Chapter Seven: THE MONEY TRUST CREATES THE FED: The Federal Reserve Conspiracy by Antony C. Sutton from archive.org

Chapter Seven: 
THE MONEY TRUST CREATES THE FED 



How would you like to have the Wall Street Journal one 
week ahead of publication? 

Some people do have this privilege, not advance issues of 
Wall Street Journal; but advance knowledge of Federal Reserve 
policies... what they will be tomorrow, next week, next month and 
next year. 

From time to time the Fed makes pronouncements and 
before the pronouncement they have to decide what to pronounce. 
They get together, they discuss, they make plans and then they 
issue statements. 

The meetings are always secret, known only to the Fed 
Directors. However, if we knew what Chairman Alan Greenspan 
was going to announce on monetary and credit policies, what the 
discount rate will be, or what the prime rate will be, we could 
quickly make a fortune, because that knowledge has impact on 
Treasury bill rates, on metals markets, on the stock market and on 
real estate markets. 

The Federal Reserve system is a private system owned by 
the banks and gives only banks this advance information. 

The idea for the Fed was conceived on a small island in the 
Atlantic Ocean off Glynn County, Georgia. Back in 1910 Jekyl 
Island was a private club used by an elitist group of 



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The Federal Reserve Conspiracy _ 



Wall Street financiers as a hideaway to discuss extra private business 
away from prying public ears. It was on Jekyl Island that the money 
trust designed its plan for Congressional approval of a private money 
monopoly. 

American public opinion at the turn of the century was hostile to 
the idea of a central bank and generally opposed any further power for 
Wall Street interests. Yet a central bank along European lines offered 
vast secure profits for any financial group that could persuade Congress 
to enact central bank legislation. An elastic fiat and credit system 
offered power not possible with gold and silver as rigid disciplines on 
the financial system. 

The clandestine Jekyl Island meeting was to design a plan to bring 
a central bank to the United States disguised as a regional banking 
system.... while the bankers publicly opposed what they privately 
proposed. 

This dissimulation was so successful that, according to private 
secretary Joseph Tumulty, Woodrow Wilson, in signing the Federal 
Reserve Act actually believed he was removing financial power from 
Wall Street interests. 

President Wilson when governor of New Jersey in 1911 had 
declared: 

The greatest monopoly in this country is the 

money monopoly. So long as that exists, our old 

variety of freedom and individual energy of 

development are out of the question. 

A great industrial nation is controlled by its system of credit. 
Our system of credit is concentrated. The growth of the nation, 
therefore, and all our activities are in the hands of a few men.... 

This is the greatest question of all: and to this statesmen 
must address themselves with earnest 



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The Money Trust Creates The Fed 

determination to serve the long future and the true liberties of free 
men. (1) 

Wilson may actually have believed his own statement that the 
Federal Reserve System was "the keystone of the great arch of the 
Democratic Administration."® What then is the reality behind this 
financial power known 100 years ago as the "money trust" or the 
"money power" and today as an elite group that can profit from a 
central bank? 

To answer this question we have to go back in history and look at 
the 19th century trusts and the financial tip of the trust pyramid as it 
existed in the first decade of the twentieth century. 

Between 1870 and the onset of World War One, American 
industry was concentrated under the control or influence of a handful of 
financiers, mostly in New York. John Moody, editor of the standard 
reference, Moody's Manual of Corporation Securities, recorded the 
trustification of American industry in a monumental volume of statistics 
and evidence.® Moody was a sympathetic observer and like Clarence 
Barron® another acute observer, considered trusts to be both useful and 
inevitable. 

Criticism of the industrial trusts was widespread. John Moody's 
The Truth About Trusts with its wealth of detail demonstrated the 
pervasive money powers dominating the steel, non-ferrous metals, oil, 
tobacco, shipping, sugar and railroad industries - specifically the power 
of J. P. Morgan, the Rockefeller brothers, Edward Harriman, John 
McCormick, Henry Havemeyer and Thomas F. Ryan. 

In tracing the early history of the drive for an American central 
bank by the "money power," two historical episodes stand out: 

(1) the 1907 financial panic used by the bankers and their allies to 
urge the necessity for a central bank (although 



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The Federal Reserve Conspiracy 



the panic was precipitated by Wall Street, this was not proven until 
many years later.) 

(2) the meteoric rise of German banker Paul Warburg with his 
missionary zeal to promote a carbon copy of the German Reichsbank in 
the United States. 

In 1907 there were still a few capitalists willing to challenge Wall 
Street and dispute its iron grip on financial power. Among these 
outsiders was Montana copper millionaire Frederick Augustus Heinze, 
who was selected as the key target for the 1907 panic. Heinze brought 
his copper fortune to New York and joined with C. W. Morse of the Ice 
Trust. Jointly they acquired control of Mercantile National Bank, using 
the assets of the Bank of North America already dominated by Morse. 

Heinze and Morse then acquired control of the Knickerbocker 
Trust Company, allied with the Trust Company of America and Lincoln 
Trust. They then incorporated a speculative vehicle, the United Copper 
Company. It was stock market games with United Copper that 
precipitated the 1907 crisis. Banks under control of the "money trust" 
called their loans to United Copper and began a run on the Heinze- 
Morse Mercantile National Bank. It is now generally agreed "that the 
1907 panic was precipitated by the struggle to get rid of Heinze. " (5) 

In 1913 the money trust and the 1907 panic were investigated by 
the Pujo Committee, which recorded the enormous power of the J. P. 
Morgan firm. (6) 

During the years 1900 to 1920 the money trust was effectively 
controlled by the banking firm of J. P. Morgan, comprising Morgan 
himself until his death in 1913, then his son, J. P. Morgan, Jr. and the 
firm's dozen to 15 partners in association with their Rockefeller, 
Harriman and Kuhn Loeb allies. After an extended documented inquiry, 
the 1912 Pujo Committee concluded that the "money trust" was 



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The Money Trust Creates The Fed 

Far more dangerous than all that has happened to us in the 
past in the way of elimination of competition in industry, is the 
control of credit through the domination of these groups over 
banks and industries. 

It is impossible that there should be competition with all the 
facilities for raising money or selling large issues of bonds in the 
hands of these few bankers and their partners and allies, who 
together dominate the financial policies of most of the existing 
systems.... 

The acts of this inner group, as here described, have, 
nevertheless, been more destructive of competition than anything 
accomplished by the trusts, for they strike at the very vitals of 
potential competition in every industry that is under their 
protection, a condition which if permitted to continue, will render 
impossible all attempts to restore normal competitive conditions in 
the industrial world. (7) 

In the public debate over creation of a Federal Reserve System in 
the United States, the 1907 crash was repeatedly used as the reason to 
install a central bank in the United States. The Fed was put forward as a 
way to stop financial panics. However, the 1907 panic was deliberately 
created by the "Standard Oil crowd" and the Morgan firm. 

In other words, the same group that stood to benefit from a central 
bank created the panic used to persuade the electorate that a central 
bank was vital. 

How well this private monopoly has maintained its power over the 
intervening decades since 1913 is the conclusion of a 1976 
Congressional staff report. After identifying the closed shop directors of 
the Federal Reserve 



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The Federal Reserve Conspiracy 

System in the mid-1970s this Congressional investigation concludes: 

In summary the Federal Reserve directors are apparently 
representative of a small elite group which dominates much of the 
economic life of this nation. (8) 

What is important to note is that the Federal Reserve is a private 
system with private stockholders. The money trust of the 19th century 
has been granted a legal monopoly while almost all other industry is 
subject to the Sherman Antitrust Act. It is monopoly, and monopoly 
requires political power to keep in place. It is also noteworthy that 
writing on the Federal Reserve glosses over the private ownership, yet 
the very aspect of the Federal Reserve that needs to be publicly 
discussed is its private nature, who owns what and what advantages 
accrue to ownership. 

Where J. P. Morgan sat on the councils of New York City finance 
in 1907, David Rockefeller sat in the 1970s and Alan Greenspan sits 
today. Wall Street Journal in 1977 showed how these insiders used 
privileged Fed information for personal advantage. In 1907 it was J. P. 
Morgan who summoned the Treasury Secretary for an interview. In 
1980 David Rockefeller summons Henry Kissinger for a meeting. 

How did the Money Trust pull off this coup -establishment of a 
central bank under their control in a country that strongly opposed the 
idea? Justice Brandeis describes the process as follows: 

The development of our financial oligarchy, ...with which the 

history of political despotism has familiarized us - usurpation 

proceeding by gradual encroachment rather than by violent acts; 

and by "subtle and often long concealed concentration. " 

It was by processes such as these that Caesar Augustus 
became master of Rome. The makers of 



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The Money Trust Creates The Fed 

our Constitution had in mind like dangers to our political liberty, 
when they provided so carefully for the separation of 
governmental powersS 10) 

The J. P. Morgan firm which dominated the Money Trust 
understood this process of "subtle" and "gradual encroachment" to 
perfection. The firm even publicly opposed the Federal Reserve bill 
which they had privately put together. 

The Morgan partners understood this process and were carefully 
chosen. In exchange for absolute loyalty they received guaranteed 
opportunities to make personal fortunes from the political and financial 
power of the monopoly. While Morgan was nominally only senior 
partner he held final and absolute powers within the firm. 

Few Morgan partners entered politics. Most partners preferred to 
work quietly behind the scenes. In the period 1900 - 1930, four partners 
were exceptions to this rule and by tracing their political moves we can 
today identify how they used duplicity to bring about objectives. 

These four partners were E. P. Davison, Dwight Whitney Morrow, 
Edward R. Stettinius and George W. Perkins. In an earlier book we 
described how the firm of Morgan manipulated the Bolshevik 
Revolution so the Morgan firm would profit whoever won in Russia. 

Morgan partner Davison was head of the Red Cross War Council 
in 1917-1919 and worked with W. Boyd Thompson, another Morgan 
ally who aided the Bolshevik side of the Revolution with funds. Dwight 
W. Morrow used his influence to get arms and diplomatic support for 
the Bolsheviks (we reprinted a Morrow memorandum on this in 
Bolshevik Revolution). Thomas Lamont used his influence in London to 
soften the British position against the Bolsheviks. 



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The Federal Reserve Conspiracy_ 



Yet the Morgan firm and other partners gave help to the White 
Russians fighting the Bolsheviks and was prominent in the Siberian 
intervention. 

Morrow retired from his Morgan partnership in the 1920s and 
after a year as Chairman of the Aircraft Board became U.S. 
Ambassador to Mexico (1927-1930) and a United States Senator in 
1931. Stettinius supervised all war purchases for the United States in 
World War One - to the considerable advantage of Morgan-dominated 
firms. 

George Perkins was a founder in 1912 and then Chairman of the 
Executive Committee of the Progressive Party - a Morgan political 
vehicle to split the Republican Party and ease Woodrow Wilson into the 
White House. David Rockefeller used the same tactic with John 
Anderson in the 1980 election. 

The device used by the Morgan firm to control American finance 
and industry was the voting trust. The handful of directors, usually three 
in a voting trust, was selected by J. P. Morgan personally. These 
directors, members of the Morgan inner group, and the voting directors 
in turn selected directors of banks and firms. 

Thus the voting trust for Guaranty Trust had two Morgan partners: 
Thomas W. Lamont and William H. Porter, plus George F. Baker, who 
was president of Morgan-controlled First National Bank. This group 
selected other outside Guaranty Trust directors, and Guaranty Trust in 
turn controlled numerous firms, lesser banks and financial institutions. 

This Morgan complex was, in 1912, able to dominate Wall Street 
banks, and so the "Money Trust." Morgan control was simplicity itself, 
based on a pyramid of power principle. Morgan partners selected 
directors of major financial institutions, and in return for the privileges 
of directorship, the loyalty of these outside directors to the Morgan 
firm was guaranteed. In turn these financial 



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The Money Trust Creates The Fed 

institutions controlled industrial and railroad trusts and 
combinations. The system worked well in the late 19th century 
and the early 20th century. This is how Woodrow Wilson and 
Colonel House saw this "Money Trust": 

I think Woodrow Wilson's remark that the "money trust" 
was the most pernicious of all trusts is eminently correct. .a 
few individuals and their satellites control the leading banks 
and trust companies in America... they also control the 
leading corporations..} 12 ^ 

The Money Trust was legalized in 1913 as the Federal 
Reserve System, a suitably innocuous name that disguises the fact 
that it is a private central bank. 

The history of the system can be traced through three stages: 
the original plan created secretly in 1910, the promotion of 
Woodrow Wilson for President by the Money Power and then 
finally by what we can only describe as illegal passage of the 
Federal Reserve bill through the Congress. 

Representative Lindbergh from Minnesota, father of the 
world famous flier, was one of the most consistent and ardent 
critics of the Morgan group during his ten years in the House of 
Representatives. He is said to be the only man in Congress who 
read the entire 20 volumes of the Aldrich Monetary Commission. 
Such a Niagara of words poured over Congressmen raised the 
suspicion among reasonable people that those interests 
responsible for it are purposely making it impossible for 
Congressmen to digest it. Of the Aldrich Banking and Currency 
Plan, Lindbergh said: 

The Aldrich Banking and Currency Plan is a monstrous 
scheme to place under one control all the finances of the 
country, public and private. It would create one great central 
association with fifteen branches to encompass all the 
states.. ..It would admit of no membership except banks and 
trust 



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The Federal Reserve Conspiracy 

companies, and exclude the smaller ones of these. The rest of the 
world would not only be excluded from holding stock, but by the 
nature of the association, powers and relations of finances to 
commerce, it would dictate the terms on which business should be 
done. With that power centered in the great city banks and these 
banks controlled by the trusts and money powers, the politics as 
well as the business of the country would be under its dictation. (13) 



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The Money Trust Creates The Fed 



Endnotes to Chapter Seven: 



(1) Louis D. Brandeis, Other People's Money; and How Bankers Use 
It, (New York: Frederick A. Stokes Co.) p. 1. 

(2) Joseph P. Tumulty, Woodrow Wilson as I Knew Him (New York: 
Doubleday, 1921). 

(3) John Moody, The Trust About The Trusts (New York: Moody 
Publishing Company, 1904). 

(4) Clarence W. Barron, They Told Barron (New York: Harper & 
Brothers, 1930). 

(5) Dictionary of American Biography, Frederick Heinze. The 
Engineering and Mining Journal commented, "This was the 
beginning of the panic of 1907." 

(6) U.S. Congress, House of Representatives, Committee on Banking 
and Currency. Money Trust Investigation (Washington, D.C., 
1913) and Committee to Investigate the Concentration of Control 
of Money and Credit, Report. (62nd Congress, 3rd session. House 
Report No. 1593), known as the Pujo Committee Report. 

(7) The Story Of Our Money, p. 187. 

(8) U.S. Congress, House of Representatives, Committee on Banking, 
Currency and Housing. Federal Reserve Directors: A Study of 
Corporate and Banking Influence. August, 1976. (94th Congress, 
2nd session). Washington, U.S. Government Printing Office, 
1976. 

(9) See Wall Street Journal, August 29, 1977. 



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The Federal Reserve Conspiracy 

(10) The Story of Our Money, op. cil, pp. 188-89. 

(11) Antony Sutton, Wall Street and the Bolshevik Revolution (New 
Rochelle, New York: Arlington House, 1974). See particularly 
pages 89-100 and the chapter, "J. P. Morgan gives a little help to 
the other side." 

(12) Colonel E. M. House to Senator Culbertson (July 26, 1911); 
Charles Seymour, The Intimate Papers of Colonel House, (Boston 
and New York: Houghton Mifflin Co., 1926-28), I. 159. 

(15) Cited in The Story of Our Money, op. cil, p. 189. 



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The Money Trust Creates The Fed 

Chart 7-1: 

STAGEONE:THEORIGINALPLANFDRAFEDERAL 
RESERVE SYSTEM 




Benjamin Strong 

CD. Norton 

Henry Davison' 

Frank Vanderlip 

Sen. Nelson 
Aldrich 

Loeb /(— ^ Paul Warburg 



I Kuhn- I 



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Chapter Eight: 
THE JEKYL ISLAND CONSPIRACY