Chapter Three
American Banking Families Decide to
Organize a Federal Reserve System
By the beginning of the Twentieth Century, the American economy had become so
dynamic that the major banking dynasties found it increasingly difficult to maintain a tight
control. Even the control they had so carefully kept secret was being challenged as
a major
political issue in national elections.
As we have previously noted, the dynastic "banker families" in England had established
their monopoly control over finance by setting up the Bank of England as a privately controlled
institution which had the
appearance
of an official government instituti
financial control had been set up in France, Germany, Italy and Switzerland. Many of these
European banking families had intermarried or bought their way into the American banking
dynasties so it was inevitable that eventually the sa
up in the United States as that which had worked so well in various European countries. The
me device for centralized control would be set
formula called for a scheme which would look like the government was taking over when in
reality, the control would b
e solidified in the same secret group which had always [page 16]
it. As Dr. Gabriel Kolko pointed out: "Ironically, contrary to the consensus of historians, it was
not the existence of monopoly that caused the federal government to intervene in the ec
but the lack of it.... In the long run, key business leaders realized they had no vested interest in a
onomy,
chaotic [uncontrolled] industry and economy in which not only their profits but their very
existence might be challenged."
1(16)
Who Were These "Key Business Leaders?"
held
Dr. Quigley has identified them in
City Bank of New York. The Rockefeller Chase Bank was later merged wit
Tragedy And Hope,
"When we speak in Wall Street of the 'private bankers,' we refer to a handful of great
banking houses whose operations are on an international scale and which in the United States
represent the same power that the Rothschilds have so long possessed in Eur
:
and Serano S. Pratt supports the
Quigley position in his book entitled,
The Work of Wall Street
ope. These houses
may, like J.P. Morgan & Co., and Brown Bros. & Co., be closely allied by partnership ties to
other powerful firms in other cities; and represent here the great firms and institutions of Europe,
just as August Belmont & Co. have long repre
sented the Rothschilds."
2(17)
By the turn of the century, the Rockefellers had also joined the dynastic banking families.
John D. Rockefeller had purchased the Chase Bank and his brother William bought the National
h the Warburg's
Manhattan Bank to form Chase-Manhattan, the most powerful financial combine in the world
The scheme to set up a privately-controlled Federal Reserve System was supported by all
of these dynastic banking families.
The First Attempt Fails
To appreciate some of Dr. Quigley's comments in
Tragedy And Hope
, we should
summarize the origin and history of the Federal Reserve System.
Stephen Birmingham in his book,
Our Crowd, 3(18)
says the person who played the most
significant part in getting Federal Reserve ad
opted was Paul Warburg. He had come to the United
States with his brother, Felix Warburg, from Germany in 1902. They left their
brother Max in
Frankfurt to run the
[page 17]
family bank. In due time Paul married Nina Loeb of Kuhn, Loeb
and Company, while Felix married Jacob Schiff's daughter, Frieda Schiff. Both brothers became
Kuhn-Loeb partners and Paul was awarded a yearly salar
country preparing the climate for a central banking system in the United States.
y of $500,000 to go up and down the
Working with Warburg was J.P. Morgan's leading Washington representative, Senator
Nelson Aldrich, whose daughter Abby was married to John D. Rockefeller, Jr. (Nelson
Rockefeller, governor of New York, is named after his maternal grandfather.)
Senator Aldrich and Paul Warburg set up an extremely secretive meeting with
representatives of the leading banking dynasties to prepare the first draft for the Federal Reserve
System. They met on Jekyl Island, Georgia. Rockefeller's agent, Frank Vanderlip
years later:
admitted many
"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
today.
furtive -- as any conspirator.... I do not feel it is any exaggeration t
The secret meeting on Jekyl Island included Henry P. Davison of J.P. Morgan &
o speak of our secret
expedition to Jekyl Island as the occasion of the actual conception of what eventually became the
Federal Reserve System."
4(19)
Company; Frank A. Vanderlip, President of the Rockefeller-owned National City Bank; A. Piatt
Andrew, Assistant Secretary of the Treasury; Benjamin Strong of Morgan's Bankers Tru
st
Company, and, of course, Paul Warburg.
This was right at the time when the idea of creating a Federal central bank "free of Wall
Street or any monopolistic interest
" was being promoted by the
Banking Law Journal
number of national political personalities. Therefore, the object of the con
ference on Jekyl Island
was to set up a central bank which had the appearance of meeting this demand while actually
thwarting it. Paul Warburg went to the conference with a plan copied after the private central
banks in England and Europe. Professor Kolko
conference was very much like Warburg's in principle, and Warburg claimed. authorship for it
even though Vanderlip actually drafted the final plan."
writes: "The plan which emerged from the
5(20)
But the plan failed. It was introduced into the Senate as the Aldrich Bill. The name of
Aldrich was so closely linked to Morgan and
[page 18]
Wall Street, and the resentment against
these influences was so strong, that the bill was readily defeated. The g
roup of master planners
backed away to devise a new tactic.
The Federal Reserve System Finally Becomes a Reality
It was decided that the Republican Party was too closely connected with Wall Street and
the only hope of getting a central bank adopted would be to get the Democrats in power and have
a new bill introduced which would be promoted into popular acceptance b
y claiming that it was a
measure designed to strip Wall Street of its power. The Wall Street cadre thereupon set forth to
achieve this in the presidential election of 1912.
At first this looked virtually impossible, because President William Howard Taft (a
Republican who had opposed the Aldrich Bill) was very popular and seemed a sure-fire bet for
re-election. The picture changed when the former President Teddy Roosevelt (al
so a Republican
but opposed to Taft) decided to run on the Progressive Party ticket against Taft. The Democrats
then nominated Woodrow Wilson, making it a three-way race. Suddenly the central bank
promoters saw the opportunity they needed.
Two Morgan agents, Frank Munsey and George Perkins moved in behind Teddy
Roosevelt with money and manpower from Wall Street. As Ferdinand Lundberg states:
"As soon as Roosevelt signified that he would again challenge Taft, the President's defeat
was inevitable. Throughout the three cornered fight Roosevelt had Munsey and Perkins
constantly at his heels, supplying money, going over his speeches, bringing peo
ple from Wall
and a
Street in to help, and, in general, carrying the entire burden of the campaign against Taft....
"Perkins and J.P. Morgan and Company were the substance of the Progressive Party;
everything else was trimming.... In short, most of Roosevelt's campaign fund was supplied by the
two Morgan hatchet men who were seeking Taft's scalp."
[Rockefeller] National City Bank.... Sitting with Dodge as co-directors of the National City Bank
New York Times
8(23)
6(21)
Meanwhile, Wall Street was ALSO backing Wilson. Clear back in 1906, George Harvey,
president of the Morgan-controlled
Harper's Weekly
, had suggested Wilson for President. Then
the Rockefellers took up the fund-raising for Wilson together with other Wall S
treet
[page 19]
backers of the Democratic Party. Ferdinand Lundberg says:
"The financial genius behind Woodrow Wilson was Cleveland H. Dodge of the
at the time were the younger Rockefeller, J. Ogden Armour, and James Stillman. In s
hort, except
for George F. Baker, everyone whom the Pujo Committee (in Congress) had termed rulers of the
'Money Trust' was in this bank."
7(22)
Bernard Baruch chatting with President Eisenhower.
Additional supporters of Wilson who belonged to the dynastic banking families included
Jacob Schiff, Bernard Baruch, Henry Morgenthau, Thomas Fortune Ryan, and the publisher of
, Adolph Ochs.
Even Morgan's men who managed Teddy Roosevelt's campaign had money behind
Wilson. The idea was to give Roosevelt enough support to divide Taft's Republican vote and give
Wilson enough support to beat them both. This strategy worked, and Wilson was elected
before the election, however, the promoters of the central bank set up a front organization to
create a public climate which would be favorable to the Federal Reserve idea. Professor Kolko
[page 20]
"During the spring of 1911 the backers of the plan moved to create the 'National Citizens
League for the Promotion of a Sound Banking System' to accomplish the task. Warburg and the
other New York bankers behind the Aldrich plan arranged to have the leagu
e centered in
Chicago...."
9(24)
the
says:
. Even
President Wilson, Mrs. Wilson and "Colonel" Edward M. House
Because of the Rockefeller influence over the University of Chicago, this new front
organization was headed by J. Lawrence Laughlin of that institution with his former student and
close confidante, H. Parker Willis, writing the necessary legislation. It w
as simply the Aldrich
Bill in a new dress. To see that the newly elected President would have the right advisors,
Wilson's financial backers surrounded him with their own agents. The most important of these
was "Colonel" Edward Mandell House, the British-e
president during the Wilson administration. Two of his pet projects, the central bank and the
ducated son of a financier who represented
certain British financial interests in the Southern States. House gradually emerged as the virtual
graduated income tax
, were both successfully adopted through the amazing capacity of House to
pull wires behind the scenes. It is now known that House was the author of the book,
Philip Dru:
Administrator
by Karl Marx."
, which described how
[page 21]
Dru worked to establish "Socialism as dreamed
Professor Charles Seymour who edited
The Intimate Papers of Colonel House, assures us
that House was the "unseen guardian angel" of the Federal Reserve Act. There was constant
contact between House and Paul Warburg. The biographer for House assures us fur
ther that "The
Schiffs, the Warburgs, the Kahns, the Rockefellers, and the Morgans had faith in House...."
To prevent opponents of Wall Street from identifying the Federal Reserve Act with the
international bankers, a smoke-screen of opposition was fulminated. In his autobiography,
William McAdoo, Wilson's Secretary of the Treasury and son-in-law, wrote:
"Bankers fought the Federal Reserve legislation -- and every provision of the Federal
Reserve Act -- with the tireless energy of men fighting a forest fire. They said it was populistic,
socialistic, half-baked, destructive, infantile, badly conceived and
unworkable."
10(25)
However, McAdoo talked with these heated opponents of President Wilson's Federal
Reserve project and decided there might be something phoney about the smoke-screen of
opposition. "These interviews with bankers led me to an interesting conclusion. I percei
ved
gradually, through all the haze and smoke of controversy, that the banking world was not really
as much opposed to the bill as it pretended to be...."
11(26)
Thus the stage was set. It was December 22, 1913, that the Federal Reserve Act passed
the House of Representatives by a vote of 298 to 60 and the Senate passed it by a majority of 43 to 25.
But Who Controls the Federal Reserve System?
The operation of the Federal Reserve System is one of the most interesting and
mysterious combines in the country. Since it was founded in 1913 it has successfully resisted
every attempt to conduct an audit of its affairs. The system consists of 12 "Natio
nal Banks" but
the only one of any significance is the one in New York. The New York bank has always been
managed by someone completely congenial to the interests of the international bankers. It is
important to realize that the Federal Reserve System is n
Technically the stock is owned by the 12 National Banks which receive a dividend of six percent
ot a bona fide Government agency.
each year. Any profits from the System are supposed to be turned over to the U.S. Treasury.
In fact, the President appoints the seven members of the Federal Reserve Board for
fourteen-year terms, but in spite of all this window dressing the Federal Reserve Board is
completely independent in its decisions. President Johnson admitted thi
Reserve defied him during his administration and when David Kennedy, the Nixon Secretary of
s when the Federal
the treasury, was asked about the credit-tightening policies of the Federal Reserve, he replied:
"It's not my job to approve or disapprove. It is
the action of the Federal Reserve."
12(27)
The mammoth and secret operations of the Federal Reserve are therefore proceeding
along the lines which Dr. Quigley says the international bankers were determined to achieve.
They intended to use the financial power of Britain and the United States to for
ce all the major
countries to operate "through central banks free from all political control, with all questions of
international finance to be settled by agreements by such central banks without interference from
governments."
13(28)
The motivation for such a scheme can be better appreciated when it is realized that
loaning money to governments can be a very lucrative business, especially loans to the United
States Government. The U.S. presently owes more money (most of it to the inte
rnational banking
institutions) than all the money owed by the rest of the nations in the world combined. The U.S.
national debt is presently 372 billion dollars.
Every year
American tax payers are required to
contribute 20 billion dollars to pay the inter
est on this indebtedness. It is the third largest item in
the Federal budget. It can be readily seen why those who are appointed to the key positions in the
U.S. Federal Reserve System (where loans are negotiated and interest rates fixed) occupy
possibly t
he most critically influential spot in the entire world.
Dr. Quigley says the true dimensions of the whole scheme are better appreciated when it
is realized that the far-reaching aim of the dynastic bankers was:
"... nothing less than to create a world system of financial control in private hands able to
dominate the
political system
of each country and the
economy
of the world as a whole. This
system was to be controlled in a feudalist fashion by the central ban
ks of the world acting in
22]
[page
concert, by secret agreements arrived at in frequent private meetings and conferences. The apex
of the system was to be the Bank for International Settlements in Basle, Switzerland, a private
bank owned and controlled by the world
's central banks which were themselves private
corporations. Each central bank, in the hands of
Bank of England, Benjamin Strong of the New York Federal Reserve Bank, Charles Rist of the
in 1909. He became governor of the Federal Reserve Bank of New York as the joint nominee of
[page 23]
men like Montague Norman of the
Bank of France, and Hjalmer
Schacht of the Reichs bank, sought to dominate its government by
its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of
economic activity in the country, and to influence cooperative politicians by subsequent
nomic rewards in the business world."
14(29)
That the international bankers have been in complete control of the U.S. Federal Reserve
System from its inception is readily demonstrated. Dr. Quigley points out that the first governor
of the Federal Reserve Bank of New York was Benjamin Strong, who bec
ame a close colleague
of Montague Norman of the Bank of England.
"Strong owed his career to the favor of the Morgan Bank, especially of Henry P. Davison,
who made him secretary of the Bankers Trust Company of New York (in succession to Thomas
W. Lamont) in 1904, used him as Morgan's agent in the banking rearrangements
following the
crash of 1907, and made him vice-president of the Bankers Trust (still in succession to Lamont)
Morgan and of Kuhn, Loeb and Company in 1914. Two year
they both revered."
15(30)
s later, Strong met Norman for the
first time, and they at once made an agreement to work in cooperation for the financial practices
The original Federal Reserve Board was largely hand-picked by "Colonel" House and
included Paul Warburg. Subsequent appointments have always been completely congenial to the
interests of Wall Street and the international bankers. Ferdinand Lundberg confir
ms Quigley's
evaluations:
"In practice the Federal Reserve Bank of New York became the fountainhead of the
system of twelve regional banks, for New York was the money market of the nation. The other
eleven banks were so many expensive mausoleums erected to salve the local pride an
d quell the
Jacksonian fears of the Hinterland. Benjamin Strong ... president of the Bankers Trust Company
[Morgan], was selected as the first Governor of the New York Reserve Bank. An adept in high
finance, Strong for many years manipulated the country's
directors representing the leading New York banks. Under Strong the Reserve System,
monetary system at the discretion of
unsuspe
cted by the nation, was
England and the Bank of France...."
[page 24]
16(31)
brought into interlocking relations with the Bank of
So now we have run full circle. Dr. Carroll Quigley was anxious to have us know who
has been running the world. He makes it clear that in spite of their power, these secret centers of
control are seldom in dictatorial positions where they can actually tak
e direct, decisive political
action; but their financial stranglehold on the world allows them to
influence
and
manipulate
affairs of various nations to an amazing degree and to suit their own purposes. Therefore,
eco
the
whatever the purposes and goals of thi
rest of the world.
inconsistent and incongruous suddenly loom up with
s group happen to be are of monumental importance to the
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Chapter Four
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