Excerpts from Chapter One
of Creature from Jekyll Island specifically addressing the creation of the Federal Reserve System.
The secret meeting on Jekyll Island in Georgia at which the Federal
Reserve was conceived; the birth of a banking cartel to protect its
members from competition; the strategy of how to convince Congress
and the public that this cartel was an agency of the United States
government.--...were seven men who represented an estimated
one-forth of the total wealth of the entire world.
1. Nelson W. Aldrich, Republican "whip" in the Senate, Chairman of
the National Monetary Commission, business associate of J.P. Morgan,
father-in-law to John D. Rockefeller, Jr.;
2. Abraham Piatt Andrew, Assistant Secretary of the United States
Treasury;
3. Frank A. Vanderlip, president of the National City Bank of New
York, the most powerful of the banks at that time, representing
William Rockefeller and the international investment banking house
of Kuhn, Loeb & Company;
4. Henry P. Davison, senior partner of the J.P Morgan Company;
5. Charles D. Norton, president of J.P. Morgan's First National Bank
of New York;
6. Benjamin Strong, head of J.P. Morgan's Bankers Trust Company; and
7. Paul M. Warburg, a partner in Kuhn, Loeb & Company, a
representative of the Rothschild banking dynasty in England and
France, and brother to Max Warburg who was head of the Warburg
banking consortium in Germany and the Netherlands.
In 1913, the same year that the Federal Reserve Act was passed into
law, a subcommittee of the House Committee on Currency and Banking,
under the chairmanship of Arsene Pujo of Louisiana, completed its
investigation into the concentration of financial power in the
United States. Pujo was considered to be a spokesman for the oil
interests, part of the very group under investigation, and did
everything possible to sabotage the hearings. In spite of his
efforts, however, the final report of the committee at large was
devastating. It stated:
Your committee is satisfied from
the proofs submitted, even in the absence of data from the banks,
that there is an established and well defined identity and community
of interest between a few leaders of finance...which has resulted in
great and rapidly growing concentration of the control of money and
credit in the hands of these few men...
When we consider, also, in this
connection that into these reservoirs of money and credit there flow
a large part of the reserves of the banks of the country, that they
are also the agents and correspondents of the out-of-town banks in
the loaning of their surplus funds in the only public money market
of the country, and that a small group of men and their partners and
associates have now further strengthened their hold upon the
resources of these institutions by acquiring large stock holdings
therein, by representation on their boards and through valuable
patronage, we begin to realize something of the extent to which this
practical and effective domination and control over our greatest
financial, railroad and industrial corporations has developed,
largely within the past five years, and that it is fraught with
peril to the welfare of the country.
The purpose of this meeting on Jekyll Island was...to come to an
agreement on the structure and operation of a banking cartel. The
goal of the cartel, as is true with all of them, was to maximize
profits by minimizing competition between members, to make it
difficult for new competitors to enter the field, and to utilize the
police power of government to enforce the cartel agreement.
In more specific terms, the purpose and, indeed, the actual outcome
of this meeting was to create the blueprint for the Federal Reserve
System.--
The first leak regarding this meeting found its way into print in
1916. It appeared in Leslie's Weekly and was written by a
young financial reporter by the name of B.C. Forbes, who later
founded Forbes Magazine. The article was primarily in praise
of Paul Warburg, and it is likely that Warburg let the story out
during conversations with the writer. At any rate, the opening
paragraph contained a dramatic but highly accurate summary of both
the nature and purpose of the meeting:
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 hundreds of miles south, embarking on a mysterious launch,
sneaking on to 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.-
In 1930, Paul Warburg wrote a massive book - 1750 pages in all -
entitled "The Federal Reserve System, Its Origin and Growth".
In this tome, he described the meeting and its purpose but did not
mention either its location or the names of those who attended. But
he did say:
"The results of the conference were
entirely confidential. Even the fact there had been a meeting was
not permitted to become public." Then in a footnote he added:
"Though eighteen 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."--
In the February 9, 1935, issue of
the Saturday Evening Post, an article appeared written by
Frank Vanderlip. In it he said:
"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....I do not feel
it is any exaggeration to speak of our secret expedition to Jekyll
Island as the occasion of the actual conception of what eventually
became the Federal Reserve System....We were told to leave our last
names behind us. We were told, further, that we should avoid dining
together on the night of our departure. We were instructed to come
one at a time and as unobtrusively as possible to the railroad
terminal on the New Jersey littoral of the Hudson, where Senator
Aldrich's private car would be in readiness, attached to the rear
end of a train for the South....
Once aboard the private car we began to observe the taboo that had
been fixed on last names. We addressed one another as "Ben," "Paul,"
"Nelson," "Abe" - it is Abraham Piatt Andrew. Davison and I adopted
even deeper disguises, abandoning our first names. On the theory
that we were always right, he became Wilbur and I became Orville,
after those two aviation pioneers, the Wright brothers....The
servants and train crew may have known the identities of one or two
of us, but they did not know all, and it was the names of all
printed together that would have made our mysterious journey
significant in Washington, in Wall Street, even in London.
Discovery, we knew, simply must not happen, or else all our time and
effort would be wasted.
If it were to be exposed publicly that our particular group had got
together and written a banking bill, that bill would have no chance
whatever of passage by Congress.--
As with all cartels, it had to be created by legislation and
sustained by the power of government under the deception of
protecting the consumer.--
As John Kenneth Galbraith explained
it:
"It was his [Aldrich's] thought to
outflank the opposition by having not one central bank but many. And
the word bank would itself be avoided."--Galbraith says "...Warburg
has, with some justice, been called the father of the system."
Professor Edwin Seligman, a member
of the international banking family of J. & W. Seligman, and head of
the Department of Economics at Columbia University, writes that
"...in its fundamental features, the Federal Reserve Act is the work
of Mr. Warburg more than any other man in the country."--
Another brother, Max Warburg, was the financial adviser of the
Kaiser and became Director of the Reichsbank in Germany. This was,
of course, a central bank, and it was one of the cartel models used
in the construction of the Federal Reserve System. The Reichsbank,
incidentally, a few years later would create the massive
hyperinflation that occurred in Germany, wiping out the middle class
and the entire German economy as well.-
...A. Barton Hepburn of Chase
National Bank was even more candid. He said:
"The measure recognizes and adopts
the principles of a central bank. Indeed, if all works out as the
sponsors of the law hope, it will make all incorporated banks
together joint owners of a central dominating power."
And that is about as good a
definition of a cartel as one is likely to find.--
...it is incapable of achieving its stated objectives.--
...why is the System incapable of achieving its stated objectives?
The painful answer is: those were never its true objectives.--
Anthony Sutton, former Research Fellow at the Hoover Institution for
War, Revolution and Peace, and also Professor of Economics at
California State University, Los Angeles, provides a somewhat deeper
analysis. He writes:
"Warburg's revolutionary plan to
get American Society to go to work for Wall Street was astonishingly
simple. Even today,...academic theoreticians cover their blackboards
with meaningless equations, and the general public struggles in
bewildered confusion with inflation and the coming credit collapse,
while the quite simple explanation of the problem goes undiscussed
and almost entirely uncomprehended. The Federal Reserve System is a
legal private monopoly of the money supply operated for the benefit
of the few under the guise of protecting and promoting the public
interest.--"
The real significance of the
journey to Jekyll Island and the creature that was hatched there was
inadvertently summarized by the words of Paul Warburg's admiring
biographer, Harold Kellock:
"Paul M. Warburg is probably the
mildest-mannered man that ever personally conducted a revolution. It
was a bloodless revolution: he did not attempt to rouse the populace
to arms. He stepped forth armed simply with an idea. And he
conquered. That's the amazing thing. A shy, sensitive man, he
imposed his idea on a nation of a hundred million people.--"
