SECRETS OF THE FEDERAL RESERVE
The London Connection
Dedicated to two of the finest scholars of
the twentieth century
Who generously gave of their vast
knowledge to a young writer to guide him in a field which he could not
have managed alone.
I wish to thank my former fellow members of the staff of the
Library of Congress whose very kind assistance, cooperation and
suggestions made the early versions of this book possible. I also wish
to thank the staffs of the Newberry Library, Chicago, the New York
City Public Library, the Alderman Library of the University of
Virginia, and the McCormick Library of Washington and Lee University,
Lexington, Virginia, for their invaluable assistance in the completion
of thirty years of further research for this definitive work on the
Federal Reserve System.
About the Author
Eustace Mullins is a veteran of the United States Air Force, with
thirty-eight months of active service during World War II. A native
Virginian, he was educated at Washington and Lee University, New York
University, Ohio University, the University of North Dakota, the
Escuelas des Bellas Artes, San Miguel de Allende, Mexico, and the
Institute of Contemporary Arts, Washington, D.C.
The original book, published under the title Mullins On The
Federal Reserve, was commissioned by the poet Ezra Pound in 1948.
Ezra Pound was a political prisoner for thirteen and a half years at
St. Elizabeth’s Hospital, Washington, D.C. (a Federal institution for
the insane). His release was accomplished largely through the efforts
of Mr. Mullins.
The research at the Library of Congress was directed and reviewed
daily by George Stimpson, founder of the National Press Club in
Washington, whom The New York Times on September 28, 1952
called, "A highly regarded reference source in the capitol. Government
officials, Congressmen, and reporters went to him for information on
Published in 1952 by Kasper and Horton, New York, the original book
was the first nationally-circulated revelation of the secret meetings
of the international bankers at Jekyll Island, Georgia, 1907-1910, at
which place the draft of the Federal Reserve Act of 1913 was written.
During the intervening years, the author continued to gather new
and more startling information about the backgrounds of the people who
direct the Federal Reserve policies. New information gathered over the
years from hundreds of newspapers, periodicals, and books give
corroborating insight into the connections of the international
While researching this material, Eustace Mullins was on the staff
of the Library of Congress. Mullins later was a consultant on highway
finance for the American Petroleum Institute, consultant on hotel
development for Institutions Magazine, and editorial director for the
Chicago Motor Club’s four publications.
* The London Acceptance Council is limited to
seventeen international banking houses authorized by the Bank of
England to handle foreign exchange.
ABOUT THE COVER
The cover reproduces the outline of the eagle from the red shield,
the coat of arms of the city of Frankfurt, Germany, adapted by Mayer
Amschel Bauer (1744-1812) who changed his name from Bauer to
Rothschild ("Red Shield"). Rothschild added five golden arrows held in
the eagle’s talons, signifying his five sons who operated the five
banking houses of the international House of Rothschild: Frankfurt,
London, Paris, Vienna, and Naples.
Table of Contents
Chapter One Jekyll Island 1
Chapter Two The Aldrich Plan 10
Chapter Three The Federal Reserve Act 16
Chapter Four The Federal Advisory Council 40
Chapter Five The House of Rothschild 47
Chapter Six The London Connection 63
Chapter Seven The Hitler Connection 69
Chapter Eight World War One 82
Chapter Nine The Agricultural Depression 114
Chapter Ten The Money Creators 119
Chapter Eleven Lord Montagu Norman 131
Chapter Twelve The Great Depression 143
Chapter Thirteen The 1930's 151
Chapter Fourteen Congressional Expose 171
Appendix I 181
In 1949, while I was visiting Ezra Pound
who was a political prisoner at St. Elizabeth’s Hospital, Washington,
D.C. (a Federal institution for the insane), Dr. Pound asked me if I
had ever heard of the Federal Reserve System. I replied that I had
not, as of the age of 25. He then showed me a ten dollar bill marked
"Federal Reserve Note" and asked me if I would do some research at the
Library of Congress on the Federal Reserve System which had issued
this bill. Pound was unable to go to the Library himself, as he was
being held without trial as a political prisoner by the United States
government. After he was denied broadcasting time in the U.S., Dr.
Pound broadcast from Italy in an effort to persuade people of the
United States not to enter World War II. Franklin D. Roosevelt had
personally ordered Pound’s indictment, spurred by the demands of his
three personal assistants, Harry Dexter White, Lauchlin Currie, and
Alger Hiss, all of whom were subsequently identified as being
connected with Communist espionage.
I had no interest in money or banking as a subject,
because I was working on a novel. Pound offered to supplement my
income by ten dollars a week for a few weeks. My initial research
revealed evidence of an international banking group which had secretly
planned the writing of the Federal Reserve Act and Congress’ enactment
of the plan into law. These findings confirmed what Pound had long
suspected. He said, "You must work on it as a detective story." I was
fortunate in having my research at the Library of Congress directed by
a prominent scholar, George Stimpson, founder of the National Press
Club, who was described by The New York Times of September 28, 1952:
"Beloved by Washington newspapermen as ‘our walking Library of
Congress’, Mr. Stimpson was a highly regarded reference source in the
Capitol. Government officials, Congressmen and reporters went to him
for information on any subject."
I did research four hours each day at the Library of
Congress, and went to St. Elizabeth’s Hospital in the afternoon. Pound
and I went over the previous day’s notes.
I then had dinner with George
Stimpson at Scholl’s Cafeteria while he went over my material, and I
then went back to my room to type up the corrected notes. Both
Stimpson and Pound made many suggestions in guiding me in a field in
which I had no previous experience. When Pound’s resources ran low, I
applied to the Guggenheim Foundation, Huntington Hartford Foundation,
and other foundations to complete my research on the Federal Reserve.
Even though my foundation applications were sponsored by the three
leading poets of America, Ezra Pound, E.E. Cummings, and Elizabeth
Bishop, all of the foundations refused to sponsor this research. I
then wrote up my findings to date, and in 1950 began efforts to market
this manuscript in New York. Eighteen publishers turned it down
without comment, but the nineteenth, Devin Garrity, president of Devin
Adair Publishing Company, gave me some friendly advice in his office.
"I like your book, but we can’t print it," he told me. "Neither can
anybody else in New York. Why don’t you bring in a prospectus for your
novel, and I think we can give you an advance. You may as well forget
about getting the Federal Reserve book published. I doubt if it could
ever be printed."
devastating news, coming after two years of intensive work. I reported
back to Pound, and we tried to find a publisher in other parts of the
country. After two years of fruitless submissions, the book was
published in a small edition in 1952 by two of Pound’s disciples, John
Kasper and David Horton, using their private funds, under the title
Mullins on the Federal Reserve. In 1954, a second edition, with
unauthorized alterations, was published in New Jersey, as The Federal
Reserve Conspiracy. In 1955, Guido Roeder brought out a German edition
in Oberammergau, Germany. The book was seized and the entire edition
of 10,000 copies burned by government agents led by Dr. Otto John.
The burning of
the book was upheld April 21, 1961 by judge Israel Katz of the
Bavarian Supreme Court. The U.S. Government refused to
intervene, because U.S. High Commissioner to Germany,
James B. Conant (president of Harvard University
1933 to 1953), had approved the initial book burning order.
This is the only book which has been burned in Germany since World War
II. In 1968 a pirated edition of this book appeared in California.
Both the FBI and the U.S. Postal inspectors refused to act, despite
numerous complaints from me during the next decade. In 1980 a new
German edition appeared. Because the U.S. Government apparently no
longer dictated the internal affairs of Germany, the identical book
which had been burned in 1955 now circulates in Germany without
I had collaborated on several books with Mr. H.L. Hunt
and he suggested that I should continue my long-delayed research on
the Federal Reserve and bring out a more definitive version of this
book. I had just signed a contract to write the authorized biography
of Ezra Pound, and the Federal Reserve book had to be postponed. Mr.
Hunt passed away before I could get back to my research, and once
again I faced the problem of financing research for the book.
My original book had traced and named the shadowy
figures in the United States who planned the Federal Reserve Act. I
now discovered that the men whom I exposed in 1952 as the shadowy
figures behind the operation of the Federal Reserve System were
themselves shadows, the American fronts for the unknown figures who
became known as the "London Connection." I found that notwithstanding
our successes in the Wars of Independence of 1812 against England, we
remained an economic and financial colony of Great Britain. For the
first time, we located the original stockholders of the Federal
Reserve Banks and traced their parent companies to the London
This research is substantiated by citations and
documentation from hundreds of newspapers, periodicals and books and
charts showing blood, marriage, and business relationships. More than
a thousand issues of The New York Times on microfilm have been checked
not only for original information, but verification of statements from
It is a truism of the writing profession that a writer
has only one book within him. This seems applicable in my case,
because I am now in the fifth decade of continuous writing on a single
subject, the inside story of the Federal Reserve System. This book was
from its inception commissioned and guided by Ezra Pound. Four of his
protégés have previously been awarded the Nobel Prize for Literature,
William Butler Yeats for his later poetry, James Joyce for "Ulysses",
Ernest Hemingway for "The Sun Also Rises", and T.S. Elliot for "The
Waste Land". Pound played a major role in the inspiration and in the
editing of these works--which leads us to believe that this present
work, also inspired by Pound, represents an ongoing literary
Although this book in its inception was expected to be
a tortuous work on economic and monetary techniques, it soon developed
into a story of such universal and dramatic appeal that from the
outset, Ezra Pound urged me to write it as a detective story, a genre
which was invented by my fellow Virginian, Edgar Allan Poe. I believe
that the continuous circulation of this book during the past forty
years has not only exonerated Ezra Pound for his much condemned
political and monetary statements, but also that it has been, and will
continue to be, the ultimate weapon against the powerful conspirators
who compelled him to serve thirteen and a half years without trial, as
a political prisoner held in an insane asylum a la KGB. His earliest
vindication came when the government agents who represented the
conspirators refused to allow him to testify in his own defense; the
second vindication came in 1958 when these same agents dropped all
charges against him, and he walked out of St. Elizabeth’s Hospital, a
free man once more. His third and final vindication is this work,
which documents every aspect of his exposure of the ruthless
international financiers to whom Ezra Pound became but one more
victim, doomed to serve years as the Man in the Iron Mask, because he
had dared to alert his fellow-Americans to their furtive acts of
treason against all people of the United States.
In my lectures throughout this nation, and in my
appearances on many radio and television programs, I have sounded the
toxin that the Federal Reserve System is not Federal; it has no
reserves; and it is not a system at all, but rather, a criminal
syndicate. From November, 1910, when the conspirators met on Jekyll
Island, Georgia, to the present time, the machinations of the Federal
Reserve bankers have been shrouded in secrecy. Today, that secrecy has
cost the American people a three trillion dollar debt, with annual
interest payments to these bankers amounting to some three hundred
billion dollars per year, sums which stagger the imagination, and
which in themselves are ultimately unpayable. Officials of the Federal
Reserve System routinely issue remonstrances to the public, much as
the Hindu fakir pipes an insistent tune to the dazed cobra which sways
its head before him, not to resolve the situation, but to prevent it
from striking him. Such was the soothing letter written by Donald J.
Winn, Assistant to the Board of Governors in response to an inquiry by
a Congressman, the Honorable Norman D. Shumway, on March 10, 1983. Mr.
Winn states that "The Federal Reserve System was established by an act
of Congress in 1913 and is not a ‘private corporation’." On the next
page, Mr. Winn continues, "The stock of the Federal Reserve Banks is
held entirely by commercial banks that are members of the Federal
Reserve System." He offers no explanation as to why the government has
never owned a single share of stock in any Federal Reserve Bank, or
why the Federal Reserve System is not a "private corporation" when all
of its stock is owned by "private corporations".
American history in the twentieth century has recorded
the amazing achievements of the Federal Reserve bankers. First, the
outbreak of World War I, which was made possible by the funds
available from the new central bank of the United States. Second, the
Agricultural Depression of 1920. Third, the Black Friday Crash on Wall
Street of October, 1929 and the ensuing Great Depression. Fourth,
World War II. Fifth, the conversion of the assets of the United States
and its citizens from real property to paper assets from 1945 to the
present, transforming a victorious America and foremost world power in
1945 to the world’s largest debtor nation in 1990. Today, this nation
lies in economic ruins, devastated and destitute, in much the same
dire straits in which Germany and Japan found themselves in 1945. Will
Americans act to rebuild our nation, as Germany and Japan have done
when they faced the identical conditions which we now face--or will we
continue to be enslaved by the Babylonian debt money system which was
set up by the Federal Reserve Act in 1913 to complete our total
destruction? This is the only question which we have to answer, and we
do not have much time left to answer it.
Because of the depth and the importance of the
information which I had developed at the Library of Congress under the
tutelage of Ezra Pound, this work became the happy hunting ground for
many other would-be historians, who were unable to research this
material for themselves. Over the past four decades, I have become
accustomed to seeing this material appear in many other books,
invariably attributed to other writers, with my name never mentioned.
To add insult to injury, not only my material, but even my title has
been appropriated, in a massive, if obtuse, work called "Secrets of
the Temple--the Federal Reserve". This heavily advertised book
received reviews ranging from incredulous to hilarious. Forbes
Magazine advised its readers to read their review and save their
money, pointing out that "a reader will discover no secrets" and that
"This is one of those books whose fanfares far exceed their merit."
This was not accidental, as this overblown whitewash of the Federal
Reserve bankers was published by the most famous nonbook publisher in
After my initial shock at discovering that the most
influential literary personality of the twentieth century, Ezra Pound,
was imprisoned in "the Hellhole" in Washington, I immediately wrote
for assistance to a Wall Street financier at whose estate I had
frequently been a guest. I reminded him that as a patron of the arts,
he could not afford to allow Pound to remain in such inhuman
captivity. His reply shocked me even more. He wrote back that "your
friend can well stay where he is." It was some years before I was able
to understand that, for this investment banker and his colleagues,
Ezra Pound would always be "the enemy".
Jackson Hole, Wyoming
Here are the simple facts of the great
betrayal. Wilson and House knew that they were doing something
momentous. One cannot fathom men’s motives and this pair probably
believed in what they were up to. What they did not believe in was
representative government. They believed in government by an
uncontrolled oligarchy whose acts would only become apparent after an
interval so long that the electorate would be forever incapable of
doing anything efficient to remedy depredations.
(St. Elizabeth’s Hospital,
Washington, D.C. 1950)
(AUTHOR’S NOTE: Dr. Pound wrote this introduction for
the earliest version of this book, published by Kasper and Horton, New
York, 1952. Because he was being held as a political prisoner without
trial by the Federal Government, he could not afford to allow his name
to appear on the book because of additional reprisals against him.
Neither could he allow the book to be dedicated to him, although he
had commissioned its writing. The author is gratified to be able to
remedy these necessary omissions, thirty-three years after the
JEFFERSON’S OPINION ON THE
CONSTITUTIONALITY OF THE BANK
February 15, 1791
(The Writings of Thomas Jefferson, ed.
by H. E. Bergh, Vol. III, p. 145 ff.)
The bill for establishing a national bank, in 1791,
undertakes, among other things,--
1. To form the subscribers into a corporation.
2. To enable them, in their corporate capacities, to
receive grants of lands; and, so far, is against the laws of mortmain.
3. To make alien subscribers capable of holding lands;
and so far is against the laws of alienage.
4. To transmit these lands, on the death of a
proprietor, to a certain line of successors; and so far, changes the
course of descents.
5. To put the lands out of the reach of forfeiture, or
escheat; and so far, is against the laws of forfeiture and escheat.
6. To transmit personal chattels to successors, in a
certain line; and so far, is against the laws of distribution.
7. To give them the sole and exclusive right of
banking, under the national authority; and, so far, is against the
laws of monopoly.
8. To communicate to them a power to make laws,
paramount to the laws of the states; for so they must be construed, to
protect the institution from the control of the state legislatures;
and so probably they will be construed.
I consider the foundation of the Constitution as laid
on this ground--that all powers not delegated to the United States, by
the Constitution, nor prohibited by it to the states, are reserved to
the states, or to the people (12th amend.). To take a single step
beyond the boundaries thus specially drawn around the powers of
Congress, is to take possession of a boundless field of power, no
longer susceptible of any definition.
The incorporation of a bank, and the powers assumed by
this bill, have not, in my opinion, been delegated to the United
States by the Constitution.
"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
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 riding 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
The official biography of Senator Nelson Aldrich
"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
4 T.W. Lamont, Henry P. Davison, Harper,
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
The Aldrich group had no interest in hunting. Jekyll
Island was chosen for the site of the preparation of the central bank
because it offered complete privacy, and because there was not a
journalist within fifty miles. Such was the need for secrecy that the
members of the party agreed, before arriving at Jekyll Island, that no
last names would be used at any time during their two week stay. The
group later referred to themselves as the First Name Club, as the last
names of Warburg, Strong, Vanderlip and the others were prohibited
during their stay. The customary attendants had been given two week
vacations from the club, and new servants brought in from the mainland
for this occasion who did not know the names of any of those present.
Even if they had been interrogated after the Aldrich party went back
to New York, they could not have given the names. This arrangement
proved to be so satisfactory that the members, limited to those who
had actually been present at Jekyll Island, later had a number of
informal get-togethers in New York.
Why all this secrecy? Why this thousand mile trip in a
closed railway car to a remote hunting club? Ostensibly, it was to
carry out a program of public service, to prepare banking reform which
would be a boon to the people of the United States, which had been
ordered by the National
Monetary Commission. The participants were no
strangers to public benefactions. Usually, their names were inscribed
on brass plaques, or on the exteriors of buildings which they had
donated. This was not the procedure which they followed at Jekyll
Island. No brass plaque was ever erected to mark the selfless actions
of those who met at their private hunt club in 1910 to improve the lot
of every citizen of the United States.
In fact, no benefaction took place at Jekyll Island.
The Aldrich group journeyed there in private to write the banking and
currency legislation which the National Monetary Commission had been
ordered to prepare in public. At stake was the future control of the
money and credit of the United States. If any genuine monetary reform
had been prepared and presented to Congress, it would have ended the
power of the elitist one world money creators. Jekyll Island ensured
that a central bank would be established in the United States which
would give these bankers everything they had always wanted.
As the most technically proficient of those present,
Paul Warburg was charged with doing most of the drafting of the plan.
His work would then be discussed and gone over by the rest of the
group. Senator Nelson Aldrich was there to see that the completed plan
would come out in a form which he could get passed by Congress, and
the other bankers were there to include whatever details would be
needed to be certain that they got everything they wanted, in a
finished draft composed during a onetime stay. After they returned to
New York, there could be no second get together to rework their plan.
They could not hope to obtain such secrecy for their work on a second
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-
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
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
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
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
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
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,
"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
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
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
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
10 Frank Vanderlip, From Farmboy to
"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
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
In his biography of Nelson Aldrich in 1930, Stephenson
"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
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:
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,
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,
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.
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
After the National Monetary Commission had returned
from Europe, it held no official meetings for nearly two years. No
records or minutes were ever presented showing who had authored the
Aldrich Plan. Since they held no official meetings, the members of the
commission could hardly claim the Plan as their own. The sole tangible
result of the Commission’s three hundred thousand dollar expenditure
was a library of thirty massive volumes on European banking. Typical
of these works is a thousand page history of the Reichsbank, the
central bank which controlled money and credit in Germany, and whose
principal stockholders, were the Rothschilds and Paul Warburg’s family
banking house of M.M. Warburg Company. The Commission’s records show
that it never functioned as a deliberative body. Indeed, its only
"meeting" was the secret conference held at Jekyll Island, and this
conference is not mentioned in any publication of the Commission.
Senator Cummins passed a resolution in Congress ordering the
Commission to report on January 8, 1912, and show some constructive
results of its three years’ work. In the face of this challenge, the
National Monetary Commission ceased to exist.
With their five million dollars as a war chest, the
Aldrich Plan propagandists waged a no-holds barred war against their
opposition. Andrew Frame testified before the House Banking and
Currency Committee of the American Bankers Association. He represented
a group of Western bankers who opposed the Aldrich Plan:
CHAIRMAN CARTER GLASS: "Why didn’t the Western bankers make
themselves heard when the American Bankers Association gave its
unqualified and, we are assured, unanimous approval of the scheme
proposed by the National Monetary Commission?"
ANDREW FRAME: "I’m glad you called my attention to that.
When that monetary bill was given to the country, it was but a few
days previous to the meeting of the American Bankers Association in
New Orleans in 1911. There was not one banker in a hundred who had
read that bill. We had twelve addresses in favor of it. General Hamby
of Austin, Texas, wrote a letter to President Watts asking for a
hearing against the bill. He did not get a very courteous answer. I
refused to vote on it, and a great many other bankers did likewise."
MR. BULKLEY: "Do you mean that no member of the Association
could be heard in opposition to the bill?"
ANDREW FRAME: "They throttled all argument."
MR. KINDRED: "But the report was given out that it was
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
ANDREW FRAME: "It did not reiterate the endorsement for the
simple fact that the backers of the Aldrich Plan knew that the
Association would not endorse it. We were ready for them, but they did
not bring it up."
Andrew Frame exposed the collusion which
in 1911 procured an endorsement of the Aldrich Plan from the American
Bankers Association but which in 1912 did not even dare to repeat its
endorsement, for fear of an honest and open discussion of the merits
of the plan.
Chairman Glass then called as witness one
of the ten most powerful bankers in the United States, George
Blumenthal, partner of the international banking house of Lazard
Freres and brother-in-law of Eugene Meyer, Jr. Carter Glass effusively
welcomed Blumenthal, stating that "Senator O’Gorman of New York was
kind enough to suggest your name to us." A year later, O’Gorman
prevented a Senate Committee from asking his master, Paul Warburg, any
embarrassing questions before approving his nomination as the first
Governor of the Federal Reserve Board.
George Blumenthal stated, "Since 1893 my firm of
Lazard Freres has been foremost in importations and exportations of
gold and has thereby come into contact with everybody who had anything
to do with it."
Congressman Taylor asked, "Have you a statement there
as to the part you have had in the importation of gold into the United
States?" Taylor asked this because the Panic of 1893 is known to
economists as a classic example of a money panic caused by gold
"No," replied George Blumenthal, "I have nothing at
all on that, because it is not bearing on the question."
A banker from Philadelphia, Leslie Shaw, dissented
with other witnesses at these hearings, criticizing the much vaunted
"decentralization" of the System. He said, "Under the Aldrich Plan the
bankers are to have local associations and district associations, and
when you have a local organization, the centered control is assured.
Suppose we have a local association in Indianapolis; can you not name
the three men who will dominate that association? And then can you not
name the one man everywhere else. When you have hooked the banks
together, they can have the biggest influence of anything in this
country, with the exception of the newspapers."
To promote the Democratic currency bill, Carter Glass
made public the sorry record of the Republican efforts of Senator
Aldrich’s National Monetary Commission. His House Report in 1913 said,
"Senator MacVeagh fixes the cost of the National Monetary Commission
to May 12, 1911 at $207,130. They have since spent another hundred
thousand dollars of the taxpayer’s money. The work done at such cost
cannot be ignored, but, having examined the extensive literature
published by the Commission, the Banking and Currency Committee finds
little that bears upon the present state of the credit market of the
United States. We object to the Aldrich Bill on the following points:
Its entire lack of adequate government or public
control of the banking mechanism it sets up.
Its tendency to throw voting control into the hands of
the large banks of the system.
The extreme danger of inflation of currency inherent
in the system.
The insincerity of the bond-funding plan provided for
by the measure, there being a barefaced pretense that this system was
to cost the 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
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
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.
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
Senator LaFollette remarks in his memoirs that his
speech against the Money Trust later cost him the Presidency of the
United States, just as Woodrow Wilson’s early support of the Aldrich
Plan had brought him into consideration for that office.
Congress finally made a gesture to appease popular
feeling by appointing a committee to investigate the control of money
and credit in the United States. This was the Pujo Committee , a
subcommittee of the House Banking and Currency Committee, which
conducted the famous "Money Trust" hearings in 1912, under the
leadership of Congressman Arsene Pujo of Louisiana, who was regarded
as a spokesman for the oil interests. These hearings were deliberately
dragged on for five months, and resulted in six-thousand pages of
printed testimony in four volumes. Month after month, the bankers made
the train trip from New York to Washington, testified before the
Committee and returned to New York. The hearings were extremely dull,
and no startling information turned up at these sessions. The bankers
solemnly admitted that they
were indeed bankers, insisted that they always
operated in the public interest, and claimed that they were animated
only by the highest ideals of public service, like the Congressmen
before whom they were testifying.
The paradoxical nature of the Pujo Money Trust
Hearings may better be understood if we examine the man who
single-handedly carried on these hearings, Samuel Untermyer. He was
one of the principal contributors to Woodrow Wilson’s Presidential
campaign fund, and was one of the wealthiest corporation lawyers in
New York. He states in his autobiography in "Who’s Who" of 1926 that
he once received a $775,000 fee for a single legal transaction, the
successful merger of the Utah Copper Company and the Boston
Consolidated and Nevada Company, a firm with a market value of one
hundred million dollars. He refused to ask either Senator LaFollette
or Congressman Lindbergh to testify in the investigation which they
alone had forced Congress to hold. As Special Counsel for the Pujo
Committee, Untermyer ran the hearings as a one-man operation. The
Congressional members, including its chairman, Congressman Arsene Pujo,
seemed to have been struck dumb from the commencement of the hearings
to their conclusion. One of these silent servants of the public was
Congressman James Byrnes, of South Carolina, representing Bernard
Baruch’s home district, who later achieved fame as "Baruch’s man", and
was placed by Baruch in charge of the Office of War Mobilization
during the Second World War.
Although he was a specialist in such matters,
Untermyer did not ask any of the bankers about the system of
interlocking directorates through which they controlled industry. He
did not go into international gold movements, which were known as a
factor in money panics, or the international relationships between
American bankers and European bankers. The international banking
houses of Eugene Meyer, Lazard Freres, J. & W. Seligman, Ladenburg
Thalmann, Speyer Brothers, M. M. Warburg, and the Rothschild Brothers
did not arouse Samuel Untermyer’s curiosity, although it was well
known in the New York financial world that all of these family banking
houses either had branches or controlled subsidiary houses in Wall
Street. When Jacob Schiff appeared before the Pujo Committee, Mr.
Untermyer’s adroit questioning allowed Mr. Schiff to talk for many
minutes without revealing any information about the operations of the
banking house of Kuhn Loeb Company, of which he was senior partner,
and which Senator Robert L. Owen had identified as the representative
of the European Rothschilds in the United States.
The aging J.P. Morgan, who had only a few more months
to live, appeared before the Committee to justify his decades of
international financial deals. He stated for Mr. Untermyer’s
edification that "Money is a commodity." This was a favorite ploy of
the money creators, as they wished to make the public believe that the
creation of money was a natural occur-
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 blasé members of the Committee.
The farce of the Pujo Committee ended without a single
well-known opponent of the money creators being allowed to appear or
testify. As far as Samuel Untermyer was concerned, Senator LaFollette
and Congressman Charles Augustus Lindbergh had never existed.
Nevertheless, these Congressmen had managed to convince the people of
the United States that the New York bankers did have a monopoly on the
nation’s money and credit. At the close of the hearings, the bankers
and their subsidized newspapers claimed that the only way to break
this monopoly was to enact the banking and currency legislation now
being proposed to Congress, a bill which would be passed a year later
as the Federal Reserve Act. The press seriously demanded that the New
York banking monopoly be broken by turning over the administration of
the new banking system to the most knowledgeable banker of them all,
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-
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
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
* 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.
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 WallStreet group, was removed.
Immediately the Secretary and the Assistant Secretary, John Skelton
Williams, were criticized severely by the agents of the
Wall Street group.’" "I myself have known more than one occasion when
bankers refused credit to men who opposed their political views and
purposes. When Senator Aldrich and others were going around the
country exploiting this scheme, the big banks of New York and
Chicago were engaged in
raising a munificent fund to bolster up the Aldrich
propaganda. I have been told by bankers of my own state that
contributions to this exploitation fund had been demanded of them and
that they had contributed because they were afraid of being
blacklisted or boycotted. There are bankers of this country who are
enemies of the public welfare. In the past, a few great banks have
followed policies and projects that have paralyzed the industrial
energies of the country to perpetuate their tremendous power over the
financial and business industries of America."
Carter Glass states in his autobiography that he was
summoned by Woodrow Wilson to the White House, and that Wilson told
him he intended to make the reserve notes obligations of the United
States. Glass says, "I was for an instant speechless. I remonstrated.
There is not any government obligation here, Mr. President. Wilson
said he had had to compromise on this point in order to save the
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,
"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
* Theodore Roosevelt
13 Elisha Ely Garrison, Roosevelt, Wilson and the Federal
Reserve Law, Christopher Publications, Boston, 1931
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
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,
"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
Warburg, and so we got Alger and Donald Hiss, Lee Pressman,
Harry Dexter White and many other protégés of Little Weenie."*
House’s openly Socialistic views were forthrightly
expressed in Philip Dru, Administrator; on pages 57-58, House wrote:
"In a direct and forceful manner, he pointed out that our
civilization was fundamentally wrong, inasmuch, among other things, as
it restricted efficiency; that if society were properly organized,
there would be none who were not sufficiently clothed and fed. The
result, that the laws, habits and ethical training in vogue were alike
responsible for the inequalities in opportunity and the consequent
wide difference between the few and the many; that the results of such
conditions was to render inefficient a large part of the population,
the percentage differing in each country in the ratio that education
and enlightenment and unselfish laws bore to ignorance, bigotry and
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
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.
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
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
* 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
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
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
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.
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
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
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
20 George Sylvester Viereck, The Strangest Friendship In
History, Woodrow Wilson and Col. House, Liveright, New York, 1932
"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
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."
Lindbergh said on that historic day, to the House:
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
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
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
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."
denounced the Federal Reserve Act in The Great Conspiracy of the House
"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
22 H.W. Loucks, The Great Conspiracy of the House of
Morgan, Privately printed, 1916
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.
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
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
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,
24 Col. E.M. House, The Intimate Papers of Col. House, 4 v.
1926-1928, Houghton Mifflin Co.
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
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.
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
"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."
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
"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
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
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,
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
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
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;
* See charts V through IX
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
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
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
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
* 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.
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:
June 18, 1914
Dear Senator Owen:
Mr. Jones has
always stood for the rights of the people against the
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.
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
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
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.
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
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 expandhealthfully in every direction."
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
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
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.
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
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
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
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
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.
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
"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. Itstaggers 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,
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.
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.
The House of
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
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
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
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
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.
years, Newport was the capital of this unsavory trade. William Ellery,
the Collector of the Port of Newport, said in 1791:
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
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-
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
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,
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
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
33 Henry Clews, Twenty-eight Years in Wall Street, Irving
Company, New York, 1888, page 157
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
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
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.
36 Matthew Josephson, The Robber Barons, Harcourt Brace,
37 John Moody, The Masters of Capital
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,
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
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.,
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
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."
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,
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."
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
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.
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,
Lewinsohn, The Profits of War, E.P. Dutton, 1937
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:
Hath benefit of interest on all
the moneys which it, the bank, creates out of
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.
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
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
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,
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
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)."
control of the money came the control of the news media. Kent Cooper,
head of the Associated Press, writes in his autobiography, Barriers
bankers under the House of Rothschild acquired an interest in the
three leading European agencies."51
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,
51 Kent Cooper, Barriers Down, pg. 21
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,
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
"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
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
explanation of this fact is given:
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.
56 McRae and Cairncross, Capital City, Eyre Methuen,
London, 1963, p. 1
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
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
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
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
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
protégé. 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.
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
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
59 E.M. Josephson, The Strange Death of Franklin D.
Roosevelt, Chedney Press, N.Y. 1948
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
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
61 McRae and Cairncross, Capital City, Eyre Methuen,
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
62 McRae and Cairncross, Capital City, Eyre Methuen,
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.
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
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
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
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
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
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
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
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.
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
* 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."
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
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
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
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
"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
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
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."
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.
writes, in The Empire of High Finance:
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
was a member of the
Anglo-German Fellowship with two other partners as members, and a
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
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.’"
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,
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
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.
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
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
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
* 1787 Constitutional Convention
* NOTE: Emmett Tyrell, Jr., Richmond Times Dispatch, Feb.
15, 1983 "Every peace movement of this century has been followed by
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
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 Banksshould 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,
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
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
"I do," said Wilson.
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
71 Public Papers of Woodrow Wilson, Dodd & Baker, v.5, p.
"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
"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."
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
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
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.
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
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,
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
72 Max Warburg, Memoirs of Max Warburg, Berlin, 1936
73 David Farrar, The Warburgs, Michael Joseph, Ltd.,
74 "Truth Magazine", George Conroy, editor, Boston, issue
of December 16, 1912
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
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.
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
British Ambassador to the United States, in a letter to Lord Grey
"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
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 protégé 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
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.
78 Col. Elisha Garrison, Roosevelt, Wilson and the Federal
Reserve Law, Christopher Publishing House, Boston, 1931, p. 260
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,
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
@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.
@insert CHART I
@CHART I cont.
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
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
79 Bernard Baruch, My Own Story, Henry-Holt Company, New
York, 1957, p. 194
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:
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
purchases and sales), executed by the War Finance Corporation (Eugene
were largely directed by the managing director of the War Finance
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
through the War
Finance Corporation was not the market price and was not the cost of
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
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
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
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
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
@insert 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
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
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
@insert 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
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
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
George R. James, member of the Federal Reserve Board
in 1923-24, had been Chief of the Cotton Section of the War Industries
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
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
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
@insert 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
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,
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
@insert 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,
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
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
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
83 Francois Coty, Tearing Away the Veil, Paris, 1940
@insert 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
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
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
"Woodrow Wilson is
a type of Pecksniff who was now disappeared amid universal
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
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
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,
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:
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
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
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
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
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
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
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.
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
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.
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
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.
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:
Reserve System has done more for the farmer than he has yet begun to
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
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:
Reserve Bank that should have been the farmer’s greatest protection
has become his greatest foe. The deflation of the farmer was a crime
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
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
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
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
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
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
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:
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
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
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
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
The international gold dealings of the Federal Reserve
System, and its active support in helping the League of Nations to
force all the nations
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.
wrote, in the English periodical, "Spectator", on January 10, 1925
"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:
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.
Gustav Cassel wrote in 1928:
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:
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."
Reserve Bulletin of June, 1925, stated that:
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.
Lombard, in the periodical "World’s Work" writes that:
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."
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
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,
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
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
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
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
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
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
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
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:
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
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
exercising undue influence on the Federal Reserve
Board and called for a Congressional investigation, but Congress was
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
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."
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
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:
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".
There has been close cooperation in the fixing of discount
rates between London and New
86 Paul Einzig, The Fight For Financial Supremacy,
Lord Montagu Norman
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,
* 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.
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
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.
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?
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
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
GOVERNOR MILLER: They may have met them as
individuals, but not as a committee.
MR. KING: How does the Open-Market Committee get its
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
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
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
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
GOVERNOR MILLER: That is a detail with which I am not
REPRESENTATIVE STRONG: Would it not be fair to say
that the fellows who wanted the gold were the ones who instigated the
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
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
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.
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.
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.
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
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
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
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.
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
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:
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
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 protégé, 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
"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
"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:
Federal Reserve Board policy by many investors is not based on its
attempt todeflate 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,
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
"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.
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
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
"‘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
"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.
the English economist, said, in the March, 1926 American Economic
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
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.
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.
"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
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
Honorable Reginald McKenna stated that:
90 Col. Curtis B. Dall, F.D.R., My Exploited Father-in-Law,
Liberty Lobby, Wash., D.C. 1970
"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
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
"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
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
There had been some warnings of the approaching crash
in England, which American newspapers never saw.
The London Statist on May 25,
authorities in the United States apparently want a business panic to
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.’"
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-
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.
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
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
"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.
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:
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.
five billion dollars in security values which disappeared on October
24, 1929) President Hoover said:
business of the country, that is, production and distribution of
commodities, is on a sound and prosperous basis."
of the Treasury, Andrew Mellon, stated on December 25, 1929, that:
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.
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.
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
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."
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
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,
"We pay Mr. Platt $22,000 a year, and we took his
secretary over, of course." This meant another five thousand a year.
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
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
"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
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
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-
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
Federal International Banking Corporation, an
Anglo-American outfit dealing in foreign securities in the United
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
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.
"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.
pointed out in 1935 that:
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.
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.
Harding of the Federal Reserve Board testified in 1921 that:
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."
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
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
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
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
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
"Does that mean that J.P. Morgan can go back into
"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.
March 14, 1936, noted that:
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
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.
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
"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."
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."
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?
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
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
House Banking and Currency Committee on June 24, 1941, Governor Eccles
"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
"When you sell bonds on the open market, you extinguish
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
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
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,
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
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
"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.
Eccles said before the House Committee on Banking and Currency:
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.
Governor Eccles stated before the House Committee:
Reserve Board has the power of open market operations. Open-market
operations are the most important single instrument of
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. Authorityover these
operations, which affect the welfare of the whole people, must be
invested in a bodyrepresenting 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
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
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.
cash, in truth, does not exist and has never existed. What we call
‘cash reserves’ are simply bookkeeping credits entered upon ledgers
of the Federal Reserve Banks. The credits
are created by the Federal Reserve Banks and then passed along through
the banking system."
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
Patman puts it,
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)
"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--thecost
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
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.
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
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:
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
ECCLES: Well, the banks create money when they make loans
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
ECCLES: "I mean the Federal Reserve, when it carries out an
open market operation, that is, if it purchases Government securities
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
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
At the House Hearing of 1947, Mr. Kolburn asked Mr.
"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
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."
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-
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
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 havegiven
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
GOVERNOR ECCLES: I
would like to discuss OPA, and leave the stabilization fund for a
timewhen 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
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."
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.
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
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
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
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
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
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.
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:
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:
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,
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
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.
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
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:
"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.
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:
|Bank of New York
|Chase Manhattan Bank
Bank & Trust
|J. Henry Schroder
Bank & Trust
|National Bank of
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
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,
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]
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]
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
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.
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."
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,
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.
"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
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
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.
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
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
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
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
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
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
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.
NELSON W. 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
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
Advisors in 1974. He was the protégé 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 protégé 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
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
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
CONGRESSMAN ARSENE PUJO
Served in Congress 1903-1913. Democrat from Louisiana.
Chairman of House Banking and Currency Committee. Chairman of "Pujo
Hearings" Subcommittee, 1912.
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 HENRY 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.
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.
New York Times 1858-1983
Washington Post 1933-1983
Barron’s Weekly 1921-1983
Business Week 1929-1983
Forbes Magazine 1917-1983
National Review 1955-1983
The Nation 1865-1983
The New Republic 1914-1983
Current Biography 1940-1983 H.W. Wilson Co., N.Y.
Dictionary of National Biography, Scribners, N.Y.
Directory of Directors, London 1896-1983
Directory of Directors In The City of New York
The Concise Dictionary of National Biography,
1903-1979, Oxford University
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.
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
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
House Committee Hearings on Extension of Public Debt,
Federal Reserve Directors: A Study of Corporate and
Staff Report, Committee on Banking, Currency and
Housing, House of
Representatives, 94th Congress, 2d Session, August,
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,
Economic Education, N.Y. 1959
The War on Gold, Antony C. Sutton, 76 Press,
Wall Street and the Rise of Hitler, Antony C. Sutton,
76 Press, California, 1976
Collected Speeches of Louis T McFadden, Congressional
The Truth About Rockefeller, E.M. Josephson, Chedney
Press, N.Y. 1964
The Strange Death of Franklin D. Roosevelt, E.M.
Josephson, Chedney Press,
Behind the Throne, Paul Emden, Hoddard Stoughton,
The Money Power of Europe, Paul Emden, Hoddard
The Robber Barons, Mathew Josephson, Harcourt Brace,
The Rothschilds, Frederic Morton, Curtis Publishing
The Magnificent Rothschilds, Cecil Roth, Robert Hale
Pawns In The Game, William Guy Carr, (privately
Tearing Away the Veils, Francois Coty, Paris, 1940
Writers on English Monetary History, 1626-1730,
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,
Monetary Policy of Plenty Instead of Scarcity,
Committee on Banking and
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.
Rulers of America, A Study of Finance Capital, Anna
Publishers, N.Y. 1936
Banking in the United States Before the Civil War,
National Banking System, National Monetary Commission,
The Federal Reserve System, Paul Warburg, Macmillan,
Roosevelt, Wilson and the Federal Reserve Law, Col.
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,
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,
The Federal Reserve System, H. Parker Willis, Ronald
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,
Philip Dru, Administrator, E.M. House, B.W. Huebsch,
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.
Capital City, McRae and Cairncross, Eyre Methuen,
Aggression, Otto Lehmann-Russbeldt, Hutchinson,
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,
A Primer on Money, House Banking and Currency
Pierpont Morgan and Friends, The Anatomy of A Myth,
Prentice Hall, N.J., 1973
Pierpont Morgan, Herbert Satterleee, Macmillan, N.Y.,
Morgan the Magnificent, John K. Winkler, Vanguard,
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
The Federal Reserve and Our Manipulated Dollar, Martin
A. Larson, Devin Adair
Co., Old Greenwich, Conn., 1975
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.
|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
||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, 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
|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
||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
|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,
|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
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.
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
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?
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
Q: Can I buy
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?
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
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.
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
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".
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
on the Federal Reserve Corporation
Remarks in Congress, 1934
AN ASTOUNDING EXPOSURE