coty, Tearing Away the Veil, Paris, 1940
109
@insert CHART IX
110
CHART IX
This chart shows the interlocks between the Federal Reserve Bank of New
York and J.P. Morgan Co., Morgan Guaranty Trust Co., and the Rothschild affiliates of
Royal Bank of Canada, Sun Life Assurance Co. of Canada, Sun Alliance, and London Assurance
Group.
________________________________________________________________________
member of the Supreme Economic Council in charge of raw metals. GRAHAM:
Did you sit in the council with the gentlemen who were negotiating the treaty? BARUCH:
Yes, sir, some of the time. GRAHAM: All except the meetings that were participated in by
the Five? (The Five being the leaders of the five allied nations). BARUCH: And frequently
those also."
Paul Warburg accompanied Wilson on the American Commission to Negotiate
Peace as his chief financial advisor. He was pleasantly surprised to find at the head of
the German delegation his brother, Max Warburg, who brought along Carl Melchior, also of
M.M. Warburg Company, William Georg von Strauss, Franz Urbig, and Mathias Erzberger.
Thomas W. Lamont states in his privately printed memoirs, Across World
Frontiers, "The German delegation included two German bankers of the Warburg firm
whom I happened to know slightly and with whom I was glad to talk informally, for they
seemed to be striving earnestly to offer some reparations composition that might be
acceptable to the Allies."84 Lamont was also pleased to see Sir William Wiseman,
chief advisor to the British delegation.
The bankers at the conference convinced Wilson that they needed an
international government to facilitate their international monetary operations. Vol. IV,
p. 52, Intimate Papers of Col. House quotes a message from Sir William Wiseman to Lord
Reading, August 16, 1918, "The President has two main principles in view; there must
be a League of Nations and it must be virile."
Wilson, who seems to have lived in a world of fantasy, was shocked when
American citizens booed him during his campaign to have them sign over their hard won
independence to what appeared to many to be an international dictatorship. He promptly
went into a depression, and retired to his bedroom. His wife immediately shut the White
House doors against Col. House, and from September 25, 1919 to April 13, 1920, she
__________________________
84 Thomas W. Lamont, Across World Frontiers, (Privately printed) 1950, p. 138
111
ruled the United States with the aid of an intimate friend, her
"military aide", Col. Rixey Smith. As everyone was shut out of their
deliberations, no one ever knew which of the pair functioned as the President, and which
was the Vice President.
The admirers of Woodrow Wilson were led for decades by Bernard Baruch, who
stated that Woodrow Wilson was the greatest man he ever knew. Wilson’s appointments
to the Federal Reserve Board, and that body’s responsibility for financing the First
World War, as well as Wilson’s handing over the United States to the immigrant
triumvirate during the War, made him appear to be the most important single effector of
ruin in American history.
It is no wonder that after his abortive trip to Europe, where he was
hissed and jeered in the streets by the French people, and snickered at in the halls of
Versailles by Orlando and Clemenceau, Woodrow Wilson returned home to take to his bed. The
sight of the destruction and death in Europe, for which he was directly responsible, was
perhaps more of a shock than he could bear. The Italian Minister Pentaleoni expressed the
feelings of the European peoples when he wrote that:
"Woodrow Wilson is a type of Pecksniff who was now disappeared amid
universal execration."
It is America’s misfortune that our subsidized press and educational
system have been devoted to enshrining a man who colluded in causing so much death and
sorrow throughout the world.
The financial cartel suffered only minor setbacks in those crucial years.
On February 12, 1917, The New York Times reported that "The five members of the
Federal Reserve Board were impeached on the floor of the House by Rep. Charles A.
Lindbergh, Republican member of the House Banking and Currency Committee. According to Mr.
Lindbergh, ‘the conspiracy began in’ 1906 when the late J.P. Morgan, Paul M.
Warburg, a present member of the Federal Reserve Board, the National City Bank and other
banking firms ‘conspired’ to obtain currency legislation in the interest of big
business and the appointment of a special board to administer such a law, in order to
create industrial slaves of the masses, the aforesaid conspirators did conspire and are
now conspiring to have the Federal Reserve Board administered so as to enable the
conspirators to coordinate all kinds of big business and to keep themselves in control of
big business in order to amalgamate all the trusts into one great trust in restraint and
control of trade and commerce." The impeachment resolution was not acted on by the
House.
The New York Times reported on August 10, 1918, "Mr. Warburg’s
term having expired, he voluntarily retired from the Federal Reserve Board." Thus the
previous intimation that Mr. Warburg left the Federal Reserve Board because he had a
brother in the Secret Service of a foreign
112
country, namely, Germany, with whom we were at war, was not the cause of
his retirement. In any case, he did not leave the Federal Reserve Administration, as he
immediately took over J.P. Morgan’s seat on the Federal Advisory Council, from which
post he continued to administer the Federal Reserve System for the next ten years.
113
CHAPTER NINE
The Agricultural Depression
When Paul Warburg resigned from the Federal Reserve Board of Governors in
1918, his place was taken by Albert Strauss, partner in the international banking house of
J & W Seligman. This banking house had large interests in Cuba and South America, and
played a prominent part in financing the many revolutions in those countries. Its most
notorious publicity came during the Senate Finance Committee’s investigation in 1933,
when it was brought out that J & W Seligman had given a $415,000 bribe to Juan Leguia,
son of the President of Peru, in order to get that nation to accept a loan.
A partial list of Albert Strauss’ directorships, according to
"Who’s Who", shows that he was: Chairman of the Board of the Cuba Cane
Sugar Corporation; director, Brooklyn Manhattan Transit Co., Coney Island Brooklyn RR, New
York Rapid Transit, Pierce-Arrow, Cuba Tobacco Corporation, and the Eastern Cuba Sugar
Corporation.
Governor Delano resigned in August, 1918, to be commissioned a Colonel in
the Army. The war ended on November 11, 1918.
William McAdoo was replaced in 1918 by Carter Glass as Secretary of the
Treasury. Both Strauss and Glass were present during the secret meeting of the Federal
Reserve Board on May 18, 1920, when the Agricultural Depression of 1920-21 was made
possible.
One of the main lies about the Federal Reserve Act when it was being
ballyhooed in 1913 was its promise to take care of the farmer. Actually, it has never
taken care of anybody but a few big bankers. Prof. O.M.W. Sprague, Harvard economist,
writing in the Quarterly Journal of Economics of February, 1914, said:
"The primary purpose of the Federal Reserve Act is to make
sure that there will always be an
available supply of money and credit in this country to meet unusual banking
requirements."
There is nothing in that wording to help the farmer.
The First World War had introduced into this country a general prosperity,
as revealed by the stocks of heavy industry on the New York Exchange in 1917-1918, by the
increase in the amount of money circulated, and by the enormous bank clearings during the
whole of 1918. It was the assigned duty of the Federal Reserve System to get back the vast
amount
114
of money and credit which had escaped their control during this time of
prosperity. This was done by the Agricultural Depression of 1920-21.
The operations of the Federal Reserve Open Market Committee in 1917-18,
while Paul Warburg was still Chairman, show a tremendous increase in purchases of
bankers’ and trade acceptances. There was also a great increase in the purchase of
United States Government securities, under the leadership of the able Eugene Meyer, Jr. A
large part of the stock market speculation in 1919, at the end of the War when the market
was very unsettled, was financed with funds borrowed from Federal Reserve Banks with
Government securities as collateral. Thus the Federal Reserve System set up the
Depression, first by causing inflation, and then raising the discount rate and making
money dear.
In 1914, Federal Reserve Bank rates had dropped from six percent to four
percent, had gone to a further low of three percent in 1916, and had stayed at that level
until 1920. The reason for the low interest rate was the necessity for floating the
billion dollar Liberty Loans. At the beginning of each Liberty Loan Drive, the Federal
Reserve Board put a hundred million dollars into the New York money market through its
open market operations, in order to provide a cash impetus for the drive. The most
important role of the Liberty Bonds was to soak up the increase in circulation of the
medium of exchange (integer of account) brought about by the large amount of currency and
credit put out during the war. Laborers were paid high wages, and farmers received the
highest prices for their produce they had ever known. These two groups accumulated
millions of dollars in cash which they did not put into Liberty Bonds. That money was
effectively out of the hands of the Wall Street group which controlled the money and
credit of the United States. They wanted it back, and that is why we had the Agricultural
Depression of 1920-21.
Much of the money was deposited in small country banks in the Middle West
and West which had refused to have any part of the Federal Reserve System, the farmers and
ranchers of those regions seeing no good reason why they should give a group of
international financiers control of their money. The main job of the Federal Reserve
System was to break these small country banks and get back the money which had been paid
out to the farmers during the war, in effect, ruin them, and this it proceeded to do.
First of all, a Federal Farm Loan Board was set up which encouraged the
farmers to invest their accrued money in land on long term loans, which the farmers were
eager to do. Then inflation was allowed to take its course in this country and in Europe
in 1919 and 1920. The purpose of the inflation in Europe was to cancel out a large portion
of the war debts owed by the Allies to the American people, and its purpose in this
country was to draw in the excess moneys which had been distributed to
115
the working people in the form of higher wages and bonuses for production.
As prices went higher and higher, the money which the workers had accumulated became worth
less and less, inflicting upon them an unfair drain, while the propertied classes were
enriched by the inflation because of the enormous increase in the value of land and
manufactured goods. The workers were thus effectively impoverished, but the farmers, who
were as a class more thrifty, and who were more self-sufficient, had to be handled more
harshly.
G.W. Norris, in "Collier’s Magazine" of March 20, 1920,
said:
"Rumor has it that two members of the Federal Reserve Board
had a plain talk with some New
York bankers and financiers in December, 1919. Immediately afterwards, there
was a notable
decline in transactions on the stock market and a cessation of company
promotions. It is
understood that action in the same general direction has already been taken in
other sections of the country, as evidence of the abuse of the Federal Reserve System to
promote speculation in land and commodities appeared."
Senator Robert L. Owen, Chairman of the Senate Banking and Currency
Committee, testified at the Senate Silver Hearings in 1939 that:
"In the early part of 1920, the farmers were exceedingly prosperous. They
were paying off the
mortgages and buying a lot of new land, at the instance of the Government--had
borrowed money
to do it--and then they were bankrupted by a sudden contraction of credit and
currency which
took place in 1920. What took place in 1920 was just the reverse of what should
have been taking
place. Instead of liquidating the excess of credits created by the war through
a period of years, the
Federal Reserve Board met in a meeting which was not disclosed to the public.
They met on the
18th of May, 1920, and it was a secret meeting. They spent all day conferring;
the minutes made
sixty printed pages, and they appear in Senate Document 310 of February 19,
1923. The Class A
Directors, the Federal Reserve Advisory Council, were present, but the Class B
Directors, who
represented business, commerce, and agriculture, were not present. The Class C
Directors,
representing the people of the United States, were not present and were not
invited to be present.
Only the big bankers were there, and their work of that day resulted in a
contraction of credit
which had the effect the next year of reducing the national income fifteen
billion dollars,
throwing millions of people out of employment, and reducing the value of lands
and ranches by
twenty billion dollars."
Carter Glass, member of the Board in 1920 as Secretary of the Treasury,
wrote in his autobiography, Adventure in Constructive Finance published in 1928;
"Reporters were not present, of course, as they should not have been and as they
never are at any bank board meeting in the world."85
__________________________
85 Carter Glass, Adventure in Constructive Finance, Doubleday, N.Y. 1928
116
It was Carter Glass who had complained that, if a suggested amendment by
Senator LaFollette were passed, on the Federal Reserve Act of 1913, to the effect that no
member of the Federal Reserve Board should be an official or director or stockholder of
any bank, trust company, or insurance company, we would end up by having mechanics and
farm laborers on the Board. Certainly mechanics and farm laborers could have caused no
more damage to the country than did Glass, Strauss, and Warburg at the secret meeting of
the Federal Reserve Board.
Senator Brookhart of Iowa testified that at that secret meeting Paul
Warburg, also President of the Federal Advisory Council, had a resolution passed to send a
committee of five to the Interstate Commerce Commission and ask for an increase in
railroad rates. As head of Kuhn, Loeb Co. which owned most of the railway mileage in the
United States, he was already missing the huge profits which the United States Government
had paid during the war, and he wanted to inflict new price raises on the American people.
Senator Brookhart also testified that:
"I went into Myron T. Herrick’s office in Paris, and told him that I
came there to study
cooperative banking. He said to me, ‘as you go over the countries of
Europe, you will find that
the United States is the only civilized country in the world that by law is
prohibiting its people
from organizing a cooperative system.’ I went up to New York and talked to
about two hundred people. After talking cooperation and standing around waiting for my
train--I did not specifically mention cooperative banking, it was cooperation in
general--a man called me off to one side and said, ‘I think Paul Warburg is the
greatest financier we have ever produced. He believes a lot more of your cooperative ideas
than you think he does, and if you want to consult anybody about the business of
cooperation, he is the man to consult, because he believes in you, and you can rely on
him.’ A few minutes later I was steered up against Mr. Warburg himself, and he said
to me, ‘You are absolutely right about this cooperative idea. I want to let you know
that the big bankers are with you. I want to let you know that now, so that you will not
start anything on cooperative
banking and turn them against you.’ I said, ‘Mr. Warburg, I have
already prepared and tomorrow
I am going to offer an amendment to the Lant Bill authorizing the establishment
of cooperative
national banks.’ That was the intermediate credit act which was then
pending to authorize the
establishment of cooperative national banks. That was the extent of my
conversation with Mr.
Warburg, and we have not had any since."
Mr. Wingo testified that in April, May, June and July of 1920, the
manufacturers and merchants were allowed a very large increase in credits. This was to
tide them through the contraction of credit which was intended to ruin the American
farmers, who, during this period, were denied all credit.
117
At the Senate Hearings in 1923, Eugene Meyer, Jr. put his finger on a
primary reason for the Federal Reserve Board’s action in raising the interest rate to
7% on agricultural and livestock paper:
"I believe," he said, "that a great deal of
trouble would have been avoided if a larger number of
the eligible non-member banks had been members of the Federal Reserve
System."
Meyer was correct in pointing this out. The purpose of the Board’s
action was to break those state and joint land stock banks which had steadfastly refused
to surrender their freedom to the banker’s dictatorship set up by the System.
Kemmerer in the ABC of the Federal Reserve System had written in 1919 that:
"The tendency will be toward unification and simplicity which will be
brought about by the state
institutions, in increasing numbers, becoming stockholders and depositors in
the reserve banks."
However, the state banks had not responded.
The Senate Hearings of 1923 investigating the causes of the Agricultural
Depression of 1920-21 had been demanded by the American people. The complete record of the
secret meeting of the Federal Reserve Board on May 18, 1920 had been printed in the
"Manufacturers’ Record" of Baltimore, Maryland, a magazine devoted to the
interests of small Southern manufacturers.
Benjamin Strong, Governor of the Federal Reserve Bank of New York, and
close friend of Montagu Norman, the Governor of the Bank of England, claimed at these
Hearings:
"The Federal Reserve System has done more for the farmer
than he has yet begun to realize."
Emmanuel Goldenweiser, Director of Research for the Board of Governors,
claimed that the discount rate was raised purely as an anti-inflationary measure, but he
failed to explain why it was a raise aimed solely at farmers and workers, while at the
same time the System protected the manufacturers and merchants by assuring them increased
credits.
The final statement on the Federal Reserve Board’s causing the
Agricultural Depression of 1920-21 was made by William Jennings Bryan. In
"Hearst’s Magazine" of November, 1923, he wrote:
"The Federal Reserve Bank that should have been the
farmer’s greatest protection has become his
greatest foe. The deflation of the farmer was a crime deliberately
committed."
118
CHAPTER TEN
The Money Creators
The editorial page of The New York Times, January 18, 1920, carried an
interesting comment on the Federal Reserve System. The unidentified writer, perhaps Paul
Warburg, stated, "The Federal Reserve is a fount of credit, not of capital."
This is one of the most revealing statements ever made about the Federal Reserve System.
It says that the Federal Reserve System will never add anything to our capital structure,
or to the formation of capital, because it is organized to produce credit, to create money
for credit money and speculations, instead of providing capital funds for the improvement
of commerce and industry. Simply stated, capitalization would mean the providing of notes
backed by a precious metal or other commodity. Reserve notes are unbacked paper loaned at
interest.
On July 25, 1921, Senator Owen stated on the editorial page of The New
York Times, The Federal Reserve Board is the most gigantic financial power in all the
world. Instead of using this great power as the Federal Reserve Act intended that it
should, the board....delegated this power to the banks, threw the weight of its influence
toward the support of the policy of German inflation." The senator whose name was on
the Act saw that it was not performing as promised.
After the Agricultural Depression of 1920-21, the Federal Reserve Board of
Governors settled down to eight years of providing rapid credit expansion of the New York
bankers, a policy which culminated in the Great Depression of 1929-31 and helped paralyze
the economic structure of the world. Paul Warburg had resigned in May, 1918, after the
monetary system of the United States had been changed from a bond-secured currency to a
currency based upon commercial paper and the shares of the Federal Reserve Banks. Warburg
returned to his five hundred thousand dollar a year job with Kuhn, Loeb Company, but he
continued to determine the policy of the Federal Reserve System, as President of the
Federal Advisory Council and as Chairman of the Executive Committee of the American
Acceptance Council.
From 1921 to 1929, Paul Warburg organized three of the greatest trusts in
the United States, the International Acceptance Bank, largest acceptance bank in the
world, Agfa Ansco Film Corporation, with headquarters in Belgium, and I.G. Farben
Corporation whose American
119
branch Warburg set up as I.G. Chemical Corporation. The Westinghouse
Corporation is also one of his creations.
In the early 1920s, the Federal Reserve System played the decisive role in
the re-entry of Russia into the international finance structure. Winthrop and Stimson
continued to be the correspondents between Russian and American bankers, and Henry L.
Stimson handled the negotiations concluding in our recognition of the Soviet after
Roosevelt’s election in 1932. This was an anti-climax, because we had long before
resumed exchange relations with Russian financiers.
The Federal Reserve System began purchasing Russian gold in 1920, and
Russian currency was accepted on the Exchanges. According to Colonel Ely Garrison, in his
autobiography, and according to the United States Naval Secret Service Report on Paul
Warburg, the Russian Revolution had been financed by the Rothschilds and Warburgs, with a
member of the Warburg family carrying the actual funds used by Lenin and Trotsky in
Stockholm in 1918.
An article in the English monthly "Fortnightly", July, 1922,
says:
"During the past year, practically every single
capitalistic institution has been restored. This is
true of the State Bank, private banking, the Stock Exchange, the right to
possess money to
unlimited amount, the right of inheritance, the bill of exchange system, and
other institutions and
practices involved in the conduct of private industry and trade. A great part
of the former
nationalized industries are now found in semi-independent trusts."
The organization of powerful trusts in Russia under the guise of Communism
made possible the receipt of large amounts of financial and technical help from the United
States. The Russian aristocracy had been wiped out because it was too inefficient to
manage a modern industrial state. The international financiers provided funds for Lenin
and Trotsky to overthrow the Czarist regime and keep Russia in the First World War. Peter
Drucker, spokesman for the oligarchy in America, declared in an article in the Saturday
Evening Post in 1948, that:
"RUSSIA IS THE IDEAL OF THE MANAGED ECONOMY TOWARDS WHICH
WE ARE
MOVING."
In Russia, the issuance of sufficient currency to handle the needs of
their economy occurred only after a government had been put in power which had absolute
control of the people. During the 1920s, Russia issued large quantities of so-called
"inflation money", a managed currency. The same "Fortnightly" article
(of July, 1922) observed that:
"As economic pressure produced the ‘astronomical dimensions
system’ of currency; it can never
destroy it. Taken alone, the system is self-contained, logically perfected,
even intelligent. And it
can perish only through the collapse or destruction of the political edifice
which it decorates."
120
"Fortnightly" also remarked, in 1929, that:
"Since 1921, the daily life of the Soviet citizen is no
different from that of the American citizen,
and the Soviet system of government is more economical."
Admiral Kolchak, leader of the White Russian armies, was supported by the
international bankers, who sent British and American troops to Siberia in order to have a
pretext for printing Kolchak rubles. At one time in 1920, the bankers were manipulating on
the London Exchange the old Czarist rubles, Kerensky rubles and Kolchak rubles, the values
of all three fluctuating according to the movements of the Allied troops aiding Kolchak.
Kolchak also was in possession of considerable amounts of gold which had been seized by
his armies. After his defeat, a trainload of this gold disappeared in Siberia. At the
Senate Hearings in 1921 on the Federal Reserve System, it was brought out that the System
had been receiving this gold. Congressman Dunbar questioned Governor W.P.G. Harding of the
Federal Reserve Board as follows:
DUNBAR: "In other words, Russia is sending a great deal of gold to
the European countries, which in turn send it to us?"
HARDING: "This is done to pay for the stuff bought in this country
and to create dollar exchange."
DUNBAR: "At the same time, that gold came from Russia through
Europe?"
HARDING: "Some of it is thought to be Kolchak gold, coming through
Siberia, but it is none of the Federal Reserve Banks’ business. The Secretary of the
Treasury has issued instructions to the assay office not to take any gold which does not
bear the mint mark of a friendly nation."
Just what Governor Harding meant by "a friendly nation" is not
clear. In 1921, we were not at war with any country, but Congress was already beginning to
question the international gold dealings of the Federal Reserve System. Governor Harding
could very well shrug his shoulders and say that it was none of the Federal Reserve
Banks’ business where the gold came from. Gold knows no nationality or race. The
United States by law had ceased to be interested in where its gold came from in 1906, when
Secretary of the Treasury Shaw made arrangements with several of the larger New York banks
(ones in which he had interests) to purchase gold with advances of cash from the United
States Treasury, which would then purchase the gold from these banks. The Treasury could
claim that it did not know where its gold came from since their office only registers the
bank from which it made the purchase. Since 1906, the Treasury has not known from which of
the international gold merchants it was buying its gold.
The international gold dealings of the Federal Reserve System, and its
active support in helping the League of Nations to force all the nations
121
of Europe and South America back on the gold standard for the benefit of
international gold merchants like Eugene Meyer, Jr. and Albert Strauss, is best
demonstrated by a classic incident, the sterling credit of 1925.
J.E. Darling wrote, in the English periodical, "Spectator", on
January 10, 1925 that:
"Obviously, it is of the first importance to the United States to induce
England to resume the gold
standard as early as possible. An American controlled Gold Standard, which must
inevitably
result in the United States becoming the world’s supreme financial power,
makes England a
tributary and satellite, and New York the world’s financial centre."
Mr. Darling fails to point out that the American people have as little to
do with this as the British people, and that resumption of the gold standard by Britain
would benefit only that small group of international gold merchants who own the
world’s gold. No wonder that "Banker’s Magazine" gleefully remarked in
July, 1925 that:
"The outstanding event of the past half year in the banking world was the
restoration of the gold
standard."
The First World War changed the status of the United States from that of a
debtor nation to the position of the world’s greatest creditor nation, a title
formerly occupied by England. Since debt is money, according to the Governor Marriner
Eccles of the Federal Reserve Board, this also made us the richest nation of the world.
The war also caused the removal of the headquarters of the world’s acceptance market
from London to New York, and Paul Warburg became the most powerful trade acceptance banker
in the world. The mainstay of the international financiers, however, remained the same.
The gold standard was still the basis of foreign exchange, and the small group of
internationals who owned the gold controlled the monetary system of the Western nations.
Professor Gustav Cassel wrote in 1928:
"The American dollar, not the gold standard, is the
world’s monetary standard. The American
Federal Reserve Board has the power to determine the purchasing power of the
dollar by making
changes in the rate of discount, and thus controls the monetary standard of the
world."
If this were true, the members of the Federal Reserve Board would be the
most powerful financiers in the world. Occasionally their membership includes such
influential men as Paul Warburg or Eugene Meyer, Jr., but usually they are a rubber-stamp
committee for the Federal Advisory Council and the London bankers.
In May, 1925, the British Parliament passed the Gold Standard Act, putting
Great Britain back on the gold standard. The Federal Reserve System’s major role in
this event came out on March 16, 1926, when George Seay, Governor of the Federal Reserve
Bank of Richmond, testified before the House Banking and Currency Committee that:
122
"A verbal understanding confirmed by correspondence,
extended Great Britain a two hundred
million dollar gold loan or credit. All negotiations were conducted between
Benjamin Strong,
Governor of the Federal Reserve Bank of New York and Mr. Montagu Norman,
Governor of the
Bank of England. The purpose of this loan was to help England get back on the
gold standard,
and the loan was to be met by investment of Federal Reserve funds in bills of
exchange and
foreign securities."
The Federal Reserve Bulletin of June, 1925, stated that:
"Under its arrangement with the Bank of England the Federal
Reserve Bank of New York
undertakes to sell gold on credit to the Bank of England from time to time
during the next two
years, but not to exceed $200,000,000 outstanding at any one time."
A two hundred million dollar gold credit had been arranged by a verbal
understanding between the international bankers, Benjamin Strong and Montagu Norman. It
was apparent by this time that the Federal Reserve System had other interests at heart
than the financial needs of American business and industry. Great Britain’s return to
the gold standard was further facilitated by an additional gold loan of a hundred million
dollars from J.P. Morgan Company. Winston Churchill, British Chancellor of the Exchequer,
complained later that the cost to the British government of this loan was $1,125,000 the
first year, this sum representing the profit to J.P. Morgan Company in that time.
The matter of changing the discount rate, for instance, has never been
satisfactorily explained. Inquiry at the Federal Reserve Board in Washington elicited the
reply that "the condition of the money market is the prime consideration behind
changes in the rate." Since the money market is in New York, it takes no imagination
to deduce that New York bankers may be interested in changes of the rate and often attempt
to influence it.
Norman Lombard, in the periodical "World’s Work" writes
that:
"In their consideration and disposal of proposed changes of
policy, the Federal Reserve Board
should follow the procedure and ethics observed by our court of law.
Suggestions that there
should be a change of rate or that the Reserve Banks should buy or sell
securities may come from
anyone and with no formality or written argument. The suggestion may be made to
a Governor or
Director of the Federal Reserve System over the telephone or at his club over
the luncheon table,
or it may be made in the course of a casual call on a member of the Federal
Reserve Board. The
interests of the one proposing the change need not be revealed, and his name
and any suggestions
he makes are usually kept secret. If it concerns the matter of open market
operations, the public
has no inkling of the decision until the regular weekly statement appears,
showing changes in the
holdings of the Federal Reserve Banks. Meanwhile, there is no public
discussion, there is no
statement of the reasons for the decision, or of the names of those opposing or
favoring it."
123
The chances of the average citizen meeting a Governor of the Federal
Reserve System at his club are also slight.
The House Hearings on Stabilization of the Purchasing Power of the Dollar
in 1928 proved conclusively that the Federal Reserve Board worked in close cooperation
with the heads of European central banks, and that the Depression of 1929-31 was planned
at a secret luncheon of the Federal Reserve Board and those heads of European central
banks in 1927. The Board has never been made responsible to the public for its decisions
or actions. The constitutional checks and balances seem not to operate in finance.
The true allegiance of the members of the Federal Reserve Board has always
been to the central bankers. The three features of the central bank, its ownership by
private stockholders who receive rent and profit for their use of the nation’s
credit, absolute control of the nation’s financial resources, and mobilization of the
nation’s credit to finance foreigners, all were demonstrated by the Federal Reserve
System during the first fifteen years of its operations.
Further demonstration of the international purposes of the Federal Reserve
Act of 1913 is provided by the "Edge Amendment" of December 24, 1919, which
authorizes the organization of corporations expressly for "engaging in international
foreign banking and other international or foreign financial operations, including the
dealing in gold or bullion, and the holding of stock in foreign corporations." In
commenting on this amendment, E.W. Kemmerer, economist from Princeton University, remarked
that:
"The federal reserve system is proving to be a great influence in the
internationalizing of
American trade and American finance."
The fact that this internationalizing of American trade and American
finance has been a direct cause for involving us in two world wars does not disturb Mr.
Kemmerer. There is plenty of evidence to show how Paul Warburg used the Federal Reserve
System as the instrument for getting trade acceptance adopted on a wide scale by American
businessmen.
The use of trade acceptances, (which are the currency of international
trade) by bankers and corporations in the United States prior to 1915 was practically
unknown. The rise of the Federal Reserve System exactly parallels the increase in the use
of acceptances in this country, nor is this a coincidence. The men who wanted the Federal
Reserve System were the men who set up acceptance banks and profited by the use of
acceptances.
As early as 1910, the National Monetary Commission began to issue
pamphlets and other propaganda urging bankers and businessmen in this country to adopt
trade acceptances in their transactions. For three
124
years the Commission carried on this campaign, and the Aldrich Plan
included a broad provision authorizing the introduction and use of bankers’
acceptances into the American system of commercial paper.
The Federal Reserve Act of 1913 as passed by Congress did not specifically
authorize the use of acceptances, but the Federal Reserve Board in 1915 and 1916 defined
"trade acceptance", further defined by Regulation A Series of 1920, and further
defined by Series 1924. One of the first official acts of the Board of Governors in 1914
was to grant acceptances a preferentially low rate of discount at Federal Reserve Banks.
Since acceptances were not being used in this country at that time, no explanation of
business exigency could be advanced for this action. It was apparent that someone in power
on the Board of Governors wanted the adoptance of acceptances.
The National Bank Act of 1864, which was the determining financial
authority of the United States until November, 1914, did not permit banks to lend their
credit. Consequently, the power of banks to create money was greatly limited. We did not
have a bank of issue, that is, a central bank, which could create money. To get a central
bank, the bankers caused money panic after money panic on the business people of the
United States, by shipping gold out of the country, creating a money shortage, and then
importing it back. After we got our central bank, the Federal Reserve System, there was no
longer any need for a money panic, because the banks could create money. However, the
panic as an instrument of power over the business and financial community was used again
on two important occasions, in 1920, causing the Agricultural Depression, because state
banks and trust companies had refused to join the Federal Reserve System, and in 1929,
causing the Great Depression, which centralized nearly all power in this country in the
hands of a few great trusts.
A trade acceptance is a draft drawn by the seller of goods on the
purchaser, and accepted by the purchaser, with a time of expiration stamped upon it. The
use of trade acceptances in the wholesale market supplies short-term, assured credit to
carry goods in process of production, storage, transit, and marketing. It facilitates
domestic and foreign commerce. Seemingly, then, the bankers who wished to replace the
open-book account system with the trade acceptance system were progressive men who wished
to help American import-export trade. Much propaganda was issued to that effect, but this
was not really the story.
The open-book system, heretofore used entirely by American business
people, allowed a discount for cash. The acceptance system discourages the use of cash, by
allowing a discount for credit. The open-book system also allowed much easier terms of
payment, with liberal extensions on the debt. The acceptance does not allow this, since it
is
125
a short-term credit with the time-date stamped upon it. It is out of the
seller’s hands, and in the hands of a bank, usually an acceptance bank, which does
not allow any extension of time. Thus, the adoption of acceptances by American businessmen
during the 1920’s greatly facilitated the domination and swallowing up of small
business into huge trusts, which accelerated the crash of 1929.
Trade acceptances had been used to some extent in the United States before
the Civil War. During that war, exigencies of trade had destroyed the acceptance as a
credit medium, and it had not come back into favor in this country, our people preferring
the simplicity and generosity of the open-book system. Open-book accounts are a
single-name commercial paper, bearing only the name of the debtor. Acceptances are
two-name paper, bearing the name of the debtor and the creditor. Thus they became
commodities to be bought and sold by banks. To the creditor, under the open-book system,
the debt is a liability. To the acceptance bank holding an acceptance, the debt is an
asset. The men who set up acceptance banks in this country, under the leadership of Paul
Warburg, secured control of the billions of dollars of credit existing as open accounts on
the books of American businessmen.
Governor Marriner Eccles of the Federal Reserve Board stated before the
House Banking and Currency Committee that: "Debt is the basis for the creation of
money."
Large holders of trade acceptances got the use of billions of dollars
worth of credit-money, besides the rate of interest charged upon the acceptance itself. It
is obvious why Paul Warburg should have devoted so much time, money, and energy to getting
acceptances adopted by this country’s banking machinery.
On September 4, 1914, the National City Bank accepted the first time-draft
drawn on a national bank under provisions of the Federal Reserve Act of 1913. This was the
beginning of the end of the open-book account system as an important factor in wholesale
trade. Beverly Harris, vice-president of the National City Bank of New York, issued a
pamphlet in 1915 stating that:
"Merchants using the open account system are usurping the functions of
bankers."
In The New York Times on June 14, 1920, Paul Warburg, Chairman of the
American Acceptance Council, said:
"Unless the Federal Reserve Board puts itself heart and soul behind the
untrammeled
development of acceptances as a prime investment for banks of the Federal
Reserve Banks the
future safe and sound development of the system will be jeopardized."
This was a statement of the purpose of Warburg and his bunch who wanted
"monetary reform" in this country. They were out to get control
126
of all credit in the United States, and they got it, by means of the
Federal Reserve System, the acceptance system, and the lack of concern by the citizens.
The First World War was a boon to the introduction of trade acceptances,
and the volume jumped to four hundred million dollars in 1917, growing through the 1920s
to more than a billion dollars a year, which culminated in a high peak just before the
Great Depression of 1929-31. The Federal Reserve Bank of New York’s charts show that
its use of acceptances reached a peak in November, 1929, the month of the stock market
crash, and declined sharply thereafter. The acceptance people by then had gotten what they
wanted, which was control of American business and industry. "Fortune Magazine"
in February of 1950 pointed out that:
"Volume of acceptances declined from $1,732 million in 1929 to $209
million in 1940, because
of the concentration of acceptance banking in a few hands, and the
Treasury’s low-interest
policy, which made direct loans cheaper than acceptance. There has been a
slight upturn since
the war, but it is often cheaper for large companies to finance imports from
their own coffers."
In other words, the "large companies" more accurately, the great
trusts, now have control of credit and have not needed acceptances. Besides the barrage of
propaganda issued by the Federal Reserve System itself, the National Association of Credit
Men, the American Bankers’ Association, and other fraternal organizations of the New
York bankers devoted much time and money to distributing acceptance propaganda. Even their
flood of lectures and pamphlets proved insufficient, and in 1919 Paul Warburg organized
the American Acceptance Council, which was devoted entirely to acceptance propaganda.
The first convention held by this association at Detroit, Michigan, on
June 9, 1919, coincided with the annual convention of the National Association of Credit
Men, held there on that date, so that "interested observers might with facility
participate in the lectures and meetings of both groups," according to a pamphlet
issued by the American Acceptance Council.
Paul Warburg was elected President of this organization, and later became
chairman of the Executive Committee of the American Acceptance Council, a position which
he held until his death in 1932. The Council published lists of corporations using trade
acceptances, all of them businesses in which Kuhn, Loeb Co. or its affiliates held
control. Lectures given before the Council or by members of the Council were attractively
bound and distributed free by the National City Bank of New York to the country’s
businessmen.
Louis T. McFadden, Chairman of the House Banking and Currency Committee,
charged in 1922 that the American Acceptance Council was
127
exercising undue influence on the Federal Reserve Board and called for a
Congressional investigation, but Congress was not interested.
At the second annual convention of the American Acceptance Council, held
in New York on December 2, 1920, President Paul Warburg stated:
"It is a great satisfaction to report that during the year under review it
was possible for the
American Acceptance Council to further develop and strengthen its relations
with the Federal
Reserve Board."
During the 1920s Paul Warburg, who had resigned from the Federal Reserve
Board after holding a position as Governor for a year in wartime, continued to exercise
direct personal influence on the Federal Reserve Board by meeting with the Board as
President of the Federal Advisory Council and as President of the American Acceptance
Council. He was, from its organization in 1920 until his death in 1932, Chairman of the
Board of the International Acceptance Bank of New York, the largest acceptance bank in the
world. His brother, Felix M. Warburg, also a partner in Kuhn, Loeb Co., was director of
the International Acceptance Bank and Paul’s son, James Paul Warburg, was
Vice-President. Paul Warburg was also a director on other important acceptance banks in
this country, such as Westinghouse Acceptance Bank, which were organized in the United
States immediately after the World War, when the headquarters of the international
acceptance market was moved from London to New York, and Paul Warburg became the most
powerful acceptance banker in the world.
Paul Warburg became an even more legendary figure by his memorialization
as "Daddy Warbucks" in the comic strip, "Little Orphan Annie". The
strip celebrated a homeless waif and her dog who are adopted by "the richest man in
the world", Daddy Warbucks, a takeoff on "Warburg", who has almost magical
powers and can accomplish anything by the power of his limitless wealth. Those in the know
snickered when "Annie", the musical comedy version of this story, had a highly
successful run of several years on Broadway, because the vast majority of the audience had
no idea that this was merely another Warburg operation.
It was the transference of the acceptance market from England to this
country which gave rise to Thomas Lamont’s ecstatic speech before the Academy of
Political Science in 1917 that:
"The dollar, not the pound, is now the basis for
international exchange."
Americans were proud to hear that, but they did not realize at what a
price.
Visible proof of the undue influence of the American Acceptance Council on
the Federal Reserve Board, about which Congressman McFadden complained, is the chart
showing the rate-pattern of the
128
Federal Reserve Bank of New York during the 1920s. The Bank’s
official discount rate follows exactly for nine years the ninety-day bankers’
acceptance rate, and the Federal Reserve Bank of New York sets the discount rate for the
rest of the Reserve Banks.
Throughout the 1920s the Board of Governors retained two of its first
members, C.S. Hamlin and Adolph C. Miller. These men found themselves careers as arbiters
of the nation’s monetary policy. Hamlin was on the Board from 1914 until 1936, when
he was appointed Special Counsel to the Board, while Miller served from 1914 until 1931.
These two men were allowed to stay on the Board so many years because they were both
eminently respectable men who gave the Board a certain prestige in the eyes of the public.
During these years one important banker after another came on the Board, served for
awhile, and went on to better things. Neither Miller nor Hamlin ever objected to anything
that the New York bankers wanted. They changed the discount rate and they performed open
market operation with Government securities whenever Wall Street wanted them to. Behind
them was the figure of Paul Warburg, who exercised a continuous and dominant influence as
President of the Federal Advisory Council, on which he had such men of common interests
with himself as Winthrop Aldrich and J.P. Morgan. Warburg was never too occupied with his
duties of organizing the big international trusts to supervise the nation’s financial
structures. His influence from 1902, when he arrived in this country as immigrant from
Germany, until 1932, the year of his death, was dependent on his European alliance with
the banking cartel. Warburg’s son, James Paul Warburg, continued to exercise such
influence, being appointed Franklin D. Roosevelt’s Director of the Budget when that
great man assumed office in 1933, and setting up the Office of War Information, our
official propaganda agency during the Second World War.
In The Fight for Financial Supremacy, Paul Einzig, editorial writer for
the London Economist, wrote that:
"Almost immediately after World War I a close cooperation
was established between the Bank of
England and the Federal Reserve authorities, and more especially with the
Federal Reserve Bank
of New York.* This cooperation was largely due to the cordial relations
existing between Mr.
Montagu Norman of the Bank of England and Mr. Benjamin Strong, Governor of the
Federal
Reserve Bank of New York until 1928. On several occasions the discount rate
policy of the
Federal Reserve Bank of New York was guided by a desire to help the Bank of
England.
__________________________
* William Boyce Thompson (Wall Street operator) commented to Clarence Barron,
Nov. 27, 1920, "Why should the Federal Reserve Bank have private wires all over the
country and talk daily by cable with the Bank of England?" p. 327 "They Told
Barron".
129
There has been close cooperation in the fixing of discount rates
between London and New
York."86
__________________________
86 Paul Einzig, The Fight For Financial Supremacy, Macmillan, 1931
130
CHAPTER ELEVEN
Lord Montagu Norman
The collaboration between Benjamin Strong and Lord Montagu Norman is one
of the greatest secrets of the twentieth century. Benjamin Strong married the daughter of
the president of Bankers Trust in New York, and subsequently succeeded to its presidency.
Carroll Quigley, in Tragedy and Hope says: "Strong became Governor of the Federal
Reserve Bank of New York as the joint nominee of Morgan and of Kuhn, Loeb Company in
1914."87
Lord Montagu Norman is the only man in history who had both his maternal
grandfather and his paternal grandfather serve as Governors of the Bank of England. His
father was with Brown, Shipley Company, the London Branch of Brown Brothers (now Brown
Brothers Harriman). Montagu Norman (1871-1950) came to New York to work for Brown Brothers
in 1894, where he was befriended by the Delano family, and by James Markoe, of Brown
Brothers. He returned to England, and in 1907 was named to the Court of the Bank of
England. In 1912, he had a nervous breakdown, and went to Switzerland to be treated by
Jung, as was fashionable among the powerful group which he represented.*
Lord Montagu Norman was Governor of the Bank of England from 1916 to 1944.
During this period, he participated in the central bank conferences which set up the Crash
of 1929 and a worldwide depression. In The Politics of Money by Brian Johnson, he writes,
"Strong and Norman, intimate friends, spent their holidays together at Bar Harbour
and in the South of France." Johnson says, "Norman therefore became
Strong’s alter ego. . . . "Strong’s easy money policies on the New York
money market from 1925-28 were the fulfillment of his agreement with Norman to keep New
York interest rates below those of London. For the sake of international cooperation,
Strong withheld the steadying hand of high interest rates from New York until it was too
late. Easy money in New
__________________________
87 Carroll Quigley, Tragedy and Hope, Macmillan, New York, p. 326
* When people of this class are stricken by guilt feelings while plotting world
wars and economic depressions which will bring misery, suffering and death to millions of
the world’s inhabitants, they sometimes have qualms. These qualms are jeered at by
their peers as "a failure of nerve". After a bout with their psychiatrists, they
return to their work with renewed gusto, with no further digressions of pity for "the
little people" who are to be their victims.
131
York had encouraged the surging American boom of the late 1920s, with its
fantastic heights of speculation."88
Benjamin Strong died suddenly in 1928. The New York Times obituary, Oct.
17, 1928, describes the conference between the directors of the three great central banks
in Europe in July, 1927, "Mr. Norman, Bank of England, Strong of the New York Federal
Reserve Bank, and Dr. Hjalmar Schacht of the Reichsbank, their meeting referred to at the
time as a meeting of ‘the world’s most exclusive club’. No public reports
were ever made of the foreign conferences, which were wholly informal, but which covered
many important questions of gold movements, the stability of world trade, and world
economy."
The meetings at which the future of the world’s economy are decided
are always reported as being "wholly informal", off the record, no reports made
to the public, and on the rare occasions when outraged Congressmen summon these mystery
figures to testify about their activities they merely trace the outline of steps taken,
and develop no information about what was really said or decided.
At the Senate Hearings on the Federal Reserve System in 1931, H. Parker
Willis, one of the authors and First Secretary of the Federal Reserve Board from 1914
until 1920, pointedly asked Governor George Harrison, Strong’s successor as Governor
of the Federal Reserve Bank of New York:
"What is the relationship between the Federal Reserve Bank of New York and
the money
committee of the Stock Exchange?"
"There is no relationship," Governor Harrison replied.
"There is no assistance or cooperation in fixing the rate in any
way?", asked Willis.
"No," said Governor Harrison, "although on various occasions
they advise us of the state of the
money situation, and what they think the rate ought to be." This was an
absolute contradiction of
his statement that "There is no relationship". The Federal Reserve
Bank of New York which set
the discount rate for the other Reserve Banks, actually maintained a close
liaison with the money
committee of the Stock Exchange.
The House Stabilization Hearings of 1928 proved conclusively that the
Governors of the Federal Reserve System had been holding conferences with heads of the big
European central banks. Even had the Congressmen known the details of the plot which was
to culminate in the Great Depression of 1929-31, there would have been nothing they could
have done to stop it. The international bankers who controlled gold movements could
inflict their will on any country, and the United States was as helpless as any other.
Notes from these House Hearings follow:
__________________________
88 Brian Johnson, The Politics of Money, McGraw Hill, New York, 1970, p. 63.
132
MR. BEEDY: "I notice on your chart that the lines which produce the
most violent fluctuations are found under ‘Money Rates in New York.’ As the
rates of money rise and fall in the big cities the loans that are made on investments seem
to take advantage of them, at present, a quite violent change, while industry in general
does not seem to avail itself of these violent changes, and that line is fairly even,
there being no great rises or declines.
GOVERNOR ADOLPH MILLER: This was all more or less in the interests of the
international situation. They sold gold credits in New York for sterling balances in
London.
REPRESENTATIVE STRONG: (No relation to Benjamin): Has the Federal Reserve
Board the power to attract gold to this country?
E.A. GOLDENWEISER, research director for the Board: The Federal Reserve
Board could attract gold to this country by making money rates higher.
GOVERNOR ADOLPH MILLER: I think we are very close to the point where any
further solicitude on our part for the monetary concerns of Europe can be altered. The
Federal Reserve Board last summer, 1927, set out by a policy of open market purchases,
followed in course by reduction on the discount rate at the Reserve Banks, to ease the
credit situation and to cheapen the cost of money. The official reasons for that departure
in credit policy were that it would help to stabilize international exchange and stimulate
the exportation of gold.
CHAIRMAN MCFADDEN: Will you tell us briefly how that matter was brought to
the Federal Reserve Board and what were the influences that went into the final
determination?
GOVERNOR ADOLPH MILLER: You are asking a question impossible for me to
answer.
CHAIRMAN MCFADDEN: Perhaps I can clarify it--where did the suggestion come
from that caused this decision of the change of rates last summer?
GOVERNOR ADOLPH MILLER: The three largest central banks in Europe had sent
representatives to this country. There were the Governor of the Bank of England, Mr.
Hjalmar Schacht, and Professor Rist, Deputy Governor of the Bank of France. These
gentlemen were in conference with officials of the Federal Reserve Bank of New York. After
a week or two, they appeared in Washington for the better part of a day. They came down
the evening of one day and were the guests of the Governors of the Federal Reserve Board
the following day, and left that afternoon for New York.
CHAIRMAN MCFADDEN: Were the members of the Board present at this luncheon?
133
GOVERNOR ADOLPH MILLER: Oh, yes, it was given by the Governors of the
Board for the purpose of bringing all of us together.
CHAIRMAN MCFADDEN: Was it a social affair, or were matters of importance
discussed?
GOVERNOR MILLER: I would say it was mainly a social affair. Personally, I
had a long conversation with Dr. Schacht alone before the luncheon, and also one of
considerable length with Professor Rist. After the luncheon I began a conversation with
Mr. Norman, which was joined in by Governor Strong of New York.
CHAIRMAN MCFADDEN: Was that a formal meeting of the Board?
GOVERNOR ADOLPH MILLER: No.
CHAIRMAN MCFADDEN: It was just an informal discussion of the matters they
had been discussing in New York?
GOVERNOR MILLER: I assume so. It was mainly a social occasion. What I said
was mainly in the nature of generalities. The heads of these central banks also spoke in
generalities.
MR. KING: What did they want?
GOVERNOR MILLER: They were very candid in answers to questions. I wanted
to have a talk with Mr. Norman, and we both stayed behind after luncheon, and were joined
by the other foreign representatives and the officials of the New York Reserve Bank. These
gentlemen were all pretty concerned with the way the gold standard was working. They were
therefore desirous of seeing an easy money market in New York and lower rates, which would
deter gold from moving from Europe to this country. That would be very much in the
interest of the international money situation which then existed.
MR. BEEDY: Was there some understanding arrived at between the
representatives of these foreign banks and the Federal Reserve Board or the New York
Federal Reserve Bank?
GOVERNOR MILLER: Yes.
MR. BEEDY: It was not reported formally?
GOVERNOR MILLER: No. Later, there came a meeting of the Open-Market Policy
Committee, the investment policy committee of the Federal Reserve System, by which and to
which certain recommendations were made. My recollection is that about eighty million
dollars worth of securities were purchased in August consistent with this plan.
CHAIRMAN MCFADDEN: Was there any conference between the members of the
Open Market Committee and those bankers from abroad?
GOVERNOR MILLER: They may have met them as individuals, but not as a
committee.
134
MR. KING: How does the Open-Market Committee get its ideas?
GOVERNOR MILLER: They sit around and talk about it. I do not know whose
idea this was. It was distinctly a time in which there was a cooperative spirit at work.
CHAIRMAN MCFADDEN: You have outlined here negotiations of very great
importance.
GOVERNOR MILLER: I should rather say conversations.
CHAIRMAN MCFADDEN: Something of a very definite character took place?
GOVERNOR MILLER: Yes.
CHAIRMAN MCFADDEN: A change of policy on the part of our whole financial
system which has resulted in one of the most unusual situations that has ever confronted
this country financially (the stock market speculation boom of 1927-1929). It seems to me
that a matter of that importance should have been made a matter of record in Washington.
GOVERNOR MILLER: I agree with you.
REPRESENTATIVE STRONG: Would it not have been a good thing if there had
been a direction that those powers given to the Federal Reserve System should be used for
the continued stabilization of the purchasing power of the American dollar rather than be
influenced by the interests of Europe?
GOVERNOR MILLER: I take exception to that term "influence".
Besides, there is no such thing as stabilizing the American dollar without stabilizing
every other gold currency. They are tied together by the gold standard. Other eminent men
who come here are very adroit in knowing how to approach the folk who make up the
personnel of the Federal Reserve Board.
MR. STEAGALL: The visit of these foreign bankers resulted in money being
cheaper in New York?
GOVERNOR MILLER: Yes, exactly.
CHAIRMAN MCFADDEN: I would like to put in the record all who attended that
luncheon in Washington.
GOVERNOR MILLER: In addition to the names I have given you, there was also
present one of the younger men from the Bank of France. I think all members of the Federal
Reserve Board were there. Under Secretary of the Treasury Ogden Mills was there, and the
Assistant Secretary of the Treasury, Mr. Schuneman, also, two or three men from the State
Department and Mr. Warren of the Foreign Department of the Federal Reserve Bank of New
York. Oh yes, Governor Strong was present.
135
CHAIRMAN MCFADDEN: This conference, of course, with all of these foreign
bankers did not just happen. The prominent bankers from Germany, France, and England came
here at whose suggestion?
GOVERNOR MILLER: A situation had been created that was distinctly
embarrassing to London by reason of the impending withdrawal of a certain amount of gold
which had been recovered by France and that had originally been shipped and deposited in
the Bank of England by the French Government as a war credit. There was getting to be some
tension of mind in Europe because France was beginning to put her house in order for a
return to the gold standard. This situation was one which called for some moderating
influence.
MR. KING: Who was the moving spirit who got those people together?
GOVERNOR MILLER: That is a detail with which I am not familiar.
REPRESENTATIVE STRONG: Would it not be fair to say that the fellows who
wanted the gold were the ones who instigated the meeting?
GOVERNOR MILLER: They came over here.
REPRESENTATIVE STRONG: The fact is that they came over here, they had a
meeting, they banqueted, they talked, they got the Federal Reserve Board to lower the
discount rate, and to make the purchases in the open market, and they got the gold.
MR. STEAGALL: Is it true that action stabilized the European currencies
and upset ours?
GOVERNOR MILLER: Yes, that was what it was intended to do.
CHAIRMAN MCFADDEN: Let me call your attention to the recent conference in
Paris at which Mr. Goldenweiser, director of research for the Federal Reserve Board, and
Dr. Burgess, assistant Federal Reserve Agent of the Federal Reserve Bank of New York, were
in consultation with the representatives of the other central banks. Who called the
conference?
GOVERNOR MILLER: My recollection is that it was called by the Bank of
France.
GOVERNOR YOUNG: No, it was the League of Nations who called them
together."
The secret meeting between the Governors of the Federal Reserve Board and
the heads of the European central banks was not called to stabilize anything. It was held
to discuss the best way of getting the gold held in the United States by the System back
to Europe to force the nations of that continent back on the gold standard. The League of
Nations had not yet succeeded in doing that, the objective for which that body was set up
in the first place, because the Senate of the United States
136
had refused to let Woodrow Wilson betray us to an international monetary
authority. It took the Second World War and Franklin D. Roosevelt to do that. Meanwhile,
Europe had to have our gold and the Federal Reserve System gave it to them, five hundred
million dollars worth. The movement of that gold out of the United States caused the
deflation of the stock boom, the end of the business prosperity of the 1920s and the Great
Depression of 1929-31, the worst calamity which has ever befallen this nation. It is
entirely logical to say that the American people suffered that depression as a punishment
for not joining the League of Nations. The bankers knew what would happen when that five
hundred million dollars worth of gold was sent to Europe. They wanted the Depression
because it put the business and finance of the United States in their hands.
The Hearings continue:
MR. BEEDY: "Mr. Ebersole of the Treasury Department concluded his
remarks at the dinner we attended last night by saying that the Federal Reserve System did
not want stabilization and the American businessman did not want it. They want these
fluctuations in prices, not only in securities but in commodities, in trade generally,
because those who are now in control are making their profits out of that very
instability. If control of these people does not come in a legitimate way, there may be an
attempt to produce it by general upheavals such as have characterized society in days gone
by. Revolutions have been promoted by dissatisfaction with existing conditions, the
control being in the hands of the few, and the many paying the bills.
CHAIRMAN MCFADDEN: I have here a letter from a member of the Federal
Reserve Board who was summoned to appear here. I would like to have it put in the record.
It is from Governor Cunningham:
Dear Mr. Chairman:
For the past several weeks I have been confined to my home on account of
illness and am
now preparing to spend a few weeks away from Washington for the purpose of
hastening
convalescence.
Edward H. Cunningham
This is in answer to an invitation extended him to appear before our
Committee. I also have a letter from George Harrison, Deputy Governor of the Federal
Reserve Bank of New York.
My dear Mr. Congressman:
Governor Strong sailed for Europe last week. He had not been at all well since
the first of the
year, and, while he did appear before your Committee last March, it was only
shortly after that
that he suffered a very severe attack of shingles, which has sorely racked his
nerves.
George L. Harrison, May 19, 1928
I also desire to place in the record a statement in the New York Journal
of Commerce, dated May 22, 1928, from Washington:
‘It is stated in well-informed circles here that the chief
topic being taken up by Governor Strong
of the Federal Reserve Bank of New York on his present visit to Paris is the
arrangement of
stabilization credits for France, Rumania, and Yugoslavia. A second vital
question Mr. Strong
will take up is the amount of gold France is to draw from this
country.’"
Further questioning by Chairman McFadden about the strange illness of
Benjamin Strong brought forth the following testimony from Governor Charles S. Hamlin of
the Federal Reserve Board on May 23rd, 1928:
"All I know is that Governor Strong has been very ill, and he has gone
over to Europe primarily,
I understand, as a matter of health. Of course, he knows well the various
offices of the European
central banks and undoubtedly will call on them."
Governor Benjamin Strong died a few weeks after his return from Europe,
without appearing before the Committee.
The purpose of these hearings before the House Committee on Banking and
Currency in 1928 was to investigate the necessity for passing the Strong bill, presented
by Representative Strong (no relation to Benjamin, the international banker), which would
have provided that the Federal Reserve System be empowered to act to stabilize the
purchasing power of the dollar. This had been one of the promises made by Carter Glass and
Woodrow Wilson when they presented the Federal Reserve Act before Congress in 1912, and
such a provision had actually been put in the Act by Senator Robert L. Owen, but Carter
Glass’ House Committee on Banking and Currency had struck it out. The traders and
speculators did not want the dollar to become stable, because they would no longer be able
to make a profit. The citizens of this country had been led to gamble on the stock market
in the 1920s because the traders had created a nationwide condition of instability.
The Strong Bill of 1928 was defeated in Congress.
The financial situation in the United States during the 1920s was
characterized by an inflation of speculative values only. It was a trader-made situation.
Prices of commodities remained low, despite the over-pricing of securities on the
exchange.
The purchasers did not expect their securities to pay dividends. The idea
was to hold them awhile and sell them at a profit. It had to stop somewhere, as Paul
Warburg remarked in March, 1929. Wall Street did not let it stop until the people had put
their savings into these over-priced securities. We had the spectacle of the President of
the United States, Calvin Coolidge, acting as a shill for the stock market operators when
he recommended to the American people that they continue buying on the
138
market, in 1927. There had been uneasiness about the inflated condition of
the market, and the bankers showed their power by getting the President of the United
States, the Secretary of the Treasury, and the Chairman of the Board of Governors of the
Federal Reserve System to issue statements that brokers’ loans were not too high, and
that the condition of the stock market was sound.
Irving Fisher warned us in 1927 that the burden of stabilizing prices all
over the world would soon fall on the United States. One of the results of the Second
World War was the establishment of an International Monetary Fund to do just that.
Professor Gustav Cassel remarked in the same year that:
"The downward movement of prices has not been a spontaneous result of
forces beyond our
control. It is the result of a policy deliberately framed to bring down prices
and give a higher
value to the monetary unit."
The Democratic Party, after passing the Federal Reserve Act and leading us
into the First World War, assumed the role of an opposition party during the 1920s. They
were on the outside of the political fence, and were supported during those lean years by
liberal handouts from Bernard Baruch, according to his biography. How far outside of it
they were and how little chance they had in 1928, is shown by a plank in the official
Democratic Party platform adopted at Houston on June 28, 1928:
"The administration of the Federal Reserve System for the advantage of the
stock-market
speculators should cease. It must be administered for the benefit of farmers,
wage-earners,
merchants, manufacturers, and others engaged in constructive business."
This idealism insured defeat for its protagonist, Al Smith, who was
nominated by Franklin D. Roosevelt. The campaign against Al Smith also was marked by
appeals to religious intolerance, because he was a Catholic. The bankers stirred up
anti-Catholic sentiment all over the country to achieve the election of their World War I
prot�g�, Herbert Hoover.
Instead of being used to promote the financial stability of the country,
as had been promised by Woodrow Wilson when the Act was passed, financial instability has
been steadily promoted by the Federal Reserve Board. An official memorandum issued by the
Board on March 13, 1939, stated that:
"The Board of Governors of the Federal Reserve System opposes any bill
which proposes a stable
price level."
Politically, the Federal Reserve Board was used to advance the election of
the bankers’ candidates during the 1920s. The "Literary Digest" on August
4, 1928, said, on the occasion of the Federal Reserve Board raising the rate to five
percent in a Presidential year:
139
"This reverses the politically desirable cheap money policy
of 1927, and gives smooth conditions
on the stock market. It was attacked by the Peoples’ Lobby of Washington,
D.C. which said that
‘This increase at a time when farmers needed cheap money to finance the
harvesting of their
crops was a direct blow at the farmers, who had begun to get back on their feet
after the
Agricultural Depression of 1920-21.
"The New York World" said on that occasion:
"Criticism of Federal Reserve Board policy by many investors is not based
on its attempt to
deflate the stock market, but on the charge that the Board itself, by last
year’s policy, is
completely responsible for such stock market inflation as exists."
A damning survey of the Federal Reserve System’s first fifteen years
appears in the "North American Review" of May, 1929, by H. Parker Willis,
professional economist who was one of the authors of the Act and First Secretary of the
Board from 1914 until 1920. He expresses complete disillusionment.
"My first talk with President-elect Wilson was in 1912. Our conversation
related entirely to
banking reform. I asked whether he felt confident we could secure the
administration of a
suitable law and how we should get it applied and enforced. He answered:
‘We must rely on
American business idealism.’ He sought for something which could be
trusted to afford
opportunity to American Idealism. It did serve to finance the World War and to
revise American
banking practices. The element of idealism that the President prescribed and
believed we could
get on the principle of noblesse oblige from American bankers and businessmen
was not there.
Since the inauguration of the Federal Reserve Act we have suffered one of the
most serious
financial depressions and revolutions ever known in our history, that of
1920-21. We have seen
our agriculture pass through a long period of suffering and even of revolution,
during which one
million farmers left their farms, due to difficulties with the price of land
and the odd status of
credit conditions. We have suffered the most extensive era of bank failures
ever known in this
country. Forty-five hundred banks have closed their doors since the Reserve
System began
functioning. In some Western towns there have been times when all banks in that
community
failed, and given banks have failed over and over again. There has been little
difference in
liability to failure between members and non-members of the Federal Reserve
System.
"Wilson’s choice of the first members of the Federal Reserve Board
was not especially happy.
They represented a composite group chosen for the express purpose of placating
this, that, or the
other big interest. It was not strange that appointees used their places to pay
debts. When the
Board was considering a resolution to the effect that future members of the
reserve system should
be appointed solely on merit, because of the demonstrated incompetence of some
of their number.
Comptroller John Skelton Williams moved to strike out the word
‘solely’ and in this he was
sustained by the Board. The inclusion of certain elements (Warburg,
140
Strauss, etc.) in the Board gave an opportunity for catering to special
interests that was to prove
disastrous later on.
"President Wilson erred, as he often erred, in supposing that the holding
of an important office
would transform an incumbent and revivify his patriotism. The Reserve Board
reached the low
ebb of the Wilson period with the appointment of a member who was chosen for
his ability to get
delegates for a Democratic candidate for the Presidency. However, this level
was not the dregs
reached under President Harding. He appointed an old crony, D.R. Crissinger, as
Governor of the
Board, and named several other super-serviceable politicians to other places.
Before his death he
had done his utmost to debauch the whole undertaking. The System has gone
steadily downhill
ever since.
"Reserve Banks had hardly assumed their first form when it became apparent
that local bankers
had sought to use them as a means of taking care of ‘favorite sons’,
that is, persons who had by
common consent become a kind of general charge upon the banking community, or
inefficients
of various kinds. When reserve directors were to be chosen, the country bankers
often refused to
vote, or, when they voted, cast their ballots as directed by city
correspondents. In these
circumstances popular or democratic control of reserve banks was out of the
question. Reasonable
efficiency might have been secured if honest men, recognizing their public
duty, had assumed
power. If such men existed, they did not get on the Federal Reserve Board. In
one reserve bank
today the chief management is in the hands of a man who never did a day’s
actual banking in his
life, while in another reserve institution both Governor and Chairman are the
former heads of now defunct banks. They naturally have a high failure record in their
district. In a majority of districts the standard of performance as judged by good banking
standards is disgracefully low among reserve executive officials. The policy of the
Federal Reserve Bank of Philadelphia is known in the System as the ‘Friends and
Relatives Banks.’
"It was while making war profits in considerable amounts that someone
conceived the idea of
using the profits to provide themselves with phenomenally costly buildings.
Today the Reserve
Banks must keep a full billion dollars of their money constantly at work merely
to pay their own
expenses in normal times.
"The best illustration of what the System has done and not done is offered
by the experience
which the country was having with speculation, in May, 1929. Three years prior
to that, the
present bull market was just getting under way. In the autumn of 1926 a group
of bankers, among
them one of world famous name, were sitting at a table in a Washington hotel.
One of them
raised the question whether the low discount rates of the System were not
likely to encourage
speculation.
"‘Yes’, replied the famous banker, ‘they will, but that
cannot be helped. It is the price we must
pay for helping Europe.’
"It may well be questioned whether the encouragement of speculation by the
Board has been the
price paid for helping Europe or whether
141
it is the price paid to induce a certain class of financiers to
help Europe, but in either case
European conditions should not have had anything to do with the Board’s
discount policy. The
fact of the matter is that the Federal Reserve Banks do not come into contact
with the community.
"The ‘small man’ from Maine to Texas has gradually been led to
invest his savings in the stock
market, with the result that the rising tide of speculation, transacted at a
higher and higher rate
of speed, has swept over the legitimate business of the country.
"In March, 1928, Roy A. Young, Governor of the Board, was called before a
Senate committee.
‘Do you think the brokers’ loans are too high?", he was asked.
"‘I am not prepared to say whether brokers’ loans are too high
or too low,’ he replied, ‘but I am
sure they are safely and conservatively made.’
"Secretary of the Treasury Mellon in a formal statement assured the
country that they were not
too high, and Coolidge, using material supplied him by the Federal Reserve
Board, made a plain
statement to the country that they were not too high. The Federal Reserve
Board, charged with the duty of protecting the interests of the average man, thus did its
utmost to assure the average man that he should feel no alarm about his savings. Yet the
Federal Reserve Board issued on February 2, 1929, a letter addressed to the Reserve Bank
Directors cautioning them against grave danger of further speculation.
"What could be expected from a group of men such as composed the Board, a
set of men who
were solely interested in standing from under when there was any danger of
friction, displaying a
bovine and canine appetite for credit and praise, while eager only to
‘stand in’ with the ‘big men’
whom they know as the masters of American finance and banking?"
H. Parker Willis omitted any reference to Lord Montague Norman and the
machinations of the Bank of England which were about to result in the Crash of 1929 and
the Great Depression.
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CHAPTER TWELVE
The Great Depression
R.G. Hawtrey, the English economist, said, in the March, 1926 American
Economic Review:
"When external investment outstrips the supply of general
savings the investment market must
carry the excess with money borrowed from the banks. A remedy is control of
credit by a rise in
bank rate."
The Federal Reserve Board applied this control of credit, but not in 1926,
nor as a remedial measure. It was not applied until 1929, and then the rate was raised as
a punitive measure, to freeze out everybody but the big trusts.
Professor Cassel, in the Quarterly Journal of Economics, August 1928,
wrote that:
"The fact that a central bank fails to raise its bank rate in accordance
with the actual situation of
the capital market very much increases the strength of the cyclical movement of
trade, with all its
pernicious effects on social economy. A rational regulation of the bank rate
lies in our hands, and
may be accomplished only if we perceive its importance and decide to go in for
such a policy.
With a bank rate regulated on these lines the conditions for the development of
trade cycles
would be radically altered, and indeed, our familiar trade cycles would be a
thing of the past."
This is the most authoritative premise yet made relating that our business
depressions are artificially precipitated. The occurrence of the Panic of 1907, the
Agricultural Depression of 1920, and the Great Depression of 1929, all three in good crop
years and in periods of national prosperity, suggests that premise is not guesswork. Lord
Maynard Keynes pointed out that most theories of the business cycle failed to relate their
analysis adequately to the money mechanism. Any survey or study of a depression which
failed to list such factors as gold movements and pressures on foreign exchange would be
worthless, yet American economists have always dodged this issue.
The League of Nations had achieved its goal of getting the nations of
Europe back on the gold standard by 1928, but three-fourths of the world’s gold was
in France and the United States. The problem was how to get that gold to countries which
needed it as a basis for money and credit. The answer was action by the Federal Reserve
System.
143
Following the secret meeting of the Federal Reserve Board and the heads of
the foreign central banks in 1927, the Federal Reserve Banks in a few months doubled their
holdings of Government securities and acceptances, which resulted in the exportation of
five hundred million dollars in gold in that year. The System’s market activities
forced the rates of call money down on the Stock Exchange, and forced gold out of the
country. Foreigners also took this opportunity to purchase heavily in Government
securities because of the low call money rate.
"The agreement between the Bank of England and the
Washington Federal Reserve authorities
many months ago was that we would force the export of 725 million of gold by
reducing the bank
rates here, thus helping the stabilization of France and Europe and putting
France on a gold
basis."89 (April 20, 1928)
On February 6, 1929, Mr. Montagu Norman, Governor of the Bank of England,
came to Washington and had a conference with Andrew Mellon, Secretary of the Treasury.
Immediately after that mysterious visit, the Federal Reserve Board abruptly changed its
policy and pursued a high discount rate policy, abandoning the cheap money policy which it
had inaugurated in 1927 after Mr. Norman’s other visit. The stock market crash and
the deflation of the American people’s financial structure was scheduled to take
place in March. To get the ball rolling, Paul Warburg gave the official warning to the
traders to get out of the market. In his annual report to the stockholders of his
International Acceptance Bank, in March, 1929, Mr. Warburg said:
"If the orgies of unrestrained speculation are permitted to
spread, the ultimate collapse is certain
not only to affect the speculators themselves, but to bring about a general
depression involving
the entire country."
During three years of "unrestrained speculation", Mr. Warburg
had not seen fit to make any remarks about the condition of the Stock Exchange. A friendly
organ, The New York Times, not only gave the report two columns on its editorial page, but
editorially commented on the wisdom and profundity of Mr. Warburg’s observations. Mr.
Warburg’s concern was genuine, for the stock market bubble had gone much farther than
it had been intended to go, and the bankers feared the consequences if the people realized
what was going on. When this report in The New York Times started a sudden wave of selling
on the Exchange, the bankers grew panicky, and it was decided to ease the market somewhat.
Accordingly, Warburg’s National City Bank rushed twenty-five million dollars in cash
to the call money market, and postponed the day of the crash.
The revelation of the Federal Reserve Board’s final decision to
trigger the Crash of 1929 appears, amazingly enough, in The New York Times. On April 20,
1929, the Times headlined, "Federal Advisory Council Mystery
__________________________
89 Clarence W. Barron, They Told Barron, Harpers, New York, 1930, p. 353
144
Meeting in Washington. Resolutions were adopted by the council and
transmitted to the board, but their purpose was closely guarded. An atmosphere of deep
mystery was thrown about the proceedings both by the board and the council. Every effort
was made to guard the proceedings of this extraordinary session. Evasive replies were
given to newspaper correspondents."
Only the innermost council of "The London Connection" knew that
it had been decided at this "mystery meeting" to bring down the curtain on the
greatest speculative boom in American history. Those in the know began to sell off all
speculative stocks and put their money in government bonds. Those who were not privy to
this secret information, and they included some of the wealthiest men in America,
continued to hold their speculative stocks and lost everything they had.
In FDR, My Exploited Father-in-Law, Col. Curtis B. Dall, who was a broker
on Wall Street at that time, writes of the Crash, "Actually it was the calculated
‘shearing’ of the public by the World Money-Powers, triggered by the planned
sudden shortage of the supply of call money in the New York money market."90
Overnight, the Federal Reserve System had raised the call rate to twenty percent. Unable
to meet this rate, the speculators’ only alternative was to jump out of windows.
The New York Federal Reserve Bank rate, which dictated the national
interest rate, went to six percent on November 1, 1929. After the investors had been
bankrupted, it dropped to one and one-half percent on May 8, 1931. Congressman Wright
Patman in "A Primer On Money", says that the money supply decreased by eight
billion dollars from 1929 to 1933, causing 11,630 banks of the total of 26,401 in the
United States to go bankrupt and close their doors.
The Federal Reserve Board had already warned the stockholders of the
Federal Reserve Banks to get out of the Market, on February 6, 1929, but it had not
bothered to say anything to the rest of the people. Nobody knew what was going on except
the Wall Street bankers who were running the show. Gold movements were completely
unreliable. The Quarterly Journal of Economics noted that:
"The question has been raised, not only in this country,
but in several European
countries, as to whether customs statistics record with accuracy the movements
of
precious metals, and, when investigation has been made, confidence in such
figures has been weakened rather than strengthened. Any movement between
France and England, for instance, should be recorded in each country, but such
comparison shows an average yearly discrepancy of fifty million francs for
France
and eighty-five million francs for England. These enormous discrepancies are
not
accounted for."
The Right Honorable Reginald McKenna stated that:
__________________________
90 Col. Curtis B. Dall, F.D.R., My Exploited Father-in-Law, Liberty Lobby,
Wash., D.C. 1970
145
"Study of the relations between changes in gold stock and movement in
price levels shows what
should be very obvious, but is by no means recognized, that the gold standard
is in no sense
automatic in operation. The gold standard can be, and is, usefully managed and
controlled for the
benefit of a small group of international traders."
In August 1929, the Federal Reserve Board raised the rate to six percent.
The Bank of England in the next month raised its rate from five and one-half percent to
six and one-half percent. Dr. Friday in the September, 1929, issue of Review of Reviews,
could find no reason for the Board’s action:
"The Federal Reserve statement for August 7, 1929, shows
that signs of inadequacy for autumn
requirements do not exist. Gold resources are considerably more than the
previous year, and gold
continues to move in, to the financial embarrassment of Germany and England.
The reasons for
the Board’s action must be sought elsewhere. The public has been given
only the hint that ‘This
problem has presented difficulties because of certain peculiar
conditions’. Every reason which
Governor Young advanced for lowering the bank rate last year exists now.
Increasing the rate
means that not only is there danger of drawing gold from abroad, but imports of
the yellow metal
have been in progress for the last four months. To do anything to accentuate
this is to take the
responsibility for bringing on a world-wide credit deflation."
Thus we find that not only was the Federal Reserve System responsible for
the First World War, which it made possible by enabling the United States to finance the
Allies, but its policies brought on the world-wide depression of 1929-31. Governor Adolph
C. Miller stated at the Senate Investigation of the Federal Reserve Board in 1931 that:
"If we had had no Federal Reserve System, I do not think we
would have had as bad a speculative
situation as we had, to begin with."
Carter Glass replied, "You have made it clear that the Federal
Reserve Board provided a terrific credit expansion by these open market
transactions."
Emmanuel Goldenweiser said, "In 1928-29 the Federal Board was engaged
in an attempt to restrain the rapid increase in security loans and in stock market
speculation. The continuity of this policy of restraint, however, was interrupted by
reduction in bill rates in the autumn of 1928 and the summer of 1929."
Both J.P. Morgan and Kuhn, Loeb Co. had "preferred lists" of men
to whom they sent advance announcements of profitable stocks. The men on these preferred
lists were allowed to purchase these stocks at cost, that is, anywhere from 2 to 15 points
a share less than they were sold to the public. The men on these lists were fellow
bankers, prominent industrialists, powerful city politicians, national Committeemen of the
Republican and Democratic Parties, and rulers of foreign countries. The men on these lists
were notified of the coming crash, and sold all but so-called gilt-edged stocks, General
Motors, Dupont, etc. The prices on these stocks also sank to record lows, but they came up
soon afterwards. How the big bankers operated in
146
1929 is revealed by a Newsweek story on May 30, 1936, when a Roosevelt
appointee, Ralph W. Morrison, resigned from the Federal Reserve Board:
"The consensus of opinion is that the Federal Reserve Board
has lost an able man. He sold his
Texas utilities stock to Insull for ten million dollars, and in 1929 called a
meeting and ordered
his banks to close out all security loans by September 1. As a result, they
rode through the
depression with flying colors."
Predictably enough, all of the big bankers rode through the depression
"with flying colors." The people who suffered were the workers and farmers who
had invested their money in get-rich stocks, after the President of the United States,
Calvin Coolidge, and the Secretary of the Treasury, Andrew Mellon, had persuaded them to
do it.
There had been some warnings of the approaching crash in England, which
American newspapers never saw. The London Statist on May 25, 1929 said:
"The banking authorities in the United States apparently
want a business panic to curb
speculation."
The London Economist on May 11, 1929, said:
"The events of the past year have seen the beginnings of a
new technique, which, if maintained
and developed, may succeed in ‘rationing the speculator without injuring
the trader.’"
Governor Charles S. Hamlin quoted this statement at the Senate hearings in
1931 and said, in corroboration of it:
"That was the feeling of certain members of the Board, to
remove Federal Reserve credit from the
speculator without injuring the trader."
Governor Hamlin did not bother to point out that the
"speculators" he was out to break were the school-teachers and small town
merchants who had put their savings into the stock market, or that the "traders"
he was trying to protect were the big Wall Street operators, Bernard Baruch and Paul
Warburg.
When the Federal Reserve Bank of New York raised its rate to six percent
on August 9, 1929, market conditions began which culminated in tremendous selling orders
from October 24 into November, which wiped out a hundred and sixty billion dollars worth
of security values. That was a hundred and sixty billions which the American citizens had
one month and did not have the next. Some idea of the calamity may be had if we remember
that our enormous outlay of money and goods in the Second World War amounted to not much
more than two hundred billions of dollars, and a great deal of that remained as negotiable
securities in the national debt. The stock market crash is the greatest misfortune which
the United States has ever suffered.
The Academy of Political Science of Columbia University in its annual
meeting in January, 1930, held a post-mortem on the Crash of 1929. Vice-
147
President Paul Warburg was to have presided, and Director Ogden Mills was
to have played an important part in the discussion. However, these two gentlemen did not
show up. Professor Oliver M.W. Sprague of Harvard University remarked of the crash:
"We have here a beautiful laboratory case of the stock
market’s dropping apparently from its own
weight."
It was pointed out that there was no exhaustion of credit, as in 1893, nor
any currency famine, as in the Panic of 1907, when clearing-house certificates were
resorted to, nor a collapse of commodity prices, as in 1920. What then, had caused the
crash? The people had purchased stocks at high prices and expected the prices to continue
to rise. The prices had to come down, and they did. It was obvious to the economists and
bankers gathered over their brandy and cigars at the Hotel Astor that the people were at
fault. Certainly the people had made a mistake in buying over-priced securities, but they
had been talked into it by every leading citizen from the President of the United States
on down. Every magazine of national circulation, every big newspaper, and every prominent
banker, economist, and politician, had joined in the big confidence game of urging people
to buy those over-priced securities. When the Federal Reserve Bank of New York raised its
rate to six percent, in August 1929, people began to get out of the market, and it turned
into a panic which drove the prices of securities down far below their natural levels. As
in previous panics, this enabled both Wall Street and foreign operators in the know to
pick up "blue-chip" and gilt-edged" securities for a fraction of their real
value.
The Crash of 1929 also saw the formation of giant holding companies which
picked up these cheap bonds and securities, such as the Marine Midland Corporation, the
Lehman Corporation, and the Equity Corporation. In 1929 J.P. Morgan Company organized the
giant food trust, Standard Brands. There was an unequaled opportunity for trust operators
to enlarge and consolidate their holdings.
Emmanuel Goldenweiser, director of research for the Federal Reserve
System, said, in 1947:
"It is clear in retrospect that the Board should have ignored the
speculative expansion and
allowed it to collapse of its own weight."
This admission of error eighteen years after the event was small comfort
to the people who lost their savings in the Crash.
The Wall Street Crash of 1929 was the beginning of a world-wide credit
deflation which lasted through 1932, and from which the Western democracies did not
recover until they began to rearm for the Second World War. During this depression, the
trust operators achieved further control by their backing of three international
swindlers, The Van Sweringen brothers, Samuel Insull, and Ivar Kreuger. These men
pyramided billions of dollars worth of securities to fantastic heights. The bankers who
promoted
148
them and floated their stock issue could have stopped them at any time, by
calling loans of less than a million dollars, but they let these men go on until they had
incorporated many industrial and financial properties into holding companies, which the
banks then took over for nothing. Insull piled up public utility holdings throughout the
Middle West, which the banks got for a fraction of their worth. Ivar Kreuger was backed by
Lee Higginson Company, supposedly one of the nation’s most reputable banking houses.
The Saturday Evening Post called him "more than a financial titan", and the
English review Fortnightly said, in an article written December 1931, under the title,
"A Chapter in Constructive Finance": "It is as a financial irrigator that
Kreuger has become of such vital importance to Europe."*
"Financial irrigator" we may remember, was the title bestowed
upon Jacob Schiff by Newsweek Magazine, when it described how Schiff had bought up
American railroads with Rothschild’s money.
The New Republic remarked on January 25th, 1933, when it commented on the
fact that Lee Higginson Company had handled Kreuger and Toll Securities on the American
market:
"Three-quarters of a billion dollars was made away with.
Who was able to dictate to the French
police to keep secret the news of this extremely important suicide for some
hours, during which
somebody sold Kreuger securities in large amounts, thus getting out of the
market before the
debacle?"
The Federal Reserve Board could have checked the enormous credit expansion
of Insull and Kreuger by investigating the security on which their loans were being made,
but the Governors never made any examination of the activities of these men.
The modern bank with the credit facilities it affords, gives an
opportunity which had not previously existed for such operators as Kreuger to make an
appearance of abundant capital by the aid of borrowed capital. This enables the speculator
to buy securities with securities. The only limit to the amount he can corner is the
amount to which the banks will back him, and, if a speculator is being promoted by a
reputable banking house, as Kreuger was promoted by Lee Higginson Company, the only way he
could be stopped would be by an investigation of his actual financial resources, which in
Kreuger’s case would have proved to be nil.
The leader of the American people during the Crash of 1929 and the
subsequent depression was Herbert Hoover. After the first break of the
__________________________
* NOTE: Ivar Kreuger, we may recall, was occasionally the personal guest of his
old friend, President Herbert Hoover, at the White House. Hoover seems to have maintained
a cordial relationship with many of the most prominent swindlers of the twentieth century,
including his partner, Emile Francqui. The receivership of the billion dollar Kreuger
Fraud was handled by Samuel Untermeyer, former counsel for Pujo Committee hearings.
149
market (the five billion dollars in security values which disappeared on
October 24, 1929) President Hoover said:
"The fundamental business of the country, that is, production and
distribution of commodities, is
on a sound and prosperous basis."
His Secretary of the Treasury, Andrew Mellon, stated on December 25, 1929,
that:
"The Government’s business is in sound
condition."
His own business, the Aluminum Company of America, apparently was not
doing so well, for he had reduced the wages of all employees by ten percent.
The New York Times reported on April 7, 1931, "Montagu Norman,
Governor of the Bank of England, conferred with the Federal Reserve Board here today.
Mellon, Meyer, and George L. Harrison, Governor of the Federal Reserve Bank of New York,
were present."
The London Connection had sent Norman over this time to ensure that the
Great Depression was proceeding according to schedule. Congressman Louis McFadden had
complained, as reported in The New York Times, July 4, 1930, "Commodity prices are
being reduced to 1913 levels. Wages are being reduced by the labor surplus of four million
unemployed. The Morgan control of the Federal Reserve System is exercised through control
of the Federal Reserve Bank of New York, the mediocre representation and acquiescence of
the Federal Reserve Board in Washington." As the depression deepened, the
trust’s lock on the American economy strengthened, but no finger was pointed at the
parties who were controlling the system.
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CHAPTER THIRTEEN
The 1930’s
In 1930 Herbert Hoover appointed to the Federal Reserve Board an old
friend from World War I days, Eugene Meyer, Jr., who had a long record of public service
dating from 1915, when he went into partnership with Bernard Baruch in the Alaska-Juneau
Gold Mining Company. Meyer had been a Special Advisor to the War Industries Board on
Non-Ferrous Metals (gold, silver, etc.); Special Assistant to the Secretary of War on
aircraft production; in 1917 he was appointed to the National Committee on War Savings,
and was made Chairman of the War Finance Corporation from 1918-1926. He then was appointed
chairman of the Federal Farm Loan Board from 1927-29. Hoover put him on the Federal
Reserve Board in 1930, and Franklin D. Roosevelt created the Reconstruction Bank for
Reconstruction and Development in 1946. Meyer must have been a man of exceptional ability
to hold so many important posts. However, there were some Senators who did not believe he
should hold any Government office, because of his family background as an international
gold dealer and his mysterious operations in billions of dollars of Government securities
in the First World War. Consequently, the Senate held Hearings to determine whether Meyer
ought to be on the Federal Reserve Board.
At these Hearings, Representative Louis T. McFadden, Chairman of the House
Banking and Currency Committee, said:
"Eugene Meyer, Jr. has had his own crowd with him in the government since
he started in 1917.
His War Finance Corporation personnel took over the Federal Farm Loan System,
and almost
immediately afterwards, the Kansas City Join Stock Land Bank and the Ohio Joint
Stock Land
Bank failed."
REPRESENTATIVE RAINEY: Mr. Meyer, when he nominally resigned as head of
the Federal Farm Loan Board, did not really cease his activities there. He left behind him
an able body of wreckers. They are continuing his policies and consulting with him. Before
his appointment, he was frequently in consultation with Assistant Secretary of the
Treasury Dewey. Just before his appointment, the Chicago Joint Land Stock Bank, the Dallas
Joint Stock Land Bank, the Kansas City Joint Land Stock Bank, and the Des Moines Land Bank
were all functioning. Their bonds
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were selling at par. The then farm commissioner had an understanding with
Secretary Dewey that nothing would be done without the consent and approval of the Federal
Farm Loan Board. A few days afterwards, United States Marshals, with pistols strapped at
their sides, and sometimes with drawn pistols, entered these five banks and demanded that
the banks be turned over to them. Word went out all over the United States, through the
newspapers, as to what had happened, and these banks were ruined. This led to the breach
with the old Federal Farm Loan Board, and to the resignation of three of its members, and
the appointment of Mr. Meyer to be head of that Board.
SENATOR CAREY: Who authorized the marshals to take over the banks?
REP. RAINEY: Assistant Secretary of the Treasury Dewey. That started the
ruin of all these rural banks, and the Gianninis bought them up in great numbers."
World’s Work of February 1931, said:
"When the World War began for us in 1917, Mr. Eugene Meyer,
Jr. was among the first to be
called to Washington. In April, 1918, President Wilson named him Director of
the War Finance
Corporation. This corporation loaned out 700 million dollars to banking and
financial
institutions."
The Senate Hearings on Eugene Meyer, Jr. continued:
REPRESENTATIVE MCFADDEN: "Lazard Freres, the international banking
house of New York and Paris, was a Meyer family banking house. It frequently figures in
imports and exports of gold, and one of the important functions of the Federal Reserve
System has to do with gold movements in the maintenance of its own operations. In looking
over the minutes of the hearing we had last Thursday, Senator Fletcher had asked Mr.
Meyer, ‘Have you any connections with international banking?’ Mr. Meyer had
answered, ‘Me? Not personally.’ This last question and answer do not appear in
the stenographic transcript. Senator Fletcher remembers asking the question and the
answer. It is an odd omission.
SENATOR BROOKHART: I understand that Mr. Meyer looked it over for
corrections.
REPRESENTATIVE MCFADDEN: Mr. Meyer is a brother-in-law of George
Blumenthal, a member of the firm of J.P. Morgan Company, which represents the Rothschild
interests. He also is a liaison officer between the French Government and J.P. Morgan.
Edmund Platt, who had eight years to go on a term of ten years as Governor of the Federal
Reserve Board, resigned to make room for Mr. Meyer. Platt was given a Vice-Presidency of
Marine Midland Corporation by Meyer’s brother-in-law Alfred A. Cook. Eugene Meyer,
Jr. as head of the War Finance Corporation, engaged in the placing of two billion dollars
in Government
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securities, placed many of those orders first with the banking house now
located at 14 Wall Street in the name of Eugene Meyer, Jr. Mr. Meyer is now a large
stockholder in the Allied Chemical Corporation. I call your attention to House Report No.
1635, 68th Congress, 2nd Session, which reveals that at least twenty-four million dollars
in bonds were duplicated. Ten billion dollars worth of bonds surreptitiously destroyed.
Our committee on Banking and Currency found the records of the War Finance Corporation
under Eugene Meyer, Jr. extremely faulty. While the books were being brought before our
committee by the people who were custodians of them and taken back to the Treasury at
night, the committee discovered that alterations were being made in the permanent
records."
The record of public service did not prevent Eugene Meyer, Jr. from
continuing to serve the American people on the Federal Reserve Board, as Chairman of the
Reconstruction Finance Corporation, and as head of the International Bank.
President Rand, of the Marine Midland Corporation, questioned about his
sudden desire for the services of Edmund Platt, said:
"We pay Mr. Platt $22,000 a year, and we took his secretary over, of
course." This meant another five thousand a year.
Senator Brookhart showed that Eugene Meyer, Jr. administered the Federal
Farm Loan Board against the interests of the American farmer, saying:
"Mr. Meyer never loaned more than 180 million dollars of
the capital stock of 500 million dollars
of the farm loan board, so that in aiding the farmers he was not even able to
use half of the
capital."
MR. MEYER: Senator Kenyon wrote me a letter which showed that I cooperated
with great advantage to the people of Iowa.
SENATOR BROOKHART: "You went out and took the opposite side from the
Wall Street crowd. They always send somebody out to do that. I have not yet discovered in
your statements much interest in making loans to the farmers at large, or any real effort
to help their condition. In your two years as head of the Federal Farm Loan Board you made
very few loans compared to your capital. You loaned only one-eighth of the demand,
according to your own statement."
Despite the damning evidence uncovered at these Senate Hearings, Eugene
Meyer, Jr. remained on the Federal Reserve Board.
During this tragic period, chairman Louis McFadden of the House Banking
and Currency Committee continued his lone crusade against the "London
Connection" which had wrecked the nation. On June 10, 1932, McFadden addressed the
House of Representatives:
"Some people think the Federal Reserve banks are United
States Government institutions. They
are not government institutions. They are private credit monopolies which prey
upon the people
of the United
153
States for the benefit of themselves and their foreign
customers. The Federal Reserve banks are
the agents of the foreign central banks. Henry Ford has said, ‘The one aim
of these financiers is
world control by the creation of inextinguishable debts.’ The truth is the
Federal Reserve Board
has usurped the Government of the United States by the arrogant credit monopoly
which operates
the Federal Reserve Board and the Federal Reserve Banks."
On January 13, 1932, McFadden had introduced a resolution indicting the
Federal Reserve Board of Governors for "Criminal Conspiracy":
"Whereas I charge them, jointly and severally, with the crime of having
treasonably conspired
and acted against the peace and security of the United States and having
treasonably conspired to
destroy constitutional government in the United States. Resolved, that the
Committee on the
Judiciary is authorized and directed as a whole or by subcommittee to
investigate the official
conduct of the Federal Reserve Board and agents to determine whether, in the
opinion of the said
committee, they have been guilty of any high crime or misdemeanour which in the
contemplation
of the Constitution requires the interposition of the Constitutional powers of
the House."
No action was taken on this Resolution. McFadden came back on December 13,
1932 with a motion to impeach President Herbert Hoover. Only five Congressmen stood with
him on this, and the resolution failed. The Republican majority leader of the House
remarked, "Louis T. McFadden is now politically dead."
On May 23, 1933, McFadden introduced House Resolution No. 158, Articles of
Impeachment against the Secretary of the Treasury, two Assistant Secretaries of the
Treasury, the Federal Reserve Board of Governors, and officers and directors of the
Federal Reserve Banks for their guilt and collusion in causing the Great Depression.
"I charge them with having unlawfully taken over 80 billion dollars from the United
States Government in the year 1928, the said unlawful taking consisting of the unlawful
recreation of claims against the United States Treasury to the extent of over 80 billion
dollars in the year 1928, and in each year subsequent, and by having robbed the United
States Government and the people of the United States by their theft and sale of the gold
reserve of the United States."
The Resolution never reached the floor. A whispering campaign that
McFadden was insane swept Washington, and in the next Congressional elections, he was
overwhelmingly defeated by thousands of dollars poured into his home district of Canton,
Pennsylvania.
In 1932, the American people elected Franklin D. Roosevelt President of
the United States. This was hailed as the freeing of the American people from the evil
influence which had brought on the Great Depres-
154
sion, the ending of Wall Street domination, and the disappearance of the
banker from Washington.
Roosevelt owed his political career to a fortuitous circumstance. As
Assistant Secretary of the Navy during World War I, because of old school ties, he had
intervened to prevent prosecution of a large ring of homosexuals in the Navy which
included several Groton and Harvard chums. This brought him to the favorable appreciation
of a wealthy international homosexual set which travelled back and forth between New York
and Paris, and which was presided over by Bessie Marbury, of a very old and prominent New
York family. Bessie’s "wife", who lived with her for a number of years, was
Elsie de Wolfe, later Lady Mendl in a "mariage de convenance", the arbiter of
the international set. They recruited J.P. Morgan’s youngest daughter, Anne Morgan,
into their circle, and used her fortune to restore the Villa Trianon in Paris, which
became their headquarters. During World War I, it was used as a hospital. Bessie Marbury
expected to be awarded the Legion of Honor by the French Government as a reward, but J.P.
Morgan, Jr., who despised her for corrupting his youngest sister, requested the French
Government to withhold the award, which they did. Smarting from this rebuff, Bessie
Marbury threw herself into politics, and became a power in the Democratic National Party.
She had also recruited Eleanor Roosevelt into her circle, and, during a visit to Hyde
Park, Eleanor confided that she was desperate to find something for "poor
Franklin" to do, as he was confined to a wheelchair, and was very depressed.
"I know what we’ll do," exclaimed Bessie, "We’ll
run him for Governor of New York!" Because of her power, she succeeded in this goal,
and Roosevelt later became President.
One of the men Roosevelt brought down from New York with him as a Special
Advisor to the Treasury was Earl Bailie of J & W Seligman Company, who had become
notorious as the man who handed the $415,000 bribe to Juan Leguia, son of the President of
Peru, in order to get the President to accept a loan from J & W Seligman Company.
There was a great deal of criticism of this appointment, and Mr. Roosevelt, in keeping
with his new role as defender of the people, sent Earl Bailie back to @bringing in New
York.
Franklin D. Roosevelt himself was an international banker of ill repute,
having floated large issues of foreign bonds in this country in the 1920s. These bonds
defaulted, and our citizens lost millions of dollars, but they still wanted Mr. Roosevelt
as President. The New York Directory of Directors lists Mr. Roosevelt as President and
Director of United European Investors, Ltd., in 1923 and 1924, which floated many millions
of German marks in this country, all of which defaulted. Poor’s Directory of
Directors lists him as a director of The International Germanic Trust Company in 1928.
Franklin D. Roosevelt was also an advisor to the
155
Federal International Banking Corporation, an Anglo-American outfit
dealing in foreign securities in the United States.
Roosevelt’s law firm of Roosevelt and O’Connor during the 1920s
represented many international corporations. His law partner, Basil O’Connor, was a
director in the following corporations:
Cuban-American Manganese Corporation, Venezuela-Mexican Oil Corporation,
West Indies Sugar Corporation, American Reserve Insurance Corporation, Warm Springs
Foundation. He was director in other corporations, and later head of the American Red
Cross.
When Franklin D. Roosevelt took office as President of the United States,
he appointed as Director of the Budget James Paul Warburg, son of Paul Warburg, and Vice
President of the International Acceptance Bank and other corporations. Roosevelt appointed
as Secretary of the Treasury W.H. Woodin, one of the biggest industrialists in the
country, Director of the American Car Foundry Company and numerous other locomotive works,
Remington Arms, The Cuba Company, Consolidated Cuba Railroads, and other big corporations.
Woodin was later replaced by Henry Morgenthau, Jr., son of the Harlem real estate operator
who had helped put Woodrow Wilson in the White House. With such a crew as this,
Roosevelt’s promises of radical social changes showed little likelihood of
fulfillment. One of the first things he did was to declare a bankers’ moratorium, to
help the bankers get their records in order.
World’s Work says:
"Congress has left Charles G. Dawes and Eugene Meyer, Jr.
free to appraise, by their own
methods, the security which prospective borrowers of the two billion dollar
capital may offer."
Roosevelt also set up the Securities Exchange Commission, to see to it
that no new faces got into the Wall Street gang, which caused the following colloquy in
Congress:
REPRESENTATIVE WOLCOTT: At hearings before this committee in 1933, the
economists showed us charts which proved beyond all doubt that the dollar value
commodities followed the price level of gold. It did not, did it?
LEON HENDERSON: No.
REPRESENTATIVE GIFFORD: Wasn’t Joe Kennedy put in [as Chairman of the
Securities Exchange Committee] by President Roosevelt because he was sympathetic with big
business?
LEON HENDERSON: I think so.
Paul Einzig pointed out in 1935 that:
156
"President Roosevelt was the first to declare himself
openly in favor of a monetary policy aiming
at a deliberately engineered rise in prices. In a negative sense his policy was
successful. Between
1933 and 1935 he succeeded in reducing private indebtedness, but this was done
at the cost of
increasing public indebtedness."
In other words, he eased the burden of debts off of the rich onto the
poor, since the rich are few and the poor many.
Senator Robert L. Owen, testifying before the House Committee on Banking
and Currency in 1938, said:
"I wrote into the bill which was introduced by me in the
Senate on June 26, 1913, a provision
that the powers of the System should be employed to promote a stable price
level, which meant a
dollar of stable purchasing, debt-paying power. It was stricken out. The
powerful money interests
got control of the Federal Reserve Board through Mr. Paul Warburg, Mr. Albert
Strauss, and Mr.
Adolph C. Miller and they were able to have that secret meeting of May 18,
1920, and bring
about a contraction of credit so violent it threw five million people out of
employment. In 1920
that Reserve Board deliberately caused the Panic of 1921. The same people,
unrestrained in the
stock market, expanding credit to a great excess between 1926 and 1929, raised
the price of
stocks to a fantastic point where they could not possibly earn dividends, and
when the people
realized this, they tried to get out, resulting in the Crash of October 24,
1929."
Senator Owen did not go into the question of whether the Federal Reserve
Board could be held responsible to the public. Actually, they cannot. They are public
officials who are appointed by the President, but their salaries are paid by the private
stockholders of the Federal Reserve Banks.
Governor W.P.G. Harding of the Federal Reserve Board testified in 1921
that:
"The Federal Reserve Bank is an institution owned by the stockholding
member banks. The
Government has not a dollar’s worth of stock in it."
However, the Government does give the Federal Reserve System the use of
its billions of dollars of credit, and this gives the Federal Reserve its characteristic
of a central bank, the power to issue currency on the Government’s credit. We do not
have Federal Government notes or gold certificates as currency. We have Federal Reserve
Bank notes, issued by the Federal Reserve Banks, and every dollar they print is a dollar
in their pocket.
W. Randolph Burgess, of the Federal Reserve Bank of New York, stated
before the Academy of Political Science in 1930 that:
"In its major principles of operation the Federal Reserve System is no
different from other banks
of issue, such as the Bank of England, the Bank of France, or the
Reichsbank."
157
All of these central banks have the power of issuing currency in their
respective countries. Thus, the people do not own their own money in Europe, nor do they
own it here. It is privately printed for private profit. The people have no sovereignty
over their money, and it has developed that they have no sovereignty over other major
political issues such as foreign policy.
As a central bank of issue, the Federal Reserve System has behind it all
the enormous wealth of the American people. When it began operations in 1913, it created a
serious threat to the central banks of the impoverished countries of Europe. Because it
represented this great wealth, it attracted far more gold than was desirable in the 1920s,
and it was apparent that soon all of the world’s gold would be piled up in this
country. This would make the gold standard a joke in Europe, because they would have no
gold over there to back their issue of money and credit. It was the Federal Reserve’s
avowed aim in 1927, after the secret meeting with the heads of the foreign central banks,
to get large quantities of that gold sent back to Europe, and its methods of doing so, the
low interest rate and heavy purchases of Government securities, which created vast sums of
new money, intensified the stock market speculation and made the stock market crash and
resultant depression a national disaster.
Since the Federal Reserve System was guilty of causing this disaster, we
might suppose that they would have tried to alleviate it. However, through the dark years
of 1931 and 1932, the Governors of the Federal Reserve Board saw the plight of the
American people worsening and did nothing to help them. This was more criminal than the
original plotting of the Depression. Anyone who lived through those years in this country
remembers the widespread unemployment, the misery, and the hunger of our people. At any
time during those years the Federal Reserve Board could have acted to relieve this
situation.
The problem was to get some money back into circulation. So much of the
money normally used to pay rent and food bills had been sucked into Wall Street that there
was no money to carry on the business of living. In many areas, people printed their own
money on wood and paper for use in their communities, and this money was good, since it
represented obligations to each other which people fulfilled.
The Federal Reserve System was a central bank of issue. It had the power
to, and did, when it suited its owners, issue millions of dollars of money. Why did it not
do so in 1931 and 1932? The Wall Street bankers were through with Mr. Herbert Hoover, and
they wanted Franklin D. Roosevelt to come in on a wave of glory as the saviour of the
nation. Therefore, the American people had to starve and suffer until March of 1933, when
the White Knight came riding in with his crew of Wall Street
158
bribers and put some money into circulation. That was all there was to it.
As soon as Mr. Roosevelt took office, the Federal Reserve began to buy Government
securities at the rate of ten million dollars a week for ten weeks, and created a hundred
million dollars in new money, which alleviated the critical famine of money and credit,
and the factories started hiring people again.
During the Roosevelt Administration, The Federal Reserve Board, insofar as
the public was concerned, was Marriner Eccles, an emulator and admirer of "the
Chief". Eccles was a Utah banker, President of the First Securities Corporation, a
family investment trust consisting of a number of banks which Eccles had picked up cheap
during the Agricultural Depression of 1920-21. Eccles also was a director of such
corporations as Pet Milk Company, Mountain States Implement Company, and Amalgamated
Sugar. As a big banker, Eccles fitted in well with the group of powerful men who were
operating Roosevelt.
There was some discussion in Congress as to whether Eccles ought to be on
the Federal Reserve Board at the same time he had all of these banks in Utah, but he
testified that he had very little to do with the First Securities Corporation besides
being President of it, and so he was confirmed as Chairman of the Board.
Eugene Meyer, Jr. now resigned from the Board to spend more of his time
lending the two billion dollar capital of the Reconstruction Finance Corporation, and
determining the value of collateral by his own methods.
The Banking Act of 1935, which greatly increased Roosevelt’s power
over the nation’s finances, was an integral part of the legislation by which he
proposed to extend his reign in the United States. It was not opposed by the people as was
the National Recovery Act, because it was not so naked an infringement of their liberties.
It was, however, an important measure. First of all, it extended the terms of office of
the Federal Reserve Board of Governors to fourteen years, or, three and a half times the
length of a Presidential term. This meant that a President assuming office who might be
hostile to the Board could not appoint a majority to it who would be favorable to him.
Thus, a monetary policy inaugurated before a President came into the White House would go
on regardless of his wishes.
The Banking Act of 1935 also repealed the clause of the Glass-Steagall
Banking Act of 1933, which had provided that a banking house could not be on the Stock
Exchange and also be involved in investment banking. This clause was a good one, since it
prevented a banking house from lending money to a corporation which it owned. Still it is
to be remembered that this clause covered up some other provisions in that Act, such as
the creation of the Federal Deposit Insurance Corporation, providing insurance money to
the amount of 150 million dollars, to
159
guarantee fifteen billion dollars worth of deposits. This increased the
power of the big bankers over small banks and gave them another excuse to investigate
them. The Banking Act of 1933 also legislated that all earnings of the Federal Reserve
Banks must by law go to the banks themselves. At last the provision in the Act that the
Government share in the profits was gotten rid of. It had never been observed, and the
increase in the assets of the Federal Reserve Banks from 143 million dollars in 1913 to 45
billion dollars in 1949 went entirely to the private stockholders of the banks. Thus, the
one constructive provision of the Banking Act of 1933 was repealed in 1935, and also the
Federal Reserve Banks were now permitted to loan directly to industry, competing with the
member banks, who could not hope to match their capacity in arranging large loans.
When the provision that banks could not be involved in investment banking
and operate on the Stock Exchange was repealed in 1935, Carter Glass, originator of that
provision, was asked by reporters:
"Does that mean that J.P. Morgan can go back into investment
banking?"
"Well, why not?" replied Senator Glass. "There has been an
outcry all over the country that the banks will not make loans. Now the Morgans can go
back to underwriting."
Because that provision was unfavorable to them, the bankers had simply
clamped down on making loans until it was repealed.
Newsweek of March 14, 1936, noted that:
"The Federal Reserve Board fired nine chairmen of Reserve
Banks, explaining that ‘it intended
to make the chairmanships of the Reserve Banks largely a part-time job on an
honorary basis.’"
This was another instance of the centralization of control in the Federal
Reserve System. The regional district system had never been an important factor in the
administration of monetary policy, and the Board was not cutting down on its officials
outside of Washington. The Chairman of the Senate Committee on Banking and Currency had
asked, during the Gold Reserve Hearings of 1934:
"Is it not true, Governor Young, that the Secretary of the
Treasury for the past twelve years has
dominated the policy of the Federal Reserve Banks and the Federal Reserve Board
with respect to
the purchase of United States bonds?"
Governor Young had denied this, but it had already been brought out that
on both of his hurried trips to this country in 1927 and 1929 to dictate Federal Reserve
policy, Governor Montagu Norman of the Bank of England had gone directly to Andrew Mellon,
Secretary of the Treasury, to get him to purchase Government securities on the open market
and start the movement of gold out of this country back to Europe.
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The Gold Reserve Hearings had also brought in other people who had more
than a passing interest in the operations of the Federal Reserve System. James Paul
Warburg, just back from the London Economic Conference with Professor O.M.W. Sprague and
Henry L. Stimson, came in to declare that he thought we ought to modernize the gold
standard. Frank Vanderlip suggested that we do away with the Federal Reserve Board and set
up a Federal Monetary Authority. This would have made no difference to the New York
bankers, who would have selected the personnel anyway. And Senator Robert L. Owen,
longtime critic of the system, made the following statement:
"The people did not know the Federal Reserve Banks were
organized for profit-making. They
were intended to stabilize the credit and currency supply of the country. That
end has not been
accomplished. Indeed, there has been the most remarkable variation in the
purchasing power of
money since the System went into effect. The Federal Reserve men are chosen by
the big banks,
through discreet little campaigns, and they naturally follow the ideals which
are portrayed to
them as the soundest from a financial point of view."
Benjamin Anderson, economist for the Chase National Bank of New York,
said:
"At the moment, 1934, we have 900 million dollars excess
reserves. In 1924, with increased
reserves of 300 million, you got some three or four billion in bank expansion
of credit very
quickly. That extra money was put out by the Federal Reserve Banks in 1924
through buying
government securities and was the cause of the rapid expansion of bank credit.
The banks
continued to get excess reserves because more gold came in, and because,
whenever there was a
slackening, the Federal Reserve people would put out some more. They held back
a bit in 1926.
Things firmed up a bit that year. And then in 1927 they put out less than 300
million additional
reserves, set the wild stock market going, and that led us right into the smash
of 1929."
Dr. Anderson also stated that:
"The money of the Federal Reserve Banks is money they
created. When they buy Government
securities they create reserves. They pay for the Government securities by
giving checks on
themselves, and those checks come to the commercial banks and are by them
deposited in the
Federal Reserve Banks, and then money exists which did not exist before."
SENATOR BULKLEY: It does not increase the circulating medium at all?
ANDERSON: No.
This is an explanation of the manner in which the Federal Reserve Banks
increased their assets from 143 million dollars to 45 billion dollars in thirty-five
years. They did not produce anything, they were non-productive enterprises, and yet they
had this enormous profit, merely by creating money, 95 percent of it in the form of
credit, which did not add
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to the circulating medium. It was not distributed among the people in the
form of wages, nor did it increase the buying power of the farmers and workers. It was
credit-money created by bankers for the use and profit of bankers, who increased their
wealth by more than forty billion dollars in a few years because they had obtained control
of the Government’s credit in 1913 by passing the Federal Reserve Act.
Marriner Eccles also had much to say about the creation of money. He
considered himself an economist, and had been brought into the Government service by
Stuart Chase and Rexford Guy Tugwell, two of Roosevelt’s early brain-trusters. Eccles
was the only one of the Roosevelt crowd who stayed in office throughout his
administration.
Before the House Banking and Currency Committee on June 24, 1941, Governor
Eccles said:
"Money is created out of the right to issue
credit-money."
Turning over the Government’s credit to private bankers in 1913 gave
them unlimited opportunities to create money. The Federal Reserve System could also
destroy money in large quantities through open market operations. Eccles said, at the
Silver Hearings of 1939:
"When you sell bonds on the open market, you extinguish
reserves."
Extinguishing reserves means wiping out a basis for money and credit
issue, or, tightening up on money and credit, a condition which is usually even more
favorable to bankers than the creation of money. Calling in or destroying money gives the
banker immediate and unlimited control of the financial situation, since he is the only
one with money and the only one with the power to issue money in a time of money shortage.
The money panics of 1873, 1893, 1920-21, and 1929-31, were characterized by a drawing in
of the circulating medium. In economical terms, this does not sound like such a terrible
thing, but when it means that people do not have money to pay their rent or buy food, and
when it means that an employer has to lay off three-fourths of his help because he cannot
borrow the money to pay them, the enormous guilt of the bankers and the long record of
suffering and misery for which they are responsible would suggest that no punishment might
be too severe for their crimes against their fellowmen.
On September 30, 1940, Governor Eccles said:
"If there were no debts in our money system, there would be
no money."
This is an accurate statement about our money system. Instead of money
being created by the production of the people, the annual increase in goods and services,
it is created by the bankers out of the debts of the people. Because it is inadequate, it
is subject to great fluctuations and is basically unstable. These fluctuations are also a
source of great profit. For that reason, the Federal Reserve Board has consistently
opposed any
162
legislation which attempts to stabilize the monetary system. Its position
has been set forth definitively in Chairman Eccles’ letter to Senator Wagner on March
9, 1939, and the Memorandum issued by the Board on March 13, 1939.
Chairman Eccles wrote that:
". . . you are advised that the Board of Governors of the Federal Reserve
System does not favor
the enactment of Senate Bill No. 31, a bill to amend the Federal Reserve Act,
or any other
legislation of this general character."
The Memorandum of the Board stated, in its "Memorandum on Proposals
to maintain prices at fixed levels":
"The Board of Governors opposes any bill which proposes a
stable price level, on the grounds
that prices do not depend primarily on the price or cost of money; that the
Board’s control over
money cannot be made complete; and that steady average prices, even if
obtainable by official
action, would not insure lasting prosperity."
Yet William McChesney Martin, the Chairman of the Board of Governors in
1952, said before the Subcommittee on Debt Control, the Patman Committee, on March 10,
1952 that "One of the fundamental purposes of the Federal Reserve Act is to protect
the value of the dollar."
Senator Flanders questioned him: "Is that specifically stated in the
original legislation setting up the Federal Reserve System?"
"No," replied Mr. Martin, "but it is inherent in the entire
legislative history and in the surrounding circumstances."
Senator Robert L. Owen has told us how it was taken out of the original
legislation against his will, and that the Board of Governors has opposed such
legislation. Apparently Mr. Martin does not know this.
Steady average prices, indeed, are impossible so long as we have the
speculators on the stock exchange driving prices up and down in order to reap profits for
themselves. Despite Governor Eccles’ insistence that steady average prices would not
insure lasting prosperity, they could do much to bring about this condition. A man on a
yearly wage of $2,500 is not more prosperous if the price of bread increases five cents a
loaf during the year.
In 1935, Eccles said before the House Committee on Banking and Currency:
"The Government controls the gold reserve, that is, the
power to issue money and credit, thus
largely regulating the price structure."
This is an almost direct contradiction of Eccles’ statement in 1939
that prices do not depend, primarily, on the price or cost of money.
In 1935, Governor Eccles stated before the House Committee:
"The Federal Reserve Board has the power of open market
operations. Open-market
operations are the most important single instrument of
163
control over the volume and cost of credit in this country. When I say
"credit" in this connection,
I mean money, because by far the largest part of money in use by the people of
this country is in
the form of bank credit or bank deposits. When the Federal Reserve Banks buy
bills or securities
in the open market, they increase the volume of the people’s money and
lower its cost; and when
they sell in the open market they decrease the volume of money and increase its
cost. Authority
over these operations, which affect the welfare of the whole people, must be
invested in a body
representing the national interest."
Governor Eccles testimony exposes the heart of the money machine which
Paul Warburg revealed to his incredulous fellow bankers at Jekyll Island in 1910. Most
Americans comment that they cannot understand how the Federal Reserve System operates. It
remains beyond understanding, not because it is complex, but because it is so simple. If a
confidence man comes up to you and offers to demonstrate his marvelous money machine, you
watch while he puts in a blank piece of paper, and cranks out a $100 bill. That is the
Federal Reserve System. You then offer to buy this marvelous money machine, but you
cannot. It is owned by the private stockholders of the Federal Reserve Banks, whose
identities can be traced partially, but not completely, to "the London
Connection."
At the House Banking and Currency Committee Hearings on June 6, 1960,
Congressman Wright Patman, Chairman, questioned Carl E. Allen, President of the Federal
Reserve Bank of Chicago. (p. 4). PATMAN: "Now Mr. Allen, when the Federal Reserve
Open Market Committee buys a million dollar bond you create the money on the credit of the
Nation to pay for that bond, don’t you? ALLEN: That is correct. PATMAN: And the
credit of the Nation is represented by Federal Reserve Notes in that case, isn’t it?
If the banks want the actual money, you give Federal Reserve notes in payment, don’t
you? ALLEN: That could be done, but nobody wants the Federal Reserve notes. PATMAN: Nobody
wants them, because the banks would rather have the credit as reserves."
This is the most incredible part of the Federal Reserve operation and one
which is difficult for anyone to understand. How can any American citizen grasp the
concept that there are people in this country who have the power to make an entry in a
ledger that the government of the United States now owes them one billion dollars, and to
collect the principal and interest on this "loan"?
Congressman Wright Patman tells us in "The Primer of Money", p.
38 of going into a Federal Reserve Bank and asking to see their bonds on which the
American people are paying interest. After being shown the bonds, he asked to see their
cash, but they only had some ledgers and blank checks. Patman says,
"The cash, in truth, does not exist and has never existed.
What we call ‘cash reserves’ are simply
bookkeeping credits entered upon ledgers
164
of the Federal Reserve Banks. The credits are created by the
Federal Reserve Banks and then
passed along through the banking system."
Peter L. Bernstein, in A Primer On Money, Banking and Gold says:
"The trick in the Federal Reserve notes is that the Federal
reserve banks lose no cash when they
pay out this currency to the member banks. Federal Reserve notes are not
redeemable in anything
except what the Government calls ‘legal tender’--that is, money that
a creditor must be willing to
accept from a debtor in payment of sums owed him. But since all Federal Reserve
notes are
themselves declared by law to be legal money, they are really redeemable only
in themselves . . .
they are an irredeemable obligation issued by the Federal Reserve
Banks."91
As Congressman Patman puts it,
"The dollar represents a one dollar debt to the Federal
Reserve System. The Federal Reserve Banks create money out of thin air to buy Government
bonds from the United States Treasury, lending money into circulation at interest, by
bookkeeping entries of checkbook credit to the United States Treasury. The Treasury writes
up an interest bearing bond for one billion dollars. The Federal Reserve gives the
Treasury a one billion dollar credit for the bond, and has created out of nothing a one
billion dollar debt which the American people are obligated to pay with interest."
(Money Facts, House Banking and Currency Committee, 1964, p. 9)
Patman continues,
"Where does the Federal Reserve system get the money with
which to create Bank Reserves?
Answer. It doesn’t get the money, it creates it. When the Federal Reserve
writes a check, it is
creating money. The Federal Reserve is a total moneymaking machine. It can
issue money or
checks."
In 1951, the Federal Reserve Bank of New York published a pamphlet,
"A Day’s Work at the Federal Reserve Bank of New York." On page 22, we find
that:
"There is still another and more important element of public interest in
the operation of banks
besides the safekeeping of money; banks can ‘create’ money. One of
the most important factors to
remember in this connection is that the supply of money affects the general
level of prices--the
cost of living. The Cost of Living Index and money supply are parallel."
The decisions of the Federal Reserve Board, or rather, the decisions which
they are told to make by "parties unknown", affect the daily lives of every
American by the effect of these decisions on prices. Raising the interest rate, or causing
money to became "dearer" acts to limit the amount of money available in the
market, as does the raising of reserve
__________________________
91 Peter L. Bernstein, A Primer On Money, Banking and Gold, Vintage Books, New
York, 1965, p. 104
165
requirements by the Federal Reserve System. Selling bonds by the Open
Market Committee also extinguishes and lowers the money supply. Buying government
securities on the open market "creates" more money, as does lowering the
interest rate and making money "cheaper". It is axiomatic that an increase in
the money supply brings prosperity, and that a decrease in the money supply brings on a
depression. Dramatic increases in the money which outstrip the supply of goods brings on
inflation, "too much money chasing too few goods". A more esoteric aspect of the
monetary system is "velocity of circulation", which sounds much more technical
than it is. This is the speed at which money changes hands; if it is gold buried in the
peasant’s garden, that is a slow velocity of circulation, caused by a lack of
confidence in the economy or the nation. Very rapid velocity of circulation, such as the
stock market boom of the late 1920s, means quick turnover, spending and investment of
money, and its stems from confidence, or overconfidence, in the economy. With a high
velocity of circulation, a smaller money supply circulates among as many people and goods
as a larger money supply would circulate with a slower velocity of circulation. We mention
this because the velocity of circulation, or confidence in the economy, also is greatly
affected by the Federal Reserve actions. Milton Friedman comments in Newsweek, May 2,
1983, "The Federal Reserve’s major function is to determine the money supply. It
has the power to increase or decrease the money supply at any rate it chooses."
This is an enormous power, because increasing the money supply can cause
the re-election of an administration, while decreasing it can cause an administration to
be defeated. Friedman goes on to criticize the Federal Reserve, "How is it that an
institution which has so poor a record of performance nevertheless has so high a public
reputation and even commands a considerable measure of credibility for its
forecasts?"
All open market transactions, which affect the money supply, are conducted
for a single System account by the Federal Reserve Bank of New York on the behalf of all
the Federal Reserve Banks, and supervised by an officer of the Federal Reserve Bank of New
York. The conferences at which decisions are made to buy or sell securities by the Open
Market Committee remain closed to the public, and the deliberations also remain a mystery.
On May 8, 1928, The New York Times reported that Adolph C. Miller, Governor of the Federal
Reserve Board, testifying before the House Banking and Currency Committee, stated that
open market purchases and rediscount rates were established through
"conversations". At that time, the purchases on the open market amounted to
seventy or eighty million dollars a day, and would be ten times that today. These are vast
sums to be manipulated on the basis of mere "conversations", but that is as much
information as we can obtain.
166
Because of these mysterious transactions which affect the life, liberty
and happiness of every American citizen, there have been numerous proposals such as Senate
Document No. 23, presented by Mr. Logan on January 24, 1939, that "The Government
should create, issue and circulate all the currency and credit needed to satisfy the
spending power of the Government and the buying power of the consumers. The privilege of
creating and issuing money is not only the supreme prerogative of Government, but it is
the Government’s greatest creative opportunity."
On March 21, 1960, Congressman Wright Patman used a simple illustration in
the Congressional Record of how banks "create money".
"If I deposit $100 with my bank and the reserve
requirements imposed by the Federal Reserve
Bank are 20% then the bank can make a loan to John Doe of up to $80. Where does
the $80
come from? It does not come out of my deposit of $100; on the contrary, the
bank simply credits John Doe’s account with $80. The bank can acquire Government
obligations by the same procedure, by simply creating deposits to the credit of the
government. Money creating is a power of the commercial banks . . . Since 1917 the Federal
Reserve has given the private banks forty-six billion dollars of reserves."
How this is done is best revealed by Governor Eccles at Hearings before
the House Committee on Banking and Currency on June 24, 1941:
ECCLES: "The banking system as a whole creates and
extinguishes the deposits as they make
loans and investments, whether they buy Government Bonds or whether they buy
utility bonds or whether they make Farmer’s loans.
MR. PATMAN: I am thoroughly in accord with what you say, Governor, but the fact
remains
that they created the money, did they not?
ECCLES: Well, the banks create money when they make loans and
investments."
On September 30, 1941, before the same Committee, Governor Eccles was
asked by Representative Patman:
"How did you get the money to buy those two billion dollars worth of
Government securities in
1933?
ECCLES: We created it.
MR. PATMAN: Out of what?
ECCLES: Out of the right to issue credit money.
MR. PATMAN: And there is nothing behind it, is there, except our
Government’s credit?
ECCLES: That is what our money system is. If there were no debts in our money
system, there
wouldn’t be any money."
On June 17, 1942, Governor Eccles was interrogated by Mr. Dewey.
ECCLES: "I mean the Federal Reserve, when it carries out an open market
operation, that is, if it
purchases Government securities in the
167
open market, it puts new money into the hands of the banks which
creates idle deposits.
DEWEY: There are no excess reserves to use for this purpose?
ECCLES: Whenever the Federal Reserve System buys Government securities in the
open market,
or buys them direct from the Treasury, either one, that is what it does.
DEWEY: What are you going to use to buy them with? You are going to create
credit?
ECCLES: That is all we have ever done. That is the way the Federal Reserve
System operates.
The Federal Reserve System creates money. It is a bank of issue."
At the House Hearing of 1947, Mr. Kolburn asked Mr. Eccles:
"What do you mean by monetization of the public debt?
ECCLES: I mean the bank creating money by the purchase of Government
securities. All
is created by debt--either private or public debt.
FLETCHER: Chairman Eccles, when do you think there is a possibility of
returning to a free and
open market, instead of this pegged and artificially controlled financial
market we now have?
ECCLES: Never. Not in your lifetime or mine."
Congressman Jerry Voorhis is quoted in U.S. News, August 31, 1959,
as questioning Secretary of Treasury Anderson, "Do you mean that Banks, in buying
Government securities, do not lend out their customers’ deposits? That they create
the money they use to buy the securities? ANDERSON: That is correct. Banks are different
from other lending institutions. When a savings association, an insurance company, or a
credit union makes a loan, it lends the very dollar that its customers have previously
paid in. But when a bank makes a loan, it simply adds to the borrower’s deposit
account in the bank by the amount of the loan. The money is not taken from anyone. It is
new money, recreated by the bank, for the use of the borrower."
Strangely enough, there has never been a court trial on the legality or
Constitutionality of the Federal Reserve Act. Although it is on much the same shaky
grounds as the National Recovery Act, or NRA, which was challenged in Schechter Poultry v.
United States of America, 29 U.S. 495, 55 US 837.842 (1935), the NRA was ruled
unconstitutional by the Supreme Court on the grounds that "Congress may not abdicate
or transfer to others its legitimate functions. Congress cannot Constitutionally delegate
its legislative authority to trade or industrial associations or groups so as to empower
them to make laws."
Article 1, Sec. 8 of the Constitution provides that "The Congress
shall have power to borrow money on the credit of the United States . . . and to coin
Money, regulate the value thereof, and of foreign Coin, and fix the Standard of Weights
and Measures." According to the NRA deci-
168
sion, Congress cannot delegate this power to the Federal Reserve System,
nor can it delegate its legislative authority to the Federal Reserve System to allow the
System to fix the rate of bank reserves, the rediscount rate, or the volume of money. All
of these are "legislated" by the Federal Reserve Board, meeting in legislative
sessions to determine these matters and to issue "laws" or regulations fixing
them.
The Second World War gave the big bankers who owned the Federal Reserve
System a chance to unload on the country billions of dollars printed early in 1930, in the
biggest counterfeiting operation in history, all legalized by Roosevelt’s government,
of course. Henry Hazlitt writes in the January 4, 1943 issue of Newsweek Magazine:
"The money that began to appear in circulation a week ago, December 21,
1942, was really
printing press money in the fullest sense of the term, that is, money which has
no collateral of any kind behind it. The Federal Reserve statement that ‘The
Board of Governors, after consultation with the Treasury Department, has authorized
Federal Reserve Banks to utilize at this time the existing stocks of currency printed in
the early thirties, known as ‘Federal Reserve Banknotes’. We repeat, these notes
have absolutely no collateral of any kind behind them."
Governor Eccles also testified to some other interesting matters of the
Federal Reserve and war finance at the Senate Hearings on the Office of Price
Administration in 1944:
"The currency in circulation was increased from seven
billion dollars in four years to twenty-one
and a half billion. We are losing some considerable amounts of gold during the
war period. As
our exports have gone out, largely on a lend-lease basis, we have taken imports
on which we have
given dollar balances. These countries are now drawing off these dollar
balances in the form of
gold.
MR. SMITH: Governor Eccles, what is the objective that the foreign governments
are after in
this projected program whereby we would contribute gold to an international
fund?
GOVERNOR ECCLES: I would like to discuss OPA, and leave the stabilization fund
for a time
when I am prepared to go into it.
MR. SMITH: Just a minute. I feel that this fund is very pertinent to what we
are talking about
today.
MR. FORD: I believe that the stabilization fund is entirely off the @OPA and
consequently we
ought to stick to the business at hand."
The Congressmen never did get to discuss the Stabilization Fund, another
setup whereby we would give the impoverished countries of Europe back the gold which had
been sent over here. In 1945, Henry Hazlitt, commenting in Newsweek of January 22,
on Roosevelt’s annual budget message to Congress, quoted Roosevelt as saying:
"I shall later recommend legislation reducing the present high gold
reserve requirements of the
Federal Reserve Banks."
169
Hazlitt pointed out that the reserve requirement was not high, it was just
what it had been for the past thirty years. Roosevelt’s purpose was to free more gold
from the Federal Reserve System and make it available for the Stabilization Fund, later
called the International Monetary Fund, part of the World Bank for Reconstruction and
Development, the equivalent of the League Finance Committee which would have swallowed the
financial sovereignty of the United States if the Senate had let us join it.
170
CHAPTER FOURTEEN
Congressional Expos�
"Mr. Volcker’s politics is something of an
enigma."--New York Times
Since 1933 when Eugene Meyer resigned from the Federal Reserve Board of
Governors, no member of the international banking families has personally served on the
Board of Governors. They have chosen to work from behind the scenes through carefully
selected presidents of the Federal Reserve Bank of New York and other employees.
The present chairman of the Federal Reserve Board of Governors is Paul
Volcker. His appointment was greeted by one well-known economist with the following
prediction, "Volcker’s selection has been by far the worst. Carter has put
Dracula in charge of the blood bank. To us, it means a crash and depression in the 80s is
more certain than ever."
Col. E.C. Harwood’s Research Report, August 6, 1979, gave much
the same view. "Paul Volcker is from the same mold as the unsound money men who have
misguided the monetary actions of this nation for the past five decades. The outcome
probably will be equally disastrous for the dollar and the U.S. economy."
Despite these gloomy views, the report from The New York Times on
the selection of Volcker was positively ecstatic. On July 26, 1979, The Times commented
that Volcker learned "the business" from Robert Roosa, now partner of Brown
Brothers Harriman, and that Volcker had been part of the Roosa Brain Trust at the Federal
Reserve Bank of New York, and, later, at the Treasury in the Kennedy administration.
"David Rockefeller, the chairman of Chase, and Mr. Roosa were strong influences in
the Mr. Carter decision to name Mr. Volcker for the Reserve Board chairmanship." The
New York Times did not point out that David Rockefeller and Robert Roosa had
previously chosen Mr. Carter, a member of the Trilateral Commission, as the presidential
candidate of the Democratic Party, or that Mr. Carter would hardly refuse to appoint their
choice of Paul Volcker as the new Chairman of the Federal Reserve Board. Nor is it
straining the point to be reminded that this manner of selection of the Chairman of the
Board of Governors is directly in the line of royal prerogative going back to George
Peabody’s initial agreement with N.M. Rothschild, to the Jekyll Island meeting, and
to the enactment of the Federal Reserve Act.
171
The Times noted that "Volcker’s choice was approved by
European banks in Bonn, Frankfurt and Zurich." William Simon, former Secretary of
Treasury, was quoted as saying "a marvelous choice." The Times further
noted that the Dow market rose on Volcker’s nomination, registering the best gains in
three weeks for a rise of 9.73 points, and that the dollar rose sharply on foreign
exchange@ at home and abroad.
Who was Volcker, that his appointment could have such an effect on the
stock market and the value of the dollar in foreign exchange? He represented the most
powerful house of "the London Connection," Brown Brothers Harriman, and the
London houses which directed the Rockefeller empire. On July 29, 1979, The Times had
said of Volcker, "New Man Will Chart His Own Course".
Volcker’s background shows that this was nonsense. His course has
always been charted for him by his masters in London. He attended Princeton, obtained an
M.A. at Harvard, and went to the London School of Economics 1951-52, the banker’s
graduate school. He then came to the Federal Reserve Bank of New York as an economist from
1952-57, economist at Chase Manhattan Bank, 1957-61, with Treasury Department 1961-65, as
deputy under secretary for monetary affairs, 1963-65, and under secretary for monetary
affairs, 1969-74. He then became President of the Federal Reserve Bank of New York from
1975-79, when Carter, at the behest of Robert Roosa and David Rockefeller, appointed him
Chairman of the Federal Reserve Board of Governors. He was succeeded as President of
Federal Reserve Bank of New York by Anthony Solomon, a Harvard Ph.D. who was with the OPA
1941-42 and with the government financial mission to Iran 1942-46. He operated a canned
food company in Mexico from 1951-61, was president of International Investment Corp. for
Yugoslavia 1969-72 (a communist country), under secretary for monetary affairs at Treasury
1977-80. In short, Solomon’s background was much the same as Paul Volcker’s.
The New York Times stated on December 2, 1981, "For years the
Federal Reserve was the second or third most secret institution in town. The Sunshine Act
of 1976 penetrated the curtain a trifle. The board now holds a public meeting once a week
on Wednesday at 10 a.m., but not to discuss Monetary policy, which is still regarded as
top secret and not to be discussed in public." The Times mentioned that when
Open Market Committee meetings are held, Solomon and Volcker sit together at the head of
the table and relay the instructions which they have received from abroad.
Behind Volcker and Solomon stands Robert Roosa, Secretary of the Treasury
in Carter’s shadow cabinet, and representing Brown Brothers Harriman, the Trilateral
Commission, the Council on Foreign Relations, the Bilderbergers, and the Royal Economic
Institute. He is a trustee of the
172
Rockefeller Foundation*, and a director of Texaco and American Express
companies. Dr. Martin Larson points out that "The international consortium of
financiers known as the Bilderbergers, who meet annually in profound secrecy to determine
the destiny of the western world, is a creature of the Rockefeller-Rothschild alliance,
and that it held its third meeting on St. Simons Island, only a short distance from Jekyll
Island." Larson also states that "The Rockefeller interests work in close
alliance with the Rothschilds and other central banks."**
On June 18, 1983, President Ronald Reagan ended months of speculation by
announcing that he was reappointing Paul Volcker as Chairman of the Federal Reserve Board
of Governors for another four year term, although Volcker’s term was not up until
August 6, 1983. Reagan’s reappointment of a Carter appointee puzzled some political
observers, but apparently he had succumbed to considerable pressure, as indicated by a
lead editorial in The Washington Post, June 10, 1983, "There is no one who
matches Mr. Volcker in both political standing and grasp of the intricate networks that
make up the world’s financial system." The anonymous writer gave no
documentation for his elevation of Volcker to the standing of the world’s greatest
financier, and as for his political standing, The New York Times commented on June
19, 1983, "Mr. Volcker’s politics is something of an enigma." His
"non-political" stance conforms with the Washington tradition of "the
political independence of the Fed" which has been maintained for many years. However,
the problem of its dependence on "the London connection" has never been
discussed in Washington.
In reality, Volcker is more of a politician than an economist. After
attending the London School of Economics, and finding out who issues the orders of the
international financial community, Volcker has ever since played the game. Not once has he
failed to carry out the orders of the "London Connection".
Can it really be possible that "The London Connection" exists,
and that men like Volcker and Solomon receive their instructions, in however devious or
indirect a manner, from foreign bankers? Let us look at the evidence, circumstantial, to
be sure, but circumstantial evidence of the quality which has often sent men to the
penitentiary or to the electric chair. John Moody pointed out in 1911 that seven men of
the Morgan group, allied with the Standard Oil-Kuhn, Loeb group, ruled the United States.
Where do these groups stand in the financial picture today?
U.S. News published on April 11, 1983, a list of the largest bank
holding companies in the United States by assets as of December 31, 1982. Number 1 is
Citicorp, New York, with assets of $130 billion. This is Baker and
__________________________
* See Chart V
** See Chart I
173
Morgan’s First National Bank of New York, merged with National City
Bank in 1955, two of the largest purchasers of Federal Reserve Bank of New York stock in
1914. Number 3, is Chase Manhattan, New York, with assets of $80.9 billion. This is Chase
and Bank of Manhattan merged, the Rockefeller and Kuhn Loeb group, also purchasers of
Federal Reserve Bank of New York stock in 1914. Number 4 is Manufacturers Hanover of New
York $64 billion, also purchaser of Federal Reserve Bank of New York stock in 1914. Number
5 is J.P. Morgan Company of New York, $58.6 billion in assets and holder of considerable
Federal Reserve Bank stock. Number 6 is Chemical Bank of New York, $48.3 billion also
purchaser of Federal Reserve stock in 1914. And Number 11, First Chicago Corporation, the
First National Bank of Chicago which was principal correspondent of the Morgan-Baker bank
in New York, and which furnished the first two presidents of the Federal Advisory Council.
The direct line which leads from the participants in the Jekyll Island
Conference of 1910 to the present day is illustrated by a passage from "A Primer on
Money", Committee on Banking and Currency, U.S. House of Representatives, 88th
Congress, 2d session, August 5, 1964, p. 75:
"The practical effect of requiring all purchases to be made
through the open market is to take
money from the taxpayer and give it to the dealers. It forces the Government to
pay a toll for
borrowing money. There are six ‘bank’ dealers: First National City
Bank of New York; Chemical
Crop. Exchange Bank, New York, Morgan Guaranty Trust Co., New York, Bankers
Trust of New York, First National Bank of Chicago, and Continental Illinois Bank of
Chicago."
Thus the banks which receive a "toll" on all money borrowed by
the Government of the United States are the same banks which planned the Federal Reserve
Act of 1913. There is ample evidence demonstrating the present preeminence of the same
banks which set up the Federal Reserve System in 1914. For instance, Warren Brookes writes
on the editorial page of The Washington Post, June 6, 1983:
"Citicorp (National City Bank and First National Bank of
New York, merged in 1955) just
recorded an 18.6% return on equity, J.P. Morgan, 17%, Chemical Bank and Bankers
Trust, nearly 16%, an exceptional rate of return."
These are the banks which bought the first issue of Federal Reserve Bank
stock in 1914, and which owned the controlling interest in the Federal Reserve Bank of New
York, which sets the interest rate and is the bank for all open market operations.
These banks also profit steadily from the otherwise inexplicable
fluctuations in monetary growth and interest rates. Brookes further comments on
"actual monetary growth rates alternately gyrating from 0 to 17% in successive six
month periods for three recession-wracked years. The two measures of money growth most
admired by Milton Friedman M2 and M3,
174
have actually shown little change on a year to year basis in the 1972-82
period."
Thus we have money growth rates gyrating from 0 to 17% but no actual year
to year changes, which raises the question of why we cannot have stability of monetary
growth throughout the year. The answer is that the big profits are made by these
gyrations, and the next question is, who sets in motion these gyrations? The answer is
"the London Connection".
To draw attention from the continued control of the bankers and their
heirs, who obtained the government monopoly of the nation’s money and credit in 1913,
the paid propagandists of the controlled media monopoly and academia are constantly
trotting forth new and more exotic theories of economics. Thus James Burnham, one of the
National Review propagandists, won fame with a ridiculous theory of "the
managers". He postulated that the old arbiters of wealth, the J.P. Morgans, the
Warburgs and the Rothschilds had, by 1950, disappeared from the scene, being replaced by a
new class of "managers". This theory, which had no foundation in fact, served to
obscure the fact that the same people still controlled the monetary system of the world.
The "managers" were just that, executives like Volcker who were front men, paid
employees who would continue to receive their paychecks only as long as they carried out
their employers’ instructions. Burnham remains a well-paid propagandist at the National
Review, which many prominent leaders, including President Reagan, believe to be a
"conservative" publication.
From 1914 to 1982, a period in which many thousands of American banks went
bankrupt, the original purchasers of Federal Reserve Bank stock have not only survived but
they have consolidated their power. And what of "the London Connection"? Does it
still exist, and is it still dictating the economic destiny of the United States? The
Washington Post, May 19, 1983, carried a story datelined Nairobi, Kenya, noting the
meeting of the African Development Bank. "The British merchant bank, Morgan Grenfell
and a syndicate of the United States, Kuhn Loeb, Lehman Brothers International, the French
Lazard Freres and Britain’s Warburg are discreetly acting as financial advisors to
about ten debt-plagued African states."
There are the same names we encountered in 1914, still managing the
finances of the world, with profits for themselves but with disastrous results for
everyone else. Perhaps we can look for relief to the present Administration of President
Reagan. Unfortunately, before reaching him we have to run the gamut of the long list of
his principal staff, composed of men from J. Henry Schroder, Brown Brothers Harriman, and
other leading components of "The London Connection".
Lopez Portillo, President of Mexico, in addressing the Mexican National
Congress of Mexico in September, 1982, called the world credit boom of the past decade a
financial pestilence akin to the Black Death which swept
175
Europe in the fourteenth century. "As in mediaeval times, it flattens
country after country. It is transmitted by rats and it yields unemployment and misery,
industrial bankruptcy and enrichment by speculation. The remedy prescribed by faith
healers is forced inactivity and depriving the patient of food."
Forbes Magazine stated October 11, 1982, "The world gasps for
liquidity, not because the supply of money has contracted but because too much of it now
goes to pay off old debts rather than fund new productive investments."
The policy of high interest rates and tight money has been disastrous for
the United States. In early 1983, a slight easing of money and credit promises some
relief, but as long as the Federal Reserve system and its unseen manipulators continue
their control of the money supply, we can expect more problems. The Nation on
December 11, 1982, in commenting on economic problems, stated, "The blame for all
this lies at the door of the Federal Reserve System working as usual on behalf of the
international banking system."
The evidence of how the Federal Reserve System works on behalf of the
international banking system is graphically illustrated by a series of charts drawn up by
the staff of the Committee on Banking, Currency and Housing of the House of
Representatives, 94th Congress, 2d session, August, 1976, "FEDERAL RESERVE DIRECTORS:
A STUDY OF CORPORATE AND BANKING INFLUENCE".* We present as our Chart V page 49 of
this study, showing the interlocking directorates of David Rockefeller. As our Chart VI we
reproduce page 55 of this study, showing the interlocking directorates of Frank R.
Milliken, one of the Class C Directors** of the Federal Reserve Bank of New York. In this
chart are all the main personages in our story of the Jekyll Island conference: Citibank,
J.P. Morgan and Company, Kuhn Loeb and Company, and many related firms. As Chart VII we
reproduce page 53 of this study, showing the interlocking directorates of another Class C
Director of the Federal Reserve Bank of New York, Alan Pifer. As President of the Carnegie
Corporation of New York, he interlocks with J. Henry Schroder Trust Company, J. Henry
Schroder Banking Corporation, Rockefeller Center, Inc., Federal Reserve Bank of Boston,
Equitable Life Assurance Society (J.P. Morgan), and others. Thus an August, 1976 study
from the House Committee on Banking, Currency and Housing, brings before us all of our
main cast of personages, functioning today just as they did in 1914.
__________________________
* Due to space limitations, only five of the seventy-five charts in the study,
all of which show the connections between prominent, powerful individuals with control in
the Federal Reserve System have been selected to illustrate the connections between
officers and directors of the twelve Federal Reserve Banks in 1976 and the firms listed in
this book.
** "The three Class C Directors are appointed by the Board of Governors as
representatives of the public interest as a whole." p. 34, Congressional Study, 1976.
176
This 120 page Congressional study details public policy functions of the
Federal Reserve District Banks, how directors are selected, who is selected, the public
relations lobbying factor, bank domination and bank examination, and corporate interlocks
with Reserve banks. Charts were used to illustrate Class A, Class B, and Class C
directorships of each district bank. For each branch bank a chart was designed giving
information regarding bank appointed directors and those appointed by the Board of
Governors of the Federal Reserve System.
In his Foreword to the study, Chairman Henry S. Reuss, (D-Wis) wrote:
"This Committee has observed for many years the influence of private
interests over the
essentially public responsibilities of the Federal Reserve System.
As the study makes clear, it is difficult to imagine a more narrowly based
board of directors for a
public agency than has been gathered together for the twelve banks of the
Federal Reserve
System.
Only two segments of American society--banking and big business--have any
substantial
representation on the boards, and often even these become merged through
interlocking
directorates . . . . Small farmers are absent. Small business is barely
visible. No women appear on
the district boards and only six among the branches. Systemwide--including
district and branch
boards--only thirteen members from minority groups appear.
The study raises a substantial question about the Federal Reserve’s
oft-repeated claim of
"independence". One might ask, independent from what? Surely not
banking or big business, if
we are to judge from the massive interlocks revealed by this analysis of the
district boards.
The big business and banking dominance of the Federal Reserve System cited in
this report can be traced, in part, to the original Federal Reserve Act, which gave member
commercial banks the
right to select two-thirds of the directors of each district bank. But the
Board of Governors in
Washington must share the responsibility for this imbalance. They appoint the
so-called "public"
members of the boards of each district bank, appointments which have largely
reflected the same
narrow interests of the bank-elected members . . . . Until we have basic
reforms, the Federal
Reserve System will be handicapped in carrying out its public responsibilities
as an economic
stabilization and bank regulatory agency. The System’s mandate is too
essential to the nation’s
welfare to leave so much of the machinery under the control of narrow private
interests.
Concentration of economic and financial power in the United States has gone too
far."
In a section of the text entitled "The Club System", the
Committee noted:
"This ‘club’ approach leads the Federal Reserve
to consistently dip into the same pools--the
same companies, the same universities, the same bank holding companies--to fill
directorships."
This Congressional study concludes as follows:
177
"Many of the companies on these tables, as mentioned earlier, have
multiple interlocks to the Federal Reserve System. First Bank Systems; Southeast Banking
Corporation; Federated Department Stores; Westinghouse Electric Corporation; Proctor and
Gamble; Alcoa; Honeywell, Inc.; Kennecott Copper; Owens-Corning Fiberglass; all have two
or more director ties to district or branch banks.
In Summary, the Federal Reserve directors are apparently representatives
of a small elite group which dominates much of the economic life of this nation." END
OF CONGRESSIONAL REPORT.
178
ADDENDUM
As of 11:05 Tuesday, July 26, 1983, the list of member banks holding
Federal Reserve Bank of New York stock includes twenty-seven New York City banks. Listed
below are the number of shares held by ten of these banks, amounting to 66% of the total
outstanding number of shares, namely 7,005,700:
|
Shares |
Percent |
| Bankers Trust Company |
438,831 |
( 6%) |
| Bank of New York |
141,482 |
( 2%) |
| Chase Manhattan Bank |
1,011,862 |
(14%) |
| Chemical Bank |
544,962 |
( 8%) |
| Citibank |
1,090,813 |
(15%) |
| European American Bank & Trust |
127,800 |
( 2%) |
| J. Henry Schroder Bank & Trust |
37,493 |
( .5%) |
| Manufacturers Hanover |
509,852 |
( 7%) |
| Morgan Guaranty Trust |
655,443 |
( 9%) |
| National Bank of North America |
105,600 |
( 2%) |
The tremendous number of shares held today as against the original
purchases in 1914 is brought about by Section 5 of the original Federal Reserve Act which
called for a member bank to buy and hold stock in the district Federal Reserve Bank equal
to 6% of its capital and surplus.
Currently, shares held by five of the above named banks comprise 53% of
the total Federal Reserve Bank of New York stock. An examination of the major stockholders
of the New York City banks shows clearly that a few families, related by blood marriage,
or business interests, still control the New York City banks which, in turn, hold the
controlling stock of the Federal Reserve Bank of New York.
It is notable that three of the banks holding Federal Reserve Bank of New
York stock, in the amount of 270,893 shares, are subsidiaries of foreign banks. J. Henry
Schroder Bank and Trust is listed by Standard and Poors as a subsidiary of
Schroders Ltd. of London. The National Bank of North America is a subsidiary of the
National Westminster Bank, one of London’s "Big Five". European American
Bank is a subsidiary of the European American Bank, Bahamas, LTD. It is interesting to
note that the directors of the European American Bank & Trust include Milton F.
Rosenthal, president and Chief Operating Officer of the international gold company,
179
Engelhard Minerals and Chemical; Hamilton F. Potter, a partner in Sullivan
and Cromwell (J. Henry Schroder Bank & Trust attorneys); Edward H. Tuck, partner of
Shearman and Sterling (Citibank’s attorneys); F.H. Ulrich and Hans Liebkutsch,
managing directors of the giant Midland Bank of London, one of the "Big Five";
and Roger Alloo, Paul-Emmanuel Janssen, and Maurice Laure of the Societe Generale de
Banque (Brussels, Belgium). [See Chart III]
This information, derived from the latest issue of the tabulation
available from the Board of Governors, Federal Reserve System, is cited as current
evidence which indicates that the controlling stock in the Federal Reserve Bank of New
York, which sets the rate and scale of operations for the entire Federal Reserve System is
heavily influenced by banks directly controlled by "The London Connection", that
is, the Rothschild-controlled Bank of England. [See Chart I]
180
APPENDIX I
E.C. Knuth, in The Empire of the City, priv. printed, 1946, p. 27,
refers to "the Bank of England, the full partner of the American Administration in
the conduct of the financial affairs of all the world" and cites the Encyclopaedia
Americana, 1943 edition.
Barron cites Lord Swaythling, (April 8, 1923), "Lord Swaythling said,
‘Exchange can only be run from London. This is the center in Exchange.’" (They
Told Barron, by Clarence W. Barron, founder of Baron’s Weekly, Harpers, New York,
1930, p. 27.)
Exchange, in the international financial world, means the transactions in
money or securities, or simply, the "exchange" of the values of these
securities. It is necessary that this "exchange" take place where the values can
be established, and this place is the "City" in London.
London was established as the primary center of exchange because of the
"Consols" of the Bank of England, bonds which could never be redeemed, but which
paid a stable rate of return. Henry Clews writes, in The Wall Street View, Silver
Burdett Co. 1900, p. 255, "The Consolidated Act of 1757 consolidated the debts of the
nation of England at 3%, which were kept in an account at the Bank of England and is the
great bulwark of its deposits." By ostentatiously "dumping"
"Consols" on the London Exchange after the Battle of Waterloo, in a pretended
panic, Nathan Meyer Rothschild then secretly bought up the Consols sold in the panic by
other holders at a low rate, and became the largest holder of Consols, and thus won
control of the Bank of England in 1815.
12% Dividends
Although a Labor government nationalized the Bank of England in 1946, The
Great Soviet Encyclopaedia points out (vol. I, p. 490c) that the Bank of England
continues to pay 12% dividends per annum, just as it had done prior to the
nationalization. The "Governor" is appointed by the government, in a situation
similar to that in the United States, where the Governors of the Federal Reserve System
are appointed by the President. However, as is pointed out in the Encyclopaedia
Americana v. 13, p. 272, "In practice, the governors of the Bank of England have
not hesitated to criticize and bring pressure on the government in public."
Bank Rate
The interest rate set by the Bank of England is known as "the Bank
rate", and it is a controlling factor in interest rates throughout the world,
181
although rates in other countries may be higher or lower than this
"Bank rate". The Bank of England manages the government debt, and is called upon
to arbitrate in political affairs. It served as the intermediary with the Iran
revolutionaries in negotiating for the return of the American hostages--a recent example.
We should not be surprised that the present Governor of the Bank of
England, Sir Gordon Richardson is a prominent international financial figure, who appears
elsewhere in these pages because of his connection with the J. Henry Schroder @Wagg in
London from 1962 to 1972, when he became Governor of the Bank of England. He was also
director of J. Henry Schroder Co., New York, and Schroder Banking Corp., New York. He also
serves as director of Rolls Royce and Lloyd’s Bank. Although he resides in London, he
maintains a home in New York, and is listed in the current Manhattan directory simply as
"G. Richardson, 45 Sutton Place S.", although a prior listing showed him at 4
Sutton Place. Sutton Place was developed as a fashionable address for the international
set by Bessie Marbury, whom we earlier cited for her connection with the Morgan family and
the Roosevelts.
The present directors of the Bank of England (1982) include Leopold de
Rothschild of N.M. Rothschild & Sons, Sir Robert Clark, chairman of Hill Samuel Bank,
the most influential bank after Rothschilds, John Clay, of Hambros Bank, and David
Scholey, of Warburg Bank, and joint chairman of S.C. Warburg Co.
Anthony Sampson writes, in "The Changing Anatomy of Britain",
Random House, New York, 1982, p. 279, "The more cosmopolitan banks with foreign
experts and directors, such as Warburgs, Montagus, Rothschilds and Kleinworts, had also
discovered a huge new source of profits in the market for Eurodollars which began in the
late fifties and multiplied through the 60s . . . British bankers themselves controlled
relatively small funds, but they knew how to make money out of other people’s
money."
The Eurodollar market, a new development in "created money" is
monopolized by the above firms.
Eurodollar Empire
"Today, together with allies on the island of Manhattan
(Britain’s most important piece of real estate), the British Empire controls the
entire $1.5 trillion Eurodollar financial market, another $300-$500 billion in the Cayman
Islands, Bahamas, and $50-$100 billion in the Hong-Kong Singapore "Asia-dollar
market". . . . Consider the $1.5 trillion Eurodollar market an "outlaw"
market in the U.S. dollars over which this nation has no control. Here control and profits
are overwhelmingly in the hands of London banks, who set the terms of lending and the
interest rate on this mass of American dollars in relation to the London Interbank
Borrowing
182
Rate (LIBOR) . . . U.S. banks like Citibank (New York City), on whose
board of directors sits the powerful British financier, Lord Aldington, collaborate openly
in this market. At the same time, British banks including the known central bank for the
world’s drug trade, the Hongkong and Shanghai Bank, pour into America to devour U.S.
banks. In 1978 the Hongshang (Ed.--Hongkong and Shanghai Bank) took over New York’s
Marine Midland Bank, the state’s 11th largest commercial bank. . . The British also
control the creation of American dollars. While Federal Reserve Board Chairman Paul
Volcker tightens credit against the domestic economy, British-controlled banks in the
Cayman Islands (such as the European American Bank--Ed.) a British possession 200 miles
off Florida, and in the Bermudas and a dozen other "free banking" computer
terminals create hundreds of billions of American dollars. How is this done? There are no
reserve ratios or other restrictions on the creation of dollar-denominated credits in the
Empire’s "free enterprise" banking. A $1 million bona fide credit coming
from the United States can be turned into $20 to $100 million in dollar-denominated
credits as it passes through the British system without reserve ratios."*
Not only the financial power, but also the legal power, has remained
seated in Britain. The Washington Post commented on June 18, 1983 that after the
American Revolution, all the old laws remained in effect in the new United States: Some of
these laws of "English common law" dated back to 1278, long before America was
discovered.
This enormous financial power of "the City" is revealed in many
areas. Dean Acheson states, in "Present at the Creation", 1969, W.W. Norton, New
York, p. 779, "We stayed at the embassy residence, the old J.P. Morgan mansion, 14
Prince’s Gate, facing Hyde Park." How many Americans are aware that the U.S.
Embassy residence in London is the J.P. Morgan home, or that Dean Acheson, a former Morgan
employee, described himself as Secretary of State on p. 505, "My own attitude had
long been, and was known to have been, pro-British." No one commented on an American
Secretary of State’s open bias in favor of England.
The Federal Reserve "created" money is not used only for
financial matters; this money is also used to maintain the bankers’ control of every
aspect of political, economic and social life. It is used to bankroll the enormous
expenditures of political candidates, the swollen budgets of universities, the huge
outlays required to start newspapers or magazines, and a vast array of foundations,
"think-tanks" and other instruments of mind control.
Psychological Warfare
Few Americans know that almost every development in psychology in the
United States in the past sixty-five years has been directed by the Bureau of
Psychological Warfare of the British Army. A short time ago,
__________________________
* Harpers Magazine, Feb. 1980
183
the present writer learned a new name, The Tavistock Institute of London,
also known as the Tavistock Institute of Human Relations. "Human relations"
covers every aspect of human behavior, and it is the modest goal of the Tavistock
Institute to obtain and exercise control over every aspect of human behavior of American
citizens.
Because of the intensive artillery barrages of World War I, many soldiers
were permanently impaired by shell shock. In 1921, the Marquees of Tavistock, 11th Duke of
Bedford, gave a building to a group which planned to conduct rehabilitation programs for
shell shocked British soldiers. The group took the name of "Tavistock Institute"
after its benefactor. The General Staff of the British Army decided it was crucial that
they determine the breaking point of the soldier under combat conditions. The Tavistock
Institute was taken over by Sir John Rawlings Reese, head of the British Army
Psychological Warfare Bureau. A cadre of highly trained specialists in psychological
warfare was built up in total secrecy. In fifty years, the name "Tavistock
Institute’ appears only twice in the Index of the New York Times, yet this
group, according to LaRouche and other authorities, organized and trained the entire
staffs of the Office of Strategic Services (OSS), the Strategic Bombing Survey, Supreme
Headquarters of the Allied Expeditionary Forces, and other key American military groups
during World War II. During World War II, the Tavistock Institute combined with the
medical sciences division of the Rockefeller Foundation for esoteric experiments with
mind-altering drugs. The present drug culture of the United States is traced in its
entirety to this Institute, which supervised the Central Intelligence Agency’s
training programs. The "LSD counter culture" originated when Sandoz A.G., a
Swiss pharmaceutical house owned by S.G. Warburg & Co., developed a new drug from
lysergic acid, called LSD. James Paul Warburg (son of Paul Warburg who had written the
Federal Reserve Act in 1910), financed a subsidiary of the Tavistock Institute in the
United States called the Institute for Policy Studies, whose director, Marcus Raskin, was
appointed to the National Security Council. James Paul Warburg set up a CIA program to
experiment with LSD on CIA agents, some of whom later committed suicide. This program,
MK-Ultra, supervised by Dr. Gottlieb, resulted in huge lawsuits against the United States
Government by the families of the victims.
The Institute for Policy Studies set up a campus subsidiary, Students for
Democratic Society (SDS), devoted to drugs and revolution. Rather than finance SDS
himself, Warburg used CIA funds, some twenty million dollars, to promote the campus riots
of the 1960s.
The English Tavistock Institute has not restricted its activities to
left-wing groups, but has also directed the programs of such supposedly
"conservative" American think tanks as the Herbert Hoover Institute at Stanford
University, Heritage Foundation, Wharton, Hudson, Massachusetts Institute of Technology,
and Rand. The "sensitivity train-
184
ing" and "sexual encounter" programs of the most radical
California groups such as Esalen Institute and its many imitators were all developed and
implemented by Tavistock Institute psychologists.
One of the rare items concerning the Tavistock Institute appears in Business
Week, Oct. 26, 1963, with a photograph of its building in the most expensive medical
offices area of London. The story mentions "the Freudian bias" of the Institute,
and comments that it is amply financed by British blue-chip corporations, including
Unilever, British Petroleum, and Baldwin Steel. According to Business Week, the
psychological testing programs and group relations training programs of the Institute were
implemented in the United States by the University of Michigan and the University of
California, which are hotbeds of radicalism and the drug network.
It was the Marquees of Tavistock, 12th Duke of Bedford, whom Rudolf Hess
flew to England to contact about ending World War II. Tavistock was said to be worth $40
million in 1942. In 1945, his wife committed suicide by taking an overdose of pills.
185
186
BIOGRAPHIES
NELSON ALDRICH (1841-1915)
Senator from Rhode Island; head of National Monetary Commission; his
daughter Abby Aldrich married John D. Rockefeller, Jr.; he became the grandfather of his
namesake. Nelson Aldrich Rockefeller, as well as the present David Rockefeller and
Laurence Rockefeller.
WILLIAM JENNINGS BRYAN (1860-1925)
Woodrow Wilson’s Secretary of State, three times losing presidential
candidate of the Democratic Party, in 1896, 1900, and 1908, and head of the Democratic
Party.
ALFRED OWEN CROZIER (1863-1939)
A prominent attorney in Grand Rapids, Cincinnati, and New York, Crozier
wrote eight books on legal and monetary problems, focussing on his opposition to the
supplanting of Constitutional money by the corporation currency printed by private firms
for their profit.
CLARENCE DILLON (1882-1979)
Born in San Antonio, Texas, son of Samuel Dillon and Bertha Lapowitz.
Harvard, 1905. Married Anne Douglass of Milwaukee. His son, C. Douglas Dillon (later
Secretary of the Treasury, 1961-65) was born in Geneva, Switzerland in 1909 while they
were abroad. Dillon met William A. Read, founder of the Wall Street bond broker William A.
Read and Company, through introduction by Harvard classmate William A. Phillips in 1912
and Dillon joined Read’s Chicago office in that year. He moved to New York in 1914.
Read died in 1916, and Dillon bought a majority interest in the firm. During World War 1,
Bernard Baruch, chairman of the War Industries Board, (known as the Czar of American
industry) asked Dillon to be assistant chairman of the War Industries Board. In 1920,
William A. Read & Company name was changed to Dillon, Read & Company. Dillon was
director of American Foreign Securities Corporation, which he had set up in 1915 to
finance the French Government’s purchases of munitions in the United States. His
righthand man at Dillon Read, James Forrestal, became Secretary of the Navy, later
Secretary of Defense, and died under mysterious circumstances at a Federal hospital. In
1957, Fortune Magazine listed Dillon as one of the richest men in the United States, with
a fortune then estimated to be from $150 to $200 million.
ALAN GREENSPAN (1926- )
Appointed by President Reagan to succeed Paul Volcker as Chairman of the
Board of Governors of the Federal Reserve System in 1987. Greenspan had succeeded Herbert
Stein as chairman of the President’s Council of Economic
187
Advisors in 1974. He was the prot�g� of former chairman of the Board of
Governors, Arthur Burns of Austria (Bernstein). Burns was a monetarist representing the
Rothschild’s Viennese School of Economics, which manifested its influence in England
through the Royal Colonial Society, a front for Rothschilds and other English bankers who
stashed their profits from the world drug trade in the Hong Kong Shanghai Bank. The staff
economist for the Royal Colonial Society was Alfred Marshall, inventor of the monetarist
theory, who, as head of the Oxford Group, became the patron of Wesley Clair Mitchell, who
founded the National Bureau of Economic Research for the Rockefellers in the United
States. Mitchell, in turn, became the patron of Arthur Burns and Milton Friedman, whose
theories are now the power techniques of Greenspan at the Federal Reserve Board. Greenspan
is also the prot�g� of Ayn Rand, a weirdo who interposed her sexual affairs with
guttural commands to be selfish. Rand was also the patron of CIA propagandist William
Buckeley and the National Review. Greenspan was director of major Wall Street firms such
as J.P. Morgan Co., Morgan Guaranty Trust (the American bank for the Soviets after the
Bolshevik Revolution of 1917), Brookings Institution, Bowery Savings Bank, the Dreyfus
Fund, General Foods, and Time, Inc. Greenspan’s most impressive achievement was as
chairman of the National Commission on Social Security from 1981-1983. He juggled figures
to convince the public that Social Security was bankrupt, when in fact it had an enormous
surplus. These figures were then used to fasten onto American workers a huge increase in
Social Security withholding tax, which invoked David Ricardo’s economic dictum of the
iron law of wages, that workers could only be paid a subsistence wage, and any funds
beyond that must be extorted from them forcibly by tax increases. As a partner of J.P.
Morgan Co. since 1977, Greenspan represented the unbroken line of control of the Federal
Reserve System by the firms represented at the secret meeting on Jekyll Island in 1910,
where Henry P. Davison, righthand man of J.P. Morgan, was a key figure in the drafting of
the Federal Reserve Act. Within days of taking over as chairman of the Federal Reserve
Board, Greenspan immediately raised the interest rate on Sept. 4, 1987, the first such
increase in three years of general prosperity, and precipitated the stock market crash of
Oct., 1987, Black Monday, when the Dow Jones average plunged 508 points. Under
Greenspan’s direction, the Federal Reserve Board has steadily nudged the United
States deeper and deeper into recession, without a word of criticism from the complaisant
members of Congress.
COLONEL EDWARD MANDELL HOUSE (1858-1938)
Son of a Rothschild agent in Texas. Succeeded in electing five consecutive
governors of Texas; became Woodrow Wilson’s advisor in 1912. Cooperated with Paul
Warburg to get the Federal Reserve Act passed by Congress in 1913.
ROBERT MARION LAFOLLETTE (1855-1925)
Served in Senate from Wisconsin 1905-25. Led agrarian reformers in
opposing Eastern bankers and their plans for the Federal Reserve Act. Ran for President in
1924 on Progressive-Socialist ticket.
188
CHARLES AUGUSTUS LINDBERGH, SR. (1860-1924)
Congressman from Minnesota (1907-1917) who led the fight against enactment
of the Federal Reserve Act in 1913. He served until 1917 when he resigned to run for
governor of Minnesota. He ran a good campaign despite adverse newspaper attacks led by The
New York Times. His campaign was adversely affected when Federal agents burned his books,
including Why Is Your Country At War? and the papers and contents of his home office in
Little Falls, Minnesota.
LOUIS T. McFADDEN (1876-1936)
Congressman and Chairman of the House Banking and Currency Committee,
1927-33; courageously opposed the manipulators of the Federal Reserve System in the
1920’s and the 1930’s. Introduced bills to impeach Federal Reserve Board of
Governors and allied officials. After three attempts on his life, he died mysteriously.
JOHN PIERPONT MORGAN (1837-1913)
Considered the dominant American financier at the turn of the century.
Who’s Who in 1912 stated he "controls over 50,000 miles of railroads in the
United States." Organized United States Steel Corporation. Became representative of
House of Rothschild through his father, Junius S. Morgan, who had become London partner of
George Peabody & Company, later Junius S. Morgan Company, a Rothschild agent. John
Pierpont Morgan, Jr. succeeded his father as head of the Morgan empire.
DAVID MULLINS (1946- )
Appointed Governor of the Federal Reserve Board May 21, 1990, David
Mullins’ term runs to Jan. 31, 1996. He was recently nominated to serve as Vice
Chairman of the Federal Reserve Board, and served as Assistant Secretary of the Treasury
for Domestic Finance 1988-90, receiving the department’s highest award, the Alexander
Hamilton Award, for his service in such programs as synthetic fuels, federal finance, Farm
Credit Assistance Board, and author of the President’s Plan for rescuing the savings
and loan institutions. He is a distant cousin of the author, descended from John Mullins,
the first recorded settler in the western area of Virginia, hero of the battle of
King’s Mountain, and recipient of a 200 acre grant of land for his service in the
American Revolution.
WRIGHT PATMAN (1893-1976)
Congressman and Chairman of the House Banking and Currency Committee
1963-74. Led the fight in Congress to stop the manipulators of the Federal Reserve System
from 1937 to his death in 1976.
CONGRESSMAN ARSENE PUJO
Served in Congress 1903-1913. Democrat from Louisiana. Chairman of House
Banking and Currency Committee. Chairman of "Pujo Hearings" Subcommittee, 1912.
189
SIR GORDON RICHARDSON (1915- )
Head of the Bank of England since 1973. Chairman J. Henry Schroder Wagg,
London, 1962-72; director of J. Henry Schroder Banking Corporation, New York; Schroder
Banking Corporation, New York; Lloyd’s Bank, London; Rolls Royce.
JACOB SCHIFF (1847-1920)
Born in Rothschild house in Frankfurt, Germany. Emigrated to United
States, married Therese Loeb, daughter of Solomon Loeb, founder of Kuhn, Loeb and Co.
Schiff became senior partner of Kuhn, Loeb and Co., and as representative of Rothschild
interests gained control of most of railway mileage in United States.
BARON KURT VON SCHRODER (1889- )
Adolph Hitler’s personal banker, advanced funds for Hitler’s
accession to power in Germany in 1933; German representative of the London and New York
branches of J. Henry Schroder Banking Corporation; SS Senior Group Leader; director of all
German subsidiaries of I.T.T; Himmler’s Circle of Friends; advisor to board of
directors, Deutsche Reichsbank (German central bank).
ANTHONY MORTON SOLOMON (1919- )
Educated at Harvard, economist Office of Price Administration, 1941-42;
financial mission to Iran, 1942-46; Agency for international Development South America,
1965-69; president international Investment Corporation for Yugoslavia 1969-72; advisor to
Chairman, Ways and Means Committee, House of Representatives, 1972-73; Undersecretary
Monetary Affairs, U.S. Treasury, 1977-80; president Federal Reserve Bank of New York,
1980-
SAMUEL UNTERMYER (1858-1940)
A partner of the law firm of Guggenheimer and Untermyer of New York, who
conducted the "Pujo Hearings" of the House Banking and Currency Committee in
1912. Counsel for Rogers and Rockefeller in many large suits against F. Augustus Heinze,
Thomas W Lawson and others. Earned a single fee of $775,000 for handling merger of Utah
Copper Company. Reported in The New York Times May 26, 1924 as urging immediate
recognition of Soviet Russia at Carnegie Hall meeting. Untermyer’s prestige and power
is illustrated by the fact that this front page obituary in The New York Times covered six
columns. His listing in Who’s Who was the longest for thirteen years.
FRANK VANDERLIP (1864-1937)
Assistant Secretary of Treasury 1897-1901; won prestige for financing
Spanish American War by floating $200,000,000 in bonds during his incumbency for what is
known as "National City Bank’s War" President of National City Bank
1909-19. One of the original Jekyll Island group who wrote Federal Reserve Act in
November, 1910. No mention of this important fact is made in extensive obituary in The New
York Times, June 30, 1937.
190
GEORGE SYLVESTER VIERECK (1884-1962)
Author of the definitive study The Strangest Friendship in History,
Woodrow Wilson and Col. House, Liveright, 1932. A leading poet of the early 1900’s,
reviewed on the front page of The New York Times Book Review, and known as the leading
German-American citizen of the United States.
PAUL VOLCKER (1927- )
Chairman of the Federal Reserve Board of Governors since 1979, appointed
by President Carter, reappointed by President Reagan for another four year term beginning
August 6, 1983. Educated at Princeton, Harvard and London School of Economics; employed by
Federal Reserve Bank of New York, 1952-57; Chase Manhattan Bank, 1957-61; Treasury
Department, 1961-74; president Federal Reserve Bank of New York, 1975-79.
PAUL WARBURG (1868-1932)
Conceded to be the actual author of our central bank plan, the Federal
Reserve System, by knowledgeable authorities. Emigrated to the United States from Germany
1904; partner, Kuhn Loeb and Company bankers, New York; naturalized 1911. Member of the
original Federal Reserve Board of Governors, 1914-1918; president Federal Advisory
Council, 1918-1928. Brother of Max Warburg, who was head of German Secret Service during
World War I and who represented Germany at the Peace Conference, 1918-1919, while Paul was
chairman of the Federal Reserve System.
SIR WILLIAM WISEMAN (1885-1962)
Partner of Kuhn, Loeb and Company; head of British Secret Service during
World War I. Worked closely with Col. House dominating the United States and England.
191
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192
BIBLIOGRAPHY
Newspapers:
New York Times 1858-1983
Washington Post 1933-1983
Periodicals:
Barron’s Weekly 1921-1983
Business Week 1929-1983
Forbes Magazine 1917-1983
Fortune 1930-1983
Harper’s 1850-1983
National Review 1955-1983
Newsweek 1933-1983
The Nation 1865-1983
The New Republic 1914-1983
Time 1923-1983
Books:
Current Biography 1940-1983 H.W. Wilson Co., N.Y.
Dictionary of National Biography, Scribners, N.Y. 1934-1965
Directory of Directors, London 1896-1983
Directory of Directors In The City of New York 1898-1918
The Concise Dictionary of National Biography, 1903-1979, Oxford University
Press
Congressional Record 1910-1983
International Index to Periodicals 1920-1965, H.W. Wilson Co., N.Y.
Poole’s Index to Periodical Literature 1802-1906, Wm. T Poole,
Chicago
Readers Guide to Periodicals 1900-1983
Rand McNally’s Bankers Guide 1904-1928
Moody’s Banking and Finance 1928-1968
Who’s Who in America 1890-1983, A.N. Marquis Co.
Who’s Who, Great Britain 1921-1983
Who Was Who In America 1607-1906, A.N. Marquis Co.
Who’s Who in the World 1972-1983, A.N. Marquis Co.
Who’s Who in Finance and Industry 1936-1969, A.N. Marquis Co.
193
Standard and Poor’s Register of Directors 1928-1983
Senate Committee Hearings on Federal Reserve Act, 1913
House Committee Hearings on Federal Reserve Act, 1913
House Committee Hearings on the Money Trust (Pujo Committee) 1913
House Investigation of Federal Reserve System, 1928
Senate Investigation of Fitness of Eugene Meyer to be a Governor of the
Federal
Reserve Board, 1930
Senate Hearings on Thomas B. McCabe to be a Governor of the Federal
Reserve
System, 1948
House Committee Hearings on Extension of Public Debt, 1945
Federal Reserve Directors: A Study of Corporate and Banking Influence.
Staff Report, Committee on Banking, Currency and Housing, House of
Representatives, 94th Congress, 2d Session, August, 1976.
The Federal Reserve System, Purposes and Functions, Board of Governors,
1963
A History of Monetary Crimes, Alexander Del Mar, the Del Mar Society, 1899
Fiat Money Inflation in France, Andrew Dickson White, Foundation for
Economic Education, N.Y. 1959
The War on Gold, Antony C. Sutton, 76 Press, California, 1977
Wall Street and the Rise of Hitler, Antony C. Sutton, 76 Press,
California, 1976
Collected Speeches of Louis T McFadden, Congressional Record
The Truth About Rockefeller, E.M. Josephson, Chedney Press, N.Y. 1964
The Strange Death of Franklin D. Roosevelt, E.M. Josephson, Chedney Press,
N.Y. 1948
Behind the Throne, Paul Emden, Hoddard Stoughton, London, 1934
The Money Power of Europe, Paul Emden, Hoddard Stoughton, London
The Robber Barons, Mathew Josephson, Harcourt Brace, N.Y. 1934
The Rothschilds, Frederic Morton, Curtis Publishing Co., 1961
The Magnificent Rothschilds, Cecil Roth, Robert Hale Co., 1939
Pawns In The Game, William Guy Carr, (privately printed), 1956
Tearing Away the Veils, Francois Coty, Paris, 1940
Writers on English Monetary History, 1626-1730, London, 1896
The Federal Reserve System After Fifty Years, Committee on Banking and
Currency, Jan., Feb. 1964
The Bankers’ Conspiracy, Arthur Kitson, 1933
Laws Of The United States Relating to Currency, Finance and Banking From
1789 to 1891, Charles F. Dunbar, Ginn & Co., Boston, 1893
Monetary Policy of Plenty Instead of Scarcity, Committee on Banking and
Currency, 1937-1938
The Strangest Friendship In History, Woodrow Wilson and Col. House, George
Sylvester Viereck, Liveright, N.Y. 1932
Federal Reserve Policy Making, G.L. Bach, Knapf, N.Y. 1950
Rulers of America, A Study of Finance Capital, Anna Rockester,
International
Publishers, N.Y. 1936
194
Banking in the United States Before the Civil War, National Monetary
Commission, 1911
National Banking System, National Monetary Commission, 1911
The Federal Reserve System, Paul Warburg, Macmillan, N.Y. 1930
Roosevelt, Wilson and the Federal Reserve Law, Col. Elisha Garrison,
Christopher Publishing House, Boston, 1931
Men Who Run America, Arthur D. Howden Smith, Bobbs Merrill, N.Y., 1935
Financial Giants of America, George E Redmond, Stratford, Boston, 1922
The Great Soviet Encyclopaedia, Macmillan, London, 1973
Encyclopaedia Britannica, 1979
Encyclopaedia Americana, 1982
Dope, Inc., Goldman, Steinberg et at, New Benjamin Franklin House
Publishing
Company, N.Y. 1978
Banking and Currency and the Money Trust, Charles A. Lindbergh, Sr. 1913
The Strange Career of Mr. Hoover Under Two Flags, John Hamill, William
Faro,
N.Y. 1931
The Federal Reserve System, H. Parker Willis, Ronald Co., 1923
A.B.C. of the Federal Reserve System, E.W. Kemmerer, Princeton Univ., 1919
Adventures in Constructive Finance, Carter Glass, Doubleday, N.Y. 1927
Banking Reform in the United States, Paul Warburg, Columbia Univ., 1914
U.S. Money vs. Corporation Currency, Alfred Crozier, Cleveland, 1912
Philip Dru, Administrator, E.M. House, B.W. Huebsch, N.Y. 1912
The Intimate Papers of Col. House, edited by Charles Seymour, 4 v.
1926-1928,
Houghton Mifflin Co.
The Great Conspiracy of the House of Morgan, H.W. Loucks, 1916
Capital City, McRae and Cairncross, Eyre Methuen, London, 1963
Aggression, Otto Lehmann-Russbeldt, Hutchinson, London, 1934
The Empire of High Finance, Victor Perlo, International Pub., 1957
Memoirs of Max Warburg, Berlin, 1936
Letters and Friendships of Sir Cecil Spring-Rice
Tragedy and Hope, Carroll Quigley, Macmillan, N.Y.
The Politics of Money, Brian Johnson, McGraw Hill, N.Y. 1970
A Primer on Money, House Banking and Currency Committee, 1964
Pierpont Morgan and Friends, The Anatomy of A Myth, George Wheeler,
Prentice Hall, N.J., 1973
Pierpont Morgan, Herbert Satterleee, Macmillan, N.Y., 1940
Morgan the Magnificent, John K. Winkler, Vanguard, N.Y., 1930
Wilson, Arthur Link (5 vol.) Princeton University Press, Princeton, N.J.
Historical Beginning… The Federal Reserve, Roger T Johnson, Federal
Reserve
Bank of Boston, 1977 (7 printings, 1977-1982, totaling 92,000 copies.) [It
is noteworthy that this 64 page booklet makes no mention of Jekyll Island,
Paul Warburg’s authorship, or source of promotion funds which
resulted
in enactment of the Federal Reserve Act on December 23, 1913.]
The Federal Reserve and Our Manipulated Dollar, Martin A. Larson, Devin
Adair
Co., Old Greenwich, Conn., 1975
195
Chain Banking, Stockholder and Loan Links of 200 Largest Member Banks,
House Banking and Currency Committee, Jan. 3, 1963
International Banking, Staff Report, Committee on Banking Currency and
Housing, May 1976
Audit of the Federal Reserve System, Hearings Before the House Banking and
Currency Committee, 1975.
196
INDEX
| A Abbot, Lawrence--22 Adams, John Quincy--48 Aldrich,
Nelson--1, 2, 3, 6, 7, 8, 9, 10, 11, 19, 21, 22, 30, 33, 36 Aldrich-Vreeland Emergency
Currency Bill--12, 19, 20, 22 Allen, W.H.--33 American Acceptance Council--128 American
Bankers Association--13, 127 American Relief Administration-- 74, 78 Andrew, A. Piatt--1
Astor, John Jacob--64, 65 Auchincloss, Gordon--107 B Bagdikian, Ben H.--61 Baker, George
F.--16, 42, 43, 47, 66, 67 Baker, George F., Jr.--66 Bank of England--32, 42, 51, 52, 58,
59, 68, 69, 80, 123, 129, 131, 133, 142, 146, 180 Bank of France--32, 135 Banking Act of
1935--29, 159 Barnes, Julius--73, 74 Barron, Clarence W.--30 Baruch, Bernard--17, 26, 28,
74, 86, 89, 90, 94, 99, 109, 111, 112, 139, 147, 151 Bechtel Corporation--77, 79 Belgian
Relief Commission--69, 70, 72, 73, 74, 78, 83 Belmont, August--53 Biddle, Nicholas--6, 50
Bilderbergers--54, 172 Bleichroder, Samuel--59 Blumenthal, George--14 |
Brandeis, Justice Louis--87, 109 Bristow, Senator--38
Brookhart, Senator--117 Brown, Alexander--49 Alex Brown & Son--49 Brown Brothers
Bankers--22, 49, 131 Brown Brothers Harriman--22, 48, 49, 61, 68, 79, 131, 171, 172, 175
Brown Shipley & Company--49, 68 Bryan, William Jennings--26, 29, 82, 83, 118 Bull
Moose Party--18 Bush, George--49 Bush, Prescott--49 Byrnes, James--17 C Canaris,
Admiral--62 Carr, William Guy--53, 55 Carter, Jimmy--171, 172, 173 Cassel, Ernest--59
Cavell, Edith--72, 73 Central Bank--5 Chamberlain, Neville--78 Churchill, Winston--78, 123
Clark, Champ--29 Clay, John--182 Clews, Henry--50 Cooper, Kent--60 Council on Foreign
Relations--35, 54, 81, 172 Crissinger, D.R.--141 Cromwell, Oliver--58 Crozier, Alfred--20
D Dabney, Charles H.--50, 51 Davison, Daniel--63 |
197
| Davison, Henry P.--1, 2, 4, 33, 43, 44, 66, 103 Debs,
Eugene--105 Delano, F.A.--36, 114 Delano, Warren--36 Dodge, Cleveland H.--103, 105 Drexel,
Anthony--53 Drexel & Company--48, 54 Dulles, Allen--62, 75, 76 Dulles, John
Foster--75, 81 Duncan Sherman Company--50 E Eccles, Marriner--122, 126, 159, 162, 163,
164, 167, 168, 169 Eisenhower, Dwight D.--75, 81 Ellery, William--48 Emden, Paul--36, 60 F
Federal Advisory Council--6, 19, 40, 41, 42, 43, 44, 45, 113, 116, 117, 119, 128, 129, 144
Federal Reserve Act--7, 9, 15, 16, 18, 19, 21, 23, 26, 27, 28, 29, 30, 31, 33, 34, 35, 40,
45, 64, 82, 125, 126, 139, 162, 168, 171 Federal Reserve Banks--6, 8, 34, 35, 40, 41, 44,
83 Federal Reserve Board of Governors--6, 14, 19, 23, 29, 31, 32, 34, 35, 36, 37, 38, 39,
41, 42, 44, 45, 64, 78, 86, 87, 95, 112, 119, 124, 125, 126 128, 129, 133, 139, 140, 143,
144, 145, 146, 149, 154, 157, 159, 162, 163, 165, 169, 171, 172, 180 Federal Reserve
System--5, 6, 7, 8, 19, 21, 29, 30, 32, 35, 40, 41, 42, 43, 63, 67, 82, 84, 113, 114, 115,
118, 119, 120, 121, 122, 127, 128, 132, 134, 139, 140, 141, 143, 146, 158, 162, 163, 164,
165, 166, 168, 169, 170, 176, 180 |
Ferdinand, Archduke--69 First Name Club--3, 8, 33 First
National Bank of N.Y.--1, 34, 41, 42, 44, 47, 64, 66, 67 Forbes, B.C.--2, 7 Forbes,
Malcom--2 Forgan, James B.--41, 42 Frame, Andrew--13, 14 Francqui, Emile--69, 70, 71, 72 G
Garfield, James A.--20 Garrison, Col. Ely--22, 23, 120 Gates, Thomas S.--48 Glass,
Carter--13, 14, 19, 21, 22, 29, 30, 34, 40, 45, 114, 116, 117, 138, 160 Glass-Steagall
Banking Act--159 Goldenweiser, Emanuel--118, 136, 146, 148 Graham, Katherine--97 Gray,
Prentiss--73, 78 Guggenheim--90 H Hamill, John--69, 70 Hamilton, Alexander--5 Hamlin,
Charles S.--36, 129, 138, 147 Hanauer, Jerome J.--87, 95, 99 Harding, W.P.G.--36, 103,
121, 157 Harriman, E.H.--67, 90 Harriman, Mary--67 Harrison, George L.--132 Herrick, Myron
T.--117 Hess, Rudolf--78 Hill, James J.--47 Hiss, Alger--24, 83 Hiss, Donald--24 Hitler,
Adolf--75, 76, 77, 78, 79, 81 Hoover, Herbert H.--69, 70, 71, 72, 73, 74, 78, 139, 149,
150, 151, 158 House, Col. Edward Mandel--21, 23, 24, 25, 26, 27, 29, 30, 31, 36, 79, 88,
107, 109, 111 Hull, Cordell--84 |
198
| I International Acceptance Bank-- 128, 144 Insull,
Samuel--148 J Jackson, Andrew--5, 50 Jaffray, C.T.--43 James, F. Cyril--42 Jefferson,
Thomas--5, 7, 35 Jekyll Island--2, 3, 4, 5, 8, 9, 10, 11, 12, 20, 29, 33, 41, 44, 171
Jekyll Island Club--3 Jones, Thomas D.--36, 38, 39 Josephson, Matthew--60, 67 Juillard,
A.D.--67 K Kahn, Otto--19, 38, 66, 107 Kains, Archibald--43 Kaiping Coal Mines--70
Kemmerer, E.W.--85, 124 Kreuger, Ivar--71, 148, 149 Kuhn, Loeb Company--1, 17, 18, 21, 33,
35, 36, 37, 38, 39, 41, 44, 47, 48, 61, 66, 67, 71, 72, 74, 81, 83, 85, 86, 87, 88, 89,
99, 101, 103, 119, 127, 128, 146, 174, 175 L LaFollette, Senator Robert M.--16, 17, 18
Lamont, T.W.--2, 109, 111, 128 Laughlin, J. Lawrence--10, 11, 33 Lazard Freres--14, 34,
53, 61, 68, 74, 76, 94, 99, 152 League of Nations--136, 143, 170 Leguia, Juan--155 Lehman,
Herbert--101 Lehman Brothers--35, 66, 101, 175 Lincoln, Abraham--20, 65 Lindbergh, Charles
A., Sr.--11, 16, 17, 18, 28, 112 Loeb, Solomon--33 Lovett, Robert--48 Lundberg,
Ferdinand--32 |
Manati Sugar Corporation--73, 80, 81 Marbury,
Bessie--155 Markoe, James --131 Marshall, Louis--29 Martin, William McChesney--163 McAdoo,
William--19, 21, 26, 29, 32, 39, 99, 101, 114 McFadden, Louis--71, 72, 74, 75, 95, 127,
128, 133, 134, 135, 136, 137, 150, 151, 152, 153, 154 McIntosh, J.W.--103 Mellon,
Andrew--142, 147, 150 Meyer, Eugene--14, 17, 34, 61, 72, 74, 75, 94, 95, 99, 118, 122,
150, 151, 152, 153, 159, 171 Miller, Adolph C.--36, 129, 133, 134, 135, 136, 157, 166
Minsky--67 Money Trust--11, 12, 16 Montague, Samuel & Co.--38, 68 Moody, John--47, 52
Morgan Grenfell Company--63, 68 Morgan Harjes Company--54 Morgan, J.P.--1, 2, 3, 10, 16,
17, 18, 26, 32, 35, 41, 42, 43, 44, 47, 48, 49, 50, 51, 52, 53, 54, 66, 67, 75, 83, 101,
129, 146, 150, 160, 174, 176 Morgan, J.P. Company--1, 33, 35, 41, 47, 48, 53, 66, 123,
148, 174 Morgan, Joseph--51 Morgan, Junius S.--50, 51, 53, 65, 66 Morton, Frederic--56
Morton, Levi P.--67 Mountbatten, Philip--60 N Napoleon de Bonaparte--57 Nation, The--12,
16, 19, 30, 37 National Bank Act of 1864--125 National Citizen’s League--10, 11
National City Bank--21, 33, 34, 41, 64, 65, 66, 112, 126, 127 National Monetary
Commission--1, |
199
| 4, 5, 10, 11, 12, 13, 14, 15, 33, 124, 125 National
Recovery Act--159, 168 National Reserve Plan--7 New York Times--27, 28, 29, 33, 35, 37,
40, 44, 61, 71, 74, 75, 80, 112, 119, 126, 144, 166, 171 Norman, Lord Montagu--49, 76, 77,
123, 129, 131, 132, 133, 142, 150 Norten, Charles D.--1, 33 O O’Gorman, Senator--14,
38 Owen, Robert L.--17, 19, 29, 38, 39, 40, 41, 116, 119, 138, 157, 161 Owen-Glass
Bill--21 P Page, Walter Hines--83 Panic of 1837--5, 50, 51, 65 Panic of 1857--51, 52, 65
Panic of 1907--1, 2, 5, 10, 12, 21 Paterson, William--58, 59 Patman, Wright--34, 164, 165,
167 Peabody, George--49, 50, 51, 52, 54, 65, 171 Peabody, Riggs & Co.--49 Pegler,
Westbrook--23 Pemberton, Robert Leigh--80 Pound, Ezra--58 Pressman, Lee--24 Princeps,
Gavrel--69 Pujo, Arsene--16 Pujo Committee--16, 17, 18, 149 Pyne, Moses Taylor--66 Pyne,
Percy--65, 66 Q Quigley, Dr. Carrol--53, 131 R Reagan, Ronald--77, 79, 80, 173, 175
Reichsbank--12, 132 Rhodes, Cecil--53 |
Richardson, Sir Gordon--80 Rickard, Edgar--74 Rionda,
M.E.--73 Rockefeller, David--171, 172, 176 Rockefeller, John D.--47, 65 Rockefeller,
William--47, 65 Rockefeller, William, Jr.--65 Roosa, Robert--54, 171, 172 Roosevelt,
Franklin Delano--23, 24, 30, 31, 84, 129, 137, 139, 145, 151, 155, 156, 158, 159, 162,
169, 170 Roosevelt, Theodore--1, 18, 19, 22, 38, 82 Rosebury, Lord--53 Rothschild, Baron
Alfred--23, 60 Rothschild, House of--17, 47, 48, 50, 52, 53, 54, 60 Rothschild, James--5,
50, 57, 59, 61, 66, 109 Rothschild, Leopold--60 Rothschild, Mayer Amschel--55, 56
Rothschild, N.M.--48, 49, 51, 53, 57, 58, 59, 68, 171 Round Table--53, 54, 62 Rowe,
W.S.--43, 70 Rue, Levi L.--42 Ryan, John Barry--66 Ryan, Thomas Fortune--66 Ryan, Virginia
Fortune--66 S Schiff, Jacob--17, 19, 26, 29, 42, 47, 66, 67, 86, 87, 90, 149 Schiff,
John--66 Schiff, Ludwig--87 Schiff, Philip--87 Schoellkopf Family--34 Scholey, David--182
Schroder, Baron Bruno Von--69, 76 Schroder, Baron Rudolph Von--76 Schroder, J. Henry
Co.--48, 67, 68, 69, 71, 73, 74, 75, 76, 77, 78, 79, 80, 81, 175, 176, 179, 180 Schultz,
George--79 Seligman, E.R.A.--9 Seligman, J. & W.--9, 17, 71, 109, 114, 155 |
200
| Seymour, Charles--31 Shaw, Leslie--14 Shelton--1, 2
Simpson, John Lowery--78 Smith, Rixey--29, 112 Sontag, Susan--61 Sprague, O.M.W.--11, 114,
161 Spring-Rice, Sir Cecil--89 St. George, George F.--66 St. George, Katherine--66
Sterling, John W.--66 Stillman, Don Carlos--65 Stillman, James--8, 47, 65, 66 Stimson,
Henry L.--161 Stone, Senator--21 Strauss, Albert--112, 114, 122, 140, 141, 157 Strong,
Benjamin--1, 3, 32, 33, 44, 118, 123, 129, 131, 132, 133, 137, 138 Sugar Equalization
Board--74 Swinney, E.F.--43 T Taft, William Howard--18, 19, 38, 82 Taylor, Congressman--14
Taylor, H.A.C.--66 Taylor, Moses--64, 65, 66 Tavistock Institute--80, 184, 185 Thalmman,
Ladenburg--17 Tiarks, Frank Cyril--69, 73, 76, 77 Tientsin Railroad--72 Tobacco Trust--89
Trilateral Commission--35, 54, 172 Tugwell, Rexford Guy--162 U Untermeyer, Samuel--17, 18
U.S. Food Administration--73, 74, 78, 87 V Vanderlip, Frank--1, 2, 3, 8, 9, 19, 33, 44,
161 |
Vickers Sons & Maxim--60 Viereck, George--23, 25, 27
Volcker, Paul--34, 171, 172, 173, 183 Vreeland, Edward--12 W War Finance Corporation--24,
86, 94, 95, 97, 99, 151, 153 War Industries Board--74, 86, 90, 151 Warburg, Felix--38, 86,
87, 128, 129 Warburg, James Paul--128, 129, 156, 161 Warburg, M.M. Company--12, 17, 34, 54
Warburg, Max--84, 86, 87, 88, 111 Warburg, Paul Moritz--1, 2, 3, 4, 5, 6, 7, 8, 9, 12, 14,
19, 21, 22, 23, 24, 26, 28, 29, 30, 33, 34, 36, 37, 38, 40, 41, 42, 43, 44, 48, 66, 71,
74, 84, 86, 87, 88, 89, 99, 111, 112, 115, 117, 119, 120, 122, 126, 127, 128, 138, 144,
148, 156, 157, 164 Weinberger, Caspar--79 Wetmore, Frank O.--42 White, Harry Dexter--24
Williams, John Skelton--21, 32, 39, 101, 103, 140 Willis, H. Parker--132, 140, 142 Wilson,
Woodrow--10, 17, 18, 19, 22, 23, 24, 25, 26, 28, 29, 30, 32, 36, 38, 39, 41, 82, 83, 84,
85, 86, 87, 88, 89, 90, 99, 101, 103, 105, 107, 109, 111, 112, 117, 137, 139, 140, 141,
156 Wing, Daniel S.--43 Wiseman, Sir William--73, 88, 105, 107, 111 Z Zabriskie, G.A.--73,
74 |
201
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202
Questions and Answers
While lecturing in many countries, and appearing on radio and television
programs as a guest, the author is frequently asked questions about the Federal Reserve
System. The most frequently asked questions and the answers are as follows:
Q: What is the Federal Reserve System?
A: The Federal Reserve System is not Federal; it has no reserves; and it
is not a system, but rather, a criminal syndicate. It is the product of criminal
syndicalist activity of an international consortium of dynastic families comprising what
the author terms "The World Order" (see "THE WORLD ORDER" and
"THE CURSE OF CANAAN", both by Eustace Mullins). The Federal Reserve system is a
central bank operating in the United States. Although the student will find no such
definition of a central bank in the textbooks of any university, the author has defined a
central bank as follows: It is the dominant financial power of the country which harbors
it. It is entirely private-owned, although it seeks to give the appearance of a
governmental institution. It has the right to print and issue money, the traditional
prerogative of monarchs. It is set up to provide financing for wars. It functions as a
money monopoly having total power over all the money and credit of the people.
Q: When Congress passed the Federal Reserve Act on December 23, 1913, did
the Congressmen know that they were creating a central bank?
A: The members of the 63rd Congress had no knowledge of a central bank or
of its monopolistic operations. Many of those who voted for the bill were duped; others
were bribed; others were intimidated. The preface to the Federal Reserve Act reads
"An Act to provide for the establishment of Federal reserve banks, to furnish an
elastic currency, to afford means of rediscounting commercial papers, to establish a more
effective supervision of banking in the United States, and for other purposes." The
unspecified "other purposes" were to give international conspirators a monopoly
of all the money and credit of the people of the United States; to finance World War I
through this new central bank, to place American workers at the mercy of the Federal
Reserve system’s collection agency, the Internal Revenue Service, and to allow the
monopolists to seize the assets of their competitors and put them out of business.
Q: Is the Federal Reserve system a government agency?
A: Even the present chairman of the House Banking Committee claims that
the Federal Reserve is a government agency, and that it is not privately owned. The fact
is that the government has never owned a single share of Federal Reserve Bank stock. This
charade stems from the fact that the President of the United States appoints the Governors
of the Federal Reserve Board, who are then confirmed by the Senate. The secret author of
the Act, banker Paul Warburg, a representative of the Rothschild bank, coined the name
"Federal" from thin air for the Act, which he wrote to achieve two of his pet
aspirations, an "elastic currency", read (rubber check), and to facilitate
trading in acceptances, international trade credits. Warburg was founder and president of
the International Acceptance Corporation, and made billions in profits by trading in this
commercial paper. Sec. 7 of the Federal Reserve Act provides "Federal reserve banks,
including the capital and surplus therein, and income derived therefrom, shall be exempt
from Federal, state and local taxation, except taxes on real estate." Government
buildings do not pay real estate tax.
Q: Are our dollar bills, which carry the label "Federal Reserve
notes" government money?
A: Federal Reserve notes are actually promissory notes, promises to pay,
rather than what we traditionally consider money. They are interest bearing notes issued
against interest bearing government bonds, paper issued with nothing but paper backing,
which is known as fiat money, because it has only the fiat of the issuer to guarantee
these notes. The Federal Reserve Act authorizes the issuance of these notes "for the
purposes of making advances to Federal reserve banks... The said notes shall be
obligations of the United States. They shall be redeemed in gold on demand at the Treasury
Department of the United States in the District of Columbia." Tourists visiting the
Bureau of Printing and Engraving on the Mall in Washington, D.C. view the printing of
Federal Reserve notes at this governmental agency on contract from the Federal Reserve
System for the nominal sum of .00260 each in units of 1,000, at the same price regardless
of the denomination. These notes, printed for a private bank, then become liabilities and
obligations of the United States government and are added to our present $4 trillion debt.
The government had no debt when the Federal Reserve Act was passed in 1913.
Q: Who owns the stock of the Federal Reserve Banks?
A: The dynastic families of the ruling World Order, internationalists who
are loyal to no race, religion, or nation. They are families such as the Rothschilds, the
Warburgs, the Schiffs, the Rockefellers, the Harrimans, the Morgans and others known as
the elite, or "the big rich".
Q: Can I buy this stock?
A: No. The Federal Reserve Act stipulates that the stock of the Federal
Reserve Banks cannot be bought or sold on any stock exchange. It is passed on by
inheritance as the fortune of the "big rich". Almost half of the owners of
Federal Reserve Bank stock are not Americans.
Q: Is the Internal Revenue Service a governmental agency?
A: Although listed as part of the Treasury Department, the IRS is actually
a private collection agency for the Federal Reserve System. It originated as the Black
Hand in mediaeval Italy, collectors of debt by force and extortion for the ruling Italian
mob families. All personal income taxes collected by the IRS are required by law to be
deposited in the nearest Federal Reserve Bank, under Sec. 15 of the Federal Reserve Act,
"The moneys held in the general fund of the Treasury may be ....deposited in Federal
reserve banks, which banks, when required by the Secretary of the Treasury, shall act as
fiscal agents of the United States."
Q: Does the Federal Reserve Board control the daily price and quantity of
money?
A: The Federal Reserve Board of Governors, meeting in private as the
Federal Open Market Committee with presidents of the Federal Reserve Banks, controls all
economic activity throughout the United States by issuing orders to buy government bonds
on the open market, creating money out of nothing and causing inflationary pressure, or,
conversely, by selling government bonds on the open market and extinguishing debt,
creating deflationary pressure and causing the stock market to drop.
Q: Can Congress abolish the Federal Reserve System?
A: The last provision of the Federal Reserve Act of 1913, Sec. 30, states,
"The right to amend, alter or repeal this Act is expressly reserved." This
language means that Congress can at any time move to abolish the Federal Reserve System,
or buy back the stock and make it part of the Treasury Department, or to altar the System
as it sees fit. It has never done so.
Q: Are there many critics of the Federal Reserve beside yourself?
A: When I began my researches in 1948, the Fed was only thirty-four years
old. It was never mentioned in the press. Today the Fed is discussed openly in the news
section and the financial pages. There are bills in congress to have the Fed audited by
the Government Accounting Office. Because of my expose, it is no longer a sacred cow,
although the Big Three candidates for President in 1992, Bush, Clinton and Perot, joined
in a unanimous chorus during the debates that they were pledged not to touch the Fed.
Q: Have you suffered any personal consequences because of your expose of
the Fed?
A: I was fired from the staff of the Library of Congress after I published
this expose in 1952, the only person ever discharged from the staff for political reasons.
When I sued, the court refused to hear the case. The entire German edition of this book
was burned in 1955, the only book burned in Europe since the Second World War. I have
endured continuous harassment by government agencies, as detailed in my books "A WRIT
FOR MARTYRS" and "MY LIFE IN CHRIST". My family also suffered harassment.
When I spoke recently in Wembley Arena in London, the press denounced me as "a
sinister lunatic".
Q: Does the press always support the Fed?
A: There have been some encouraging defections in recent months. A
front page story in the Wall Street Journal, Feb. 8, 1993, stated, "The current Fed
structure is difficult to justify in a democracy. It’s an oddly undemocratic
institution. Its organization is so dated that there is only one Reserve bank west of the
Rockies, and two in Missouri...Having a central bank with a monopoly over the issuance of
the currency in a democratic society is a very difficult balancing act."
Congressman McFadden
on the Federal Reserve Corporation
Remarks in Congress, 1934
AN ASTOUNDING EXPOSURE
http://home.hiwaay.net/%7Ebecraft/mcfadden.html
A Phone Call To The Fed
http://www.apfn.org/apfn/money2.htm
It's Time to Circle the Wagons
http://www.apfn.org/apfn/money.htm
LIBERTY: YOUR RIGHT TO MAKE A LIVING
http://www.apfn.org/apfn/living.htm
The Federal Zone:
Cracking the Code of Internal Revenue
http://www.apfn.org/apfn/fedzone.htm
God, Gold, the Fed and Capitulation
http://www.apfn.org/apfn/gold.htm
The Bankruptcy of the United States
http://www.apfn.net/Doc-100_bankruptcy.htm
The Fed, The Fed, The Fed
http://www.gold-eagle.com/editorials_01/sennholz040301.html
The Declaration of Independence
http://www.apfn.org/apfn/declaration.htm
The Federal Reserve - What Is It? Who Is It?
http://www.the-oil-patch.com/archive/federal-reserve.html
The Coming Battle (The Book)
http://www.apfn.org/apfn/comingbattle.htm
The United Nations plans to CONFISCATE your profit and ---.
http://www.apfn.org/apfn/united_nations.htm
The 545 People Responsible For All of America's Woes
http://www.apfn.org/apfn/woes.htm
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