Secrets
of the Federal Reserve by Eustace
Mullins
CHAPTER 4 - Federal Advisory Council |
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Federal Reserve notes are actually promissory notes, promises to pay, rather than what we traditionally consider money. They are interest bearing notes issued against interest bearing government bonds, paper issued with nothing but paper backing, which is known as fiat money, because it has only the fiat of the issuer to guarantee these notes. The Federal Reserve Act authorizes the issuance of these notes "for the purposes of making advances to Federal reserve banks... The said notes shall be obligations of the United States. They shall be redeemed in gold on demand at the Treasury Department of the United States in the District of Columbia." Tourists visiting the Bureau of Printing and Engraving on the Mall in Washington, D.C. view the printing of Federal Reserve notes at this governmental agency on contract from the Federal Reserve System for the nominal sum of .00260 each in units of 1,000, at the same price regardless of the denomination. These notes, printed for a private bank, then become liabilities and obligations of the United States government and are added to our present $4 trillion debt. The government had no debt when the Federal Reserve Act was passed in 1913. - Eustace Mullins |
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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.
Carter Glass neither then nor later gave any substantiation for his belief that a group of bankers would protect the interests of the public, nor is there any evidence in the history of the United States that any group of bankers has ever done so. In fact, the Federal Advisory Council proved to be the "administrative process" which Paul Warburg had inserted into the Federal Reserve Act to provide just the type of remote but unseen control over the System which he desired. When he was asked by financial reporter C.W. Barron, just after the Federal Reserve Act was enacted into law by Congress, whether he approved of the bill as it was finally passed, Warburg replied, "Well, it hasn't got quite everything we want, but the lack can be adjusted later by administrative processes." The council proved to be the ideal vehicle for Warburg's purposes, as it has functioned for seventy years in almost complete anonymity, its members and their business associations, unnoticed by the public. Senator Robert Owen, chairman of the Senate Banking and Currency Committee, had said, as quoted in The New York Times, August 3, 1913 before passage of the act:
Senator Owen's optimism was doomed by the domination of the Jekyll Island promoters over the initial composition of the Federal Reserve System. Not only did the Morgan-Kuhn, Loeb alliance purchase the dominant control of stock in the Federal Reserve Bank of New York, with almost half of the shares owned by the five New York banks under their control, First National Bank, National City Bank, National Bank of Commerce, Chase National Bank and Hanover National Bank, but they also persuaded President Woodrow Wilson to appoint one of the Jekyll Island group, Paul Warburg, to the Federal Reserve Board of Governors.
Each of the twelve Federal Reserve Banks was to elect a member of the
Federal Advisory Council, which would meet with the Federal Reserve Board
of Governors four times a year in Washington, in order to "advise" the
Board on future monetary policy. This seemed to assure absolute democracy,
as each of the twelve "advisors", representing a different region of the
United States, would be expected to speak up for the economic interests of
his area, and each of the twelve members would have an equal vote. The
theory may have been admirable in its concept, but the hard facts of
economic life resulted in a quite different picture. The president of a
small bank in St. Louis or Cincinnati, sitting in conference with Paul
Warburg and J.P. Morgan to "advise" them on monetary policy, would be
unlikely to contradict two of the most powerful international financiers
in the world, as a scribbled note from either one of them would be
sufficient to plunge his little bank into bankruptcy. In fact, the small
banks of the twelve Federal Reserve districts existed only as satellites
of the big New York financial interests, and were completely at their
mercy. Martin Mayer, in The Bankers, points out that "J.P. Morgan
maintained correspondent relationships with many small banks all over the
country."30 The big New York banks did not confine themselves to
multi-million dollar deals with other great financial interests, but
carried on many smaller and more routine dealings with their
"correspondent" banks across the United States. On page 701 of The Growth of Chicago Banks by F. Cyril James, we find mention of "the First National Bank of Chicago's profitable connection with the Morgan interests. A goodwill ambassador was hastily sent to New York to invite George F. Baker to become a director of the First National Bank of Chicago."31 (J.B. Forgan to Ream, January 7, 1903.) In effect, Baker and Morgan had personally chosen the first president of the Federal Advisory Council. James B. Forgan (1852-1924) also shows the obligatory "London Connection" in the operation of the Federal Reserve System. Born in St. Andrew's, Scotland, he began his banking career there with the Royal Bank of Scotland, a correspondent of the Bank of England. He came to Canada for the Bank of British North America, worked for the Bank of Nova Scotia, which sent him to Chicago in the 1880's, and by 1900 he had become president of the First National Bank of Chicago. He served for six years as president of the Federal Advisory Council, and when he left the council, he was replaced by Frank O. Wetmore, who had also replaced him as president of the First National Bank of Chicago when Forgan was named chairman of the board. Representing the New York Federal Reserve district on the first Federal Advisory Council was J.P. Morgan. He was named chairman of the Executive Committee. Thus, Paul Warburg and J.P. Morgan sat in conference at the meetings of the Federal Reserve Board during the first four years of its operation, surrounded by the other Governors and members of the council, who could hardly have been unaware that their futures would be guided by these two powerful bankers. Another member of the Federal Advisory Council in 1914 was Levi L. Rue, representing the Philadelphia district. Rue was president of the Philadelphia National Bank. Rand McNally Bankers Directory of 1914 listed as principal correspondent of the First National Bank of New York, the Philadelphia National Bank. First National Bank of Chicago also listed Philadelphia National Bank as its principal correspondent in Philadelphia. The other members of the Federal Advisory Council included Daniel S. Wing, president of the First National Bank of Boston, W.S. Rowe, president of the First National Bank of Cincinnati, and C.T. Jaffray, president of the First National Bank of Minneapolis. These were all correspondent banks of the New York "big five" banks who controlled the money market in the United States.
Jaffray had an even closer connection with the Baker-Morgan interests. In
1908, to reinvest the large annual dividends from their First National
Bank of New York stock, Baker and Morgan set up a holding company, First
Security Corporation, which bought 500 shares of the First National Bank
of Minneapolis. Thus Jaffray was little more than a wage-earning employee
of Baker and Morgan, although he had been "selected" by stockholders of
the Federal Reserve Bank of Minneapolis to represent their interests.
First Security Corporation also owned 50,000 shares of Chase National
Bank, 5400 shares of National Bank of Commerce, 2500 shares of Bankers
Trust, 928 shares of Liberty National Bank, the bank of which Henry P.
Davison had been president when he was tapped to join the J.P. Morgan
firm, and shares of New York Trust, Atlantic Trust and Brooklyn Trust.
First Security concentrated on bank stocks which rapidly appreciated in
value, and paid handsome annual dividends. In 1927, it earned five million
dollars, but paid the shareholders eight million, taking the rest from its
surplus. 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 quarterly conference.
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,
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.
30 Martin Mayer, The Bankers, Weybright and Talley, New York, 1974, p.
207. |
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