CHAPTER SIX
The London Connection
"So you see, my dear Coningsby, that the world is governed by very different
personages from what is imagined by those who are not behind the
scenes."55~Disraeli, Prime Minister of England during Queen Victoria's
reign.
In 1775, the colonists of America declared their independence from Great
Britain, and subsequently won their freedom by the American Revolution.
Although they achieved political freedom, financial independence proved to
be a more difficult matter. In 1791, Alexander Hamilton, at the behest of
European bankers, formed the first Bank of the United States, a central bank
with much the same powers as the Bank of England. The foreign influences
behind this bank, more than a century later, were able to get the Federal
Reserve Act through Congress, giving them at last the central bank of issue
for our economy. Although the Federal Reserve Bank was neither Federal,
being owned by private stockholders, nor a Reserve, because it was intended
to create money, instead of to hold it in reserve, it did achieve enormous
financial power, so much so that it has gradually superseded the popular
elected government of the United States. Through the Federal Reserve
System, American independence was stealthily but invincibly absorbed back
into the British sphere of influence. Thus the London Connection became the
arbiter of policy of the United States.
Because of England's loss of her colonial empire after the Second World
War, it seemed that her influence as a world political power was waning.
Essentially, this was true. The England of 1980 is not the England of 1880.
She no longer rules the waves; she is a second rate, perhaps third rate,
military power, but paradoxically, as her political and military power waned,
her financial power grew. In Capital City we find, "On almost any measure
you care to take, London is the world's leading financial centre ... In the
1960s London dominance increased . . ."56
A partial explanation of this fact is given:
"Daniel Davison, head of London's Morgan Grenfell, said, 'The American
banks have brought
the necessary money, customers, capital
55 Coningsby, by Disraeli, Longmans Co., London, 1881, p. 252
56 McRae and Cairncross, Capital City, Eyre Methuen, London, 1963, p. 1
80
and skills which have established London in its present preeminence .... only the
American
banks have a lender of last resort. The Federal Reserve Board of the United
States can, and does,
create dollars when necessary. Without the Americans, the big dollar deals
cannot be put together.
Without them, London would not be credible as an international financial
centre.'"57
Thus London is the world's financial center, because it can command
enormous sums of capital, created at its command by the Federal Reserve
Board of the United States. But how is this possible? We have already
established that the monetary policies of the United States, the interest rates,
the volume and value of money, and sales of bonds, are decided, not by the
figurehead of the Federal Reserve Board of Governors, but by the Federal
Reserve Bank of New York. The pretended decentralization of the Federal
Reserve System and its twelve, equally autonomous "regional" banks, is and
has been a deception since the Federal Reserve Act became law in 1913. That
United States monetary policy stems solely from the Federal Reserve Bank of
New York is yet another fallacy. That the Federal Reserve Bank of New York
is itself autonomous, and free to set monetary policy for the entire United
States without any outside interference is especially untrue.
We might believe in this autonomy if we did not know that the majority stock
of the Federal Reserve Bank of New York was purchased by three New York
City banks: First National Bank, National City Bank, and the National Bank
of Commerce. An examination of the principal stockholders in these banks,
in 1914, and today, reveals a direct London connection.
In 1812, the National City Bank began business as the City Bank, in the same
room in which the defunct Bank of the United States, whose charter had
expired, had been doing business. It represented many of the same
stockholders, who were now functioning under a legitimate American
charter. During the early 1800s, the most famous name associated with City
Bank was Moses Taylor (1806-1882). Taylor's father had been a confidential
agent employed in buying property for the Astor interests while concealing
the fact that Astor was the purchaser. Through this tactic, Astor succeeded in
buying many farms, and also a great deal of potentially valuable real estate
in Manhattan. Although Astor's capital was reputed to come from his fur
trading, a number of sources indicate that he also represented foreign
interests. LaRouche58 states that Astor, in exchange for providing
intelligence to the British during the years before and after the
Revolutionary War, and for inciting Indians to attack
57 Ibid, p. 225
58 Lyndon H. LaRouche, Dope, Inc., New Benjamin Franklin House
Publishing Co., N.Y. 1978
and kill American settlers along the frontier, received a handsome reward.
He was not paid cash, but was given a percentage of the British opium trade
with China. It was the income from this lucrative concession which provided
the basis for the Astor fortune.
With his father's connection with the Astors, young Moses Taylor had no
difficulty in finding a place as apprentice in a banking house at the age of 15.
Like so many others in these pages, he found his greatest opportunities when
many other Americans were going bankrupt during an abrupt contraction of
credit. During the Panic of 1837, when more than half the business firms in
New York failed, he doubled his fortune. In 1855, he became president of
City Bank. During the Panic of 1857, the City Bank profited by the failure of
many of its competitors. Like George Peabody and Junius Morgan, Taylor
seemed to have an ample supply of cash for buying up distressed stocks. He
purchased nearly all the stock of Delaware Lackawanna Railroad for $5 a
share. Seven years later, it was selling for $240 a share. Moses Taylor was
now worth fifty million dollars.
In August, 1861, Taylor was named Chairman of the Loan Committee to
finance the Union Government in the Civil War. The Committee shocked
Lincoln by offering the government $5,000,000 at 12% to finance the war.
Lincoln refused and financed the war by issuing the famous "Greenbacks"
through the U.S. Treasury, which were backed by gold. Taylor continued to
increase his fortune throughout the war, and in his later years, the youthful
James Stillman became his protege. In 1882, when Moses Taylor died, he left
seventy million dollars.* His son-in-law, Percy Pyne, succeeded him as
president of City Bank, which had now become National City Bank. Pyne
was paralyzed, and was barely able to function at the bank. For nine years,
the bank stagnated, nearly all its capital being the estate of Moses Taylor.
William Rockefeller, brother of John D. Rockefeller, had bought into the
bank, and was anxious to see it progress. He persuaded Pyne to step aside in
1891 in favor of James Stillman, and soon the National City Bank became the
principal repository of the Rockefeller oil income. William Rockefeller's son,
William, married Elsie, James Stillman's daughter, Isabel. Like so many
others in New York banking, James Stillman also had a British connection.
His father, Don Carlos Stillman, had come to Brownsville, Texas, as a British
agent and blockade runner during the Civil War. Through his banking
connections in New York, Don Carlos had been able to find a place for
82
* The New York Times noted on May 24, 1882 that Moses Taylor was chairman of
the Loan Committee of the Associated Banks of New York City in 1861. Two
hundred million dollars worth of securities were entrusted to him. It is
probably due to him more than any other one man that the government in
1861 found itself with the means to prosecute the war.
his son as apprentice in a banking house. In 1914, when National City Bank
purchased almost ten per cent of the shares of the newly organized Federal
Reserve Bank of New York, two of Moses Taylor's grandsons, Moses Taylor
Pyne and Percy Pyne, owned 15,000 shares of National City stock. Moses
Taylor's son, H.A.C. Taylor, owned 7699 shares of National City Bank. The
bank's attorney, John W. Sterling, of the firm of Shearman and Sterling, also
owned 6000 shares of National City Bank. However, James Stillman owned
47,498 shares, or almost twenty percent of the bank's total shares of 250,000.
[See Chart I]
The second largest purchaser of Federal Reserve Bank of New York shares
in 1914, First National Bank, was generally known as "the Morgan Bank",
because of the Morgan representation on the board, although the bank's
founder George F. Baker held 20,000 shares, and his son G.F. Baker, Jr., had
5,000 shares for twenty-five percent of the bank's total stock of 100,000
shares. George F. Baker Sr.'s daughter married George F. St. George of
London. The St. Georges later settled in the United States, where their
daughter, Katherine St. George, became a prominent Congresswoman for a
number of years. Dr. E.M. Josephson wrote of her, "Mrs. St. George, a first
cousin of FDR and New Dealer, said, 'Democracy is a failure'." George
Baker, Jr.'s daughter, Edith Brevoort Baker, married Jacob SchifPs
grandson, John M. Schiff, in 1934. John M. Schiff is now honorary chairman
of Lehman Brothers Kuhn Loeb Company.
The third large purchase of Federal Reserve Bank of New York stock in 1914
was the National Bank of Commerce which issued 250,000 shares. J.P.
Morgan, through his controlling interest in Equitable Life, which held 24,700
shares and Mutual Life, which held 17,294 shares of National Bank of
Commerce, also held another 10,000 shares of National Bank of Commerce
through J.P. Morgan and Company (7800 shares), J.P. Morgan, Jr. (1100
shares), and Morgan partner H.P. Davison (1100 shares). Paul Warburg, a
Governor of the Federal Reserve Board of Governors, also held 3000 shares
of National Bank of Commerce. His partner, Jacob Schiff had 1,000 shares of
National Bank of Commerce. This bank was clearly controlled by Morgan,
who was really a subsidiary of Junius S. Morgan Company in London and
the N.M. Rothschild Company of London, and Kuhn, Loeb Company, which
was also known as a principal agent of the Rothschilds.
The financier Thomas Fortune Ryan also held 5100 shares of National Bank
of Commerce stock in 1914. His son, John Barry Ryan, married Otto Kahn's
83
daughter, Kahn was a partner of Warburg and Schiff in Kuhn, Loeb Company,
Ryan's granddaughter, Virginia Fortune Ryan,
59 E.M. Josephson, The Strange Death of Franklin D. Roosevelt, Chedney
Press, N.Y. 1948
married Lord Airlie, the present head of J. Henry Schroder Banking
Corporation in London and New York.
Another director of National Bank of Commerce in 1914, A.D. Juillard, was
president of A.D. Juillard Company, a trustee of New York Life, and
Guaranty Trust, all of which were controlled by J.P. Morgan. Juillard also
had a British connection, being a director of the North British and
Mercantile Insurance Company. Juillard owned 2000 shares of National
Bank of Commerce stock, and was also a director of Chemical Bank.
In The Robber Barons, by Matthew Josephson, Josephson tells us that
Morgan dominated New York Life, Equitable Life and Mutual Life by 1900,
which had one billion dollars in assets, and which had fifty million dollars a
year to invest. He says,
"In this campaign of secret alliances he (Morgan) acquired direct control of
the National Bank of
Commerce; then a part ownership in the First National Bank, allying himself
to the very strong
and conservative financier, George F. Baker, who headed it; then by means
of stock ownership
and interlocking directorates he linked to the first named banks other
leading banks, the Hanover,
the Liberty, and Chase."60
Mary W. Harriman, widow of E.H. Harriman, also owned 5,000 shares of
National Bank of Commerce in 1914. E.H. Harriman's railroad empire had
been entirely financed by Jacob Schiff of Kuhn, Loeb Company. Levi P.
Morton also owned 1500 shares of National Bank of Commerce stock in
1914. He had been the twenty-second vice-president of the United States, was
an ex-Minister from the U.S. to France, and president of L.P. Morton
Company, New York, Morton-Rose and Company and Morton Chaplin of
London. He was a director of Equitable Life Insurance Company, Home
Insurance Company, Guaranty Trust, and Newport Trust.
The astounding idea that the Federal Reserve System of the United States is
actually operated from London will probably be rejected at first hearing by
84
most Americans. However, Minsky has become famous for his theory of the
"dominant frame". He states that in any particular situation, there is a
"dominant frame" to which everything in that situation is related and
through which it can be interpreted. The "dominant frame" in the monetary
policy decisions of the Federal Reserve System is that these decisions are
made by those who stand to benefit most from them. At first glance, this
would seem to be the principal stockholders of the Federal Reserve Bank of
New York. However, we have seen that these stockholders all have a
"London Connection". The "London Connection" becomes more obvious as
the dominant power when we find in The
60 Matthew Josephson, The Robber Barons, p. 409
Capital City61 that only seventeen firms are allowed to operate as merchant
bankers in the City of London, England's financial district. All of them must
be approved by the Bank of England. In fact, most of the Governors of the
Bank of England come from the partners of these seventeen firms. Clarke
ranks the seventeen in order of their capitalization. Number 2 is the
Schroder Bank. Number 6 is Morgan Grenfell, the London branch of the
House of Morgan and actually its dominant branch. Lazard Brothers is
Number 8. N.M. Rothschild is Number 9. Brown Shipley Company, the
London branch of Brown Brothers Harriman, is Number 14. These five
merchant banking firms of London actually control the New York banks
which own the controlling interest in the Federal Reserve Bank of New York.
The control over Federal Reserve System decisions is also founded in another
unique situation. Each day, representatives of four other London banking
firms meet in the offices of N.M. Rothschild Company in London to fix the
price of gold for that day. The other four bankers are from Samuel Montagu
Company, which ranks Number 5 on the list of seventeen London merchant
banking firms, Sharps Pixley, Johnson Matheson, and Mocatta and
Goldsmid. Despite the huge tide of paper pyramided currency and notes
which are now flooding the world, at some point, every credit extension must
return to be based, in however minuscule a fashion, on some deposit of gold
in some bank somewhere in the world. Because of this factor, the London
merchant bankers, with their power to set the price of gold each day, become
the final arbiters of the volume of money and the price of money in those
countries which must bow to their power. Not the least of these is the United
States. No official of the Federal Reserve Bank of New York, or of the
Federal Reserve Board of Governors, can command the power over the
money of the world which is held by these London merchant bankers. Great
Britain, while waning in political and military power, today exercises the
greatest financial power. It is for this reason that London is the present
financial center of the world.
85
61 McRae and Cairncross, Capital City, Eyre Methuen, London, 1963
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CHAPTER SEVEN
The Hitler Connection
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