Chapter Nine THE MONEY TRUST CONS CONGRESS: The Federal Reserve Conspiracy by Antony C. Sutton from archive.org

Chapter Nine 
THE MONEY TRUST CONS CONGRESS 



Congressional passage of the Federal Reserve Act in 
December, 1913, must count as one of the more disgraceful 
unconstitutional perversions of political power in American 
history. 

Certainly it is hard to think of any Act that has had greater 
effect and illegally transferred more monopoly power to a 
conspiratorial clique. These are harsh words. The reader may 
judge if they are accurate after reading this chapter: an almost 
hour by hour detail of the passage of the Act and signature by 
President Wilson. 

The Act transferred control of the monetary supply of the 
United States from Congress to a private elite. Paper fiat currency 
replaced gold and silver. Wall Street financiers were able now to 
tap an unlimited supply of fiat money at no cost. 

Yet, as Senator Townsend stated: "This bill did not originate 
in any party platform. The people have not expressed themselves 
on it anywhere and at any time." 1 - 1 ' An extraordinary lobbying 
effort surrounded the bill just as today in the 1990s an 
extraordinary amount of lobbying is brought forth by any attempt 
to curtail or even investigate the Fed. In 1913 the Democratic 
Party leadership came 



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The Federal Reserve Conspiracy 

under strong pressure from Woodrow Wilson and New York banking 
lobbyists to ensure that opposition did not water down the currency bill 
and allow other private interests to become stockholders. 

Witness the complaint of Senator Gilbert Minell Hitchcock, an 
independent-minded gentleman from Nebraska and publisher of the 
Omaha World Herald. The Bill had come to the Senate from the House: 

Mr. HITCHCOCK: "Sacred document" as it came from the House, 

of which, as I have said, we were forbidden to dot an "i" or to 

cross a "t. " 

Mr. OWEN: By whom? 

Mr. HITCHCOCK: And which we were commanded to pass 
without a hearing and without much investigation. 

Mr. POMERENE: Mr. President, I have been around these 
hallowed precincts for some time, and I have not heard that 
anybody has forbidden anybody else to change his views or to 
criticize any bill that came from the House, or any bill that origi- 
nated here. Anyone has a right to change his view. The Senator 
himself has changed his view a number of times. I say that not to 
his discredit, but simply for the purpose of showing that he has 
been a free moral agent all these weeks. 

Mr. HITCHCOCK: Mr. President... 

Mr. OWEN: The Senator from Nebraska did not tell us by whom 
he had been ordered not to dot an "i" nor cross a "t," and I would 
be glad if the Senator would disclose that valuable information, 
unless it is confidential with the Senator. 



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_The Money Trust Cons Congress 



Mr. HITCHCOCK: I think I will leave that for the country to 
judge. I will take my chances on it. 

Mr. OWEN: If the Senator is content to leave that as an 
insinuation, it is for the Senator to do so. 

Mr. HITCHCOCK: I will take that liberty. (2) 

On September 18, 1913 the Glass Bill, the house version of the 
Morgan central banking bill, passed the House of Representatives by an 
overwhelming margin of 287 to 85. Most Congressmen had no idea 
what the bill was about. There were no amendments. Members voted 
for or against, and only the brave voted against. This Glass bill was 
named after Congressman Carter Glass of Virginia (1858-1946) - a 
banker (a director of the United Loan and Trust and the Virginia Trust 
Company). 

The Glass Bill then went to the Senate and became the Owen Bill 
after Senator Robert Latham Owen (1856-1947) of Oklahoma, 
Chairman of the Senate Finance Committee -and a banker (a major 
stockholder in the First National Bank of Muskogee). 

The Senate took exactly 4 1/2 hours to debate and adopt the Owen 
Bill, 43 to 25. The Republicans did not even see the conference report. 
This is normally read to the floor. No member of the Senate could have 
known of its contents and some Senators even stated on the floor of the 
Senate that they had no knowledge of the contents of the Owen Bill. 

At 6:02 p.m. on the same day the Bill was hurried through the 
Senate without discussion. President Woodrow Wilson signed the 
Federal Reserve Act of 1913 into law. 

A detailed review of the Senate debate indicates the Senators had 
no details to discuss and every criticism went unanswered. Republican 
Senator Bristow (1861-1944) made bitter comments on the obvious 
conflict of interest: 



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The Federal Reserve Conspiracy 

My allegation is that this bill has been drawn in the interests 
of the banks; that the Senator from Oklahoma, as the chairman of 
the committee, is largely interested in banks; that the profits which 
will accrue to those banks directly will add to his personal 
fortune; that he has voted to increase the dividends on the stock of 
the regional banks, which will be paid to the member banks, from 
5 per cent to 6 per cent; that he has voted against permitting the 
public to hold the stock of these regional banks and has insisted 
that it shall be held by the member banks; and that he has voted 
against giving the Government the control of the regional banks 
and in favor of the banks controlling the regional banks, and it is 
for him to say whether he has violated the rule laid down in 
Jefferson's Manual. (3) 

The Senate debate, for what it was worth without a conference 
report, culminated in a test of political strength on Monday, December 
15, 1913. At this vote the amendments proposed by Senator Hitchcock - 
the only Democrat working against the bill - were tabled by a vote of 40 
to 35. 

Hitchcock's amendments were aimed to make the Federal Reserve 
System a government rather than a private monopoly, i.e., the control of 
the Money Trust would be placed in the Department of the Treasury. 

It is interesting that the Senate would overwhelmingly refuse to 
place control of the money supply within the Treasury and prefer to 
hand it over to the House of Morgan. Colonel House had done his work 
well. 

On rereading the lengthy rambling debate, the likelihood of price 
inflation was recognized. The argument was a common sense approach 
that without the discipline of limited gold and silver, the pressure of 
unlimited flat money would lead to price inflation. The only argument 
against was 



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The Money Trust Cons Congress 

a rather weak "sound bankers would not allow price inflation." 

Note that we use the term price inflation. In 1913 the term 
inflation always referred to "currency inflation," i.e., expansion of the 
note issue. In the intervening decades the meaning has changed 
entirely. Today when the term inflation is used it always refers to price 
inflation, i.e., an increase in prices. 

The key Senator warning of inflation (currency inflation) ahead 
was Senator Root, who oddly accused Bryan, the pro-silver populist, as 
the dominating influence behind the Federal Reserve Act (most 
unlikely, and a probable red herring). 

However, Root did warn of currency inflation and financial panic 
but then defended the Glass-Owen bill on the grounds that no inflation 
could come about "unless the sound money men who run the banks 
brought it about." 

Once again we have the Money power controlling the opposition, 
i.e., proclaiming arguments that can be easily countered while ensuring 
that the really potent criticisms do not see the light of day. 

Today the irrefutable link between currency inflation and price 
inflation is buried in a confusion of academic double-talk and algebraic 
manipulation. Today's academic economists are so beholden to 
mathematical manipulation (with the deluding plea of rigorousness) that 
they have entirely overlooked fundamental economic truisms. With 
very few exceptions (Hillsdale College, Ludwig von Mises Institute at 
Auburn University), academic economic departments are willing pawns 
of the modern money trust or the Federal Reserve System. (This author 
can speak first hand of the abysmal ignorance of the UCLA Economics 
Department in the early 1960s). 

The reply to Reed came from Senator Hitchcock, who pointed out 
that under the Bill, "the control of the currency 



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The Federal Reserve Conspiracy 

system of the country would have to be turned over to the bankers." 
Others like Senator Weeks were unconcerned on the grounds that "the 
United States has the most competent bank men in the world." But then, 
Weeks was a banker himself. 

The last speech on this Monday afternoon came from 
Congressman Mann of Illinois, the Republican floor leader who made 
the rather odd assertion that the U. S. was in the midst of a financial and 
industrial panic which demanded passage of the Federal Reserve Act. 

Tuesday, December 16, 1913 

In Tuesday's Senate debate, Senator Root again emphasized the 
danger of inflation from the proposed Federal Reserve Act. Constant 
interruptions, according to the New York Times (December 17), suggest 
that supporters of the bill were publicly worried. They argued in reply 
that inflation was not possible if the securities issued were good 
government securities - to which Root replied: 

That is neither here nor there so far as my criticism of the 
bill is concerned. My objection is that the bill permits a vast 
inflation of our currency and that inflation can be accomplished 
just as readily and just as certainly by loans of the Government 
paper on good security as upon bad security... 

emphasizing the point that; 

no one denies that in the past from time to time great 
commercial nations have found themselves moving along a tide of 
optimism which, with the facilities of easy money has brought them 
to a point of most injurious and serious collapse. 



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The Money Trust Cons Congress 

Root reinforced his "tide of optimism" argument as follows, 

...judgement becomes modified by the optimism of the hour 
and grows less and less effective in checking the expansion of 
business as the period of expansion goes on. 

He clinched the argument: 

...instead of doing our duty as the responsible legislative 
branch of the Government of the United States, we are shirking 
that duty and throwing it upon a subordinate agency of the 
government. 

Unfortunately, Root did not push his argument to the limit, i.e., 
that this "subordinate agency of government" as he called it, was in 
effect going to be a private money monopoly of national bankers. 

The general response to warnings of inflation was to cite the 
existence of a gold reserve backing for the money supply: proposed at 
33 1/3 percent. For example, Senator Williams of Mississippi claimed 
that the great inflation feared by Senator Root was only a "bare 
mathematical possibility." Why? Because, argued Senator Williams, 
"no President conceivably would appoint one member of the board who 
believed in fiat money." Eighty years later, Senator Williams to the 
contrary, every single member of the Federal Reserve Board and its 
Regional Banks is an ardent believer in fiat money and an adversary of 
gold! In President Wilson's era it was impossible to conceive that the 
role of gold could ever cease. In President Clinton's era it is impossible 
for policy makers to visualize that gold has any role at all. 

Wednesday, December 17, 1913 

On Wednesday the powerful behind-the-scenes pressure for the 
Federal Reserve Act surfaced when the White House 



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The Federal Reserve Conspiracy 

announced that it expected the Senate to pass a currency bill before 
Saturday, that the House would accept this Senate version of the bill 
without changes and the bill would then go to the President for 
signature on Christmas eve. The flaw with this hurry-up scenario was 
that on Wednesday Senator Root's warnings about price inflation had 
some effect and a Democratic Party caucus was called, during the short 
dinner recess in the evening, to consider two of Root's proposals: (a) 
that the note issue should be limited by law and (b) that the gold reserve 
should be increased to 50 percent with a heavy tax on "depletions" 
below this level. 

After discussion the note limitation amendment was rejected, but 
the caucus did adopt a proposal to increase the gold reserve to 40 
percent while requiring that a portion of regional reserve bank earnings 
be set aside as a gold reserve. It is interesting to note that the 
Democratic majority was well aware of the discipline of gold and it was 
not the intent of Congress in 1913 in any way to reject, or even limit 
this discipline. In brief, the present day attempt to demonetize gold by 
phasing it out of the monetary system was not only rejected by the 
Congress of 1913 but the dangers of any such demonetization were 
recognized as ominous for the welfare of the United States. 

Even after the caucus, criticism was to be heard from a few 
Senators. Senator Crawford of South Dakota didn't like the private 
monopoly aspects at all: 

...you are simply creating a bank of big bankers, a bank to 
help big banks, but for which you assess the little banks to get the 
capital. The little banks are simply commanded to carry wood and 
water for the big banks. You say to the Vanderlips and the 
Hepburns and the Morgans and the Reynoldses, "come in with 
your short term paper and get the money" but you say to the 
Smiths and 



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The Money Trust Cons Congress 

the Browns and the Joneses from the small country districts, "go 
somewhere else with your long term farmers paper; we cannot 
discount it. " 

The intriguing aspect of the Wednesday evening is that while a 
majority of Congress understood more or less the idea that the system 
would be inflationary, they were apparently unwilling to bring 
themselves to vote against the bill. 

Thursday, December 18, 1913 

By Thursday effective opposition had crumbled, and to speed 
passage the Senate operated under a 15-minute rule. By this device half 
a dozen Hitchcock amendments were disposed of and others proposed 
in the previous night's Democratic Party caucus given little attention. 
The debate records serious doubts and differences of opinion coupled 
with predictions that the bill would become law before Christmas and 
signed on Monday or Tuesday of the following week. The opposition 
was sidetracked. Problems were overlooked. Fundamental questions, 
including the possibility of inflation, were bypassed by the leadership. 
One senses almost an air of panic - to pass a "currency bill," at whatever 
cost. Consequently, although the bill was known to be defective, the 
New York Times for Friday, December 19 ran its reporting under the 
head, "Near end of tight on currency bill." The White House 
promptly announced that it was considering names for Governor of the 
Federal Reserve Board. The first name to be floated out of the White 
House was that of James J. Hill of the Great Northern Railroad. It was 
proposed by international banker James Speyer - confirming the behind- 
the-scenes activity of bankers. 



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The Federal Reserve Conspiracy 

Friday, December 19, 1913 

On Friday, December 19, the Friday before Christmas when 
Congressional thoughts were more on Christmas trees than money 
trees, the Senate passed President Wilson's currency bill without further 
ado by an overwhelming vote of 54 to 34. Every Democrat in the 
Senate, plus six Republicans and one Progressive Republican, voted for 
the Federal Reserve system. Against the Federal Reserve were 34 
Republicans. As a sop to criticism, the bill included a so-called "radical 
amendment," i.e. that Congressmen could not serve on Federal Reserve 
Boards. 

Bankers, not unexpectedly, were reported to be "relieved" by the 
passage of the bill - but not fully satisfied and still pressed for changes 
in committee. William A. Gaston, President of the National Shawmut 
Bank, spent some days in Washington in conference with members of 
the House and Senate Currency Committees and commented: "...The 
prospective conference changes will make the bill more workable for 
the banks.-" 

Edmund D. Hulbert, Vice President of Merchants Loan and Trust 
Company, added to this: "...on the whole it is a sound bill and will do 
much toward putting banking and currency on a sound footing. " (4) 

W. M. Habliston, Chairman of the First National Bank of 
Richmond, stated, "It will result in an elastic currency which will avert 
panics," and Oliver J. Sands, President of the American National Bank, 
commented that 

The passage of the currency measure will have a beneficial 
effect upon the country at large and its operation will help 
business. It seems to me the beginning of an era of general 
prosperity.... 

The only reported objection from bankers came from Charles 
McKnight, President of National Bank for Western Pennsylvania: "It 
will do the country no good...." 



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The Money Trust Cons Congress 

Saturday, December 20, 1913 

After passage of the Owen bill in the Senate the measure was sent 
to a joint House-Senate conference to iron out the major differences 
between the Glass bill from the House and the Owen bill from the 
Senate. This conference excluded all Republican members. The 
conference then met for four hours on Saturday evening, December 20, 
at which time at least 20 (some say 40) major points of difference in the 
two versions were uncovered, in addition to minor disagreements in 
language requiring over 100 corrections. In most of these minor items 
the Senate yielded to the House. However, none of the 20 (40) major 
differences were discussed in this Saturday evening conference, and it 
was generally agreed that Monday passage of the joint bill was 
extremely unlikely. As reported by the New York Times (December 21, 
1913), "The points seriously at issue embody practically all the 
substantial Senate amendments." 

In an effort to work out some of the major differences, the 
conferees agreed to meet all day Sunday. Further, on this Saturday the 
full House met and refused to accept the Senate version of the bill by a 
vote of 294 to 59 and then proceeded to pass amendments binding on 
the House conferees. 

By Saturday evening, December 20, 1913, the following were 
some of the principal major points of dispute between the House and 
the Senate and reflected significant, fundamental differences in the 
approach to a currency bill: 

First - the number of regional reserve banks, 

Second - the question of guarantee of deposits, 

Third - the amount of gold reserve to be required against the 
circulating notes, 

Fourth - the changes with respect to domestic acceptance in the 
case of domestic and foreign trade, 

Fifth - the changes in the reserve provisions, 



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The Federal Reserve Conspiracy_ 



Sixth - the right of member banks to use the notes of the Federal 
reserve banks for reserve purposes, 

Seventh - the status of the two percent Government bonds used as 
security for national bank notes, 

Eighth - the Senate's provision with respect to an increase in 
national bank circulation. 

This was the legislative position late Saturday night. 

Sunday, December 21, 1913 

Quite what happened on this Sunday in Washington, D.C. we 
shall never know for sure. 

What we do know is that on Sunday morning the Senate-House 
conferees were faced with more than 20 (some say 40) fundamental 
differences on a critically important bill - a bill to affect the lives of 
every American then and in the future. Yet, the following Monday 
morning the New York Times (December 22) reported on the front page, 
"Money Bill may be law today." The Times reported that in some 
undisclosed way the House-Senate conferees had adjusted their 
differences. The "newspaper of record" put it this way: 

With almost unprecedented speed, the conference to adjust 
House and Senate differences on the currency bill practically 
completed its labors early this morning (Monday 22nd). On 
Saturday the conferees did little more than dispose of the 
preliminaries, leaving forty essential differences to be thrashed out 
Sunday. 
The "almost unprecedented" speed in the conference probably 

occurred at a most unlikely time - between 1:30 a.m. and 4 a.m. 

Monday, December 22. Let's look at that critical Monday in more 

detail. 



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The Money Trust Cons Congress 

Monday, December 22, 1913 

At midnight Sunday, December 21, either 20 or 40 
(depending on the source) major points of disagreement required 
resolution. At 11 p.m. Monday, 23 hours later, the House voted 
298 to 60 and passed the Federal Reserve Act. During this brief 
23 hours the major differences were reconciled, worded, sent to 
the printer, set up in type, proofread, printed, distributed, read by 
every member of the House, discussed, pondered, weighed, 
deliberated, debated -and voted upon. This miracle of speediness, 
never equaled before or after in the U.S. Congress, is ominously 
comparable to the rubber stamp lawmaking of the banana 
republics. 



Mon. Dec. 22, 1913 


1:30a.m. - 


■ 4:30a.m. 


House-Senate con 
ferees adjust 20 
(40) major differ- 
ences in the two 
bills. 




4:30 a.m 




Report handed to 
printers 


12 1/2 hours from 
conference to 
printed report 


7:00 a.m 




Proofs read 




1:00 p.m. 




Printed copies 
delivered from 
printers 




2:00 p.m 




Printed report on 
Senate desks with 
notification of a 
meeting at 4 p.m. 



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The Federal Reserve Conspiracy 



4:00 p.m. 



Republican members 
of conference go to 
Conference room -to 
be told that a bill had 
already been 
concluded. 



5 hours from printed 
final report to House 
vote. 



6:00 p.m. 



Printed conference 
report submitted to the 
House by 

Congressman Glass - 
most House members 
go to the restaurant for 
dinner while the bill is 
read (1 1/2 hours). 



7:30 p.m 



Debate begins with a 
20 minute speech by 
Glass. 



11:00 p.m. 



The House votes 298 
to 60 in favor of the 
Federal Reserve Act. 



The manner in which the Federal Reserve bill was handled by the 
Democratic majority and specifically by banker-politician Senator 
Owen and banker-politician Carter Glass is reflected in a complaint on 
the Senate floor 



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The Money Trust Cons Congress 

by Senator Bristow of Kansas, the Republican leader, in which he 
explains why he would not sign the conference report: 

Mr. LA FOLLETTE: Would it disturb the Senator to inform 
us who did participate in this conference and whether any Senator 
declined to participate? 

Mr. BRISTOW: As to those who participated in the 
conference I am not advised. I was a member of the committee of 
conference appointed by the President of the Senate, but I had no 
knowledge as to the meeting of the conferees until after the report 
as it is before us had been made, printed, and placed upon the 
desks of Senators. I was then notified by the chairman of the 
committee that there would be a meeting of the committee of 
conference at 4 o'clock, two hours after this report of the 
committee of conference of the two Houses of Congress on the bill 
(H.R. 7837) to provide for the establishment of Federal reserve 
banks, for furnishing an elastic currency, affording means of 
rediscounting commercial paper, and to establish a more effective 
supervision of banking in the United States, and for other 
purposes, had been placed upon my desk. I, in company with the 
Senator from Minnesota (Mr. Nelson), visited the room where we 
were invited to appear. We found the chairman of the committee 
and the Democratic members of the committee of conference there, 
and were given to understand that they had perfected the 
conference report. We were then invited to express our opinion of 
it, but I preferred to express my opinion where it might appear in 
the Record, rather than in the 



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The Federal Reserve Conspiracy 

privacy of the committee room, and that I shall undertake to do 
this morning. 

I see this report is signed by the Democratic members of the 
committee. Of course, I did not sign it because I was not invited to 
sign it, and I should not have done so, anyway, for I did not know 
at the time the report was prepared what it contained, and I had 
no opportunity of ascertaining what it contained.^ 

In brief, the Republican leader did not know what was in the Act 
nor was he given the opportunity to find out what was in the Act. Later 
in debate Bristow directly accused Owen of inserting provisions for the 
profit of his own bank. 

There were major abuses of the legislative process in the passage 
of the Federal Reserve Act - sufficient to void the act. If we have a 
society that lives by rules then there is no Federal Reserve Act. 

Both Finance Committee Chairmen, Congressman Glass and 
Senator Owen, had conflict of interest with personal banking interests 
and stood to gain from the bill. Meetings to discuss the bill were held 
without knowledge of committee members. Decisions were arrived at 
and established without the knowledge and agreement of members. 
Major sections of the bill were settled without consultation and 
railroaded into final form. There is indisputable evidence of outside 
banking influence upon Congress. 

The Federal Reserve Act is, even from our superficial 
investigation, suspect legislation. Most of Congress had no idea of the 
contents of the final bill and certainly none had the opportunity to 
reflect and consult with the broad base of the electorate. A private 
money monopoly was granted to a few national bankers under suspect 
circumstances. 



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The Money Trust Cons Congress 

As Congressman Lindbergh stated on December 23, 1913: 

This Act established the most gigantic trust on earth. When 
the President signs this bill, the invisible government by the 
Monetary Power will be legalized. The people may not know it 
immediately but the day of reckoning is only a few years 
removed.... 



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The Federal Reserve Conspiracy 



Chart 9-2: STAGE TWO: WOODROW WILSON IN DEBT 
TO THE MONEY TRUST 




George Perkins 



.Cleveland 
Bodge 
$51,3t0 



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The Money Trust Cons Congress 



Endnotes to Chapter Nine: 

(1) Congressional Record: Senate, February 8, 1915. 

(2) op. cit. 

(3) op. cit. 

(4) New York Times, December 20, 1913. 

(5) Congressional Record: Senate, December 23, 1913, p. 1468. 



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The Federal Reserve Conspiracy 




Paul Volcker, employee of Chase Manhattan Bank and 
Chairman of the Federal Reserve System in the 1970s. 



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Chapter Ten: 
THE FEDERAL RESERVE TODAY