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: 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     61     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     62     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     63     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     64     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     65     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     66     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.     67     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     68     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     69     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)     70     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.     71     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.     72     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     73     Chapter Eight:  THE JEKYL ISLAND CONSPIRACY