|
|
CHAPTER 4 - The Federal Advisory Council
In steamrolling the Federal Reserve Act through the House of
Representatives, Congressman Carter Glass declared on September 30, 1913
on the floor of the House that the interests of the public would be
protected by an advisory council of bankers.
"There can be nothing
sinister about its transactions. Meeting with it at least four times a
year will be a bankers' advisory council representing every regional
reserve district in the system. How could we have exercised greater
caution in safeguarding the public interest?
Carter Glass neither then nor later gave any substantiation for his belief
that a group of bankers would protect the interests of the public, nor is
there any evidence in the history of the United States that any group of
bankers has ever done so. In fact, the Federal Advisory Council proved to
be the "administrative process" which Paul Warburg had inserted into the
Federal Reserve Act to provide just the type of remote but unseen control
over the System which he desired. When he was asked by financial reporter
C.W. Barron, just after the Federal Reserve Act was enacted into law by
Congress, whether he approved of the bill as it was finally passed,
Warburg replied, "Well, it hasn't got quite everything we want, but the
lack can be adjusted later by administrative processes." The council
proved to be the ideal vehicle for Warburg's purposes, as it has
functioned for seventy years in almost complete anonymity, its members and
their business associations, unnoticed by the public.
Senator Robert Owen, chairman of the Senate Banking and Currency
Committee, had said, as quoted in The New York Times, August 3, 1913
before passage of the act:
"The Federal Reserve Act will furnish the bank and industrial and
commercial interests with the
discount of qualified commercial paper and thus stabilize our commercial
and industrial life. The
Federal Reserve banks are not intended as money making banks, but to serve
a great national
purpose of accommodating commerce and businessmen and banks, safeguard a
fixed market for
manufactured goods, for agricultural products and for labor. There is no
reason why the banks
should be in control of the Federal Reserve system. Stability will make
our commerce expand
healthfully in every direction."
Senator Owen's optimism was doomed by the domination of the Jekyll Island
promoters over the initial composition of the Federal Reserve System. Not
only did the Morgan-Kuhn, Loeb alliance purchase the dominant control of
stock in the Federal Reserve Bank of New York, with almost half of the
shares owned by the five New York banks under their control, First
National Bank, National City Bank, National Bank of Commerce, Chase
National Bank and Hanover National Bank, but they also persuaded President
Woodrow Wilson to appoint one of the Jekyll Island group, Paul Warburg, to
the Federal Reserve Board of Governors.
Each of the twelve Federal Reserve Banks was to elect a member of the
Federal Advisory Council, which would meet with the Federal Reserve Board
of Governors four times a year in Washington, in order to "advise" the
Board on future monetary policy. This seemed to assure absolute democracy,
as each of the twelve "advisors", representing a different region of the
United States, would be expected to speak up for the economic interests of
his area, and each of the twelve members would have an equal vote. The
theory may have been admirable in its concept, but the hard facts of
economic life resulted in a quite different picture. The president of a
small bank in St. Louis or Cincinnati, sitting in conference with Paul
Warburg and J.P. Morgan to "advise" them on monetary policy, would be
unlikely to contradict two of the most powerful international financiers
in the world, as a scribbled note from either one of them would be
sufficient to plunge his little bank into bankruptcy. In fact, the small
banks of the twelve Federal Reserve districts existed only as satellites
of the big New York financial interests, and were completely at their
mercy. Martin Mayer, in The Bankers, points out that "J.P. Morgan
maintained correspondent relationships with many small banks all over the
country."30 The big New York banks did not confine themselves to
multi-million dollar deals with other great financial interests, but
carried on many smaller and more routine dealings with their
"correspondent" banks across the United States.
Apparently secure in their belief that their activities would never be
exposed to the public, the Morgan-Kuhn, Loeb interests boldly selected the
members of the Federal Advisory Council from their correspondent banks and
from banks in which they owned stock. No one in the financial community
seemed to notice, as nothing was said about it during seventy years of the
Federal Reserve System's operation.
To avoid any suspicion that New York interests might control the Federal
Advisory Council, its first president, elected in 1914 by the other
members, was J.B. Forgan, president of the First National Bank of
Chicago. Rand McNally Bankers Directory for 1914 lists the principal
correspondents of the large banks. The principal correspondent bank of the
Baker-Morgan controlled First National Bank of New York is listed as the
First National Bank of Chicago. The principal correspondent listed by the
First National Bank of Chicago is the Bank of Manhattan in New York,
controlled by Jacob Schiff and Paul Warburg of Kuhn, Loeb Company. James
B. Forgan also was listed as a director of Equitable Life Insurance
Company, also controlled by Morgan. However, the relationship between
First National Bank of Chicago and these New York banks was even closer
than these listings indicate.
On page 701 of The Growth of Chicago Banks by F. Cyril James, we find
mention of "the First National Bank of Chicago's profitable connection
with the Morgan interests. A goodwill ambassador was hastily sent to New
York to invite George F. Baker to become a director of the First National
Bank of Chicago."31 (J.B. Forgan to Ream, January 7, 1903.) In effect,
Baker and Morgan had personally chosen the first president of the Federal
Advisory Council.
James B. Forgan (1852-1924) also shows the obligatory "London Connection"
in the operation of the Federal Reserve System. Born in St. Andrew's,
Scotland, he began his banking career there with the Royal Bank of
Scotland, a correspondent of the Bank of England. He came to Canada for
the Bank of British North America, worked for the Bank of Nova Scotia,
which sent him to Chicago in the 1880's, and by 1900 he had become
president of the First National Bank of Chicago. He served for six years
as president of the Federal Advisory Council, and when he left the
council, he was replaced by Frank O. Wetmore, who had also replaced him as
president of the First National Bank of Chicago when Forgan was named
chairman of the board.
Representing the New York Federal Reserve district on the first Federal
Advisory Council was J.P. Morgan. He was named chairman of the Executive
Committee. Thus, Paul Warburg and J.P. Morgan sat in conference at the
meetings of the Federal Reserve Board during the first four years of its
operation, surrounded by the other Governors and members of the council,
who could hardly have been unaware that their futures would be guided by
these two powerful bankers.
Another member of the Federal Advisory Council in 1914 was Levi L. Rue,
representing the Philadelphia district. Rue was president of the
Philadelphia National Bank. Rand McNally Bankers Directory of 1914 listed
as principal correspondent of the First National Bank of New York,
the Philadelphia National Bank. First National Bank of Chicago also listed
Philadelphia National Bank as its principal correspondent in Philadelphia.
The other members of the Federal Advisory Council included Daniel S. Wing,
president of the First National Bank of Boston, W.S. Rowe, president of
the First National Bank of Cincinnati, and C.T. Jaffray, president of the
First National Bank of Minneapolis. These were all correspondent banks of
the New York "big five" banks who controlled the money market in the
United States.
Jaffray had an even closer connection with the Baker-Morgan interests. In
1908, to reinvest the large annual dividends from their First National
Bank of New York stock, Baker and Morgan set up a holding company, First
Security Corporation, which bought 500 shares of the First National Bank
of Minneapolis. Thus Jaffray was little more than a wage-earning employee
of Baker and Morgan, although he had been "selected" by stockholders of
the Federal Reserve Bank of Minneapolis to represent their interests.
First Security Corporation also owned 50,000 shares of Chase National
Bank, 5400 shares of National Bank of Commerce, 2500 shares of Bankers
Trust, 928 shares of Liberty National Bank, the bank of which Henry P.
Davison had been president when he was tapped to join the J.P. Morgan
firm, and shares of New York Trust, Atlantic Trust and Brooklyn Trust.
First Security concentrated on bank stocks which rapidly appreciated in
value, and paid handsome annual dividends. In 1927, it earned five million
dollars, but paid the shareholders eight million, taking the rest from its
surplus.
Another member of the initial Federal Advisory Council was E.F. Swinney,
president of the First National Bank of Kansas City. He was also a
director of Southern Railway, and lists himself in Who's Who as
"independent in politics".
Archibald Kains represented the San Francisco district on the Federal
Advisory Council, although he maintained his office in New York, as
president of the American Foreign Banking Corporation.
After serving as a Governor of the Federal Reserve Board from 1914-1918,
Paul Warburg did not request another term. However, he was not ready to
sever his connection with the Federal Reserve System which he had done so
much to set up and put into operation. J.P. Morgan obligingly gave up his
seat on the Federal Advisory Council, and for the next ten years, Paul
Warburg continued to represent the Federal Reserve district of New York on
the Council. He was vice president of the council 1922-25, and president
1926-27. Thus Warburg remained the dominant presence at Federal Reserve
Board meetings throughout the 1920s, when the European central banks were
planning the great contraction of credit which precipitated the Crash of
1929 and the Great Depression.
Although most of the Federal Advisory Council's "advice" to the Board of
Governors has never been reported, on rare instances a few glimpses into
its deliberations were afforded by brief items in The New York Times. On
November 21, 1916, The Times reported that the Federal Advisory Council
had met in Washington for its quarterly conference.
"There was talk about absorbing Europe's extension of credit to South
America and other
countries. Federal Reserve officials said that to maintain a position as
one of the world's bankers
the United States must expect to be called upon to render a good deal of
the service performed
largely by England in the past, in extending short term credits necessary
in the production and
transportation of goods of all kinds in the world's trade, and that
acceptances in foreign trade
require lower discounts and the freest and most reliable gold markets."
(The First World War
was at its zenith in 1916.)
In addition to his service on the Board of Governors and the Federal
Advisory Council, Paul Warburg continued to address bankers' groups about
the monetary policies they were expected to follow. On October 22, 1915,
he addressed the Twin City Bankers Club, St. Paul, Minnesota during which
speech he stated,
"It is to your interest to see the Federal Reserve banks as strong as they
possibly can be. It
staggers the imagination to think what the future may have in store for
the development of
American banking. With Europe's foremost powers limited to their own
field, with the United
States turned into a creditor nation for all the world, the boundaries of
the field that lies open for
us are determined only by our power of safe expansion. The scope of our
banking future will
ultimately be limited by the amount of gold that we can muster as the
foundation of our banking
and credit structure."
The composition of the Federal Reserve Board of Governors and the Federal
Reserve Advisory Council, from its initial membership to the present day,
shows links to the Jekyll Island conference and the London banking
community which offers incontrovertible evidence, acceptable in any court
of law, that there was a plan to gain control of the money and credit of
the people of the United States, and to use it for the profit of the
architects. Old Jekyll Island hands were Frank Vanderlip, president of the
National City Bank, which bought a large portion of the shares of the
Federal Reserve Bank of New York in 1914; Paul Warburg of Kuhn, Loeb
Company; Henry P. Davison, J.P. Morgan's righthand man, and director of
the First National Bank of New York and the National Bank of Commerce,
which took a large portion of Federal Reserve Bank of New York stock; and
Benjamin Strong, also known as a Morgan lieutenant, who served as Governor
of the Federal Reserve Bank of New York during the 1920's.
"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.
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
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.
30 Martin Mayer, The Bankers, Weybright and Talley, New York, 1974, p.
207.
31 F. Cyril James, The Growth of Chicago Banks, Harper, New York, 1938.
Continue to
chapter 5
Foreword
to Secrets of the Federal Reserve
Chapter
1
-
2 -
3 -
4 -
5 -
6 -
7 -
8 -
9 -
10 -
11 -
12 -
13 -
14
ADDENDUM
BIBLIOGRAPHY
BIOGRAPHIES
INDEX
Taking Back Your Power
by Allen Aslan Heart
WHAT CAN YOU DO? Stop playing THEIR game. Take back
your power. Stop paying taxes that are not legal or lawful. Stop paying
bills you don't really owe. Stop using THEIR money. There ARE ways if you
open your mind and look for the gaps in their fences that keep the sheeple
in their pasture. Are you chattel or a real person? You are the one who
makes that choice.
|