CHAPTER 3B - The Federal Reserve Act

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."

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.

It is interesting to note how many assassinations of Presidents of the United States follow their concern with the issuing of public currency; Lincoln with his Greenback, non-interest-bearing notes, and Garfield, making a pronouncement on currency problems just before he was assassinated.
We now begin to understand why such a lengthy campaign of planned deception was necessary, from the secret conference at Jekyll Island to the identical "reform" plans proposed by the Democratic and Republican parties under different names. The bankers could not wrest control of the issuance of money from the citizens of the United States, to whom it had been designated through its Congress by the Constitution, until the Congress granted them their monopoly for a central bank. Therefore, much of the influence exerted to get the Federal Reserve Act passed was done behind the scenes, principally by two shadowy, non-elected persons: The German immigrant, Paul Warburg, and Colonel Edward Mandell House of Texas.

Paul Warburg made an appearance before the House Banking and Currency Committee in 1913, in which he briefly stated his background:

I am a member of the banking house of Kuhn, Loeb Company. I came over to this country in 1902, having been born and educated in the banking business in Hamburg, Germany, and studied banking in London and Paris, and have gone all around the world. In the Panic of 1907, the first suggestion I made was 'Let us get a national clearing house.' The Aldrich Plan contains some things which are simply fundamental rules of banking. Your aim in this plan (the Owen-Glass bill) must be the same--centralizing of reserves, mobilizing commercial credit, and getting an elastic note issue."

Warburg's phrase, "mobilization of credit" was an important one, because the First World War was due to begin shortly, and the first task of the Federal Reserve System would be to finance the World War. The European nations were already bankrupt, because they had maintained large standing armies for almost fifty years, a situation created by their own central banks, and therefore they could not finance a war. A central bank always imposes a tremendous burden on the nation for "rearmament" and "defense", in order to create inextinguishable debt, simultaneously creating a military dictatorship and enslaving the people to pay the "interest" on the debt which the bankers have artificially created.

In the Senate debate on the Federal Reserve Act, Senator Stone said on December 12, 1913

"The great banks for years have sought to have and control agents in the Treasury to serve their purposes. Let me quote from this World article, 'Just as soon as Mr. McAdoo came to Washington, a woman whom the National City Bank had installed in the Treasury Department to get advance information on the condition of banks, and other matters of interest to the big Wall Street group, was removed. Immediately the Secretary and the Assistant Secretary, John Skelton Williams, were criticized severely by the agents of the Wall Street group.'"

"I myself have known more than one occasion when bankers refused credit to men who opposed their political views and purposes. When Senator Aldrich and others were going around the country exploiting this scheme, the big banks of New York and Chicago were engaged in raising a munificent fund to bolster up the Aldrich propaganda. I have been told by bankers of my own state that contributions to this exploitation fund had been demanded of them and that they had contributed because they were afraid of being blacklisted or boycotted. There are bankers of this country who are enemies of the public welfare. In the past, a few great banks have followed policies and projects that have paralyzed the industrial energies of the country to perpetuate their tremendous power over the financial and business industries of America."

Carter Glass states in his autobiography that he was summoned by Woodrow Wilson to the White House, and that Wilson told him he intended to make the reserve notes obligations of the United States. Glass says,

"I was for an instant speechless. I remonstrated. There is not any government obligation here, Mr. President. Wilson said he had had to compromise on this point in order to save the bill."

The term "compromise" on this point came directly from Paul Warburg. Col. Elisha Ely Garrison, in Roosevelt,* Wilson and the Federal Reserve Law wrote,

"In 1911, Lawrence Abbot, Mr. Roosevelt's private officer at 'The Outlook' handed me a copy of the so-called Aldrich Plan for currency reform. I said, I could not believe that Mr. Warburg was the author. This plan is nothing more than the Aldrich-Vreeland legislation which provided for currency issue against securities. Warburg knows that as well as I do. I am going to see him at once and ask him about it. All right, the truth. Yes, I wrote it, he said. Why? I asked. It was a compromise, answered Warburg."¹³

Garrison says that Warburg wrote him on February 8, 1912.

"I have no doubt that at the end of a thorough discussion, either you will see it my way or I will see it yours--but I hope you will see it mine."

This was another famous Warburg saying when he secretly lobbied Congressmen to support his interest, the veiled threat that they should "see it his way". Those who did not found large sums contributed to their opponents at the next elections, and usually went down in defeat.

Col. Garrison, an agent of Brown Brothers bankers, later Brown Brothers Harriman, had entree everywhere in the financial community. He writes of Col. House, "Col. House agreed entirely with the early writing of Mr. Warburg." Page 337, he quotes Col. House:

"I am also suggesting that the Central Board be increased from four members to five and their terms lengthened from eight to ten years. This would give stability and would take away the power of a President to change the personnel of the board during a single term of office."

House's phrase, "take away the power of a President" is significant, because later Presidents found themselves helpless to change the direction of the government because they did not have the power to change the composition of the Federal Reserve Board to attain a majority on it during that President's term of office. Garrison also wrote in this book,

"Paul Warburg is the man who got the Federal Reserve Act together after the Aldrich Plan aroused such nationwide resentment and opposition. The mastermind of both plans was Baron Alfred Rothschild of London."

Colonel Edward Mandell House* was referred to by Rabbi Stephen Wise in his autobiography, Challenging Years as "the unofficial Secretary of State". House noted that he and Wilson knew that in passing the Federal Reserve Act, they had created an instrument more powerful than the Supreme Court. The Federal Reserve Board of Governors actually comprised a Supreme Court of Finance, and there was no appeal from any of their rulings.

Foreword to Secrets of the Federal Reserve

Chapter 1 - 2 - 3 - 4 - 5 - 6 - 7 - 8 - 9 - 10 - 11 - 12 - 13 - 14