Chapter 1. Jekyll Island: Secrets of the Federal Reserve byEustace Mullins from archive.org

CHAPTER ONE

Jekyll Island

"The matter of a uniform discount rate was discussed and settled at Jekyll
Island."-Paul M. Warburgl

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:



10
"Picture a party of the nation's greatest bankers stealing out of New York
on a private railroad car under cover of darkness, stealthily
hieing 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 working reality. "2

The official biography of Senator Nelson Aldrich states:

"In the autumn of 1910, six men went out to shoot ducks,
Aldrich, his secretary Shelton, Andrews, Davison, Vanderlip



11
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 Island"

4 T.W. Lamont, Henry P. Davison, Harper, 1933

From these references, it is possible to piece together the story. Aldrich's
private car, which had left Hobo ken 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 only.



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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
journey.



13
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 secrecy."5

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.



14
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.



15
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



16
Association,' meaning a central reserve organization with an elastic note
issue based on gold and commercial paper."

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."



17
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, Vanderlip wrote:

"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 System."

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."



IS
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 educational
purposes."

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



19
down prejudices and remove suspicion". The campaign to enact the plan into law
succeeded in doing just that.



10 Frank Vanderlip, From Farmboy to Financier

CHAPTER TWO

The Aldrich Plan