Mullins-SecretsOfTheFederalReserve.pdf 2

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Meyer’s directorship of the War Finance Corporation, the alteration of the books during a Congressional investigation, and the
fact that Meyer came out of this situation with many millions of dollars with which he proceeded to buy Allied Chemical
Corporation, The Washington Post, and other properties? Incidentally, Lazard Brothers, Meyer’s family banking house,
personally manages the fortunes of many of our political luminaries, including the Kennedy family fortune.
Besides these men, Warburg, Baruch, and Meyer, a host of J.P. Morgan Co., and Kuhn, Loeb Co., partners, employees, and
satellites came to Washington after 1917 to administer the fate of the American people.
The Liberty Loans, which sold bonds to our citizens, were nominally in the jurisdiction of the United States Treasury, under the
leadership of Wilson’s Secretary of the Treasury, William G. McAdoo, whom Kuhn, Loeb Co. had placed in charge of the
Hudson-Manhattan Railway Co. in 1902. Paul Warburg had most of the Kuhn Loeb Co. firm with him in Washington during the
War. Jerome Hanauer, partner in Kuhn, Loeb Co., was Assistant Secretary of the Treasury in charge of Liberty Loans. The two
Under-secretaries of the Treasury during the War were S. Parker Gilbert and Roscoe C. Leffingwell. Both Gilbert and
Leffingwell came to the Treasury from the law firm of Cravath and Henderson, and returned
@insert CHART IV
CHART IV
The Peabody-Morgan chart shows the London Connection of these prominent banking firms, which have been headquartered in London since
their inception. The Peabody fortune set up an Educational Fund in 1865, which was later absorbed by John D. Rockefeller into the General
Educational Board in 1905, which, in turn, was absorbed by the Rockefeller Foundation in 1960.
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to that firm when they had fulfilled their mission for Kuhn, Loeb Co. in the Treasury. Cravath and Henderson were the lawyers
for Kuhn Loeb Co. Gilbert and Leffingwell subsequently received partnerships in J.P. Morgan Co.
Kuhn, Loeb Company, the nation’s largest owners of railroad properties in this country and in Mexico, protected their interests
during the First World War by having Woodrow Wilson set up a United States Railroad Administration. The Director-General
was William McAdoo, Comptroller of the Currency. Warburg replaced this set up in 1918 with a tighter organization which he
called the Federal Transportation Council. The purpose of both of these organizations was to prevent strikes against Kuhn, Loeb
Company during the War, in case the railroad workers should try to get in wages some of the millions of dollars in wartime
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profits which Kuhn, Loeb received from the United States Government.
Among the important bankers present in Washington during the War was Herbert Lehman, of the rapidly rising firm of Lehman
Brothers, Bankers, New York, Lehman was promptly put on the General Staff of the Army, and given the rank of Colonel.
The Lehmans had had prior experience in "taking the profits out of war", a double entendre and one of Baruch’s favorite
phrases. In Men Who Rule America, Arthur D. Howden Smith writes of the Lehmans during the Civil War, "They were often
agents, fixers for both sides, intermediaries for confidential communications and handlers of the many illicit transactions in
cotton and drugs for the Confederacy, purveyors of information for the North. The Lehmans, with Mayer in Montgomery, the
first capital of the Confederacy, Henry in New Orleans, and Emanuel in New York were ideally situated to take advantage of
every opportunity for profit which appeared. They seem to have missed few chances."80
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80 Arthur D. Howden Smith, Men Who Rule America, Bobbs Merrill, N.Y. 1935, p. 112
CHART V
The David Rockefeller chart shows the link between the Federal Reserve Bank of New York, Standard Oil of Indiana, General Motors, and
Allied Chemical Corporation (Eugene Meyer family) and Equitable Life (J.P. Morgan).
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Other appointments during the First World War were as follows:
J.W. McIntosh, director of the Armour meat-packing trust, who was made chief of Subsistence for the United States Army in
1918. He later became Comptroller of the Currency during Coolidge’s Administration, and ex-officio member of the Federal
Reserve Board. During the Harding Administration, he did his bit as Director of Finance for the United States Shipping Board
when the Board sold ships to the Dollar Lines for a hundredth of their cost and then let the Dollar Line default on its payments.
After leaving public service, J.W. McIntosh became a partner in J.W. Wollman Co., New York Stockbrokers.
W.P.G. Harding, Governor of the Federal Reserve Board, was also managing director of the War Finance Corporation under
Eugene Meyer.
George R. James, member of the Federal Reserve Board in 1923-24, had been Chief of the Cotton Section of the War Industries
Board.
Henry P. Davison, senior partner in J.P. Morgan Co., was appointed head of the American Red Cross in 1917 in order to get
control of the three hundred and seventy million dollars cash which was collected from the American people in donations.
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Ronald Ransom, banker from Atlanta, and Governor of the Federal Reserve Board under Roosevelt in 1938-39, had been the
Director in Charge of Personnel for Foreign Service for the American Red Cross in 1918.
John Skelton Williams, Comptroller of the Currency, was appointed National Treasurer of the American Red Cross.
President Woodrow Wilson, the great liberal who signed the Federal Reserve Act and declared war against Germany, had an
odd career for a man who is now enshrined as a defender of the common people. His chief supporter in both his campaigns for
the Presidency was Cleveland H. Dodge, of Kuhn Loeb, who controlled National City Bank of New York. Dodge was also
President of the Winchester Arms Company and Remington Arms Company. He was very close to President Wilson
CHART VI
This chart shows the interlocks between the Federal Reserve Bank of New York, J. Henry Schroder Banking Corp., J. Henry Schroder Trust Co.,
Rockefeller Center, Inc., Equitable Life Assurance Society (J.P. Morgan), and the Federal Reserve Bank of Boston.
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throughout the great democrat’s political career. Wilson lifted the embargo on shipment of arms to Mexico on February 12,
1914, so that Dodge could ship a million dollars worth of arms and ammunition to Carranza and promote the Mexican
Revolution. Kuhn, Loeb Co. which owned the Mexican National Railways System, had become dissatisfied with the
administration of Huerta and had him kicked out.
When the British naval auxiliary Lusitania was sunk in 1915, it was loaded with ammunition from Dodge’s factories. Dodge
became Chairman of the "Survivors of Victims of the Lusitania Fund", which did so much to arouse the public against Germany.
Dodge also was notorious for using professional gangsters against strikers in his plants, yet the liberal Wilson does not appear to
have ever been disturbed by this.
Another clue to Wilson’s peculiar brand of liberalism is to be found in Chaplin’s book Wobbly, which relates how Wilson
scrawled the word "REFUSED" across the appeal for clemency sent him by the aging and ailing Eugene Debs, who had been
sent to Atlanta Prison for "speaking and writing against war". The charge on which Debs was convicted was "spoken and
written denunciation of war". This was treason to the Wilson dictatorship, and Debs was imprisoned. As head of the Socialist
Party, Debs ran for the Presidency from Atlanta Prison, the only man ever to do so, and polled more than a million votes. It was
ironic that Debs’ leadership of the Socialist Party, which at that time represented the desires of many Americans for an honest
government, should fall into the sickly hands of Norman Thomas, a former student and admirer of Woodrow Wilson at
Princeton University. Under Thomas’ leadership, the Socialist Party no longer stood for anything, and suffered a steady decline
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in influence and prestige.
Wilson continued to be deeply involved in the Bolshevik Revolution, as were House and Wiseman. Vol. 3, p. 421 of House
Intimate Papers records a cable from Sir William Wiseman to House from London, May 1, 1918, suggesting allied intervention
at the invitation of the Bolsheviki
@insert CHART VII
CHART VII
This chart shows the interlocks of the Federal Reserve Bank of New York with Citibank, Guaranty Bank and Trust Co. (J.P. Morgan), J.P.
Morgan Co., Morgan Guaranty Trust Co., Alex Brown & Sons (Brown Brothers Harriman), Kuhn Loeb & Co., Los Angeles and Salt Lake RR
(controlled by Kuhn Loeb Co.), and Westinghouse (controlled by Kuhn Loeb Co.).
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to help organize the Bolshevik forces. Lt. Col. Norman Thwaites, in his memoirs, Velvet and Vinegar says, "Often during the
years 1917-20 when delicate decisions had to be made, I consulted with Mr. (Otto) Kahn, whose calm judgment and almost
uncanny foresight as to political and economic
tendencies proved most helpful. Another remarkable man with whom I have been closely associated is Sir William Wiseman
who was advisor on American affairs to the British delegation
at the Peace Conference, and liaison officer between the American and British government during the war. He was rather more
the Col. House of this country in his relations with Downing Street."81
In the summer of 1917, Woodrow Wilson named Col. House to head the American War Mission to the Interallied War
Conference, the first American mission to a European council in history. House was criticized for naming his son-in-law,
Gordon Auchincloss, as his assistant on this mission. Paul Cravath, the lawyer for Kuhn, Loeb Company, was third in charge of
the American War Mission. Sir William Wiseman guided the American War Mission in its conferences. In The Strangest
Friendship in History, Viereck writes,
"After America entered the War, Wiseman, according to Northcliffe, was the only man who had access at all times to the
Colonel and to the White House. Wiseman rented an apartment in the house where the Colonel lived. David Lawrence referred
to the Fifty-Third Street house (New York City) jestingly as the American No. 10 Downing St. . . . Col. House had a special
code used only with Sir William Wiseman. Col. House was Bush, the Morgans were Haslam, and Trotsky was Keble."82
Thus these two "unofficial" advisors to the British and American governments had a code solely for each other, which no one
else could understand. Even stranger was the fact that the international Communist
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81 Lt. Col. Norman Thwaites, Velvet and Vinegar, Grayson Co., London, 1932
82 George Sylvester Viereck, The Strangest Friendship in History, Woodrow Wilson and Col. House, Liveright, N.Y. 1932, p. 172
@insert CHART VIII
CHART VIII
This chart shows the link between the Federal Reserve Bank of New York, Brown Brothers Harriman, Sun Life Assurance Co. (N.M. Rothschild
and Sons), and the Rockefeller Foundation.
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espionage apparatus for many years used Col. House’s book, Philip Dru, Administrator, as their official code book. Francois
Coty writes,
"Gorodin, Lenin’s agent in China, was alleged to have with him a copy of the book published by Col. House, Philip Dru,
Administrator and a code expert who lived in China told this writer that the purpose of having constant access to this book by
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Gorodin was to use it for coding and decoding messages."83
After the Armistice, Woodrow Wilson assembled the American Delegation to the Peace Conference, and embarked for Paris. It
was, on the whole, a most congenial group, consisting of the bankers who had always guided Wilson’s policies. He was
accompanied by Bernard Baruch, Thomas W. Lamont of J.P. Morgan Co., Albert Strauss of J & W Seligman bankers, who had
been chosen by Wilson to replace Paul Warburg on the Federal Reserve Board of Governors, J.P. Morgan, and Morgan lawyers
Frank Polk and John W. Davis. Accompanying them were Walter Lippmann, Felix Frankfurter, Justice Brandeis, and other
interested parties. Mason’s biography of Brandeis states that "In Paris in June of 1919, Brandeis met with such friends as Paul
Warburg, Col. House, Lord Balfour, Louis Marshall, and Baron Edmond de Rothschild."
Indeed, Baron Edmond de Rothschild served as the genial host to the leading members of the American Delegation, and even
turned over his Paris mansion to them, although the lesser members had to rough it at the elegant Hotel Crillon with Col. House
and his personal staff of 201 servants.
Baruch later testified before the Graham Committee of the Senate Foreign Relations Committee, "I was economic advisor with
the peace mission. GRAHAM: Did you frequently advise the President while there? BARUCH: Whenever he asked my advice I
gave it. I had something to do with the reparations clauses. I was the American Commissioner in charge of what they called the
Economic Section. I was a
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83 Francois Coty, Tearing Away the Veil, Paris, 1940
@insert CHART IX
CHART IX
This chart shows the interlocks between the Federal Reserve Bank of New York and J.P. Morgan Co., Morgan Guaranty Trust Co., and the
Rothschild affiliates of Royal Bank of Canada, Sun Life Assurance Co. of Canada, Sun Alliance, and London Assurance Group.
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member of the Supreme Economic Council in charge of raw metals. GRAHAM: Did you sit in the council with the gentlemen
who were negotiating the treaty? BARUCH: Yes, sir, some of the time. GRAHAM: All except the meetings that were
participated in by the Five? (The Five being the leaders of the five allied nations). BARUCH: And frequently those also."
Paul Warburg accompanied Wilson on the American Commission to Negotiate Peace as his chief financial advisor. He was
pleasantly surprised to find at the head of the German delegation his brother, Max Warburg, who brought along Carl Melchior,
also of M.M. Warburg Company, William Georg von Strauss, Franz Urbig, and Mathias Erzberger.
Thomas W. Lamont states in his privately printed memoirs, Across World Frontiers, "The German delegation included two
German bankers of the Warburg firm whom I happened to know slightly and with whom I was glad to talk informally, for they
seemed to be striving earnestly to offer some reparations composition that might be acceptable to the Allies."84 Lamont was also
pleased to see Sir William Wiseman, chief advisor to the British delegation.
The bankers at the conference convinced Wilson that they needed an international government to facilitate their international
monetary operations. Vol. IV, p. 52, Intimate Papers of Col. House quotes a message from Sir William Wiseman to Lord
Reading, August 16, 1918, "The President has two main principles in view; there must be a League of Nations and it must be
virile."
Wilson, who seems to have lived in a world of fantasy, was shocked when American citizens booed him during his campaign to
have them sign over their hard won independence to what appeared to many to be an international dictatorship. He promptly
went into a depression, and retired to his bedroom. His wife immediately shut the White House doors against Col. House, and
from September 25, 1919 to April 13, 1920, she
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84 Thomas W. Lamont, Across World Frontiers, (Privately printed) 1950, p. 138
ruled the United States with the aid of an intimate friend, her "military aide", Col. Rixey Smith. As everyone was shut out of
their deliberations, no one ever knew which of the pair functioned as the President, and which was the Vice President.
The admirers of Woodrow Wilson were led for decades by Bernard Baruch, who stated that Woodrow Wilson was the greatest
man he ever knew. Wilson’s appointments to the Federal Reserve Board, and that body’s responsibility for financing the First
World War, as well as Wilson’s handing over the United States to the immigrant triumvirate during the War, made him appear
to be the most important single effector of ruin in American history.
It is no wonder that after his abortive trip to Europe, where he was hissed and jeered in the streets by the French people, and
snickered at in the halls of Versailles by Orlando and Clemenceau, Woodrow Wilson returned home to take to his bed. The sight
of the destruction and death in Europe, for which he was directly responsible, was perhaps more of a shock than he could bear.
The Italian Minister Pentaleoni expressed the feelings of the European peoples when he wrote that:
"Woodrow Wilson is a type of Pecksniff who was now disappeared amid universal execration."
It is America’s misfortune that our subsidized press and educational system have been devoted to enshrining a man who
colluded in causing so much death and sorrow throughout the world.
The financial cartel suffered only minor setbacks in those crucial years. On February 12, 1917, The New York Times reported
that "The five members of the Federal Reserve Board were impeached on the floor of the House by Rep. Charles A. Lindbergh,
Republican member of the House Banking and Currency Committee. According to Mr. Lindbergh, ‘the conspiracy began in’
1906 when the late J.P. Morgan, Paul M. Warburg, a present member of the Federal Reserve Board, the National City Bank and
other banking firms ‘conspired’ to obtain currency legislation in the interest of big business and the appointment of a special
board to administer such a law, in order to create industrial slaves of the masses, the aforesaid conspirators did conspire and are
now conspiring to have the Federal Reserve Board administered so as to enable the conspirators to coordinate all kinds of big
business and to keep themselves in control of big business in order to amalgamate all the trusts into one great trust in restraint
and control of trade and commerce." The impeachment resolution was not acted on by the House.
The New York Times reported on August 10, 1918, "Mr. Warburg’s term having expired, he voluntarily retired from the Federal
Reserve Board." Thus the previous intimation that Mr. Warburg left the Federal Reserve Board because he had a brother in the
Secret Service of a foreign
country, namely, Germany, with whom we were at war, was not the cause of his retirement. In any case, he did not leave the
Federal Reserve Administration, as he immediately took over J.P. Morgan’s seat on the Federal Advisory Council, from which
post he continued to administer the Federal Reserve System for the next ten years.
CHAPTER NINE The Agricultural Depression
When Paul Warburg resigned from the Federal Reserve Board of Governors in 1918, his place was taken by Albert Strauss,
partner in the international banking house of J & W Seligman. This banking house had large interests in Cuba and South
America, and played a prominent part in financing the many revolutions in those countries. Its most notorious publicity came
during the Senate Finance Committee’s investigation in 1933, when it was brought out that J & W Seligman had given a
$415,000 bribe to Juan Leguia, son of the President of Peru, in order to get that nation to accept a loan.
A partial list of Albert Strauss’ directorships, according to "Who’s Who", shows that he was: Chairman of the Board of the
Cuba Cane Sugar Corporation; director, Brooklyn Manhattan Transit Co., Coney Island Brooklyn RR, New York Rapid Transit,
Pierce-Arrow, Cuba Tobacco Corporation, and the Eastern Cuba Sugar Corporation.
Governor Delano resigned in August, 1918, to be commissioned a Colonel in the Army. The war ended on November 11, 1918.
William McAdoo was replaced in 1918 by Carter Glass as Secretary of the Treasury. Both Strauss and Glass were present
during the secret meeting of the Federal Reserve Board on May 18, 1920, when the Agricultural Depression of 1920-21 was
made possible.
One of the main lies about the Federal Reserve Act when it was being ballyhooed in 1913 was its promise to take care of the
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farmer. Actually, it has never taken care of anybody but a few big bankers. Prof. O.M.W. Sprague, Harvard economist, writing
in the Quarterly Journal of Economics of February, 1914, said:
"The primary purpose of the Federal Reserve Act is to make sure that there will always be an
available supply of money and credit in this country to meet unusual banking requirements."
There is nothing in that wording to help the farmer.
The First World War had introduced into this country a general prosperity, as revealed by the stocks of heavy industry on the
New York Exchange in 1917-1918, by the increase in the amount of money circulated, and by the enormous bank clearings
during the whole of 1918. It was the assigned duty of the Federal Reserve System to get back the vast amount of money and
credit which had escaped their control during this time of prosperity. This was done by the Agricultural Depression of 1920-21.
The operations of the Federal Reserve Open Market Committee in 1917-18, while Paul Warburg was still Chairman, show a
tremendous increase in purchases of bankers’ and trade acceptances. There was also a great increase in the purchase of United
States Government securities, under the leadership of the able Eugene Meyer, Jr. A large part of the stock market speculation in
1919, at the end of the War when the market was very unsettled, was financed with funds borrowed from Federal Reserve Banks
with Government securities as collateral. Thus the Federal Reserve System set up the Depression, first by causing inflation, and
then raising the discount rate and making money dear.
In 1914, Federal Reserve Bank rates had dropped from six percent to four percent, had gone to a further low of three percent in
1916, and had stayed at that level until 1920. The reason for the low interest rate was the necessity for floating the billion dollar
Liberty Loans. At the beginning of each Liberty Loan Drive, the Federal Reserve Board put a hundred million dollars into the
New York money market through its open market operations, in order to provide a cash impetus for the drive. The most
important role of the Liberty Bonds was to soak up the increase in circulation of the medium of exchange (integer of account)
brought about by the large amount of currency and credit put out during the war. Laborers were paid high wages, and farmers
received the highest prices for their produce they had ever known. These two groups accumulated millions of dollars in cash
which they did not put into Liberty Bonds. That money was effectively out of the hands of the Wall Street group which
controlled the money and credit of the United States. They wanted it back, and that is why we had the Agricultural Depression
of 1920-21.
Much of the money was deposited in small country banks in the Middle West and West which had refused to have any part of
the Federal Reserve System, the farmers and ranchers of those regions seeing no good reason why they should give a group of
international financiers control of their money. The main job of the Federal Reserve System was to break these small country
banks and get back the money which had been paid out to the farmers during the war, in effect, ruin them, and this it proceeded
to do.
First of all, a Federal Farm Loan Board was set up which encouraged the farmers to invest their accrued money in land on long
term loans, which the farmers were eager to do. Then inflation was allowed to take its course in this country and in Europe in
1919 and 1920. The purpose of the inflation in Europe was to cancel out a large portion of the war debts owed by the Allies to
the American people, and its purpose in this country was to draw in the excess moneys which had been distributed to the
working people in the form of higher wages and bonuses for production. As prices went higher and higher, the money which the
workers had accumulated became worth less and less, inflicting upon them an unfair drain, while the propertied classes were
enriched by the inflation because of the enormous increase in the value of land and manufactured goods. The workers were thus
effectively impoverished, but the farmers, who were as a class more thrifty, and who were more self-sufficient, had to be
handled more harshly.
G.W. Norris, in "Collier’s Magazine" of March 20, 1920, said:
"Rumor has it that two members of the Federal Reserve Board had a plain talk with some New York bankers and financiers in
December, 1919. Immediately afterwards, there was a notable
decline in transactions on the stock market and a cessation of company promotions. It is understood that action in the same
general direction has already been taken in other sections of the country, as evidence of the abuse of the Federal Reserve System
to promote speculation in land and commodities appeared."
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Senator Robert L. Owen, Chairman of the Senate Banking and Currency Committee, testified at the Senate Silver Hearings in
1939 that:
"In the early part of 1920, the farmers were exceedingly prosperous. They were paying off the mortgages and buying a lot of
new land, at the instance of the Government--had borrowed money to do it--and then they were bankrupted by a sudden
contraction of credit and currency which
took place in 1920. What took place in 1920 was just the reverse of what should have been taking place. Instead of liquidating
the excess of credits created by the war through a period of years, the Federal Reserve Board met in a meeting which was not
disclosed to the public. They met on the
8th of May, 1920, and it was a secret meeting. They spent all day conferring; the minutes made sixty printed pages, and they
appear in Senate Document 310 of February 19, 1923. The Class A Directors, the Federal Reserve Advisory Council, were
present, but the Class B Directors, who
represented business, commerce, and agriculture, were not present. The Class C Directors, representing the people of the United
States, were not present and were not invited to be present.
Only the big bankers were there, and their work of that day resulted in a contraction of credit which had the effect the next year
of reducing the national income fifteen billion dollars, throwing millions of people out of employment, and reducing the value of
lands and ranches by twenty billion dollars."
Carter Glass, member of the Board in 1920 as Secretary of the Treasury, wrote in his autobiography, Adventure in Constructive
Finance published in 1928; "Reporters were not present, of course, as they should not have been and as they never are at any
bank board meeting in the world."85
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85 Carter Glass, Adventure in Constructive Finance, Doubleday, N.Y. 1928
It was Carter Glass who had complained that, if a suggested amendment by Senator LaFollette were passed, on the Federal
Reserve Act of 1913, to the effect that no member of the Federal Reserve Board should be an official or director or stockholder
of any bank, trust company, or insurance company, we would end up by having mechanics and farm laborers on the Board.
Certainly mechanics and farm laborers could have caused no more damage to the country than did Glass, Strauss, and Warburg
at the secret meeting of the Federal Reserve Board.
Senator Brookhart of Iowa testified that at that secret meeting Paul Warburg, also President of the Federal Advisory Council,
had a resolution passed to send a committee of five to the Interstate Commerce Commission and ask for an increase in railroad
rates. As head of Kuhn, Loeb Co. which owned most of the railway mileage in the United States, he was already missing the
huge profits which the United States Government had paid during the war, and he wanted to inflict new price raises on the
American people.
Senator Brookhart also testified that:
"I went into Myron T. Herrick’s office in Paris, and told him that I came there to study cooperative banking. He said to me, ‘as
you go over the countries of Europe, you will find that
the United States is the only civilized country in the world that by law is prohibiting its people from organizing a cooperative
system.’ I went up to New York and talked to about two hundred people. After talking cooperation and standing around waiting
for my train--I did not specifically mention cooperative banking, it was cooperation in general--a man called me off to one side
and said, ‘I think Paul Warburg is the greatest financier we have ever produced. He believes a lot more of your cooperative ideas
than you think he does, and if you want to consult anybody about the business of cooperation, he is the man to consult, because
he believes in you, and you can rely on him.’ A few minutes later I was steered up against Mr. Warburg himself, and he said to
me, ‘You are absolutely right about this cooperative idea. I want to let you know that the big bankers are with you. I want to let
you know that now, so that you will not start anything on cooperative banking and turn them against you.’ I said, ‘Mr. Warburg,
I have already prepared and tomorrow I am going to offer an amendment to the Lant Bill authorizing the establishment of
cooperative national banks.’ That was the intermediate credit act which was then pending to authorize the establishment of
cooperative national banks. That was the extent of my conversation with Mr. Warburg, and we have not had any since."
Mr. Wingo testified that in April, May, June and July of 1920, the manufacturers and merchants were allowed a very large
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increase in credits. This was to tide them through the contraction of credit which was intended to ruin the American farmers,
who, during this period, were denied all credit.
At the Senate Hearings in 1923, Eugene Meyer, Jr. put his finger on a primary reason for the Federal Reserve Board’s action in
raising the interest rate to 7% on agricultural and livestock paper:
"I believe," he said, "that a great deal of trouble would have been avoided if a larger number of the eligible non-member banks
had been members of the Federal Reserve System."
Meyer was correct in pointing this out. The purpose of the Board’s action was to break those state and joint land stock banks
which had steadfastly refused to surrender their freedom to the banker’s dictatorship set up by the System. Kemmerer in the
ABC of the Federal Reserve System had written in 1919 that:
"The tendency will be toward unification and simplicity which will be brought about by the state institutions, in increasing
numbers, becoming stockholders and depositors in the reserve banks."
However, the state banks had not responded.
The Senate Hearings of 1923 investigating the causes of the Agricultural Depression of 1920-21 had been demanded by the
American people. The complete record of the secret meeting of the Federal Reserve Board on May 18, 1920 had been printed in
the "Manufacturers’ Record" of Baltimore, Maryland, a magazine devoted to the interests of small Southern manufacturers.
Benjamin Strong, Governor of the Federal Reserve Bank of New York, and close friend of Montagu Norman, the Governor of
the Bank of England, claimed at these Hearings:
"The Federal Reserve System has done more for the farmer than he has yet begun to realize."
Emmanuel Goldenweiser, Director of Research for the Board of Governors, claimed that the discount rate was raised purely as
an anti-inflationary measure, but he failed to explain why it was a raise aimed solely at farmers and workers, while at the same
time the System protected the manufacturers and merchants by assuring them increased credits.
The final statement on the Federal Reserve Board’s causing the Agricultural Depression of 1920-21 was made by William
Jennings Bryan. In "Hearst’s Magazine" of November, 1923, he wrote:
"The Federal Reserve Bank that should have been the farmer’s greatest protection has become his greatest foe. The deflation of
the farmer was a crime deliberately committed."
CHAPTER TEN The Money Creators
The editorial page of The New York Times, January 18, 1920, carried an interesting comment on the Federal Reserve System.
The unidentified writer, perhaps Paul Warburg, stated, "The Federal Reserve is a fount of credit, not of capital." This is one of
the most revealing statements ever made about the Federal Reserve System. It says that the Federal Reserve System will never
add anything to our capital structure, or to the formation of capital, because it is organized to produce credit, to create money for
credit money and speculations, instead of providing capital funds for the improvement of commerce and industry. Simply stated,
capitalization would mean the providing of notes backed by a precious metal or other commodity. Reserve notes are unbacked
paper loaned at interest.
On July 25, 1921, Senator Owen stated on the editorial page of The New York Times, The Federal Reserve Board is the most
gigantic financial power in all the world. Instead of using this great power as the Federal Reserve Act intended that it should, the
board....delegated this power to the banks, threw the weight of its influence toward the support of the policy of German
inflation." The senator whose name was on the Act saw that it was not performing as promised.
After the Agricultural Depression of 1920-21, the Federal Reserve Board of Governors settled down to eight years of providing
rapid credit expansion of the New York bankers, a policy which culminated in the Great Depression of 1929-31 and helped
paralyze the economic structure of the world. Paul Warburg had resigned in May, 1918, after the monetary system of the United
States had been changed from a bond-secured currency to a currency based upon commercial paper and the shares of the Federal
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Reserve Banks. Warburg returned to his five hundred thousand dollar a year job with Kuhn, Loeb Company, but he continued to
determine the policy of the Federal Reserve System, as President of the Federal Advisory Council and as Chairman of the
Executive Committee of the American Acceptance Council.
From 1921 to 1929, Paul Warburg organized three of the greatest trusts in the United States, the International Acceptance Bank,
largest acceptance bank in the world, Agfa Ansco Film Corporation, with headquarters in Belgium, and I.G. Farben Corporation
whose American
branch Warburg set up as I.G. Chemical Corporation. The Westinghouse Corporation is also one of his creations.
In the early 1920s, the Federal Reserve System played the decisive role in the re-entry of Russia into the international finance
structure. Winthrop and Stimson continued to be the correspondents between Russian and American bankers, and Henry L.
Stimson handled the negotiations concluding in our recognition of the Soviet after Roosevelt’s election in 1932. This was an
anti-climax, because we had long before resumed exchange relations with Russian financiers.
The Federal Reserve System began purchasing Russian gold in 1920, and Russian currency was accepted on the Exchanges.
According to Colonel Ely Garrison, in his autobiography, and according to the United States Naval Secret Service Report on
Paul Warburg, the Russian Revolution had been financed by the Rothschilds and Warburgs, with a member of the Warburg
family carrying the actual funds used by Lenin and Trotsky in Stockholm in 1918.
An article in the English monthly "Fortnightly", July, 1922, says:
"During the past year, practically every single capitalistic institution has been restored. This is true of the State Bank, private
banking, the Stock Exchange, the right to possess money to unlimited amount, the right of inheritance, the bill of exchange
system, and other institutions and practices involved in the conduct of private industry and trade. A great part of the former
nationalized industries are now found in semi-independent trusts."
The organization of powerful trusts in Russia under the guise of Communism made possible the receipt of large amounts of
financial and technical help from the United States. The Russian aristocracy had been wiped out because it was too inefficient to
manage a modern industrial state. The international financiers provided funds for Lenin and Trotsky to overthrow the Czarist
regime and keep Russia in the First World War. Peter Drucker, spokesman for the oligarchy in America, declared in an article in
the Saturday Evening Post in 1948, that:
"RUSSIA IS THE IDEAL OF THE MANAGED ECONOMY TOWARDS WHICH WE ARE MOVING."
In Russia, the issuance of sufficient currency to handle the needs of their economy occurred only after a government had been
put in power which had absolute control of the people. During the 1920s, Russia issued large quantities of so-called "inflation
money", a managed currency. The same "Fortnightly" article (of July, 1922) observed that:
"As economic pressure produced the ‘astronomical dimensions system’ of currency; it can never destroy it. Taken alone, the
system is self-contained, logically perfected, even intelligent. And it can perish only through the collapse or destruction of the
political edifice which it decorates."
"Fortnightly" also remarked, in 1929, that:
"Since 1921, the daily life of the Soviet citizen is no different from that of the American citizen, and the Soviet system of
government is more economical."
Admiral Kolchak, leader of the White Russian armies, was supported by the international bankers, who sent British and
American troops to Siberia in order to have a pretext for printing Kolchak rubles. At one time in 1920, the bankers were
manipulating on the London Exchange the old Czarist rubles, Kerensky rubles and Kolchak rubles, the values of all three
fluctuating according to the movements of the Allied troops aiding Kolchak. Kolchak also was in possession of considerable
amounts of gold which had been seized by his armies. After his defeat, a trainload of this gold disappeared in Siberia. At the
Senate Hearings in 1921 on the Federal Reserve System, it was brought out that the System had been receiving this gold.
Congressman Dunbar questioned Governor W.P.G. Harding of the Federal Reserve Board as follows:
DUNBAR: "In other words, Russia is sending a great deal of gold to the European countries, which in turn send it to us?"
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HARDING: "This is done to pay for the stuff bought in this country and to create dollar exchange."
DUNBAR: "At the same time, that gold came from Russia through Europe?"
HARDING: "Some of it is thought to be Kolchak gold, coming through Siberia, but it is none of the Federal Reserve Banks’
business. The Secretary of the Treasury has issued instructions to the assay office not to take any gold which does not bear the
mint mark of a friendly nation."
Just what Governor Harding meant by "a friendly nation" is not clear. In 1921, we were not at war with any country, but
Congress was already beginning to question the international gold dealings of the Federal Reserve System. Governor Harding
could very well shrug his shoulders and say that it was none of the Federal Reserve Banks’ business where the gold came from.
Gold knows no nationality or race. The United States by law had ceased to be interested in where its gold came from in 1906,
when Secretary of the Treasury Shaw made arrangements with several of the larger New York banks (ones in which he had
interests) to purchase gold with advances of cash from the United States Treasury, which would then purchase the gold from
these banks. The Treasury could claim that it did not know where its gold came from since their office only registers the bank
from which it made the purchase. Since 1906, the Treasury has not known from which of the international gold merchants it was
buying its gold.
The international gold dealings of the Federal Reserve System, and its active support in helping the League of Nations to force
all the nations
of Europe and South America back on the gold standard for the benefit of international gold merchants like Eugene Meyer, Jr.
and Albert Strauss, is best demonstrated by a classic incident, the sterling credit of 1925.
J.E. Darling wrote, in the English periodical, "Spectator", on January 10, 1925 that:
"Obviously, it is of the first importance to the United States to induce England to resume the gold standard as early as possible.
An American controlled Gold Standard, which must inevitably result in the United States becoming the world’s supreme
financial power, makes England a tributary and satellite, and New York the world’s financial centre."
Mr. Darling fails to point out that the American people have as little to do with this as the British people, and that resumption of
the gold standard by Britain would benefit only that small group of international gold merchants who own the world’s gold. No
wonder that "Banker’s Magazine" gleefully remarked in July, 1925 that:
"The outstanding event of the past half year in the banking world was the restoration of the gold standard."
The First World War changed the status of the United States from that of a debtor nation to the position of the world’s greatest
creditor nation, a title formerly occupied by England. Since debt is money, according to the Governor Marriner Eccles of the
Federal Reserve Board, this also made us the richest nation of the world. The war also caused the removal of the headquarters of
the world’s acceptance market from London to New York, and Paul Warburg became the most powerful trade acceptance
banker in the world. The mainstay of the international financiers, however, remained the same. The gold standard was still the
basis of foreign exchange, and the small group of internationals who owned the gold controlled the monetary system of the
Western nations.
Professor Gustav Cassel wrote in 1928:
"The American dollar, not the gold standard, is the world’s monetary standard. The American Federal Reserve Board has the
power to determine the purchasing power of the dollar by making
changes in the rate of discount, and thus controls the monetary standard of the world."
If this were true, the members of the Federal Reserve Board would be the most powerful financiers in the world. Occasionally
their membership includes such influential men as Paul Warburg or Eugene Meyer, Jr., but usually they are a rubber-stamp
committee for the Federal Advisory Council and the London bankers.
In May, 1925, the British Parliament passed the Gold Standard Act, putting Great Britain back on the gold standard. The Federal
Reserve System’s major role in this event came out on March 16, 1926, when George Seay, Governor of the Federal Reserve
Bank of Richmond, testified before the House Banking and Currency Committee that:
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"A verbal understanding confirmed by correspondence, extended Great Britain a two hundred million dollar gold loan or credit.
All negotiations were conducted between Benjamin Strong,
Governor of the Federal Reserve Bank of New York and Mr. Montagu Norman, Governor of the Bank of England. The purpose
of this loan was to help England get back on the gold standard, and the loan was to be met by investment of Federal Reserve
funds in bills of exchange and foreign securities."
The Federal Reserve Bulletin of June, 1925, stated that:
"Under its arrangement with the Bank of England the Federal Reserve Bank of New York undertakes to sell gold on credit to the
Bank of England from time to time during the next two years, but not to exceed $200,000,000 outstanding at any one time."
A two hundred million dollar gold credit had been arranged by a verbal understanding between the international bankers,
Benjamin Strong and Montagu Norman. It was apparent by this time that the Federal Reserve System had other interests at heart
than the financial needs of American business and industry. Great Britain’s return to the gold standard was further facilitated by
an additional gold loan of a hundred million dollars from J.P. Morgan Company. Winston Churchill, British Chancellor of the
Exchequer, complained later that the cost to the British government of this loan was $1,125,000 the first year, this sum
representing the profit to J.P. Morgan Company in that time.
The matter of changing the discount rate, for instance, has never been satisfactorily explained. Inquiry at the Federal Reserve
Board in Washington elicited the reply that "the condition of the money market is the prime consideration behind changes in the
rate." Since the money market is in New York, it takes no imagination to deduce that New York bankers may be interested in
changes of the rate and often attempt to influence it.
Norman Lombard, in the periodical "World’s Work" writes that:
"In their consideration and disposal of proposed changes of policy, the Federal Reserve Board should follow the procedure and
ethics observed by our court of law. Suggestions that there
should be a change of rate or that the Reserve Banks should buy or sell securities may come from anyone and with no formality
or written argument. The suggestion may be made to a Governor or Director of the Federal Reserve System over the telephone
or at his club over the luncheon table,
or it may be made in the course of a casual call on a member of the Federal Reserve Board. The interests of the one proposing
the change need not be revealed, and his name and any suggestions he makes are usually kept secret. If it concerns the matter of
open market operations, the public
has no inkling of the decision until the regular weekly statement appears, showing changes in the holdings of the Federal
Reserve Banks. Meanwhile, there is no public discussion, there is no statement of the reasons for the decision, or of the names
of those opposing or favoring it."
The chances of the average citizen meeting a Governor of the Federal Reserve System at his club are also slight.
The House Hearings on Stabilization of the Purchasing Power of the Dollar in 1928 proved conclusively that the Federal
Reserve Board worked in close cooperation with the heads of European central banks, and that the Depression of 1929-31 was
planned at a secret luncheon of the Federal Reserve Board and those heads of European central banks in 1927. The Board has
never been made responsible to the public for its decisions or actions. The constitutional checks and balances seem not to
operate in finance.
The true allegiance of the members of the Federal Reserve Board has always been to the central bankers. The three features of
the central bank, its ownership by private stockholders who receive rent and profit for their use of the nation’s credit, absolute
control of the nation’s financial resources, and mobilization of the nation’s credit to finance foreigners, all were demonstrated by
the Federal Reserve System during the first fifteen years of its operations.
Further demonstration of the international purposes of the Federal Reserve Act of 1913 is provided by the "Edge Amendment"
of December 24, 1919, which authorizes the organization of corporations expressly for "engaging in international foreign
banking and other international or foreign financial operations, including the dealing in gold or bullion, and the holding of stock
in foreign corporations." In commenting on this amendment, E.W. Kemmerer, economist from Princeton University, remarked
that:
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"The federal reserve system is proving to be a great influence in the internationalizing of American trade and American
finance."
The fact that this internationalizing of American trade and American finance has been a direct cause for involving us in two
world wars does not disturb Mr. Kemmerer. There is plenty of evidence to show how Paul Warburg used the Federal Reserve
System as the instrument for getting trade acceptance adopted on a wide scale by American businessmen.
The use of trade acceptances, (which are the currency of international trade) by bankers and corporations in the United States
prior to 1915 was practically unknown. The rise of the Federal Reserve System exactly parallels the increase in the use of
acceptances in this country, nor is this a coincidence. The men who wanted the Federal Reserve System were the men who set
up acceptance banks and profited by the use of acceptances.
As early as 1910, the National Monetary Commission began to issue pamphlets and other propaganda urging bankers and
businessmen in this country to adopt trade acceptances in their transactions. For three years the Commission carried on this
campaign, and the Aldrich Plan included a broad provision authorizing the introduction and use of bankers’ acceptances into the
American system of commercial paper.
The Federal Reserve Act of 1913 as passed by Congress did not specifically authorize the use of acceptances, but the Federal
Reserve Board in 1915 and 1916 defined "trade acceptance", further defined by Regulation A Series of 1920, and further
defined by Series 1924. One of the first official acts of the Board of Governors in 1914 was to grant acceptances a preferentially
low rate of discount at Federal Reserve Banks. Since acceptances were not being used in this country at that time, no
explanation of business exigency could be advanced for this action. It was apparent that someone in power on the Board of
Governors wanted the adoptance of acceptances.
The National Bank Act of 1864, which was the determining financial authority of the United States until November, 1914, did
not permit banks to lend their credit. Consequently, the power of banks to create money was greatly limited. We did not have a
bank of issue, that is, a central bank, which could create money. To get a central bank, the bankers caused money panic after
money panic on the business people of the United States, by shipping gold out of the country, creating a money shortage, and
then importing it back. After we got our central bank, the Federal Reserve System, there was no longer any need for a money
panic, because the banks could create money. However, the panic as an instrument of power over the business and financial
community was used again on two important occasions, in 1920, causing the Agricultural Depression, because state banks and
trust companies had refused to join the Federal Reserve System, and in 1929, causing the Great Depression, which centralized
nearly all power in this country in the hands of a few great trusts.
A trade acceptance is a draft drawn by the seller of goods on the purchaser, and accepted by the purchaser, with a time of
expiration stamped upon it. The use of trade acceptances in the wholesale market supplies short-term, assured credit to carry
goods in process of production, storage, transit, and marketing. It facilitates domestic and foreign commerce. Seemingly, then,
the bankers who wished to replace the open-book account system with the trade acceptance system were progressive men who
wished to help American import-export trade. Much propaganda was issued to that effect, but this was not really the story.
The open-book system, heretofore used entirely by American business people, allowed a discount for cash. The acceptance
system discourages the use of cash, by allowing a discount for credit. The open-book system also allowed much easier terms of
payment, with liberal extensions on the debt. The acceptance does not allow this, since it is a short-term credit with the time-date
stamped upon it. It is out of the seller’s hands, and in the hands of a bank, usually an acceptance bank, which does not allow any
extension of time. Thus, the adoption of acceptances by American businessmen during the 1920’s greatly facilitated the
domination and swallowing up of small business into huge trusts, which accelerated the crash of 1929.
Trade acceptances had been used to some extent in the United States before the Civil War. During that war, exigencies of trade
had destroyed the acceptance as a credit medium, and it had not come back into favor in this country, our people preferring the
simplicity and generosity of the open-book system. Open-book accounts are a single-name commercial paper, bearing only the
name of the debtor. Acceptances are two-name paper, bearing the name of the debtor and the creditor. Thus they became
commodities to be bought and sold by banks. To the creditor, under the open-book system, the debt is a liability. To the
acceptance bank holding an acceptance, the debt is an asset. The men who set up acceptance banks in this country, under the
leadership of Paul Warburg, secured control of the billions of dollars of credit existing as open accounts on the books of
American businessmen.
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Governor Marriner Eccles of the Federal Reserve Board stated before the House Banking and Currency Committee that: "Debt
is the basis for the creation of money."
Large holders of trade acceptances got the use of billions of dollars worth of credit-money, besides the rate of interest charged
upon the acceptance itself. It is obvious why Paul Warburg should have devoted so much time, money, and energy to getting
acceptances adopted by this country’s banking machinery.
On September 4, 1914, the National City Bank accepted the first time-draft drawn on a national bank under provisions of the
Federal Reserve Act of 1913. This was the beginning of the end of the open-book account system as an important factor in
wholesale trade. Beverly Harris, vice-president of the National City Bank of New York, issued a pamphlet in 1915 stating that:
"Merchants using the open account system are usurping the functions of bankers."
In The New York Times on June 14, 1920, Paul Warburg, Chairman of the American Acceptance Council, said:
"Unless the Federal Reserve Board puts itself heart and soul behind the untrammeled development of acceptances as a prime
investment for banks of the Federal Reserve Banks the future safe and sound development of the system will be jeopardized."
This was a statement of the purpose of Warburg and his bunch who wanted "monetary reform" in this country. They were out to
get control
of all credit in the United States, and they got it, by means of the Federal Reserve System, the acceptance system, and the lack of
concern by the citizens.
The First World War was a boon to the introduction of trade acceptances, and the volume jumped to four hundred million
dollars in 1917, growing through the 1920s to more than a billion dollars a year, which culminated in a high peak just before the
Great Depression of 1929-31. The Federal Reserve Bank of New York’s charts show that its use of acceptances reached a peak
in November, 1929, the month of the stock market crash, and declined sharply thereafter. The acceptance people by then had
gotten what they wanted, which was control of American business and industry. "Fortune Magazine" in February of 1950
pointed out that:
"Volume of acceptances declined from $1,732 million in 1929 to $209 million in 1940, because of the concentration of
acceptance banking in a few hands, and the Treasury’s low-interest policy, which made direct loans cheaper than acceptance.
There has been a slight upturn since
the war, but it is often cheaper for large companies to finance imports from their own coffers."
In other words, the "large companies" more accurately, the great trusts, now have control of credit and have not needed
acceptances. Besides the barrage of propaganda issued by the Federal Reserve System itself, the National Association of Credit
Men, the American Bankers’ Association, and other fraternal organizations of the New York bankers devoted much time and
money to distributing acceptance propaganda. Even their flood of lectures and pamphlets proved insufficient, and in 1919 Paul
Warburg organized the American Acceptance Council, which was devoted entirely to acceptance propaganda.
The first convention held by this association at Detroit, Michigan, on June 9, 1919, coincided with the annual convention of the
National Association of Credit Men, held there on that date, so that "interested observers might with facility participate in the
lectures and meetings of both groups," according to a pamphlet issued by the American Acceptance Council.
Paul Warburg was elected President of this organization, and later became chairman of the Executive Committee of the
American Acceptance Council, a position which he held until his death in 1932. The Council published lists of corporations
using trade acceptances, all of them businesses in which Kuhn, Loeb Co. or its affiliates held control. Lectures given before the
Council or by members of the Council were attractively bound and distributed free by the National City Bank of New York to
the country’s businessmen.
Louis T. McFadden, Chairman of the House Banking and Currency Committee, charged in 1922 that the American Acceptance
Council was
exercising undue influence on the Federal Reserve Board and called for a Congressional investigation, but Congress was not
interested.
At the second annual convention of the American Acceptance Council, held in New York on December 2, 1920, President Paul
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Warburg stated:
"It is a great satisfaction to report that during the year under review it was possible for the American Acceptance Council to
further develop and strengthen its relations with the Federal Reserve Board."
During the 1920s Paul Warburg, who had resigned from the Federal Reserve Board after holding a position as Governor for a
year in wartime, continued to exercise direct personal influence on the Federal Reserve Board by meeting with the Board as
President of the Federal Advisory Council and as President of the American Acceptance Council. He was, from its organization
in 1920 until his death in 1932, Chairman of the Board of the International Acceptance Bank of New York, the largest
acceptance bank in the world. His brother, Felix M. Warburg, also a partner in Kuhn, Loeb Co., was director of the International
Acceptance Bank and Paul’s son, James Paul Warburg, was Vice-President. Paul Warburg was also a director on other
important acceptance banks in this country, such as Westinghouse Acceptance Bank, which were organized in the United States
immediately after the World War, when the headquarters of the international acceptance market was moved from London to
New York, and Paul Warburg became the most powerful acceptance banker in the world.
Paul Warburg became an even more legendary figure by his memorialization as "Daddy Warbucks" in the comic strip, "Little
Orphan Annie". The strip celebrated a homeless waif and her dog who are adopted by "the richest man in the world", Daddy
Warbucks, a takeoff on "Warburg", who has almost magical powers and can accomplish anything by the power of his limitless
wealth. Those in the know snickered when "Annie", the musical comedy version of this story, had a highly successful run of
several years on Broadway, because the vast majority of the audience had no idea that this was merely another Warburg
operation.
It was the transference of the acceptance market from England to this country which gave rise to Thomas Lamont’s ecstatic
speech before the Academy of Political Science in 1917 that:
"The dollar, not the pound, is now the basis for international exchange."
Americans were proud to hear that, but they did not realize at what a price.
Visible proof of the undue influence of the American Acceptance Council on the Federal Reserve Board, about which
Congressman McFadden complained, is the chart showing the rate-pattern of the Federal Reserve Bank of New York during the
1920s. The Bank’s official discount rate follows exactly for nine years the ninety-day bankers’ acceptance rate, and the Federal
Reserve Bank of New York sets the discount rate for the rest of the Reserve Banks.
Throughout the 1920s the Board of Governors retained two of its first members, C.S. Hamlin and Adolph C. Miller. These men
found themselves careers as arbiters of the nation’s monetary policy. Hamlin was on the Board from 1914 until 1936, when he
was appointed Special Counsel to the Board, while Miller served from 1914 until 1931. These two men were allowed to stay on
the Board so many years because they were both eminently respectable men who gave the Board a certain prestige in the eyes of
the public. During these years one important banker after another came on the Board, served for awhile, and went on to better
things. Neither Miller nor Hamlin ever objected to anything that the New York bankers wanted. They changed the discount rate
and they performed open market operation with Government securities whenever Wall Street wanted them to. Behind them was
the figure of Paul Warburg, who exercised a continuous and dominant influence as President of the Federal Advisory Council,
on which he had such men of common interests with himself as Winthrop Aldrich and J.P. Morgan. Warburg was never too
occupied with his duties of organizing the big international trusts to supervise the nation’s financial structures. His influence
from 1902, when he arrived in this country as immigrant from Germany, until 1932, the year of his death, was dependent on his
European alliance with the banking cartel. Warburg’s son, James Paul Warburg, continued to exercise such influence, being
appointed Franklin D. Roosevelt’s Director of the Budget when that great man assumed office in 1933, and setting up the Office
of War Information, our official propaganda agency during the Second World War.
In The Fight for Financial Supremacy, Paul Einzig, editorial writer for the London Economist, wrote that:
"Almost immediately after World War I a close cooperation was established between the Bank of England and the Federal
Reserve authorities, and more especially with the Federal Reserve Bank of New York.* This cooperation was largely due to the
cordial relations existing between Mr.
Montagu Norman of the Bank of England and Mr. Benjamin Strong, Governor of the Federal Reserve Bank of New York until
1928. On several occasions the discount rate policy of the
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Federal Reserve Bank of New York was guided by a desire to help the Bank of England.
__________________________
* William Boyce Thompson
(Wall Street operator) commented to Clarence Barron, Nov. 27, 1920, "Why should the Federal Reserve Bank have private wires all over the
country and talk daily by cable with the Bank of England?" p. 327 "They Told Barron".
There has been close cooperation in the fixing of discount rates between London and New York."86
____________________
86 Paul Einzig, The Fight For Financial Supremacy, Macmillan, 1931
CHAPTER ELEVEN Lord Montagu Norman
The collaboration between Benjamin Strong and Lord Montagu Norman is one of the greatest secrets of the twentieth century.
Benjamin Strong married the daughter of the president of Bankers Trust in New York, and subsequently succeeded to its
presidency. Carroll Quigley, in Tragedy and Hope says: "Strong became Governor of the Federal Reserve Bank of New York as
the joint nominee of Morgan and of Kuhn, Loeb Company in 1914."87
Lord Montagu Norman is the only man in history who had both his maternal grandfather and his paternal grandfather serve as
Governors of the Bank of England. His father was with Brown, Shipley Company, the London Branch of Brown Brothers (now
Brown Brothers Harriman). Montagu Norman (1871-1950) came to New York to work for Brown Brothers in 1894, where he
was befriended by the Delano family, and by James Markoe, of Brown Brothers. He returned to England, and in 1907 was
named to the Court of the Bank of England. In 1912, he had a nervous breakdown, and went to Switzerland to be treated by
Jung, as was fashionable among the powerful group which he represented.*
Lord Montagu Norman was Governor of the Bank of England from 1916 to 1944. During this period, he participated in the
central bank conferences which set up the Crash of 1929 and a worldwide depression. In The Politics of Money by Brian
Johnson, he writes, "Strong and Norman, intimate friends, spent their holidays together at Bar Harbour and in the South of
France." Johnson says, "Norman therefore became Strong’s alter ego. . . . "Strong’s easy money policies on the New York
money market from 1925-28 were the fulfillment of his agreement with Norman to keep New York interest rates below those of
London. For the sake of international cooperation, Strong withheld the steadying hand of high interest rates from New York
until it was too late. Easy money in New
__________________________
87 Carroll Quigley, Tragedy and Hope, Macmillan, New York, p. 326
* When people
of this class are stricken by guilt feelings while plotting world wars and economic depressions which will bring misery, suffering and death to
millions of the world’s inhabitants, they sometimes have qualms. These qualms are jeered at by their peers as "a failure of nerve". After a bout
with their psychiatrists, they return to their work with renewed gusto, with no further digressions of pity for "the little people" who are to be
their victims.
York had encouraged the surging American boom of the late 1920s, with its fantastic heights of speculation."88
Benjamin Strong died suddenly in 1928. The New York Times obituary, Oct. 17, 1928, describes the conference between the
directors of the three great central banks in Europe in July, 1927, "Mr. Norman, Bank of England, Strong of the New York
Federal Reserve Bank, and Dr. Hjalmar Schacht of the Reichsbank, their meeting referred to at the time as a meeting of ‘the
world’s most exclusive club’. No public reports were ever made of the foreign conferences, which were wholly informal, but
which covered many important questions of gold movements, the stability of world trade, and world economy."
The meetings at which the future of the world’s economy are decided are always reported as being "wholly informal", off the
record, no reports made to the public, and on the rare occasions when outraged Congressmen summon these mystery figures to
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testify about their activities they merely trace the outline of steps taken, and develop no information about what was really said
or decided.
At the Senate Hearings on the Federal Reserve System in 1931, H. Parker Willis, one of the authors and First Secretary of the
Federal Reserve Board from 1914 until 1920, pointedly asked Governor George Harrison, Strong’s successor as Governor of the
Federal Reserve Bank of New York:
"What is the relationship between the Federal Reserve Bank of New York and the money committee of the Stock Exchange?"
"There is no relationship," Governor Harrison replied.
"There is no assistance or cooperation in fixing the rate in any way?", asked Willis.
"No," said Governor Harrison, "although on various occasions they advise us of the state of the money situation, and what they
think the rate ought to be." This was an absolute contradiction of his statement that "There is no relationship". The Federal
Reserve Bank of New York which set
the discount rate for the other Reserve Banks, actually maintained a close liaison with the money committee of the Stock
Exchange.
The House Stabilization Hearings of 1928 proved conclusively that the Governors of the Federal Reserve System had been
holding conferences with heads of the big European central banks. Even had the Congressmen known the details of the plot
which was to culminate in the Great Depression of 1929-31, there would have been nothing they could have done to stop it. The
international bankers who controlled gold movements could inflict their will on any country, and the United States was as
helpless as any other.
Notes from these House Hearings follow:
__________________________
88 Brian Johnson, The Politics of Money, McGraw Hill, New York, 1970, p. 63.
MR. BEEDY: "I notice on your chart that the lines which produce the most violent fluctuations are found under ‘Money Rates
in New York.’ As the rates of money rise and fall in the big cities the loans that are made on investments seem to take advantage
of them, at present, a quite violent change, while industry in general does not seem to avail itself of these violent changes, and
that line is fairly even, there being no great rises or declines.
GOVERNOR ADOLPH MILLER: This was all more or less in the interests of the international situation. They sold gold credits
in New York for sterling balances in London.
REPRESENTATIVE STRONG: (No relation to Benjamin): Has the Federal Reserve Board the power to attract gold to this
country?
E.A. GOLDENWEISER, research director for the Board: The Federal Reserve Board could attract gold to this country by
making money rates higher.
GOVERNOR ADOLPH MILLER: I think we are very close to the point where any further solicitude on our part for the
monetary concerns of Europe can be altered. The Federal Reserve Board last summer, 1927, set out by a policy of open market
purchases, followed in course by reduction on the discount rate at the Reserve Banks, to ease the credit situation and to cheapen
the cost of money. The official reasons for that departure in credit policy were that it would help to stabilize international
exchange and stimulate the exportation of gold.
CHAIRMAN MCFADDEN: Will you tell us briefly how that matter was brought to the Federal Reserve Board and what were
the influences that went into the final determination?
GOVERNOR ADOLPH MILLER: You are asking a question impossible for me to answer.
CHAIRMAN MCFADDEN: Perhaps I can clarify it--where did the suggestion come from that caused this decision of the
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change of rates last summer?
GOVERNOR ADOLPH MILLER: The three largest central banks in Europe had sent representatives to this country. There
were the Governor of the Bank of England, Mr. Hjalmar Schacht, and Professor Rist, Deputy Governor of the Bank of France.
These gentlemen were in conference with officials of the Federal Reserve Bank of New York. After a week or two, they
appeared in Washington for the better part of a day. They came down the evening of one day and were the guests of the
Governors of the Federal Reserve Board the following day, and left that afternoon for New York.
CHAIRMAN MCFADDEN: Were the members of the Board present at this luncheon?
GOVERNOR ADOLPH MILLER: Oh, yes, it was given by the Governors of the Board for the purpose of bringing all of us
together.
CHAIRMAN MCFADDEN: Was it a social affair, or were matters of importance discussed?
GOVERNOR MILLER: I would say it was mainly a social affair. Personally, I had a long conversation with Dr. Schacht alone
before the luncheon, and also one of considerable length with Professor Rist. After the luncheon I began a conversation with Mr.
Norman, which was joined in by Governor Strong of New York.
CHAIRMAN MCFADDEN: Was that a formal meeting of the Board?
GOVERNOR ADOLPH MILLER: No.
CHAIRMAN MCFADDEN: It was just an informal discussion of the matters they had been discussing in New York?
GOVERNOR MILLER: I assume so. It was mainly a social occasion. What I said was mainly in the nature of generalities. The
heads of these central banks also spoke in generalities.
MR. KING: What did they want?
GOVERNOR MILLER: They were very candid in answers to questions. I wanted to have a talk with Mr. Norman, and we both
stayed behind after luncheon, and were joined by the other foreign representatives and the officials of the New York Reserve
Bank. These gentlemen were all pretty concerned with the way the gold standard was working. They were therefore desirous of
seeing an easy money market in New York and lower rates, which would deter gold from moving from Europe to this country.
That would be very much in the interest of the international money situation which then existed.
MR. BEEDY: Was there some understanding arrived at between the representatives of these foreign banks and the Federal
Reserve Board or the New York Federal Reserve Bank?
GOVERNOR MILLER: Yes.
MR. BEEDY: It was not reported formally?
GOVERNOR MILLER: No. Later, there came a meeting of the Open-Market Policy Committee, the investment policy
committee of the Federal Reserve System, by which and to which certain recommendations were made. My recollection is that
about eighty million dollars worth of securities were purchased in August consistent with this plan.
CHAIRMAN MCFADDEN: Was there any conference between the members of the Open Market Committee and those bankers
from abroad?
GOVERNOR MILLER: They may have met them as individuals, but not as a committee.
MR. KING: How does the Open-Market Committee get its ideas?
GOVERNOR MILLER: They sit around and talk about it. I do not know whose idea this was. It was distinctly a time in which
there was a cooperative spirit at work.
CHAIRMAN MCFADDEN: You have outlined here negotiations of very great importance.
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GOVERNOR MILLER: I should rather say conversations.
CHAIRMAN MCFADDEN: Something of a very definite character took place?
GOVERNOR MILLER: Yes.
CHAIRMAN MCFADDEN: A change of policy on the part of our whole financial system which has resulted in one of the most
unusual situations that has ever confronted this country financially (the stock market speculation boom of 1927-1929). It seems
to me that a matter of that importance should have been made a matter of record in Washington.
GOVERNOR MILLER: I agree with you.
REPRESENTATIVE STRONG: Would it not have been a good thing if there had been a direction that those powers given to
the Federal Reserve System should be used for the continued stabilization of the purchasing power of the American dollar rather
than be influenced by the interests of Europe?
GOVERNOR MILLER: I take exception to that term "influence". Besides, there is no such thing as stabilizing the American
dollar without stabilizing every other gold currency. They are tied together by the gold standard. Other eminent men who come
here are very adroit in knowing how to approach the folk who make up the personnel of the Federal Reserve Board.
MR. STEAGALL: The visit of these foreign bankers resulted in money being cheaper in New York?
GOVERNOR MILLER: Yes, exactly.
CHAIRMAN MCFADDEN: I would like to put in the record all who attended that luncheon in Washington.
GOVERNOR MILLER: In addition to the names I have given you, there was also present one of the younger men from the
Bank of France. I think all members of the Federal Reserve Board were there. Under Secretary of the Treasury Ogden Mills was
there, and the Assistant Secretary of the Treasury, Mr. Schuneman, also, two or three men from the State Department and Mr.
Warren of the Foreign Department of the Federal Reserve Bank of New York. Oh yes, Governor Strong was present.
CHAIRMAN MCFADDEN: This conference, of course, with all of these foreign bankers did not just happen. The prominent
bankers from Germany, France, and England came here at whose suggestion?
GOVERNOR MILLER: A situation had been created that was distinctly embarrassing to London by reason of the impending
withdrawal of a certain amount of gold which had been recovered by France and that had originally been shipped and deposited
in the Bank of England by the French Government as a war credit. There was getting to be some tension of mind in Europe
because France was beginning to put her house in order for a return to the gold standard. This situation was one which called for
some moderating influence.
MR. KING: Who was the moving spirit who got those people together?
GOVERNOR MILLER: That is a detail with which I am not familiar.
REPRESENTATIVE STRONG: Would it not be fair to say that the fellows who wanted the gold were the ones who instigated
the meeting?
GOVERNOR MILLER: They came over here.
REPRESENTATIVE STRONG: The fact is that they came over here, they had a meeting, they banqueted, they talked, they got
the Federal Reserve Board to lower the discount rate, and to make the purchases in the open market, and they got the gold.
MR. STEAGALL: Is it true that action stabilized the European currencies and upset ours?
GOVERNOR MILLER: Yes, that was what it was intended to do.
CHAIRMAN MCFADDEN: Let me call your attention to the recent conference in Paris at which Mr. Goldenweiser, director of
research for the Federal Reserve Board, and Dr. Burgess, assistant Federal Reserve Agent of the Federal Reserve Bank of New
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York, were in consultation with the representatives of the other central banks. Who called the conference?
GOVERNOR MILLER: My recollection is that it was called by the Bank of France.
GOVERNOR YOUNG: No, it was the League of Nations who called them together."
The secret meeting between the Governors of the Federal Reserve Board and the heads of the European central banks was not
called to stabilize anything. It was held to discuss the best way of getting the gold held in the United States by the System back
to Europe to force the nations of that continent back on the gold standard. The League of Nations had not yet succeeded in doing
that, the objective for which that body was set up in the first place, because the Senate of the United States had refused to let
Woodrow Wilson betray us to an international monetary authority. It took the Second World War and Franklin D. Roosevelt to
do that. Meanwhile, Europe had to have our gold and the Federal Reserve System gave it to them, five hundred million dollars
worth. The movement of that gold out of the United States caused the deflation of the stock boom, the end of the business
prosperity of the 1920s and the Great Depression of 1929-31, the worst calamity which has ever befallen this nation. It is
entirely logical to say that the American people suffered that depression as a punishment for not joining the League of Nations.
The bankers knew what would happen when that five hundred million dollars worth of gold was sent to Europe. They wanted
the Depression because it put the business and finance of the United States in their hands.
The Hearings continue:
MR. BEEDY: "Mr. Ebersole of the Treasury Department concluded his remarks at the dinner we attended last night by saying
that the Federal Reserve System did not want stabilization and the American businessman did not want it. They want these
fluctuations in prices, not only in securities but in commodities, in trade generally, because those who are now in control are
making their profits out of that very instability. If control of these people does not come in a legitimate way, there may be an
attempt to produce it by general upheavals such as have characterized society in days gone by. Revolutions have been promoted
by dissatisfaction with existing conditions, the control being in the hands of the few, and the many paying the bills.
CHAIRMAN MCFADDEN: I have here a letter from a member of the Federal Reserve Board who was summoned to appear
here. I would like to have it put in the record. It is from Governor Cunningham:
Dear Mr. Chairman:
For the past several weeks I have been confined to my home on account of illness and am now preparing to spend a few weeks
away from Washington for the purpose of hastening convalescence.
Edward H. Cunningham
This is in answer to an invitation extended him to appear before our Committee. I also have a letter from George Harrison,
Deputy Governor of the Federal Reserve Bank of New York.
My dear Mr. Congressman:
Governor Strong sailed for Europe last week. He had not been at all well since the first of the year, and, while he did appear
before your Committee last March, it was only shortly after that that he suffered a very severe attack of shingles, which has
sorely racked his nerves.
George L. Harrison, May 19, 1928
I also desire to place in the record a statement in the New York Journal of Commerce, dated May 22, 1928, from Washington:
‘It is stated in well-informed circles here that the chief topic being taken up by Governor Strong of the Federal Reserve Bank of
New York on his present visit to Paris is the arrangement of stabilization credits for France, Rumania, and Yugoslavia. A second
vital question Mr. Strong will take up is the amount of gold France is to draw from this country.’"
Further questioning by Chairman McFadden about the strange illness of Benjamin Strong brought forth the following testimony
from Governor Charles S. Hamlin of the Federal Reserve Board on May 23rd, 1928:
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"All I know is that Governor Strong has been very ill, and he has gone over to Europe primarily, I understand, as a matter of
health. Of course, he knows well the various offices of the European central banks and undoubtedly will call on them."
Governor Benjamin Strong died a few weeks after his return from Europe, without appearing before the Committee.
The purpose of these hearings before the House Committee on Banking and Currency in 1928 was to investigate the necessity
for passing the Strong bill, presented by Representative Strong (no relation to Benjamin, the international banker), which would
have provided that the Federal Reserve System be empowered to act to stabilize the purchasing power of the dollar. This had
been one of the promises made by Carter Glass and Woodrow Wilson when they presented the Federal Reserve Act before
Congress in 1912, and such a provision had actually been put in the Act by Senator Robert L. Owen, but Carter Glass’ House
Committee on Banking and Currency had struck it out. The traders and speculators did not want the dollar to become stable,
because they would no longer be able to make a profit. The citizens of this country had been led to gamble on the stock market
in the 1920s because the traders had created a nationwide condition of instability.
The Strong Bill of 1928 was defeated in Congress.
The financial situation in the United States during the 1920s was characterized by an inflation of speculative values only. It was
a trader-made situation. Prices of commodities remained low, despite the over-pricing of securities on the exchange.
The purchasers did not expect their securities to pay dividends. The idea was to hold them awhile and sell them at a profit. It had
to stop somewhere, as Paul Warburg remarked in March, 1929. Wall Street did not let it stop until the people had put their
savings into these over-priced securities. We had the spectacle of the President of the United States, Calvin Coolidge, acting as a
shill for the stock market operators when he recommended to the American people that they continue buying on the market, in
1927. There had been uneasiness about the inflated condition of the market, and the bankers showed their power by getting the
President of the United States, the Secretary of the Treasury, and the Chairman of the Board of Governors of the Federal
Reserve System to issue statements that brokers’ loans were not too high, and that the condition of the stock market was sound.
Irving Fisher warned us in 1927 that the burden of stabilizing prices all over the world would soon fall on the United States. One
of the results of the Second World War was the establishment of an International Monetary Fund to do just that. Professor
Gustav Cassel remarked in the same year that:
"The downward movement of prices has not been a spontaneous result of forces beyond our control. It is the result of a policy
deliberately framed to bring down prices and give a higher value to the monetary unit."
The Democratic Party, after passing the Federal Reserve Act and leading us into the First World War, assumed the role of an
opposition party during the 1920s. They were on the outside of the political fence, and were supported during those lean years
by liberal handouts from Bernard Baruch, according to his biography. How far outside of it they were and how little chance they
had in 1928, is shown by a plank in the official Democratic Party platform adopted at Houston on June 28, 1928:
"The administration of the Federal Reserve System for the advantage of the stock-market speculators should cease. It must be
administered for the benefit of farmers, wage-earners, merchants, manufacturers, and others engaged in constructive business."
This idealism insured defeat for its protagonist, Al Smith, who was nominated by Franklin D. Roosevelt. The campaign against
Al Smith also was marked by appeals to religious intolerance, because he was a Catholic. The bankers stirred up anti-Catholic
sentiment all over the country to achieve the election of their World War I protégé, Herbert Hoover.
Instead of being used to promote the financial stability of the country, as had been promised by Woodrow Wilson when the Act
was passed, financial instability has been steadily promoted by the Federal Reserve Board. An official memorandum issued by
the Board on March 13, 1939, stated that:
"The Board of Governors of the Federal Reserve System opposes any bill which proposes a stable price level."
Politically, the Federal Reserve Board was used to advance the election of the bankers’ candidates during the 1920s. The
"Literary Digest" on August 4, 1928, said, on the occasion of the Federal Reserve Board raising the rate to five percent in a
Presidential year:
"This reverses the politically desirable cheap money policy of 1927, and gives smooth conditions on the stock market. It was
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attacked by the Peoples’ Lobby of Washington, D.C. which said that ‘This increase at a time when farmers needed cheap money
to finance the harvesting of their crops was a direct blow at the farmers, who had begun to get back on their feet after the
Agricultural Depression of 1920-21.
"The New York World" said on that occasion:
"Criticism of Federal Reserve Board policy by many investors is not based on its attempt to deflate the stock market, but on the
charge that the Board itself, by last year’s policy, is completely responsible for such stock market inflation as exists."
A damning survey of the Federal Reserve System’s first fifteen years appears in the "North American Review" of May, 1929, by
H. Parker Willis, professional economist who was one of the authors of the Act and First Secretary of the Board from 1914 until
1920. He expresses complete disillusionment.
"My first talk with President-elect Wilson was in 1912. Our conversation related entirely to banking reform. I asked whether he
felt confident we could secure the administration of a
suitable law and how we should get it applied and enforced. He answered: ‘We must rely on American business idealism.’ He
sought for something which could be trusted to afford opportunity to American Idealism. It did serve to finance the World War
and to revise American banking practices. The element of idealism that the President prescribed and believed we could get on
the principle of noblesse oblige from American bankers and businessmen was not there.
Since the inauguration of the Federal Reserve Act we have suffered one of the most serious financial depressions and
revolutions ever known in our history, that of 1920-21. We have seen our agriculture pass through a long period of suffering and
even of revolution, during which one million farmers left their farms, due to difficulties with the price of land and the odd status
of credit conditions. We have suffered the most extensive era of bank failures ever known in this country. Forty-five hundred
banks have closed their doors since the Reserve System began
functioning. In some Western towns there have been times when all banks in that community failed, and given banks have failed
over and over again. There has been little difference in
liability to failure between members and non-members of the Federal Reserve System.
"Wilson’s choice of the first members of the Federal Reserve Board was not especially happy. They represented a composite
group chosen for the express purpose of placating this, that, or the other big interest. It was not strange that appointees used their
places to pay debts. When the Board was considering a resolution to the effect that future members of the reserve system should
be appointed solely on merit, because of the demonstrated incompetence of some of their number. Comptroller John Skelton
Williams moved to strike out the word ‘solely’ and in this he was sustained by the Board. The inclusion of certain elements
(Warburg, Strauss, etc.) in the Board gave an opportunity for catering to special interests that was to prove disastrous later on.
"President Wilson erred, as he often erred, in supposing that the holding of an important office would transform an incumbent
and revivify his patriotism. The Reserve Board reached the low
ebb of the Wilson period with the appointment of a member who was chosen for his ability to get delegates for a Democratic
candidate for the Presidency. However, this level was not the dregs reached under President Harding. He appointed an old
crony, D.R. Crissinger, as Governor of the
Board, and named several other super-serviceable politicians to other places. Before his death he had done his utmost to
debauch the whole undertaking. The System has gone steadily downhill ever since.
"Reserve Banks had hardly assumed their first form when it became apparent that local bankers had sought to use them as a
means of taking care of ‘favorite sons’, that is, persons who had by
common consent become a kind of general charge upon the banking community, or inefficients of various kinds. When reserve
directors were to be chosen, the country bankers often refused to
vote, or, when they voted, cast their ballots as directed by city correspondents. In these circumstances popular or democratic
control of reserve banks was out of the question. Reasonable
efficiency might have been secured if honest men, recognizing their public duty, had assumed power. If such men existed, they
did not get on the Federal Reserve Board. In one reserve bank
today the chief management is in the hands of a man who never did a day’s actual banking in his life, while in another reserve
institution both Governor and Chairman are the former heads of now defunct banks. They naturally have a high failure record in
their district. In a majority of districts the standard of performance as judged by good banking standards is disgracefully low
among reserve executive officials. The policy of the Federal Reserve Bank of Philadelphia is known in the System as the
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‘Friends and Relatives Banks.’
"It was while making war profits in considerable amounts that someone conceived the idea of using the profits to provide
themselves with phenomenally costly buildings. Today the Reserve Banks must keep a full billion dollars of their money
constantly at work merely to pay their own expenses in normal times.
"The best illustration of what the System has done and not done is offered by the experience which the country was having with
speculation, in May, 1929. Three years prior to that, the
present bull market was just getting under way. In the autumn of 1926 a group of bankers, among them one of world famous
name, were sitting at a table in a Washington hotel. One of them
raised the question whether the low discount rates of the System were not likely to encourage speculation.
"‘Yes’, replied the famous banker, ‘they will, but that cannot be helped. It is the price we must pay for helping Europe.’
"It may well be questioned whether the encouragement of speculation by the Board has been the price paid for helping Europe
or whether it is the price paid to induce a certain class of financiers to help Europe, but in either case European conditions
should not have had anything to do with the Board’s discount policy. The fact of the matter is that the Federal Reserve Banks do
not come into contact with the community.
"The ‘small man’ from Maine to Texas has gradually been led to invest his savings in the stock market, with the result that the
rising tide of speculation, transacted at a higher and higher rate of speed, has swept over the legitimate business of the country.
"In March, 1928, Roy A. Young, Governor of the Board, was called before a Senate committee.
‘Do you think the brokers’ loans are too high?", he was asked.
"‘I am not prepared to say whether brokers’ loans are too high or too low,’ he replied, ‘but I am sure they are safely and
conservatively made.’
"Secretary of the Treasury Mellon in a formal statement assured the country that they were not too high, and Coolidge, using
material supplied him by the Federal Reserve Board, made a plain
statement to the country that they were not too high. The Federal Reserve Board, charged with the duty of protecting the
interests of the average man, thus did its utmost to assure the average man that he should feel no alarm about his savings. Yet the
Federal Reserve Board issued on February 2, 1929, a letter addressed to the Reserve Bank Directors cautioning them against
grave danger of further speculation.
"What could be expected from a group of men such as composed the Board, a set of men who were solely interested in standing
from under when there was any danger of friction, displaying a
bovine and canine appetite for credit and praise, while eager only to ‘stand in’ with the ‘big men’ whom they know as the
masters of American finance and banking?"
H. Parker Willis omitted any reference to Lord Montague Norman and the machinations of the Bank of England which were
about to result in the Crash of 1929 and the Great Depression.
CHAPTER TWELVE The Great Depression
R.G. Hawtrey, the English economist, said, in the March, 1926 American Economic Review:
"When external investment outstrips the supply of general savings the investment market must carry the excess with money
borrowed from the banks. A remedy is control of credit by a rise in bank rate."
The Federal Reserve Board applied this control of credit, but not in 1926, nor as a remedial measure. It was not applied until
1929, and then the rate was raised as a punitive measure, to freeze out everybody but the big trusts.
Professor Cassel, in the Quarterly Journal of Economics, August 1928, wrote that:
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"The fact that a central bank fails to raise its bank rate in accordance with the actual situation of the capital market very much
increases the strength of the cyclical movement of trade, with all its pernicious effects on social economy. A rational regulation
of the bank rate lies in our hands, and
may be accomplished only if we perceive its importance and decide to go in for such a policy. With a bank rate regulated on
these lines the conditions for the development of trade cycles would be radically altered, and indeed, our familiar trade cycles
would be a thing of the past."
This is the most authoritative premise yet made relating that our business depressions are artificially precipitated. The
occurrence of the Panic of 1907, the Agricultural Depression of 1920, and the Great Depression of 1929, all three in good crop
years and in periods of national prosperity, suggests that premise is not guesswork. Lord Maynard Keynes pointed out that most
theories of the business cycle failed to relate their analysis adequately to the money mechanism. Any survey or study of a
depression which failed to list such factors as gold movements and pressures on foreign exchange would be worthless, yet
American economists have always dodged this issue.
The League of Nations had achieved its goal of getting the nations of Europe back on the gold standard by 1928, but
three-fourths of the world’s gold was in France and the United States. The problem was how to get that gold to countries which
needed it as a basis for money and credit. The answer was action by the Federal Reserve System.
Following the secret meeting of the Federal Reserve Board and the heads of the foreign central banks in 1927, the Federal
Reserve Banks in a few months doubled their holdings of Government securities and acceptances, which resulted in the
exportation of five hundred million dollars in gold in that year. The System’s market activities forced the rates of call money
down on the Stock Exchange, and forced gold out of the country. Foreigners also took this opportunity to purchase heavily in
Government securities because of the low call money rate.
"The agreement between the Bank of England and the Washington Federal Reserve authorities many months ago was that we
would force the export of 725 million of gold by reducing the bank rates here, thus helping the stabilization of France and
Europe and putting France on a gold basis."89 (April 20, 1928)
On February 6, 1929, Mr. Montagu Norman, Governor of the Bank of England, came to Washington and had a conference with
Andrew Mellon, Secretary of the Treasury. Immediately after that mysterious visit, the Federal Reserve Board abruptly changed
its policy and pursued a high discount rate policy, abandoning the cheap money policy which it had inaugurated in 1927 after
Mr. Norman’s other visit. The stock market crash and the deflation of the American people’s financial structure was scheduled
to take place in March. To get the ball rolling, Paul Warburg gave the official warning to the traders to get out of the market. In
his annual report to the stockholders of his International Acceptance Bank, in March, 1929, Mr. Warburg said:
"If the orgies of unrestrained speculation are permitted to spread, the ultimate collapse is certain not only to affect the
speculators themselves, but to bring about a general depression involving the entire country."
During three years of "unrestrained speculation", Mr. Warburg had not seen fit to make any remarks about the condition of the
Stock Exchange. A friendly organ, The New York Times, not only gave the report two columns on its editorial page, but
editorially commented on the wisdom and profundity of Mr. Warburg’s observations. Mr. Warburg’s concern was genuine, for
the stock market bubble had gone much farther than it had been intended to go, and the bankers feared the consequences if the
people realized what was going on. When this report in The New York Times started a sudden wave of selling on the Exchange,
the bankers grew panicky, and it was decided to ease the market somewhat. Accordingly, Warburg’s National City Bank rushed
twenty-five million dollars in cash to the call money market, and postponed the day of the crash.
The revelation of the Federal Reserve Board’s final decision to trigger the Crash of 1929 appears, amazingly enough, in The
New York Times. On April 20, 1929, the Times headlined, "Federal Advisory Council Mystery
__________________________
89 Clarence W. Barron, They Told Barron, Harpers, New York, 1930, p. 353
Meeting in Washington. Resolutions were adopted by the council and transmitted to the board, but their purpose was closely
guarded. An atmosphere of deep mystery was thrown about the proceedings both by the board and the council. Every effort was
made to guard the proceedings of this extraordinary session. Evasive replies were given to newspaper correspondents."
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Only the innermost council of "The London Connection" knew that it had been decided at this "mystery meeting" to bring down
the curtain on the greatest speculative boom in American history. Those in the know began to sell off all speculative stocks and
put their money in government bonds. Those who were not privy to this secret information, and they included some of the
wealthiest men in America, continued to hold their speculative stocks and lost everything they had.
In FDR, My Exploited Father-in-Law, Col. Curtis B. Dall, who was a broker on Wall Street at that time, writes of the Crash,
"Actually it was the calculated ‘shearing’ of the public by the World Money-Powers, triggered by the planned sudden shortage
of the supply of call money in the New York money market."90
Overnight, the Federal Reserve System had raised the call rate to twenty percent. Unable to meet this rate, the speculators’ only
alternative was to jump out of windows.
The New York Federal Reserve Bank rate, which dictated the national interest rate, went to six percent on November 1, 1929.
After the investors had been bankrupted, it dropped to one and one-half percent on May 8, 1931. Congressman Wright Patman
in "A Primer On Money", says that the money supply decreased by eight billion dollars from 1929 to 1933, causing 11,630
banks of the total of 26,401 in the United States to go bankrupt and close their doors.
The Federal Reserve Board had already warned the stockholders of the Federal Reserve Banks to get out of the Market, on
February 6, 1929, but it had not bothered to say anything to the rest of the people. Nobody knew what was going on except the
Wall Street bankers who were running the show. Gold movements were completely unreliable. The Quarterly Journal of
Economics noted that:
"The question has been raised, not only in this country, but in several European countries, as to whether customs statistics record
with accuracy the movements of precious metals, and, when investigation has been made, confidence in such figures has been
weakened rather than strengthened. Any movement between
France and England, for instance, should be recorded in each country, but such comparison shows an average yearly
discrepancy of fifty million francs for France and eighty-five million francs for England. These enormous discrepancies are not
accounted for."
The Right Honorable Reginald McKenna stated that:
__________________________
90 Col. Curtis B. Dall, F.D.R., My Exploited Father-in-Law, Liberty Lobby, Wash., D.C. 1970
"Study of the relations between changes in gold stock and movement in price levels shows what should be very obvious, but is
by no means recognized, that the gold standard is in no sense
automatic in operation. The gold standard can be, and is, usefully managed and controlled for the benefit of a small group of
international traders."
In August 1929, the Federal Reserve Board raised the rate to six percent. The Bank of England in the next month raised its rate
from five and one-half percent to six and one-half percent. Dr. Friday in the September, 1929, issue of Review of Reviews,
could find no reason for the Board’s action:
"The Federal Reserve statement for August 7, 1929, shows that signs of inadequacy for autumn requirements do not exist. Gold
resources are considerably more than the previous year, and gold continues to move in, to the financial embarrassment of
Germany and England. The reasons for
the Board’s action must be sought elsewhere. The public has been given only the hint that ‘This problem has presented
difficulties because of certain peculiar conditions’. Every reason which Governor Young advanced for lowering the bank rate
last year exists now. Increasing the rate
means that not only is there danger of drawing gold from abroad, but imports of the yellow metal have been in progress for the
last four months. To do anything to accentuate this is to take the responsibility for bringing on a world-wide credit deflation."
Thus we find that not only was the Federal Reserve System responsible for the First World War, which it made possible by
enabling the United States to finance the Allies, but its policies brought on the world-wide depression of 1929-31. Governor
Adolph C. Miller stated at the Senate Investigation of the Federal Reserve Board in 1931 that:
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"If we had had no Federal Reserve System, I do not think we would have had as bad a speculative situation as we had, to begin
with."
Carter Glass replied, "You have made it clear that the Federal Reserve Board provided a terrific credit expansion by these open
market transactions."
Emmanuel Goldenweiser said, "In 1928-29 the Federal Board was engaged in an attempt to restrain the rapid increase in
security loans and in stock market speculation. The continuity of this policy of restraint, however, was interrupted by reduction
in bill rates in the autumn of 1928 and the summer of 1929."
Both J.P. Morgan and Kuhn, Loeb Co. had "preferred lists" of men to whom they sent advance announcements of profitable
stocks. The men on these preferred lists were allowed to purchase these stocks at cost, that is, anywhere from 2 to 15 points a
share less than they were sold to the public. The men on these lists were fellow bankers, prominent industrialists, powerful city
politicians, national Committeemen of the Republican and Democratic Parties, and rulers of foreign countries. The men on these
lists were notified of the coming crash, and sold all but so-called gilt-edged stocks, General Motors, Dupont, etc. The prices on
these stocks also sank to record lows, but they came up soon afterwards. How the big bankers operated in 1929 is revealed by a
Newsweek story on May 30, 1936, when a Roosevelt appointee, Ralph W. Morrison, resigned from the Federal Reserve Board:
"The consensus of opinion is that the Federal Reserve Board has lost an able man. He sold his Texas utilities stock to Insull for
ten million dollars, and in 1929 called a meeting and ordered
his banks to close out all security loans by September 1. As a result, they rode through the depression with flying colors."
Predictably enough, all of the big bankers rode through the depression "with flying colors." The people who suffered were the
workers and farmers who had invested their money in get-rich stocks, after the President of the United States, Calvin Coolidge,
and the Secretary of the Treasury, Andrew Mellon, had persuaded them to do it.
There had been some warnings of the approaching crash in England, which American newspapers never saw. The London
Statist on May 25, 1929 said:
"The banking authorities in the United States apparently want a business panic to curb speculation."
The London Economist on May 11, 1929, said:
"The events of the past year have seen the beginnings of a new technique, which, if maintained and developed, may succeed in
‘rationing the speculator without injuring the trader.’"
Governor Charles S. Hamlin quoted this statement at the Senate hearings in 1931 and said, in corroboration of it:
"That was the feeling of certain members of the Board, to remove Federal Reserve credit from the speculator without injuring
the trader."
Governor Hamlin did not bother to point out that the "speculators" he was out to break were the school-teachers and small town
merchants who had put their savings into the stock market, or that the "traders" he was trying to protect were the big Wall Street
operators, Bernard Baruch and Paul Warburg.
When the Federal Reserve Bank of New York raised its rate to six percent on August 9, 1929, market conditions began which
culminated in tremendous selling orders from October 24 into November, which wiped out a hundred and sixty billion dollars
worth of security values. That was a hundred and sixty billions which the American citizens had one month and did not have the
next. Some idea of the calamity may be had if we remember that our enormous outlay of money and goods in the Second World
War amounted to not much more than two hundred billions of dollars, and a great deal of that remained as negotiable securities
in the national debt. The stock market crash is the greatest misfortune which the United States has ever suffered.
The Academy of Political Science of Columbia University in its annual meeting in January, 1930, held a post-mortem on the
Crash of 1929. Vice-President Paul Warburg was to have presided, and Director Ogden Mills was to have played an important
part in the discussion. However, these two gentlemen did not show up. Professor Oliver M.W. Sprague of Harvard University
remarked of the crash:
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"We have here a beautiful laboratory case of the stock market’s dropping apparently from its own weight."
It was pointed out that there was no exhaustion of credit, as in 1893, nor any currency famine, as in the Panic of 1907, when
clearing-house certificates were resorted to, nor a collapse of commodity prices, as in 1920. What then, had caused the crash?
The people had purchased stocks at high prices and expected the prices to continue to rise. The prices had to come down, and
they did. It was obvious to the economists and bankers gathered over their brandy and cigars at the Hotel Astor that the people
were at fault. Certainly the people had made a mistake in buying over-priced securities, but they had been talked into it by every
leading citizen from the President of the United States on down. Every magazine of national circulation, every big newspaper,
and every prominent banker, economist, and politician, had joined in the big confidence game of urging people to buy those
over-priced securities. When the Federal Reserve Bank of New York raised its rate to six percent, in August 1929, people began
to get out of the market, and it turned into a panic which drove the prices of securities down far below their natural levels. As in
previous panics, this enabled both Wall Street and foreign operators in the know to pick up "blue-chip" and gilt-edged"
securities for a fraction of their real value.
The Crash of 1929 also saw the formation of giant holding companies which picked up these cheap bonds and securities, such as
the Marine Midland Corporation, the Lehman Corporation, and the Equity Corporation. In 1929 J.P. Morgan Company
organized the giant food trust, Standard Brands. There was an unequaled opportunity for trust operators to enlarge and
consolidate their holdings.
Emmanuel Goldenweiser, director of research for the Federal Reserve System, said, in 1947:
"It is clear in retrospect that the Board should have ignored the speculative expansion and allowed it to collapse of its own
weight."
This admission of error eighteen years after the event was small comfort to the people who lost their savings in the Crash.
The Wall Street Crash of 1929 was the beginning of a world-wide credit deflation which lasted through 1932, and from which
the Western democracies did not recover until they began to rearm for the Second World War. During this depression, the trust
operators achieved further control by their backing of three international swindlers, The Van Sweringen brothers, Samuel Insull,
and Ivar Kreuger. These men pyramided billions of dollars worth of securities to fantastic heights. The bankers who promoted
them and floated their stock issue could have stopped them at any time, by calling loans of less than a million dollars, but they
let these men go on until they had incorporated many industrial and financial properties into holding companies, which the
banks then took over for nothing. Insull piled up public utility holdings throughout the Middle West, which the banks got for a
fraction of their worth. Ivar Kreuger was backed by Lee Higginson Company, supposedly one of the nation’s most reputable
banking houses. The Saturday Evening Post called him "more than a financial titan", and the English review Fortnightly said, in
an article written December 1931, under the title, "A Chapter in Constructive Finance": "It is as a financial irrigator that Kreuger
has become of such vital importance to Europe."*
"Financial irrigator" we may remember, was the title bestowed upon Jacob Schiff by Newsweek Magazine, when it described
how Schiff had bought up American railroads with Rothschild’s money.
The New Republic remarked on January 25th, 1933, when it commented on the fact that Lee Higginson Company had handled
Kreuger and Toll Securities on the American market:
"Three-quarters of a billion dollars was made away with. Who was able to dictate to the French police to keep secret the news of
this extremely important suicide for some hours, during which
somebody sold Kreuger securities in large amounts, thus getting out of the market before the debacle?"
The Federal Reserve Board could have checked the enormous credit expansion of Insull and Kreuger by investigating the
security on which their loans were being made, but the Governors never made any examination of the activities of these men.
The modern bank with the credit facilities it affords, gives an opportunity which had not previously existed for such operators as
Kreuger to make an appearance of abundant capital by the aid of borrowed capital. This enables the speculator to buy securities
with securities. The only limit to the amount he can corner is the amount to which the banks will back him, and, if a speculator is
being promoted by a reputable banking house, as Kreuger was promoted by Lee Higginson Company, the only way he could be
stopped would be by an investigation of his actual financial resources, which in Kreuger’s case would have proved to be nil.
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The leader of the American people during the Crash of 1929 and the subsequent depression was Herbert Hoover. After the first
break of the
__________________________
* NOTE: Ivar Kreuger, we may recall, was occasionally the personal guest of his old friend, President Herbert Hoover, at the White House.
Hoover seems to have maintained a cordial relationship with many of the most prominent swindlers of the twentieth century, including his
partner, Emile Francqui. The receivership of the billion dollar Kreuger Fraud was handled by Samuel Untermeyer, former counsel for Pujo
Committee hearings.
market (the five billion dollars in security values which disappeared on October 24, 1929) President Hoover said:
"The fundamental business of the country, that is, production and distribution of commodities, is on a sound and prosperous
basis."
His Secretary of the Treasury, Andrew Mellon, stated on December 25, 1929, that:
"The Government’s business is in sound condition."
His own business, the Aluminum Company of America, apparently was not doing so well, for he had reduced the wages of all
employees by ten percent.
The New York Times reported on April 7, 1931, "Montagu Norman, Governor of the Bank of England, conferred with the
Federal Reserve Board here today. Mellon, Meyer, and George L. Harrison, Governor of the Federal Reserve Bank of New
York, were present."
The London Connection had sent Norman over this time to ensure that the Great Depression was proceeding according to
schedule. Congressman Louis McFadden had complained, as reported in The New York Times, July 4, 1930, "Commodity
prices are being reduced to 1913 levels. Wages are being reduced by the labor surplus of four million unemployed. The Morgan
control of the Federal Reserve System is exercised through control of the Federal Reserve Bank of New York, the mediocre
representation and acquiescence of the Federal Reserve Board in Washington." As the depression deepened, the trust’s lock on
the American economy strengthened, but no finger was pointed at the parties who were controlling the system.
CHAPTER THIRTEEN The 1930’s
In 1930 Herbert Hoover appointed to the Federal Reserve Board an old friend from World War I days, Eugene Meyer, Jr., who
had a long record of public service dating from 1915, when he went into partnership with Bernard Baruch in the Alaska-Juneau
Gold Mining Company. Meyer had been a Special Advisor to the War Industries Board on Non-Ferrous Metals (gold, silver,
etc.); Special Assistant to the Secretary of War on aircraft production; in 1917 he was appointed to the National Committee on
War Savings, and was made Chairman of the War Finance Corporation from 1918-1926. He then was appointed chairman of the
Federal Farm Loan Board from 1927-29. Hoover put him on the Federal Reserve Board in 1930, and Franklin D. Roosevelt
created the Reconstruction Bank for Reconstruction and Development in 1946. Meyer must have been a man of exceptional
ability to hold so many important posts. However, there were some Senators who did not believe he should hold any
Government office, because of his family background as an international gold dealer and his mysterious operations in billions of
dollars of Government securities in the First World War. Consequently, the Senate held Hearings to determine whether Meyer
ought to be on the Federal Reserve Board.
At these Hearings, Representative Louis T. McFadden, Chairman of the House Banking and Currency Committee, said:
"Eugene Meyer, Jr. has had his own crowd with him in the government since he started in 1917.
His War Finance Corporation personnel took over the Federal Farm Loan System, and almost immediately afterwards, the
Kansas City Join Stock Land Bank and the Ohio Joint Stock Land Bank failed."
REPRESENTATIVE RAINEY: Mr. Meyer, when he nominally resigned as head of the Federal Farm Loan Board, did not really
cease his activities there. He left behind him an able body of wreckers. They are continuing his policies and consulting with him.
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Before his appointment, he was frequently in consultation with Assistant Secretary of the Treasury Dewey. Just before his
appointment, the Chicago Joint Land Stock Bank, the Dallas Joint Stock Land Bank, the Kansas City Joint Land Stock Bank,
and the Des Moines Land Bank were all functioning. Their bonds were selling at par. The then farm commissioner had an
understanding with Secretary Dewey that nothing would be done without the consent and approval of the Federal Farm Loan
Board. A few days afterwards, United States Marshals, with pistols strapped at their sides, and sometimes with drawn pistols,
entered these five banks and demanded that the banks be turned over to them. Word went out all over the United States, through
the newspapers, as to what had happened, and these banks were ruined. This led to the breach with the old Federal Farm Loan
Board, and to the resignation of three of its members, and the appointment of Mr. Meyer to be head of that Board.
SENATOR CAREY: Who authorized the marshals to take over the banks?
REP. RAINEY: Assistant Secretary of the Treasury Dewey. That started the ruin of all these rural banks, and the Gianninis
bought them up in great numbers."
World’s Work of February 1931, said:
"When the World War began for us in 1917, Mr. Eugene Meyer, Jr. was among the first to be called to Washington. In April,
1918, President Wilson named him Director of the War Finance
Corporation. This corporation loaned out 700 million dollars to banking and financial institutions."
The Senate Hearings on Eugene Meyer, Jr. continued:
REPRESENTATIVE MCFADDEN: "Lazard Freres, the international banking house of New York and Paris, was a Meyer
family banking house. It frequently figures in imports and exports of gold, and one of the important functions of the Federal
Reserve System has to do with gold movements in the maintenance of its own operations. In looking over the minutes of the
hearing we had last Thursday, Senator Fletcher had asked Mr. Meyer, ‘Have you any connections with international banking?’
Mr. Meyer had answered, ‘Me? Not personally.’ This last question and answer do not appear in the stenographic transcript.
Senator Fletcher remembers asking the question and the answer. It is an odd omission.
SENATOR BROOKHART: I understand that Mr. Meyer looked it over for corrections.
REPRESENTATIVE MCFADDEN: Mr. Meyer is a brother-in-law of George Blumenthal, a member of the firm of J.P. Morgan
Company, which represents the Rothschild interests. He also is a liaison officer between the French Government and J.P.
Morgan. Edmund Platt, who had eight years to go on a term of ten years as Governor of the Federal Reserve Board, resigned to
make room for Mr. Meyer. Platt was given a Vice-Presidency of Marine Midland Corporation by Meyer’s brother-in-law Alfred
A. Cook. Eugene Meyer, Jr. as head of the War Finance Corporation, engaged in the placing of two billion dollars in
Government
securities, placed many of those orders first with the banking house now located at 14 Wall Street in the name of Eugene Meyer,
Jr. Mr. Meyer is now a large stockholder in the Allied Chemical Corporation. I call your attention to House Report No. 1635,
68th Congress, 2nd Session, which reveals that at least twenty-four million dollars in bonds were duplicated. Ten billion dollars
worth of bonds surreptitiously destroyed. Our committee on Banking and Currency found the records of the War Finance
Corporation under Eugene Meyer, Jr. extremely faulty. While the books were being brought before our committee by the people
who were custodians of them and taken back to the Treasury at night, the committee discovered that alterations were being made
in the permanent records."
The record of public service did not prevent Eugene Meyer, Jr. from continuing to serve the American people on the Federal
Reserve Board, as Chairman of the Reconstruction Finance Corporation, and as head of the International Bank.
President Rand, of the Marine Midland Corporation, questioned about his sudden desire for the services of Edmund Platt, said:
"We pay Mr. Platt $22,000 a year, and we took his secretary over, of course." This meant another five thousand a year.
Senator Brookhart showed that Eugene Meyer, Jr. administered the Federal Farm Loan Board against the interests of the
American farmer, saying:
"Mr. Meyer never loaned more than 180 million dollars of the capital stock of 500 million dollars of the farm loan board, so that
in aiding the farmers he was not even able to use half of the capital."
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MR. MEYER: Senator Kenyon wrote me a letter which showed that I cooperated with great advantage to the people of Iowa.
SENATOR BROOKHART: "You went out and took the opposite side from the Wall Street crowd. They always send somebody
out to do that. I have not yet discovered in your statements much interest in making loans to the farmers at large, or any real
effort to help their condition. In your two years as head of the Federal Farm Loan Board you made very few loans compared to
your capital. You loaned only one-eighth of the demand, according to your own statement."
Despite the damning evidence uncovered at these Senate Hearings, Eugene Meyer, Jr. remained on the Federal Reserve Board.
During this tragic period, chairman Louis McFadden of the House Banking and Currency Committee continued his lone crusade
against the "London Connection" which had wrecked the nation. On June 10, 1932, McFadden addressed the House of
Representatives:
"Some people think the Federal Reserve banks are United States Government institutions. They are not government institutions.
They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their
foreign customers. The Federal Reserve banks are
the agents of the foreign central banks. Henry Ford has said, ‘The one aim of these financiers is world control by the creation of
inextinguishable debts.’ The truth is the Federal Reserve Board
has usurped the Government of the United States by the arrogant credit monopoly which operates the Federal Reserve Board
and the Federal Reserve Banks."
On January 13, 1932, McFadden had introduced a resolution indicting the Federal Reserve Board of Governors for "Criminal
Conspiracy":
"Whereas I charge them, jointly and severally, with the crime of having treasonably conspired and acted against the peace and
security of the United States and having treasonably conspired to
destroy constitutional government in the United States. Resolved, that the Committee on the Judiciary is authorized and directed
as a whole or by subcommittee to investigate the official
conduct of the Federal Reserve Board and agents to determine whether, in the opinion of the said committee, they have been
guilty of any high crime or misdemeanour which in the contemplation of the Constitution requires the interposition of the
Constitutional powers of the House."
No action was taken on this Resolution. McFadden came back on December 13, 1932 with a motion to impeach President
Herbert Hoover. Only five Congressmen stood with him on this, and the resolution failed. The Republican majority leader of the
House remarked, "Louis T. McFadden is now politically dead."
On May 23, 1933, McFadden introduced House Resolution No. 158, Articles of Impeachment against the Secretary of the
Treasury, two Assistant Secretaries of the Treasury, the Federal Reserve Board of Governors, and officers and directors of the
Federal Reserve Banks for their guilt and collusion in causing the Great Depression. "I charge them with having unlawfully
taken over 80 billion dollars from the United States Government in the year 1928, the said unlawful taking consisting of the
unlawful recreation of claims against the United States Treasury to the extent of over 80 billion dollars in the year 1928, and in
each year subsequent, and by having robbed the United States Government and the people of the United States by their theft and
sale of the gold reserve of the United States."
The Resolution never reached the floor. A whispering campaign that McFadden was insane swept Washington, and in the next
Congressional elections, he was overwhelmingly defeated by thousands of dollars poured into his home district of Canton,
Pennsylvania.
In 1932, the American people elected Franklin D. Roosevelt President of the United States. This was hailed as the freeing of the
American people from the evil influence which had brought on the Great Depression, the ending of Wall Street domination, and
the disappearance of the banker from Washington.
Roosevelt owed his political career to a fortuitous circumstance. As Assistant Secretary of the Navy during World War I,
because of old school ties, he had intervened to prevent prosecution of a large ring of homosexuals in the Navy which included
several Groton and Harvard chums. This brought him to the favorable appreciation of a wealthy international homosexual set
which travelled back and forth between New York and Paris, and which was presided over by Bessie Marbury, of a very old and
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prominent New York family. Bessie’s "wife", who lived with her for a number of years, was Elsie de Wolfe, later Lady Mendl
in a "mariage de convenance", the arbiter of the international set. They recruited J.P. Morgan’s youngest daughter, Anne
Morgan, into their circle, and used her fortune to restore the Villa Trianon in Paris, which became their headquarters. During
World War I, it was used as a hospital. Bessie Marbury expected to be awarded the Legion of Honor by the French Government
as a reward, but J.P. Morgan, Jr., who despised her for corrupting his youngest sister, requested the French Government to
withhold the award, which they did. Smarting from this rebuff, Bessie Marbury threw herself into politics, and became a power
in the Democratic National Party. She had also recruited Eleanor Roosevelt into her circle, and, during a visit to Hyde Park,
Eleanor confided that she was desperate to find something for "poor Franklin" to do, as he was confined to a wheelchair, and
was very depressed.
"I know what we’ll do," exclaimed Bessie, "We’ll run him for Governor of New York!" Because of her power, she succeeded in
this goal, and Roosevelt later became President.
One of the men Roosevelt brought down from New York with him as a Special Advisor to the Treasury was Earl Bailie of J &
W Seligman Company, who had become notorious as the man who handed the $415,000 bribe to Juan Leguia, son of the
President of Peru, in order to get the President to accept a loan from J & W Seligman Company. There was a great deal of
criticism of this appointment, and Mr. Roosevelt, in keeping with his new role as defender of the people, sent Earl Bailie back to
@bringing in New York.
Franklin D. Roosevelt himself was an international banker of ill repute, having floated large issues of foreign bonds in this
country in the 1920s. These bonds defaulted, and our citizens lost millions of dollars, but they still wanted Mr. Roosevelt as
President. The New York Directory of Directors lists Mr. Roosevelt as President and Director of United European Investors,
Ltd., in 1923 and 1924, which floated many millions of German marks in this country, all of which defaulted. Poor’s Directory
of Directors lists him as a director of The International Germanic Trust Company in 1928. Franklin D. Roosevelt was also an
advisor to the
Federal International Banking Corporation, an Anglo-American outfit dealing in foreign securities in the United States.
Roosevelt’s law firm of Roosevelt and O’Connor during the 1920s represented many international corporations. His law partner,
Basil O’Connor, was a director in the following corporations:
Cuban-American Manganese Corporation, Venezuela-Mexican Oil Corporation, West Indies Sugar Corporation, American
Reserve Insurance Corporation, Warm Springs Foundation. He was director in other corporations, and later head of the
American Red Cross.
When Franklin D. Roosevelt took office as President of the United States, he appointed as Director of the Budget James Paul
Warburg, son of Paul Warburg, and Vice President of the International Acceptance Bank and other corporations. Roosevelt
appointed as Secretary of the Treasury W.H. Woodin, one of the biggest industrialists in the country, Director of the American
Car Foundry Company and numerous other locomotive works, Remington Arms, The Cuba Company, Consolidated Cuba
Railroads, and other big corporations. Woodin was later replaced by Henry Morgenthau, Jr., son of the Harlem real estate
operator who had helped put Woodrow Wilson in the White House. With such a crew as this, Roosevelt’s promises of radical
social changes showed little likelihood of fulfillment. One of the first things he did was to declare a bankers’ moratorium, to
help the bankers get their records in order.
World’s Work says:
"Congress has left Charles G. Dawes and Eugene Meyer, Jr. free to appraise, by their own methods, the security which
prospective borrowers of the two billion dollar capital may offer."
Roosevelt also set up the Securities Exchange Commission, to see to it that no new faces got into the Wall Street gang, which
caused the following colloquy in Congress:
REPRESENTATIVE WOLCOTT: At hearings before this committee in 1933, the economists showed us charts which proved
beyond all doubt that the dollar value commodities followed the price level of gold. It did not, did it?
LEON HENDERSON: No.
REPRESENTATIVE GIFFORD: Wasn’t Joe Kennedy put in [as Chairman of the Securities Exchange Committee] by President
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Roosevelt because he was sympathetic with big business?
LEON HENDERSON: I think so.
Paul Einzig pointed out in 1935 that:
"President Roosevelt was the first to declare himself openly in favor of a monetary policy aiming at a deliberately engineered
rise in prices. In a negative sense his policy was successful. Between 1933 and 1935 he succeeded in reducing private
indebtedness, but this was done at the cost of increasing public indebtedness."
In other words, he eased the burden of debts off of the rich onto the poor, since the rich are few and the poor many.
Senator Robert L. Owen, testifying before the House Committee on Banking and Currency in 1938, said:
"I wrote into the bill which was introduced by me in the Senate on June 26, 1913, a provision that the powers of the System
should be employed to promote a stable price level, which meant a dollar of stable purchasing, debt-paying power. It was
stricken out. The powerful money interests
got control of the Federal Reserve Board through Mr. Paul Warburg, Mr. Albert Strauss, and Mr. Adolph C. Miller and they
were able to have that secret meeting of May 18, 1920, and bring about a contraction of credit so violent it threw five million
people out of employment. In 1920
that Reserve Board deliberately caused the Panic of 1921. The same people, unrestrained in the stock market, expanding credit
to a great excess between 1926 and 1929, raised the price of
stocks to a fantastic point where they could not possibly earn dividends, and when the people realized this, they tried to get out,
resulting in the Crash of October 24, 1929."
Senator Owen did not go into the question of whether the Federal Reserve Board could be held responsible to the public.
Actually, they cannot. They are public officials who are appointed by the President, but their salaries are paid by the private
stockholders of the Federal Reserve Banks.
Governor W.P.G. Harding of the Federal Reserve Board testified in 1921 that:
"The Federal Reserve Bank is an institution owned by the stockholding member banks. The Government has not a dollar’s
worth of stock in it."
However, the Government does give the Federal Reserve System the use of its billions of dollars of credit, and this gives the
Federal Reserve its characteristic of a central bank, the power to issue currency on the Government’s credit. We do not have
Federal Government notes or gold certificates as currency. We have Federal Reserve Bank notes, issued by the Federal Reserve
Banks, and every dollar they print is a dollar in their pocket.
W. Randolph Burgess, of the Federal Reserve Bank of New York, stated before the Academy of Political Science in 1930 that:
"In its major principles of operation the Federal Reserve System is no different from other banks of issue, such as the Bank of
England, the Bank of France, or the Reichsbank."
All of these central banks have the power of issuing currency in their respective countries. Thus, the people do not own their
own money in Europe, nor do they own it here. It is privately printed for private profit. The people have no sovereignty over
their money, and it has developed that they have no sovereignty over other major political issues such as foreign policy.
As a central bank of issue, the Federal Reserve System has behind it all the enormous wealth of the American people. When it
began operations in 1913, it created a serious threat to the central banks of the impoverished countries of Europe. Because it
represented this great wealth, it attracted far more gold than was desirable in the 1920s, and it was apparent that soon all of the
world’s gold would be piled up in this country. This would make the gold standard a joke in Europe, because they would have
no gold over there to back their issue of money and credit. It was the Federal Reserve’s avowed aim in 1927, after the secret
meeting with the heads of the foreign central banks, to get large quantities of that gold sent back to Europe, and its methods of
doing so, the low interest rate and heavy purchases of Government securities, which created vast sums of new money,
intensified the stock market speculation and made the stock market crash and resultant depression a national disaster.
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Since the Federal Reserve System was guilty of causing this disaster, we might suppose that they would have tried to alleviate it.
However, through the dark years of 1931 and 1932, the Governors of the Federal Reserve Board saw the plight of the American
people worsening and did nothing to help them. This was more criminal than the original plotting of the Depression. Anyone
who lived through those years in this country remembers the widespread unemployment, the misery, and the hunger of our
people. At any time during those years the Federal Reserve Board could have acted to relieve this situation.
The problem was to get some money back into circulation. So much of the money normally used to pay rent and food bills had
been sucked into Wall Street that there was no money to carry on the business of living. In many areas, people printed their own
money on wood and paper for use in their communities, and this money was good, since it represented obligations to each other
which people fulfilled.
The Federal Reserve System was a central bank of issue. It had the power to, and did, when it suited its owners, issue millions of
dollars of money. Why did it not do so in 1931 and 1932? The Wall Street bankers were through with Mr. Herbert Hoover, and
they wanted Franklin D. Roosevelt to come in on a wave of glory as the saviour of the nation. Therefore, the American people
had to starve and suffer until March of 1933, when the White Knight came riding in with his crew of Wall Street bribers and put
some money into circulation. That was all there was to it. As soon as Mr. Roosevelt took office, the Federal Reserve began to
buy Government securities at the rate of ten million dollars a week for ten weeks, and created a hundred million dollars in new
money, which alleviated the critical famine of money and credit, and the factories started hiring people again.
During the Roosevelt Administration, The Federal Reserve Board, insofar as the public was concerned, was Marriner Eccles, an
emulator and admirer of "the Chief". Eccles was a Utah banker, President of the First Securities Corporation, a family
investment trust consisting of a number of banks which Eccles had picked up cheap during the Agricultural Depression of
1920-21. Eccles also was a director of such corporations as Pet Milk Company, Mountain States Implement Company, and
Amalgamated Sugar. As a big banker, Eccles fitted in well with the group of powerful men who were operating Roosevelt.
There was some discussion in Congress as to whether Eccles ought to be on the Federal Reserve Board at the same time he had
all of these banks in Utah, but he testified that he had very little to do with the First Securities Corporation besides being
President of it, and so he was confirmed as Chairman of the Board.
Eugene Meyer, Jr. now resigned from the Board to spend more of his time lending the two billion dollar capital of the
Reconstruction Finance Corporation, and determining the value of collateral by his own methods.
The Banking Act of 1935, which greatly increased Roosevelt’s power over the nation’s finances, was an integral part of the
legislation by which he proposed to extend his reign in the United States. It was not opposed by the people as was the National
Recovery Act, because it was not so naked an infringement of their liberties. It was, however, an important measure. First of all,
it extended the terms of office of the Federal Reserve Board of Governors to fourteen years, or, three and a half times the length
of a Presidential term. This meant that a President assuming office who might be hostile to the Board could not appoint a
majority to it who would be favorable to him. Thus, a monetary policy inaugurated before a President came into the White
House would go on regardless of his wishes.
The Banking Act of 1935 also repealed the clause of the Glass-Steagall Banking Act of 1933, which had provided that a
banking house could not be on the Stock Exchange and also be involved in investment banking. This clause was a good one,
since it prevented a banking house from lending money to a corporation which it owned. Still it is to be remembered that this
clause covered up some other provisions in that Act, such as the creation of the Federal Deposit Insurance Corporation,
providing insurance money to the amount of 150 million dollars, to guarantee fifteen billion dollars worth of deposits. This
increased the power of the big bankers over small banks and gave them another excuse to investigate them. The Banking Act of
1933 also legislated that all earnings of the Federal Reserve Banks must by law go to the banks themselves. At last the provision
in the Act that the Government share in the profits was gotten rid of. It had never been observed, and the increase in the assets of
the Federal Reserve Banks from 143 million dollars in 1913 to 45 billion dollars in 1949 went entirely to the private
stockholders of the banks. Thus, the one constructive provision of the Banking Act of 1933 was repealed in 1935, and also the
Federal Reserve Banks were now permitted to loan directly to industry, competing with the member banks, who could not hope
to match their capacity in arranging large loans.
When the provision that banks could not be involved in investment banking and operate on the Stock Exchange was repealed in
1935, Carter Glass, originator of that provision, was asked by reporters:
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"Does that mean that J.P. Morgan can go back into investment banking?"
"Well, why not?" replied Senator Glass. "There has been an outcry all over the country that the banks will not make loans. Now
the Morgans can go back to underwriting."
Because that provision was unfavorable to them, the bankers had simply clamped down on making loans until it was repealed.
Newsweek of March 14, 1936, noted that:
"The Federal Reserve Board fired nine chairmen of Reserve Banks, explaining that ‘it intended to make the chairmanships of the
Reserve Banks largely a part-time job on an honorary basis.’"
This was another instance of the centralization of control in the Federal Reserve System. The regional district system had never
been an important factor in the administration of monetary policy, and the Board was not cutting down on its officials outside of
Washington. The Chairman of the Senate Committee on Banking and Currency had asked, during the Gold Reserve Hearings of
1934:
"Is it not true, Governor Young, that the Secretary of the Treasury for the past twelve years has dominated the policy of the
Federal Reserve Banks and the Federal Reserve Board with respect to the purchase of United States bonds?"
Governor Young had denied this, but it had already been brought out that on both of his hurried trips to this country in 1927 and
1929 to dictate Federal Reserve policy, Governor Montagu Norman of the Bank of England had gone directly to Andrew
Mellon, Secretary of the Treasury, to get him to purchase Government securities on the open market and start the movement of
gold out of this country back to Europe.
The Gold Reserve Hearings had also brought in other people who had more than a passing interest in the operations of the
Federal Reserve System. James Paul Warburg, just back from the London Economic Conference with Professor O.M.W.
Sprague and Henry L. Stimson, came in to declare that he thought we ought to modernize the gold standard. Frank Vanderlip
suggested that we do away with the Federal Reserve Board and set up a Federal Monetary Authority. This would have made no
difference to the New York bankers, who would have selected the personnel anyway. And Senator Robert L. Owen, longtime
critic of the system, made the following statement:
"The people did not know the Federal Reserve Banks were organized for profit-making. They were intended to stabilize the
credit and currency supply of the country. That end has not been accomplished. Indeed, there has been the most remarkable
variation in the purchasing power of
money since the System went into effect. The Federal Reserve men are chosen by the big banks, through discreet little
campaigns, and they naturally follow the ideals which are portrayed to them as the soundest from a financial point of view."
Benjamin Anderson, economist for the Chase National Bank of New York, said:
"At the moment, 1934, we have 900 million dollars excess reserves. In 1924, with increased reserves of 300 million, you got
some three or four billion in bank expansion of credit very
quickly. That extra money was put out by the Federal Reserve Banks in 1924 through buying government securities and was the
cause of the rapid expansion of bank credit. The banks
continued to get excess reserves because more gold came in, and because, whenever there was a slackening, the Federal Reserve
people would put out some more. They held back a bit in 1926.
Things firmed up a bit that year. And then in 1927 they put out less than 300 million additional reserves, set the wild stock
market going, and that led us right into the smash of 1929."
Dr. Anderson also stated that:
"The money of the Federal Reserve Banks is money they created. When they buy Government securities they create reserves.
They pay for the Government securities by giving checks on
themselves, and those checks come to the commercial banks and are by them deposited in the Federal Reserve Banks, and then
money exists which did not exist before."
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SENATOR BULKLEY: It does not increase the circulating medium at all?
ANDERSON: No.
This is an explanation of the manner in which the Federal Reserve Banks increased their assets from 143 million dollars to 45
billion dollars in thirty-five years. They did not produce anything, they were non-productive enterprises, and yet they had this
enormous profit, merely by creating money, 95 percent of it in the form of credit, which did not add to the circulating medium. It
was not distributed among the people in the form of wages, nor did it increase the buying power of the farmers and workers. It
was credit-money created by bankers for the use and profit of bankers, who increased their wealth by more than forty billion
dollars in a few years because they had obtained control of the Government’s credit in 1913 by passing the Federal Reserve Act.
Marriner Eccles also had much to say about the creation of money. He considered himself an economist, and had been brought
into the Government service by Stuart Chase and Rexford Guy Tugwell, two of Roosevelt’s early brain-trusters. Eccles was the
only one of the Roosevelt crowd who stayed in office throughout his administration.
Before the House Banking and Currency Committee on June 24, 1941, Governor Eccles said:
"Money is created out of the right to issue credit-money."
Turning over the Government’s credit to private bankers in 1913 gave them unlimited opportunities to create money. The
Federal Reserve System could also destroy money in large quantities through open market operations. Eccles said, at the Silver
Hearings of 1939:
"When you sell bonds on the open market, you extinguish reserves."
Extinguishing reserves means wiping out a basis for money and credit issue, or, tightening up on money and credit, a condition
which is usually even more favorable to bankers than the creation of money. Calling in or destroying money gives the banker
immediate and unlimited control of the financial situation, since he is the only one with money and the only one with the power
to issue money in a time of money shortage. The money panics of 1873, 1893, 1920-21, and 1929-31, were characterized by a
drawing in of the circulating medium. In economical terms, this does not sound like such a terrible thing, but when it means that
people do not have money to pay their rent or buy food, and when it means that an employer has to lay off three-fourths of his
help because he cannot borrow the money to pay them, the enormous guilt of the bankers and the long record of suffering and
misery for which they are responsible would suggest that no punishment might be too severe for their crimes against their
fellowmen.
On September 30, 1940, Governor Eccles said:
"If there were no debts in our money system, there would be no money."
This is an accurate statement about our money system. Instead of money being created by the production of the people, the
annual increase in goods and services, it is created by the bankers out of the debts of the people. Because it is inadequate, it is
subject to great fluctuations and is basically unstable. These fluctuations are also a source of great profit. For that reason, the
Federal Reserve Board has consistently opposed any
legislation which attempts to stabilize the monetary system. Its position has been set forth definitively in Chairman Eccles’ letter
to Senator Wagner on March 9, 1939, and the Memorandum issued by the Board on March 13, 1939.
Chairman Eccles wrote that:
". . . you are advised that the Board of Governors of the Federal Reserve System does not favor the enactment of Senate Bill No.
31, a bill to amend the Federal Reserve Act, or any other legislation of this general character."
The Memorandum of the Board stated, in its "Memorandum on Proposals to maintain prices at fixed levels":
"The Board of Governors opposes any bill which proposes a stable price level, on the grounds that prices do not depend
primarily on the price or cost of money; that the Board’s control over money cannot be made complete; and that steady average
prices, even if obtainable by official action, would not insure lasting prosperity."
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Yet William McChesney Martin, the Chairman of the Board of Governors in 1952, said before the Subcommittee on Debt
Control, the Patman Committee, on March 10, 1952 that "One of the fundamental purposes of the Federal Reserve Act is to
protect the value of the dollar."
Senator Flanders questioned him: "Is that specifically stated in the original legislation setting up the Federal Reserve System?"
"No," replied Mr. Martin, "but it is inherent in the entire legislative history and in the surrounding circumstances."
Senator Robert L. Owen has told us how it was taken out of the original legislation against his will, and that the Board of
Governors has opposed such legislation. Apparently Mr. Martin does not know this.
Steady average prices, indeed, are impossible so long as we have the speculators on the stock exchange driving prices up and
down in order to reap profits for themselves. Despite Governor Eccles’ insistence that steady average prices would not insure
lasting prosperity, they could do much to bring about this condition. A man on a yearly wage of $2,500 is not more prosperous if
the price of bread increases five cents a loaf during the year.
In 1935, Eccles said before the House Committee on Banking and Currency:
"The Government controls the gold reserve, that is, the power to issue money and credit, thus largely regulating the price
structure."
This is an almost direct contradiction of Eccles’ statement in 1939 that prices do not depend, primarily, on the price or cost of
money.
In 1935, Governor Eccles stated before the House Committee:
"The Federal Reserve Board has the power of open market operations. Open-market operations are the most important single
instrument of control over the volume and cost of credit in this country. When I say "credit" in this connection, I mean money,
because by far the largest part of money in use by the people of this country is in the form of bank credit or bank deposits. When
the Federal Reserve Banks buy bills or securities
in the open market, they increase the volume of the people’s money and lower its cost; and when they sell in the open market
they decrease the volume of money and increase its cost. Authority over these operations, which affect the welfare of the whole
people, must be invested in a body representing the national interest."
Governor Eccles testimony exposes the heart of the money machine which Paul Warburg revealed to his incredulous fellow
bankers at Jekyll Island in 1910. Most Americans comment that they cannot understand how the Federal Reserve System
operates. It remains beyond understanding, not because it is complex, but because it is so simple. If a confidence man comes up
to you and offers to demonstrate his marvelous money machine, you watch while he puts in a blank piece of paper, and cranks
out a $100 bill. That is the Federal Reserve System. You then offer to buy this marvelous money machine, but you cannot. It is
owned by the private stockholders of the Federal Reserve Banks, whose identities can be traced partially, but not completely, to
"the London Connection."
At the House Banking and Currency Committee Hearings on June 6, 1960, Congressman Wright Patman, Chairman, questioned
Carl E. Allen, President of the Federal Reserve Bank of Chicago. (p. 4). PATMAN: "Now Mr. Allen, when the Federal Reserve
Open Market Committee buys a million dollar bond you create the money on the credit of the Nation to pay for that bond, don’t
you? ALLEN: That is correct. PATMAN: And the credit of the Nation is represented by Federal Reserve Notes in that case,
isn’t it? If the banks want the actual money, you give Federal Reserve notes in payment, don’t you? ALLEN: That could be
done, but nobody wants the Federal Reserve notes. PATMAN: Nobody wants them, because the banks would rather have the
credit as reserves."
This is the most incredible part of the Federal Reserve operation and one which is difficult for anyone to understand. How can
any American citizen grasp the concept that there are people in this country who have the power to make an entry in a ledger
that the government of the United States now owes them one billion dollars, and to collect the principal and interest on this
"loan"?
Congressman Wright Patman tells us in "The Primer of Money", p. 38 of going into a Federal Reserve Bank and asking to see
their bonds on which the American people are paying interest. After being shown the bonds, he asked to see their cash, but they
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only had some ledgers and blank checks. Patman says,
"The cash, in truth, does not exist and has never existed. What we call ‘cash reserves’ are simply bookkeeping credits entered
upon ledgers of the Federal Reserve Banks. The credits are created by the Federal Reserve Banks and then passed along through
the banking system."
Peter L. Bernstein, in A Primer On Money, Banking and Gold says:
"The trick in the Federal Reserve notes is that the Federal reserve banks lose no cash when they pay out this currency to the
member banks. Federal Reserve notes are not redeemable in anything except what the Government calls ‘legal tender’--that is,
money that a creditor must be willing to
accept from a debtor in payment of sums owed him. But since all Federal Reserve notes are themselves declared by law to be
legal money, they are really redeemable only in themselves . . .
they are an irredeemable obligation issued by the Federal Reserve Banks."91
As Congressman Patman puts it,
"The dollar represents a one dollar debt to the Federal Reserve System. The Federal Reserve Banks create money out of thin air
to buy Government bonds from the United States Treasury, lending money into circulation at interest, by bookkeeping entries of
checkbook credit to the United States Treasury. The Treasury writes up an interest bearing bond for one billion dollars. The
Federal Reserve gives the Treasury a one billion dollar credit for the bond, and has created out of nothing a one billion dollar
debt which the American people are obligated to pay with interest." (Money Facts, House Banking and Currency Committee,
1964, p. 9)
Patman continues,
"Where does the Federal Reserve system get the money with which to create Bank Reserves?
Answer. It doesn’t get the money, it creates it. When the Federal Reserve writes a check, it is creating money. The Federal
Reserve is a total moneymaking machine. It can issue money or checks."
In 1951, the Federal Reserve Bank of New York published a pamphlet, "A Day’s Work at the Federal Reserve Bank of New
York." On page 22, we find that:
"There is still another and more important element of public interest in the operation of banks besides the safekeeping of money;
banks can ‘create’ money. One of the most important factors to remember in this connection is that the supply of money affects
the general level of prices--the cost of living. The Cost of Living Index and money supply are parallel."
The decisions of the Federal Reserve Board, or rather, the decisions which they are told to make by "parties unknown", affect
the daily lives of every American by the effect of these decisions on prices. Raising the interest rate, or causing money to
became "dearer" acts to limit the amount of money available in the market, as does the raising of reserve
__________________________
91 Peter L. Bernstein, A Primer On Money, Banking and Gold, Vintage Books, New York, 1965, p. 104
requirements by the Federal Reserve System. Selling bonds by the Open Market Committee also extinguishes and lowers the
money supply. Buying government securities on the open market "creates" more money, as does lowering the interest rate and
making money "cheaper". It is axiomatic that an increase in the money supply brings prosperity, and that a decrease in the
money supply brings on a depression. Dramatic increases in the money which outstrip the supply of goods brings on inflation,
"too much money chasing too few goods". A more esoteric aspect of the monetary system is "velocity of circulation", which
sounds much more technical than it is. This is the speed at which money changes hands; if it is gold buried in the peasant’s
garden, that is a slow velocity of circulation, caused by a lack of confidence in the economy or the nation. Very rapid velocity of
circulation, such as the stock market boom of the late 1920s, means quick turnover, spending and investment of money, and its
stems from confidence, or overconfidence, in the economy. With a high velocity of circulation, a smaller money supply
circulates among as many people and goods as a larger money supply would circulate with a slower velocity of circulation. We
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mention this because the velocity of circulation, or confidence in the economy, also is greatly affected by the Federal Reserve
actions. Milton Friedman comments in Newsweek, May 2, 1983, "The Federal Reserve’s major function is to determine the
money supply. It has the power to increase or decrease the money supply at any rate it chooses."
This is an enormous power, because increasing the money supply can cause the re-election of an administration, while
decreasing it can cause an administration to be defeated. Friedman goes on to criticize the Federal Reserve, "How is it that an
institution which has so poor a record of performance nevertheless has so high a public reputation and even commands a
considerable measure of credibility for its forecasts?"
All open market transactions, which affect the money supply, are conducted for a single System account by the Federal Reserve
Bank of New York on the behalf of all the Federal Reserve Banks, and supervised by an officer of the Federal Reserve Bank of
New York. The conferences at which decisions are made to buy or sell securities by the Open Market Committee remain closed
to the public, and the deliberations also remain a mystery. On May 8, 1928, The New York Times reported that Adolph C.
Miller, Governor of the Federal Reserve Board, testifying before the House Banking and Currency Committee, stated that open
market purchases and rediscount rates were established through "conversations". At that time, the purchases on the open market
amounted to seventy or eighty million dollars a day, and would be ten times that today. These are vast sums to be manipulated
on the basis of mere "conversations", but that is as much information as we can obtain.
Because of these mysterious transactions which affect the life, liberty and happiness of every American citizen, there have been
numerous proposals such as Senate Document No. 23, presented by Mr. Logan on January 24, 1939, that "The Government
should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the
buying power of the consumers. The privilege of creating and issuing money is not only the supreme prerogative of
Government, but it is the Government’s greatest creative opportunity."
On March 21, 1960, Congressman Wright Patman used a simple illustration in the Congressional Record of how banks "create
money".
"If I deposit $100 with my bank and the reserve requirements imposed by the Federal Reserve Bank are 20% then the bank can
make a loan to John Doe of up to $80. Where does the $80 come from? It does not come out of my deposit of $100; on the
contrary, the bank simply credits John Doe’s account with $80. The bank can acquire Government obligations by the same
procedure, by simply creating deposits to the credit of the government. Money creating is a power of the commercial banks . . .
Since 1917 the Federal Reserve has given the private banks forty-six billion dollars of reserves."
How this is done is best revealed by Governor Eccles at Hearings before the House Committee on Banking and Currency on
June 24, 1941:
ECCLES: "The banking system as a whole creates and extinguishes the deposits as they make loans and investments, whether
they buy Government Bonds or whether they buy utility bonds or whether they make Farmer’s loans.
MR. PATMAN: I am thoroughly in accord with what you say, Governor, but the fact remains that they created the money, did
they not?
ECCLES: Well, the banks create money when they make loans and investments."
On September 30, 1941, before the same Committee, Governor Eccles was asked by Representative Patman:
"How did you get the money to buy those two billion dollars worth of Government securities in 1933?
ECCLES: We created it.
MR. PATMAN: Out of what?
ECCLES: Out of the right to issue credit money.
MR. PATMAN: And there is nothing behind it, is there, except our Government’s credit?
ECCLES: That is what our money system is. If there were no debts in our money system, there wouldn’t be any money."
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On June 17, 1942, Governor Eccles was interrogated by Mr. Dewey.
ECCLES: "I mean the Federal Reserve, when it carries out an open market operation, that is, if it purchases Government
securities in the open market, it puts new money into the hands of the banks which creates idle deposits.
DEWEY: There are no excess reserves to use for this purpose?
ECCLES: Whenever the Federal Reserve System buys Government securities in the open market, or buys them direct from the
Treasury, either one, that is what it does.
DEWEY: What are you going to use to buy them with? You are going to create credit?
ECCLES: That is all we have ever done. That is the way the Federal Reserve System operates.
The Federal Reserve System creates money. It is a bank of issue."
At the House Hearing of 1947, Mr. Kolburn asked Mr. Eccles:
"What do you mean by monetization of the public debt?
ECCLES: I mean the bank creating money by the purchase of Government securities. All is created by debt--either private or
public debt.
FLETCHER: Chairman Eccles, when do you think there is a possibility of returning to a free and open market, instead of this
pegged and artificially controlled financial market we now have?
ECCLES: Never. Not in your lifetime or mine."
Congressman Jerry Voorhis is quoted in U.S. News, August 31, 1959, as questioning Secretary of Treasury Anderson, "Do you
mean that Banks, in buying Government securities, do not lend out their customers’ deposits? That they create the money they
use to buy the securities? ANDERSON: That is correct. Banks are different from other lending institutions. When a savings
association, an insurance company, or a credit union makes a loan, it lends the very dollar that its customers have previously
paid in. But when a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan.
The money is not taken from anyone. It is new money, recreated by the bank, for the use of the borrower."
Strangely enough, there has never been a court trial on the legality or Constitutionality of the Federal Reserve Act. Although it
is on much the same shaky grounds as the National Recovery Act, or NRA, which was challenged in Schechter Poultry v.
United States of America, 29 U.S. 495, 55 US 837.842 (1935), the NRA was ruled unconstitutional by the Supreme Court on the
grounds that "Congress may not abdicate or transfer to others its legitimate functions. Congress cannot Constitutionally delegate
its legislative authority to trade or industrial associations or groups so as to empower them to make laws."
Article 1, Sec. 8 of the Constitution provides that "The Congress shall have power to borrow money on the credit of the United
States . . . and to coin Money, regulate the value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."
According to the NRA decision, Congress cannot delegate this power to the Federal Reserve System, nor can it delegate its
legislative authority to the Federal Reserve System to allow the System to fix the rate of bank reserves, the rediscount rate, or
the volume of money. All of these are "legislated" by the Federal Reserve Board, meeting in legislative sessions to determine
these matters and to issue "laws" or regulations fixing them.
The Second World War gave the big bankers who owned the Federal Reserve System a chance to unload on the country billions
of dollars printed early in 1930, in the biggest counterfeiting operation in history, all legalized by Roosevelt’s government, of
course. Henry Hazlitt writes in the January 4, 1943 issue of Newsweek Magazine:
"The money that began to appear in circulation a week ago, December 21, 1942, was really printing press money in the fullest
sense of the term, that is, money which has no collateral of any kind behind it. The Federal Reserve statement that ‘The Board of
Governors, after consultation with the Treasury Department, has authorized Federal Reserve Banks to utilize at this time the
existing stocks of currency printed in the early thirties, known as ‘Federal Reserve Banknotes’. We repeat, these notes have
absolutely no collateral of any kind behind them."
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Governor Eccles also testified to some other interesting matters of the Federal Reserve and war finance at the Senate Hearings
on the Office of Price Administration in 1944:
"The currency in circulation was increased from seven billion dollars in four years to twenty-one and a half billion. We are
losing some considerable amounts of gold during the war period. As our exports have gone out, largely on a lend-lease basis, we
have taken imports on which we have
given dollar balances. These countries are now drawing off these dollar balances in the form of gold.
MR. SMITH: Governor Eccles, what is the objective that the foreign governments are after in this projected program whereby
we would contribute gold to an international fund?
GOVERNOR ECCLES: I would like to discuss OPA, and leave the stabilization fund for a time when I am prepared to go into
it.
MR. SMITH: Just a minute. I feel that this fund is very pertinent to what we are talking about today.
MR. FORD: I believe that the stabilization fund is entirely off the @OPA and consequently we ought to stick to the business at
hand."
The Congressmen never did get to discuss the Stabilization Fund, another setup whereby we would give the impoverished
countries of Europe back the gold which had been sent over here. In 1945, Henry Hazlitt, commenting in Newsweek of January
22, on Roosevelt’s annual budget message to Congress, quoted Roosevelt as saying:
"I shall later recommend legislation reducing the present high gold reserve requirements of the Federal Reserve Banks."
Hazlitt pointed out that the reserve requirement was not high, it was just what it had been for the past thirty years. Roosevelt’s
purpose was to free more gold from the Federal Reserve System and make it available for the Stabilization Fund, later called the
International Monetary Fund, part of the World Bank for Reconstruction and Development, the equivalent of the League
Finance Committee which would have swallowed the financial sovereignty of the United States if the Senate had let us join it.
CHAPTER FOURTEEN Congressional Exposé
"Mr. Volcker’s politics is something of an enigma."--New York Times
Since 1933 when Eugene Meyer resigned from the Federal Reserve Board of Governors, no member of the international
banking families has personally served on the Board of Governors. They have chosen to work from behind the scenes through
carefully selected presidents of the Federal Reserve Bank of New York and other employees.
The present chairman of the Federal Reserve Board of Governors is Paul Volcker. His appointment was greeted by one
well-known economist with the following prediction, "Volcker’s selection has been by far the worst. Carter has put Dracula in
charge of the blood bank. To us, it means a crash and depression in the 80s is more certain than ever."
Col. E.C. Harwood’s Research Report, August 6, 1979, gave much the same view. "Paul Volcker is from the same mold as the
unsound money men who have misguided the monetary actions of this nation for the past five decades. The outcome probably
will be equally disastrous for the dollar and the U.S. economy."
Despite these gloomy views, the report from The New York Times on the selection of Volcker was positively ecstatic. On July
26, 1979, The Times commented that Volcker learned "the business" from Robert Roosa, now partner of Brown Brothers
Harriman, and that Volcker had been part of the Roosa Brain Trust at the Federal Reserve Bank of New York, and, later, at the
Treasury in the Kennedy administration. "David Rockefeller, the chairman of Chase, and Mr. Roosa were strong influences in
the Mr. Carter decision to name Mr. Volcker for the Reserve Board chairmanship." The New York Times did not point out that
David Rockefeller and Robert Roosa had previously chosen Mr. Carter, a member of the Trilateral Commission, as the
presidential candidate of the Democratic Party, or that Mr. Carter would hardly refuse to appoint their choice of Paul Volcker as
the new Chairman of the Federal Reserve Board. Nor is it straining the point to be reminded that this manner of selection of the
Chairman of the Board of Governors is directly in the line of royal prerogative going back to George Peabody’s initial
agreement with N.M. Rothschild, to the Jekyll Island meeting, and to the enactment of the Federal Reserve Act.
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The Times noted that "Volcker’s choice was approved by European banks in Bonn, Frankfurt and Zurich." William Simon,
former Secretary of Treasury, was quoted as saying "a marvelous choice." The Times further noted that the Dow market rose on
Volcker’s nomination, registering the best gains in three weeks for a rise of 9.73 points, and that the dollar rose sharply on
foreign exchange@ at home and abroad.
Who was Volcker, that his appointment could have such an effect on the stock market and the value of the dollar in foreign
exchange? He represented the most powerful house of "the London Connection," Brown Brothers Harriman, and the London
houses which directed the Rockefeller empire. On July 29, 1979, The Times had said of Volcker, "New Man Will Chart His
Own Course".
Volcker’s background shows that this was nonsense. His course has always been charted for him by his masters in London. He
attended Princeton, obtained an M.A. at Harvard, and went to the London School of Economics 1951-52, the banker’s graduate
school. He then came to the Federal Reserve Bank of New York as an economist from 1952-57, economist at Chase Manhattan
Bank, 1957-61, with Treasury Department 1961-65, as deputy under secretary for monetary affairs, 1963-65, and under
secretary for monetary affairs, 1969-74. He then became President of the Federal Reserve Bank of New York from 1975-79,
when Carter, at the behest of Robert Roosa and David Rockefeller, appointed him Chairman of the Federal Reserve Board of
Governors. He was succeeded as President of Federal Reserve Bank of New York by Anthony Solomon, a Harvard Ph.D. who
was with the OPA 1941-42 and with the government financial mission to Iran 1942-46. He operated a canned food company in
Mexico from 1951-61, was president of International Investment Corp. for Yugoslavia 1969-72 (a communist country), under
secretary for monetary affairs at Treasury 1977-80. In short, Solomon’s background was much the same as Paul Volcker’s.
The New York Times stated on December 2, 1981, "For years the Federal Reserve was the second or third most secret
institution in town. The Sunshine Act of 1976 penetrated the curtain a trifle. The board now holds a public meeting once a week
on Wednesday at 10 a.m., but not to discuss Monetary policy, which is still regarded as top secret and not to be discussed in
public." The Times mentioned that when Open Market Committee meetings are held, Solomon and Volcker sit together at the
head of the table and relay the instructions which they have received from abroad.
Behind Volcker and Solomon stands Robert Roosa, Secretary of the Treasury in Carter’s shadow cabinet, and representing
Brown Brothers Harriman, the Trilateral Commission, the Council on Foreign Relations, the Bilderbergers, and the Royal
Economic Institute. He is a trustee of the Rockefeller Foundation*, and a director of Texaco and American Express companies.
Dr. Martin Larson points out that "The international consortium of financiers known as the Bilderbergers, who meet annually in
profound secrecy to determine the destiny of the western world, is a creature of the Rockefeller-Rothschild alliance, and that it
held its third meeting on St. Simons Island, only a short distance from Jekyll Island." Larson also states that "The Rockefeller
interests work in close alliance with the Rothschilds and other central banks."**
On June 18, 1983, President Ronald Reagan ended months of speculation by announcing that he was reappointing Paul Volcker
as Chairman of the Federal Reserve Board of Governors for another four year term, although Volcker’s term was not up until
August 6, 1983. Reagan’s reappointment of a Carter appointee puzzled some political observers, but apparently he had
succumbed to considerable pressure, as indicated by a lead editorial in The Washington Post, June 10, 1983, "There is no one
who matches Mr. Volcker in both political standing and grasp of the intricate networks that make up the world’s financial
system." The anonymous writer gave no documentation for his elevation of Volcker to the standing of the world’s greatest
financier, and as for his political standing, The New York Times commented on June 19, 1983, "Mr. Volcker’s politics is
something of an enigma." His "non-political" stance conforms with the Washington tradition of "the political independence of
the Fed" which has been maintained for many years. However, the problem of its dependence on "the London connection" has
never been discussed in Washington.
In reality, Volcker is more of a politician than an economist. After attending the London School of Economics, and finding out
who issues the orders of the international financial community, Volcker has ever since played the game. Not once has he failed
to carry out the orders of the "London Connection".
Can it really be possible that "The London Connection" exists, and that men like Volcker and Solomon receive their
instructions, in however devious or indirect a manner, from foreign bankers? Let us look at the evidence, circumstantial, to be
sure, but circumstantial evidence of the quality which has often sent men to the penitentiary or to the electric chair. John Moody
pointed out in 1911 that seven men of the Morgan group, allied with the Standard Oil-Kuhn, Loeb group, ruled the United
States. Where do these groups stand in the financial picture today?
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U.S. News published on April 11, 1983, a list of the largest bank holding companies in the United States by assets as of
December 31, 1982. Number 1 is Citicorp, New York, with assets of $130 billion. This is Baker and
__________________________
* See Chart V
** See Chart I
Morgan’s First National Bank of New York, merged with National City Bank in 1955, two of the largest purchasers of Federal
Reserve Bank of New York stock in 1914. Number 3, is Chase Manhattan, New York, with assets of $80.9 billion. This is Chase
and Bank of Manhattan merged, the Rockefeller and Kuhn Loeb group, also purchasers of Federal Reserve Bank of New York
stock in 1914. Number 4 is Manufacturers Hanover of New York $64 billion, also purchaser of Federal Reserve Bank of New
York stock in 1914. Number 5 is J.P. Morgan Company of New York, $58.6 billion in assets and holder of considerable Federal
Reserve Bank stock. Number 6 is Chemical Bank of New York, $48.3 billion also purchaser of Federal Reserve stock in 1914.
And Number 11, First Chicago Corporation, the First National Bank of Chicago which was principal correspondent of the
Morgan-Baker bank in New York, and which furnished the first two presidents of the Federal Advisory Council.
The direct line which leads from the participants in the Jekyll Island Conference of 1910 to the present day is illustrated by a
passage from "A Primer on Money", Committee on Banking and Currency, U.S. House of Representatives, 88th Congress, 2d
session, August 5, 1964, p. 75:
"The practical effect of requiring all purchases to be made through the open market is to take money from the taxpayer and give
it to the dealers. It forces the Government to pay a toll for
borrowing money. There are six ‘bank’ dealers: First National City Bank of New York; Chemical Crop. Exchange Bank, New
York, Morgan Guaranty Trust Co., New York, Bankers Trust of New York, First National Bank of Chicago, and Continental
Illinois Bank of Chicago."
Thus the banks which receive a "toll" on all money borrowed by the Government of the United States are the same banks which
planned the Federal Reserve Act of 1913. There is ample evidence demonstrating the present preeminence of the same banks
which set up the Federal Reserve System in 1914. For instance, Warren Brookes writes on the editorial page of The Washington
Post, June 6, 1983:
"Citicorp (National City Bank and First National Bank of New York, merged in 1955) just recorded an 18.6% return on equity,
J.P. Morgan, 17%, Chemical Bank and Bankers Trust, nearly 16%, an exceptional rate of return."
These are the banks which bought the first issue of Federal Reserve Bank stock in 1914, and which owned the controlling
interest in the Federal Reserve Bank of New York, which sets the interest rate and is the bank for all open market operations.
These banks also profit steadily from the otherwise inexplicable fluctuations in monetary growth and interest rates. Brookes
further comments on "actual monetary growth rates alternately gyrating from 0 to 17% in successive six month periods for three
recession-wracked years. The two measures of money growth most admired by Milton Friedman M2 and M3, have actually
shown little change on a year to year basis in the 1972-82 period."
Thus we have money growth rates gyrating from 0 to 17% but no actual year to year changes, which raises the question of why
we cannot have stability of monetary growth throughout the year. The answer is that the big profits are made by these gyrations,
and the next question is, who sets in motion these gyrations? The answer is "the London Connection".
To draw attention from the continued control of the bankers and their heirs, who obtained the government monopoly of the
nation’s money and credit in 1913, the paid propagandists of the controlled media monopoly and academia are constantly
trotting forth new and more exotic theories of economics. Thus James Burnham, one of the National Review propagandists, won
fame with a ridiculous theory of "the managers". He postulated that the old arbiters of wealth, the J.P. Morgans, the Warburgs
and the Rothschilds had, by 1950, disappeared from the scene, being replaced by a new class of "managers". This theory, which
had no foundation in fact, served to obscure the fact that the same people still controlled the monetary system of the world. The
"managers" were just that, executives like Volcker who were front men, paid employees who would continue to receive their
paychecks only as long as they carried out their employers’ instructions. Burnham remains a well-paid propagandist at the
National Review, which many prominent leaders, including President Reagan, believe to be a "conservative" publication.
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From 1914 to 1982, a period in which many thousands of American banks went bankrupt, the original purchasers of Federal
Reserve Bank stock have not only survived but they have consolidated their power. And what of "the London Connection"?
Does it still exist, and is it still dictating the economic destiny of the United States? The Washington Post, May 19, 1983, carried
a story datelined Nairobi, Kenya, noting the meeting of the African Development Bank. "The British merchant bank, Morgan
Grenfell and a syndicate of the United States, Kuhn Loeb, Lehman Brothers International, the French Lazard Freres and
Britain’s Warburg are discreetly acting as financial advisors to about ten debt-plagued African states."
There are the same names we encountered in 1914, still managing the finances of the world, with profits for themselves but with
disastrous results for everyone else. Perhaps we can look for relief to the present Administration of President Reagan.
Unfortunately, before reaching him we have to run the gamut of the long list of his principal staff, composed of men from J.
Henry Schroder, Brown Brothers Harriman, and other leading components of "The London Connection".
Lopez Portillo, President of Mexico, in addressing the Mexican National Congress of Mexico in September, 1982, called the
world credit boom of the past decade a financial pestilence akin to the Black Death which swept Europe in the fourteenth
century. "As in mediaeval times, it flattens country after country. It is transmitted by rats and it yields unemployment and
misery, industrial bankruptcy and enrichment by speculation. The remedy prescribed by faith healers is forced inactivity and
depriving the patient of food."
Forbes Magazine stated October 11, 1982, "The world gasps for liquidity, not because the supply of money has contracted but
because too much of it now goes to pay off old debts rather than fund new productive investments."
The policy of high interest rates and tight money has been disastrous for the United States. In early 1983, a slight easing of
money and credit promises some relief, but as long as the Federal Reserve system and its unseen manipulators continue their
control of the money supply, we can expect more problems. The Nation on December 11, 1982, in commenting on economic
problems, stated, "The blame for all this lies at the door of the Federal Reserve System working as usual on behalf of the
international banking system."
The evidence of how the Federal Reserve System works on behalf of the international banking system is graphically illustrated
by a series of charts drawn up by the staff of the Committee on Banking, Currency and Housing of the House of
Representatives, 94th Congress, 2d session, August, 1976, "FEDERAL RESERVE DIRECTORS: A STUDY OF
CORPORATE AND BANKING INFLUENCE".*
We present as our Chart V page 49 of this study, showing the interlocking directorates of David Rockefeller. As our Chart VI
we reproduce page 55 of this study, showing the interlocking directorates of Frank R. Milliken, one of the Class C Directors**
of the Federal Reserve Bank of New York. In this chart are all the main personages in our story of the Jekyll Island conference:
Citibank, J.P. Morgan and Company, Kuhn Loeb and Company, and many related firms. As Chart VII we reproduce page 53 of
this study, showing the interlocking directorates of another Class C Director of the Federal Reserve Bank of New York, Alan
Pifer. As President of the Carnegie Corporation of New York, he interlocks with J. Henry Schroder Trust Company, J. Henry
Schroder Banking Corporation, Rockefeller Center, Inc., Federal Reserve Bank of Boston, Equitable Life Assurance Society
(J.P. Morgan), and others. Thus an August, 1976 study from the House Committee on Banking, Currency and Housing, brings
before us all of our main cast of personages, functioning today just as they did in 1914.
__________________________
* Due to space limitations, only five of the seventy-five charts in the study, all of which show the connections between prominent, powerful
individuals with control in the Federal Reserve System have been selected to illustrate the connections between officers and directors of the
twelve Federal Reserve Banks in 1976 and the firms listed in this book.
** "The three Class C
Directors are appointed by the Board of Governors as representatives of the public interest as a whole." p. 34, Congressional Study, 1976.
This 120 page Congressional study details public policy functions of the Federal Reserve District Banks, how directors are
selected, who is selected, the public relations lobbying factor, bank domination and bank examination, and corporate interlocks
with Reserve banks. Charts were used to illustrate Class A, Class B, and Class C directorships of each district bank. For each
branch bank a chart was designed giving information regarding bank appointed directors and those appointed by the Board of
Governors of the Federal Reserve System.
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In his Foreword to the study, Chairman Henry S. Reuss, (D-Wis) wrote:
"This Committee has observed for many years the influence of private interests over the essentially public responsibilities of the
Federal Reserve System.
As the study makes clear, it is difficult to imagine a more narrowly based board of directors for a public agency than has been
gathered together for the twelve banks of the Federal Reserve
System.
Only two segments of American society--banking and big business--have any substantial representation on the boards, and often
even these become merged through interlocking directorates . . . . Small farmers are absent. Small business is barely visible. No
women appear on the district boards and only six among the branches. Systemwide--including district and branch boards--only
thirteen members from minority groups appear.
The study raises a substantial question about the Federal Reserve’s oft-repeated claim of "independence". One might ask,
independent from what? Surely not banking or big business, if
we are to judge from the massive interlocks revealed by this analysis of the district boards.
The big business and banking dominance of the Federal Reserve System cited in this report can be traced, in part, to the original
Federal Reserve Act, which gave member commercial banks the right to select two-thirds of the directors of each district bank.
But the Board of Governors in Washington must share the responsibility for this imbalance. They appoint the so-called "public"
members of the boards of each district bank, appointments which have largely reflected the same narrow interests of the
bank-elected members . . . . Until we have basic reforms, the Federal Reserve System will be handicapped in carrying out its
public responsibilities as an economic
stabilization and bank regulatory agency. The System’s mandate is too essential to the nation’s welfare to leave so much of the
machinery under the control of narrow private interests.
Concentration of economic and financial power in the United States has gone too far."
In a section of the text entitled "The Club System", the Committee noted:
"This ‘club’ approach leads the Federal Reserve to consistently dip into the same pools--the same companies, the same
universities, the same bank holding companies--to fill directorships."
This Congressional study concludes as follows:
"Many of the companies on these tables, as mentioned earlier, have multiple interlocks to the Federal Reserve System. First
Bank Systems; Southeast Banking Corporation; Federated Department Stores; Westinghouse Electric Corporation; Proctor and
Gamble; Alcoa; Honeywell, Inc.; Kennecott Copper; Owens-Corning Fiberglass; all have two or more director ties to district or
branch banks.
In Summary, the Federal Reserve directors are apparently representatives of a small elite group which dominates much of the
economic life of this nation." END OF CONGRESSIONAL REPORT.
ADDENDUM
As of 11:05 Tuesday, July 26, 1983, the list of member banks holding Federal Reserve Bank of New York stock includes
twenty-seven New York City banks. Listed below are the number of shares held by ten of these banks, amounting to 66% of the
total outstanding number of shares, namely 7,005,700:
Shares Percent
Bankers Trust Company 438,831 ( 6%)
Bank of New York 141,482 ( 2%)
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Chase Manhattan Bank 1,011,862 (14%)
Chemical Bank 544,962 ( 8%)
Citibank 1,090,813 (15%)
European American Bank & Trust 127,800 ( 2%)
J. Henry Schroder Bank & Trust 37,493 ( .5%)
Manufacturers Hanover 509,852 ( 7%)
Morgan Guaranty Trust 655,443 ( 9%)
National Bank of North America 105,600 ( 2%)
The tremendous number of shares held today as against the original purchases in 1914 is brought about by Section 5 of the
original Federal Reserve Act which called for a member bank to buy and hold stock in the district Federal Reserve Bank equal
to 6% of its capital and surplus.
Currently, shares held by five of the above named banks comprise 53% of the total Federal Reserve Bank of New York stock.
An examination of the major stockholders of the New York City banks shows clearly that a few families, related by blood
marriage, or business interests, still control the New York City banks which, in turn, hold the controlling stock of the Federal
Reserve Bank of New York.
It is notable that three of the banks holding Federal Reserve Bank of New York stock, in the amount of 270,893 shares, are
subsidiaries of foreign banks. J. Henry Schroder Bank and Trust is listed by Standard and Poors as a subsidiary of Schroders
Ltd. of London. The National Bank of North America is a subsidiary of the National Westminster Bank, one of London’s "Big
Five". European American Bank is a subsidiary of the European American Bank, Bahamas, LTD. It is interesting to note that the
directors of the European American Bank & Trust include Milton F. Rosenthal, president and Chief Operating Officer of the
international gold company,
Engelhard Minerals and Chemical; Hamilton F. Potter, a partner in Sullivan and Cromwell (J. Henry Schroder Bank & Trust
attorneys); Edward H. Tuck, partner of Shearman and Sterling (Citibank’s attorneys); F.H. Ulrich and Hans Liebkutsch,
managing directors of the giant Midland Bank of London, one of the "Big Five"; and Roger Alloo, Paul-Emmanuel Janssen, and
Maurice Laure of the Societe Generale de Banque (Brussels, Belgium). [See Chart III]
This information, derived from the latest issue of the tabulation available from the Board of Governors, Federal Reserve System,
is cited as current evidence which indicates that the controlling stock in the Federal Reserve Bank of New York, which sets the
rate and scale of operations for the entire Federal Reserve System is heavily influenced by banks directly controlled by "The
London Connection", that is, the Rothschild-controlled Bank of England. [See Chart I]
APPENDIX I
E.C. Knuth, in The Empire of the City, priv. printed, 1946, p. 27, refers to "the Bank of England, the full partner of the
American Administration in the conduct of the financial affairs of all the world" and cites the Encyclopaedia Americana, 1943
edition.
Barron cites Lord Swaythling, (April 8, 1923), "Lord Swaythling said, ‘Exchange can only be run from London. This is the
center in Exchange.’" (They Told Barron, by Clarence W. Barron, founder of Baron’s Weekly, Harpers, New York, 1930, p.
27.)
Exchange, in the international financial world, means the transactions in money or securities, or simply, the "exchange" of the
values of these securities. It is necessary that this "exchange" take place where the values can be established, and this place is
the "City" in London.
London was established as the primary center of exchange because of the "Consols" of the Bank of England, bonds which could
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never be redeemed, but which paid a stable rate of return. Henry Clews writes, in The Wall Street View, Silver Burdett Co.
1900, p. 255, "The Consolidated Act of 1757 consolidated the debts of the nation of England at 3%, which were kept in an
account at the Bank of England and is the great bulwark of its deposits." By ostentatiously "dumping" "Consols" on the London
Exchange after the Battle of Waterloo, in a pretended panic, Nathan Meyer Rothschild then secretly bought up the Consols sold
in the panic by other holders at a low rate, and became the largest holder of Consols, and thus won control of the Bank of
England in 1815.
12% Dividends
Although a Labor government nationalized the Bank of England in 1946, The Great Soviet Encyclopaedia points out (vol. I, p.
490c) that the Bank of England continues to pay 12% dividends per annum, just as it had done prior to the nationalization. The
"Governor" is appointed by the government, in a situation similar to that in the United States, where the Governors of the
Federal Reserve System are appointed by the President. However, as is pointed out in the Encyclopaedia Americana v. 13, p.
272, "In practice, the governors of the Bank of England have not hesitated to criticize and bring pressure on the government in
public."
Bank Rate
The interest rate set by the Bank of England is known as "the Bank rate", and it is a controlling factor in interest rates
throughout the world,
although rates in other countries may be higher or lower than this "Bank rate". The Bank of England manages the government
debt, and is called upon to arbitrate in political affairs. It served as the intermediary with the Iran revolutionaries in negotiating
for the return of the American hostages--a recent example.
We should not be surprised that the present Governor of the Bank of England, Sir Gordon Richardson is a prominent
international financial figure, who appears elsewhere in these pages because of his connection with the J. Henry Schroder
@Wagg in London from 1962 to 1972, when he became Governor of the Bank of England. He was also director of J. Henry
Schroder Co., New York, and Schroder Banking Corp., New York. He also serves as director of Rolls Royce and Lloyd’s Bank.
Although he resides in London, he maintains a home in New York, and is listed in the current Manhattan directory simply as "G.
Richardson, 45 Sutton Place S.", although a prior listing showed him at 4 Sutton Place. Sutton Place was developed as a
fashionable address for the international set by Bessie Marbury, whom we earlier cited for her connection with the Morgan
family and the Roosevelts.
The present directors of the Bank of England (1982) include Leopold de Rothschild of N.M. Rothschild & Sons, Sir Robert
Clark, chairman of Hill Samuel Bank, the most influential bank after Rothschilds, John Clay, of Hambros Bank, and David
Scholey, of Warburg Bank, and joint chairman of S.C. Warburg Co.
Anthony Sampson writes, in "The Changing Anatomy of Britain", Random House, New York, 1982, p. 279, "The more
cosmopolitan banks with foreign experts and directors, such as Warburgs, Montagus, Rothschilds and Kleinworts, had also
discovered a huge new source of profits in the market for Eurodollars which began in the late fifties and multiplied through the
60s . . . British bankers themselves controlled relatively small funds, but they knew how to make money out of other people’s
money."
The Eurodollar market, a new development in "created money" is monopolized by the above firms.
Eurodollar Empire
"Today, together with allies on the island of Manhattan (Britain’s most important piece of real estate), the British Empire
controls the entire $1.5 trillion Eurodollar financial market, another $300-$500 billion in the Cayman Islands, Bahamas, and
$50-$100 billion in the Hong-Kong Singapore "Asia-dollar market". . . . Consider the $1.5 trillion Eurodollar market an
"outlaw" market in the U.S. dollars over which this nation has no control. Here control and profits are overwhelmingly in the
hands of London banks, who set the terms of lending and the interest rate on this mass of American dollars in relation to the
London Interbank Borrowing
Rate (LIBOR) . . . U.S. banks like Citibank (New York City), on whose board of directors sits the powerful British financier,
Lord Aldington, collaborate openly in this market. At the same time, British banks including the known central bank for the
world’s drug trade, the Hongkong and Shanghai Bank, pour into America to devour U.S. banks. In 1978 the Hongshang
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(Ed.--Hongkong and Shanghai Bank) took over New York’s Marine Midland Bank, the state’s 11th largest commercial bank. . .
The British also control the creation of American dollars. While Federal Reserve Board Chairman Paul Volcker tightens credit
against the domestic economy, British-controlled banks in the Cayman Islands (such as the European American Bank--Ed.) a
British possession 200 miles off Florida, and in the Bermudas and a dozen other "free banking" computer terminals create
hundreds of billions of American dollars. How is this done? There are no reserve ratios or other restrictions on the creation of
dollar-denominated credits in the Empire’s "free enterprise" banking. A $1 million bona fide credit coming from the United
States can be turned into $20 to $100 million in dollar-denominated credits as it passes through the British system without
reserve ratios."*
Not only the financial power, but also the legal power, has remained seated in Britain. The Washington Post commented on June
18, 1983 that after the American Revolution, all the old laws remained in effect in the new United States: Some of these laws of
"English common law" dated back to 1278, long before America was discovered.
This enormous financial power of "the City" is revealed in many areas. Dean Acheson states, in "Present at the Creation", 1969,
W.W. Norton, New York, p. 779, "We stayed at the embassy residence, the old J.P. Morgan mansion, 14 Prince’s Gate, facing
Hyde Park." How many Americans are aware that the U.S. Embassy residence in London is the J.P. Morgan home, or that Dean
Acheson, a former Morgan employee, described himself as Secretary of State on p. 505, "My own attitude had long been, and
was known to have been, pro-British." No one commented on an American Secretary of State’s open bias in favor of England.
The Federal Reserve "created" money is not used only for financial matters; this money is also used to maintain the bankers’
control of every aspect of political, economic and social life. It is used to bankroll the enormous expenditures of political
candidates, the swollen budgets of universities, the huge outlays required to start newspapers or magazines, and a vast array of
foundations, "think-tanks" and other instruments of mind control.
Psychological Warfare
Few Americans know that almost every development in psychology in the United States in the past sixty-five years has been
directed by the Bureau of Psychological Warfare of the British Army. A short time ago,
__________________________
* Harpers Magazine, Feb. 1980
the present writer learned a new name, The Tavistock Institute of London, also known as the Tavistock Institute of Human
Relations. "Human relations" covers every aspect of human behavior, and it is the modest goal of the Tavistock Institute to
obtain and exercise control over every aspect of human behavior of American citizens.
Because of the intensive artillery barrages of World War I, many soldiers were permanently impaired by shell shock. In 1921,
the Marquees of Tavistock, 11th Duke of Bedford, gave a building to a group which planned to conduct rehabilitation programs
for shell shocked British soldiers. The group took the name of "Tavistock Institute" after its benefactor. The General Staff of the
British Army decided it was crucial that they determine the breaking point of the soldier under combat conditions. The
Tavistock Institute was taken over by Sir John Rawlings Reese, head of the British Army Psychological Warfare Bureau. A
cadre of highly trained specialists in psychological warfare was built up in total secrecy. In fifty years, the name "Tavistock
Institute’ appears only twice in the Index of the New York Times, yet this group, according to LaRouche and other authorities,
organized and trained the entire staffs of the Office of Strategic Services (OSS), the Strategic Bombing Survey, Supreme
Headquarters of the Allied Expeditionary Forces, and other key American military groups during World War II. During World
War II, the Tavistock Institute combined with the medical sciences division of the Rockefeller Foundation for esoteric
experiments with mind-altering drugs. The present drug culture of the United States is traced in its entirety to this Institute,
which supervised the Central Intelligence Agency’s training programs. The "LSD counter culture" originated when Sandoz
A.G., a Swiss pharmaceutical house owned by S.G. Warburg & Co., developed a new drug from lysergic acid, called LSD.
James Paul Warburg (son of Paul Warburg who had written the Federal Reserve Act in 1910), financed a subsidiary of the
Tavistock Institute in the United States called the Institute for Policy Studies, whose director, Marcus Raskin, was appointed to
the National Security Council. James Paul Warburg set up a CIA program to experiment with LSD on CIA agents, some of
whom later committed suicide. This program, MK-Ultra, supervised by Dr. Gottlieb, resulted in huge lawsuits against the United
States Government by the families of the victims.
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The Institute for Policy Studies set up a campus subsidiary, Students for Democratic Society (SDS), devoted to drugs and
revolution. Rather than finance SDS himself, Warburg used CIA funds, some twenty million dollars, to promote the campus
riots of the 1960s.
The English Tavistock Institute has not restricted its activities to left-wing groups, but has also directed the programs of such
supposedly "conservative" American think tanks as the Herbert Hoover Institute at Stanford University, Heritage Foundation,
Wharton, Hudson, Massachusetts Institute of Technology, and Rand. The "sensitivity training" and "sexual encounter" programs
of the most radical California groups such as Esalen Institute and its many imitators were all developed and implemented by
Tavistock Institute psychologists.
One of the rare items concerning the Tavistock Institute appears in Business Week, Oct. 26, 1963, with a photograph of its
building in the most expensive medical offices area of London. The story mentions "the Freudian bias" of the Institute, and
comments that it is amply financed by British blue-chip corporations, including Unilever, British Petroleum, and Baldwin Steel.
According to Business Week, the psychological testing programs and group relations training programs of the Institute were
implemented in the United States by the University of Michigan and the University of California, which are hotbeds of
radicalism and the drug network.
It was the Marquees of Tavistock, 12th Duke of Bedford, whom Rudolf Hess flew to England to contact about ending World
War II. Tavistock was said to be worth $40 million in 1942. In 1945, his wife committed suicide by taking an overdose of pills.
BIOGRAPHIES
NELSON ALDRICH (1841-1915)
Senator from Rhode Island; head of National Monetary Commission; his daughter Abby Aldrich married John D. Rockefeller,
Jr.; he became the grandfather of his namesake. Nelson Aldrich Rockefeller, as well as the present David Rockefeller and
Laurence Rockefeller.
WILLIAM JENNINGS BRYAN (1860-1925)
Woodrow Wilson’s Secretary of State, three times losing presidential candidate of the Democratic Party, in 1896, 1900, and
1908, and head of the Democratic Party.
ALFRED OWEN CROZIER (1863-1939)
A prominent attorney in Grand Rapids, Cincinnati, and New York, Crozier wrote eight books on legal and monetary problems,
focussing on his opposition to the supplanting of Constitutional money by the corporation currency printed by private firms for
their profit.
CLARENCE DILLON (1882-1979)
Born in San Antonio, Texas, son of Samuel Dillon and Bertha Lapowitz. Harvard, 1905. Married Anne Douglass of Milwaukee.
His son, C. Douglas Dillon (later Secretary of the Treasury, 1961-65) was born in Geneva, Switzerland in 1909 while they were
abroad. Dillon met William A. Read, founder of the Wall Street bond broker William A. Read and Company, through
introduction by Harvard classmate William A. Phillips in 1912 and Dillon joined Read’s Chicago office in that year. He moved
to New York in 1914. Read died in 1916, and Dillon bought a majority interest in the firm. During World War 1, Bernard
Baruch, chairman of the War Industries Board, (known as the Czar of American industry) asked Dillon to be assistant chairman
of the War Industries Board. In 1920, William A. Read & Company name was changed to Dillon, Read & Company. Dillon was
director of American Foreign Securities Corporation, which he had set up in 1915 to finance the French Government’s
purchases of munitions in the United States. His righthand man at Dillon Read, James Forrestal, became Secretary of the Navy,
later Secretary of Defense, and died under mysterious circumstances at a Federal hospital. In 1957, Fortune Magazine listed
Dillon as one of the richest men in the United States, with a fortune then estimated to be from $150 to $200 million.
ALAN GREENSPAN (1926- )
Appointed by President Reagan to succeed Paul Volcker as Chairman of the Board of Governors of the Federal Reserve System
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in 1987. Greenspan had succeeded Herbert Stein as chairman of the President’s Council of Economic Advisors in 1974. He was
the protégé of former chairman of the Board of Governors, Arthur Burns of Austria (Bernstein). Burns was a monetarist
representing the Rothschild’s Viennese School of Economics, which manifested its influence in England through the Royal
Colonial Society, a front for Rothschilds and other English bankers who stashed their profits from the world drug trade in the
Hong Kong Shanghai Bank. The staff economist for the Royal Colonial Society was Alfred Marshall, inventor of the monetarist
theory, who, as head of the Oxford Group, became the patron of Wesley Clair Mitchell, who founded the National Bureau of
Economic Research for the Rockefellers in the United States. Mitchell, in turn, became the patron of Arthur Burns and Milton
Friedman, whose theories are now the power techniques of Greenspan at the Federal Reserve Board. Greenspan is also the
protégé of Ayn Rand, a weirdo who interposed her sexual affairs with guttural commands to be selfish. Rand was also the patron
of CIA propagandist William Buckeley and the National Review. Greenspan was director of major Wall Street firms such as J.P.
Morgan Co., Morgan Guaranty Trust (the American bank for the Soviets after the Bolshevik Revolution of 1917), Brookings
Institution, Bowery Savings Bank, the Dreyfus Fund, General Foods, and Time, Inc. Greenspan’s most impressive achievement
was as chairman of the National Commission on Social Security from 1981-1983. He juggled figures to convince the public that
Social Security was bankrupt, when in fact it had an enormous surplus. These figures were then used to fasten onto American
workers a huge increase in Social Security withholding tax, which invoked David Ricardo’s economic dictum of the iron law of
wages, that workers could only be paid a subsistence wage, and any funds beyond that must be extorted from them forcibly by
tax increases. As a partner of J.P. Morgan Co. since 1977, Greenspan represented the unbroken line of control of the Federal
Reserve System by the firms represented at the secret meeting on Jekyll Island in 1910, where Henry P. Davison, righthand man
of J.P. Morgan, was a key figure in the drafting of the Federal Reserve Act. Within days of taking over as chairman of the
Federal Reserve Board, Greenspan immediately raised the interest rate on Sept. 4, 1987, the first such increase in three years of
general prosperity, and precipitated the stock market crash of Oct., 1987, Black Monday, when the Dow Jones average plunged
508 points. Under Greenspan’s direction, the Federal Reserve Board has steadily nudged the United States deeper and deeper
into recession, without a word of criticism from the complaisant members of Congress.
COLONEL EDWARD MANDELL HOUSE (1858-1938)
Son of a Rothschild agent in Texas. Succeeded in electing five consecutive governors of Texas; became Woodrow Wilson’s
advisor in 1912. Cooperated with Paul Warburg to get the Federal Reserve Act passed by Congress in 1913.
ROBERT MARION LAFOLLETTE (1855-1925)
Served in Senate from Wisconsin 1905-25. Led agrarian reformers in opposing Eastern bankers and their plans for the Federal
Reserve Act. Ran for President in 1924 on Progressive-Socialist ticket.
CHARLES AUGUSTUS LINDBERGH, SR. (1860-1924)
Congressman from Minnesota (1907-1917) who led the fight against enactment of the Federal Reserve Act in 1913. He served
until 1917 when he resigned to run for governor of Minnesota. He ran a good campaign despite adverse newspaper attacks led
by The New York Times. His campaign was adversely affected when Federal agents burned his books, including Why Is Your
Country At War? and the papers and contents of his home office in Little Falls, Minnesota.
LOUIS T. McFADDEN (1876-1936)
Congressman and Chairman of the House Banking and Currency Committee, 1927-33; courageously opposed the manipulators
of the Federal Reserve System in the 1920’s and the 1930’s. Introduced bills to impeach Federal Reserve Board of Governors
and allied officials. After three attempts on his life, he died mysteriously.
JOHN PIERPONT MORGAN (1837-1913)
Considered the dominant American financier at the turn of the century. Who’s Who in 1912 stated he "controls over 50,000
miles of railroads in the United States." Organized United States Steel Corporation. Became representative of House of
Rothschild through his father, Junius S. Morgan, who had become London partner of George Peabody & Company, later Junius
S. Morgan Company, a Rothschild agent. John Pierpont Morgan, Jr. succeeded his father as head of the Morgan empire.
DAVID MULLINS (1946- )
Appointed Governor of the Federal Reserve Board May 21, 1990, David Mullins’ term runs to Jan. 31, 1996. He was recently
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nominated to serve as Vice Chairman of the Federal Reserve Board, and served as Assistant Secretary of the Treasury for
Domestic Finance 1988-90, receiving the department’s highest award, the Alexander Hamilton Award, for his service in such
programs as synthetic fuels, federal finance, Farm Credit Assistance Board, and author of the President’s Plan for rescuing the
savings and loan institutions. He is a distant cousin of the author, descended from John Mullins, the first recorded settler in the
western area of Virginia, hero of the battle of King’s Mountain, and recipient of a 200 acre grant of land for his service in the
American Revolution.
WRIGHT PATMAN (1893-1976)
Congressman and Chairman of the House Banking and Currency Committee 1963-74. Led the fight in Congress to stop the
manipulators of the Federal Reserve System from 1937 to his death in 1976.
CONGRESSMAN ARSENE PUJO
Served in Congress 1903-1913. Democrat from Louisiana. Chairman of House Banking and Currency Committee. Chairman of
"Pujo Hearings" Subcommittee, 1912.
SIR GORDON RICHARDSON (1915- )
Head of the Bank of England since 1973. Chairman J. Henry Schroder Wagg, London, 1962-72; director of J. Henry Schroder
Banking Corporation, New York; Schroder Banking Corporation, New York; Lloyd’s Bank, London; Rolls Royce.
JACOB SCHIFF (1847-1920)
Born in Rothschild house in Frankfurt, Germany. Emigrated to United States, married Therese Loeb, daughter of Solomon
Loeb, founder of Kuhn, Loeb and Co. Schiff became senior partner of Kuhn, Loeb and Co., and as representative of Rothschild
interests gained control of most of railway mileage in United States.
BARON KURT VON SCHRODER (1889- )
Adolph Hitler’s personal banker, advanced funds for Hitler’s accession to power in Germany in 1933; German representative of
the London and New York branches of J. Henry Schroder Banking Corporation; SS Senior Group Leader; director of all
German subsidiaries of I.T.T; Himmler’s Circle of Friends; advisor to board of directors, Deutsche Reichsbank (German central
bank).
ANTHONY MORTON SOLOMON (1919- )
Educated at Harvard, economist Office of Price Administration, 1941-42; financial mission to Iran, 1942-46; Agency for
international Development South America, 1965-69; president international Investment Corporation for Yugoslavia 1969-72;
advisor to Chairman, Ways and Means Committee, House of Representatives, 1972-73; Undersecretary Monetary Affairs, U.S.
Treasury, 1977-80; president Federal Reserve Bank of New York, 1980-
SAMUEL UNTERMYER (1858-1940)
A partner of the law firm of Guggenheimer and Untermyer of New York, who conducted the "Pujo Hearings" of the House
Banking and Currency Committee in 1912. Counsel for Rogers and Rockefeller in many large suits against F. Augustus Heinze,
Thomas W Lawson and others. Earned a single fee of $775,000 for handling merger of Utah Copper Company. Reported in The
New York Times May 26, 1924 as urging immediate recognition of Soviet Russia at Carnegie Hall meeting. Untermyer’s
prestige and power is illustrated by the fact that this front page obituary in The New York Times covered six columns. His
listing in Who’s Who was the longest for thirteen years.
FRANK VANDERLIP (1864-1937)
Assistant Secretary of Treasury 1897-1901; won prestige for financing Spanish American War by floating $200,000,000 in
bonds during his incumbency for what is known as "National City Bank’s War" President of National City Bank 1909-19. One
of the original Jekyll Island group who wrote Federal Reserve Act in November, 1910. No mention of this important fact is
made in extensive obituary in The New York Times, June 30, 1937.
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GEORGE SYLVESTER VIERECK (1884-1962)
Author of the definitive study The Strangest Friendship in History, Woodrow Wilson and Col. House, Liveright, 1932. A
leading poet of the early 1900’s, reviewed on the front page of The New York Times Book Review, and known as the leading
German-American citizen of the United States.
PAUL VOLCKER (1927- )
Chairman of the Federal Reserve Board of Governors since 1979, appointed by President Carter, reappointed by President
Reagan for another four year term beginning August 6, 1983. Educated at Princeton, Harvard and London School of Economics;
employed by Federal Reserve Bank of New York, 1952-57; Chase Manhattan Bank, 1957-61; Treasury Department, 1961-74;
president Federal Reserve Bank of New York, 1975-79.
PAUL WARBURG (1868-1932)
Conceded to be the actual author of our central bank plan, the Federal Reserve System, by knowledgeable authorities. Emigrated
to the United States from Germany 1904; partner, Kuhn Loeb and Company bankers, New York; naturalized 1911. Member of
the original Federal Reserve Board of Governors, 1914-1918; president Federal Advisory Council, 1918-1928. Brother of Max
Warburg, who was head of German Secret Service during World War I and who represented Germany at the Peace Conference,
1918-1919, while Paul was chairman of the Federal Reserve System.
SIR WILLIAM WISEMAN (1885-1962)
Partner of Kuhn, Loeb and Company; head of British Secret Service during World War I. Worked closely with Col. House
dominating the United States and England.
BIBLIOGRAPHY
Newspapers:
New York Times 1858-1983
Washington Post 1933-1983
Periodicals:
Barron’s Weekly 1921-1983
Business Week 1929-1983
Forbes Magazine 1917-1983
Fortune 1930-1983
Harper’s 1850-1983
National Review 1955-1983
Newsweek 1933-1983
The Nation 1865-1983
The New Republic 1914-1983
Time 1923-1983
Books:
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Current Biography 1940-1983 H.W. Wilson Co., N.Y.
Dictionary of National Biography, Scribners, N.Y. 1934-1965
Directory of Directors, London 1896-1983
Directory of Directors In The City of New York 1898-1918
The Concise Dictionary of National Biography, 1903-1979, Oxford University Press
Congressional Record 1910-1983
International Index to Periodicals 1920-1965, H.W. Wilson Co., N.Y.
Poole’s Index to Periodical Literature 1802-1906, Wm. T Poole, Chicago
Readers Guide to Periodicals 1900-1983
Rand McNally’s Bankers Guide 1904-1928
Moody’s Banking and Finance 1928-1968
Who’s Who in America 1890-1983, A.N. Marquis Co.
Who’s Who, Great Britain 1921-1983
Who Was Who In America 1607-1906, A.N. Marquis Co.
Who’s Who in the World 1972-1983, A.N. Marquis Co.
Who’s Who in Finance and Industry 1936-1969, A.N. Marquis Co.
Standard and Poor’s Register of Directors 1928-1983
Senate Committee Hearings on Federal Reserve Act, 1913
House Committee Hearings on Federal Reserve Act, 1913
House Committee Hearings on the Money Trust (Pujo Committee) 1913
House Investigation of Federal Reserve System, 1928
Senate Investigation of Fitness of Eugene Meyer to be a Governor of the Federal
Reserve Board, 1930
Senate Hearings on Thomas B. McCabe to be a Governor of the Federal Reserve
System, 1948
House Committee Hearings on Extension of Public Debt, 1945
Federal Reserve Directors: A Study of Corporate and Banking Influence.
Staff Report, Committee on Banking, Currency and Housing, House of
Representatives, 94th Congress, 2d Session, August, 1976.
The Federal Reserve System, Purposes and Functions, Board of Governors, 1963
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A History of Monetary Crimes, Alexander Del Mar, the Del Mar Society, 1899
Fiat Money Inflation in France, Andrew Dickson White, Foundation for
Economic Education, N.Y. 1959
The War on Gold, Antony C. Sutton, 76 Press, California, 1977
Wall Street and the Rise of Hitler, Antony C. Sutton, 76 Press, California, 1976
Collected Speeches of Louis T McFadden, Congressional Record
The Truth About Rockefeller, E.M. Josephson, Chedney Press, N.Y. 1964
The Strange Death of Franklin D. Roosevelt, E.M. Josephson, Chedney Press,
N.Y. 1948
Behind the Throne, Paul Emden, Hoddard Stoughton, London, 1934
The Money Power of Europe, Paul Emden, Hoddard Stoughton, London
The Robber Barons, Mathew Josephson, Harcourt Brace, N.Y. 1934
The Rothschilds, Frederic Morton, Curtis Publishing Co., 1961
The Magnificent Rothschilds, Cecil Roth, Robert Hale Co., 1939
Pawns In The Game, William Guy Carr, (privately printed), 1956
Tearing Away the Veils, Francois Coty, Paris, 1940
Writers on English Monetary History, 1626-1730, London, 1896
The Federal Reserve System After Fifty Years, Committee on Banking and
Currency, Jan., Feb. 1964
The Bankers’ Conspiracy, Arthur Kitson, 1933
Laws Of The United States Relating to Currency, Finance and Banking From
1789 to 1891, Charles F. Dunbar, Ginn & Co., Boston, 1893
Monetary Policy of Plenty Instead of Scarcity, Committee on Banking and
Currency, 1937-1938
The Strangest Friendship In History, Woodrow Wilson and Col. House, George
Sylvester Viereck, Liveright, N.Y. 1932
Federal Reserve Policy Making, G.L. Bach, Knapf, N.Y. 1950
Rulers of America, A Study of Finance Capital, Anna Rockester, International
Publishers, N.Y. 1936
Banking in the United States Before the Civil War, National Monetary
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Commission, 1911
National Banking System, National Monetary Commission, 1911
The Federal Reserve System, Paul Warburg, Macmillan, N.Y. 1930
Roosevelt, Wilson and the Federal Reserve Law, Col. Elisha Garrison,
Christopher Publishing House, Boston, 1931
Men Who Run America, Arthur D. Howden Smith, Bobbs Merrill, N.Y., 1935
Financial Giants of America, George E Redmond, Stratford, Boston, 1922
The Great Soviet Encyclopaedia, Macmillan, London, 1973
Encyclopaedia Britannica, 1979
Encyclopaedia Americana, 1982
Dope, Inc., Goldman, Steinberg et at, New Benjamin Franklin House Publishing
Company, N.Y. 1978
Banking and Currency and the Money Trust, Charles A. Lindbergh, Sr. 1913
The Strange Career of Mr. Hoover Under Two Flags, John Hamill, William Faro,
N.Y. 1931
The Federal Reserve System, H. Parker Willis, Ronald Co., 1923
A.B.C. of the Federal Reserve System, E.W. Kemmerer, Princeton Univ., 1919
Adventures in Constructive Finance, Carter Glass, Doubleday, N.Y. 1927
Banking Reform in the United States, Paul Warburg, Columbia Univ., 1914
U.S. Money vs. Corporation Currency, Alfred Crozier, Cleveland, 1912
Philip Dru, Administrator, E.M. House, B.W. Huebsch, N.Y. 1912
The Intimate Papers of Col. House, edited by Charles Seymour, 4 v. 1926-1928,
Houghton Mifflin Co.
The Great Conspiracy of the House of Morgan, H.W. Loucks, 1916
Capital City, McRae and Cairncross, Eyre Methuen, London, 1963
Aggression, Otto Lehmann-Russbeldt, Hutchinson, London, 1934
The Empire of High Finance, Victor Perlo, International Pub., 1957
Memoirs of Max Warburg, Berlin, 1936
Letters and Friendships of Sir Cecil Spring-Rice
Tragedy and Hope, Carroll Quigley, Macmillan, N.Y.
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The Politics of Money, Brian Johnson, McGraw Hill, N.Y. 1970
A Primer on Money, House Banking and Currency Committee, 1964
Pierpont Morgan and Friends, The Anatomy of A Myth, George Wheeler,
Prentice Hall, N.J., 1973
Pierpont Morgan, Herbert Satterleee, Macmillan, N.Y., 1940
Morgan the Magnificent, John K. Winkler, Vanguard, N.Y., 1930
Wilson, Arthur Link (5 vol.) Princeton University Press, Princeton, N.J.
Historical Beginning... The Federal Reserve, Roger T Johnson, Federal Reserve
Bank of Boston, 1977 (7 printings, 1977-1982, totaling 92,000 copies.) [It
is noteworthy that this 64 page booklet makes no mention of Jekyll Island,
Paul Warburg’s authorship, or source of promotion funds which resulted
in enactment of the Federal Reserve Act on December 23, 1913.]
The Federal Reserve and Our Manipulated Dollar, Martin A. Larson, Devin Adair
Co., Old Greenwich, Conn., 1975
Chain Banking, Stockholder and Loan Links of 200 Largest Member Banks,
House Banking and Currency Committee, Jan. 3, 1963
International Banking, Staff Report, Committee on Banking Currency and
Housing, May 1976
Audit of the Federal Reserve System, Hearings Before the House Banking and
Currency Committee, 1975.
Questions and Answers
While lecturing in many countries, and appearing on radio and television programs as a guest, the author is frequently asked
questions about the Federal Reserve System. The most frequently asked questions and the answers are as follows:
Q: What is the Federal Reserve System?
A: The Federal Reserve System is not Federal; it has no reserves; and it is not a system, but rather, a criminal syndicate. It is the
product of criminal syndicalist activity of an international consortium of dynastic families comprising what the author terms
"The World Order" (see "THE WORLD ORDER" and "THE CURSE OF CANAAN", both by Eustace Mullins). The Federal
Reserve system is a central bank operating in the United States. Although the student will find no such definition of a central
bank in the textbooks of any university, the author has defined a central bank as follows: It is the dominant financial power of
the country which harbors it. It is entirely private-owned, although it seeks to give the appearance of a governmental institution.
It has the right to print and issue money, the traditional prerogative of monarchs. It is set up to provide financing for wars. It
functions as a money monopoly having total power over all the money and credit of the people.
Q: When Congress passed the Federal Reserve Act on December 23, 1913, did the Congressmen know that they were creating a
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central bank?
A: The members of the 63rd Congress had no knowledge of a central bank or of its monopolistic operations. Many of those who
voted for the bill were duped; others were bribed; others were intimidated. The preface to the Federal Reserve Act reads "An
Act to provide for the establishment of Federal reserve banks, to furnish an elastic currency, to afford means of rediscounting
commercial papers, to establish a more effective supervision of banking in the United States, and for other purposes." The
unspecified "other purposes" were to give international conspirators a monopoly of all the money and credit of the people of the
United States; to finance World War I through this new central bank, to place American workers at the mercy of the Federal
Reserve system’s collection agency, the Internal Revenue Service, and to allow the monopolists to seize the assets of their
competitors and put them out of business.
Q: Is the Federal Reserve system a government agency?
A: Even the present chairman of the House Banking Committee claims that the Federal Reserve is a government agency, and
that it is not privately owned. The fact is that the government has never owned a single share of Federal Reserve Bank stock.
This charade stems from the fact that the President of the United States appoints the Governors of the Federal Reserve Board,
who are then confirmed by the Senate. The secret author of the Act, banker Paul Warburg, a representative of the Rothschild
bank, coined the name "Federal" from thin air for the Act, which he wrote to achieve two of his pet aspirations, an "elastic
currency", read (rubber check), and to facilitate trading in acceptances, international trade credits. Warburg was founder and
president of the International Acceptance Corporation, and made billions in profits by trading in this commercial paper. Sec. 7
of the Federal Reserve Act provides "Federal reserve banks, including the capital and surplus therein, and income derived
therefrom, shall be exempt from Federal, state and local taxation, except taxes on real estate." Government buildings do not pay
real estate tax.
Q: Are our dollar bills, which carry the label "Federal Reserve notes" government money?
A: Federal Reserve notes are actually promissory notes, promises to pay, rather than what we traditionally consider money.
They are interest bearing notes issued against interest bearing government bonds, paper issued with nothing but paper backing,
which is known as fiat money, because it has only the fiat of the issuer to guarantee these notes. The Federal Reserve Act
authorizes the issuance of these notes "for the purposes of making advances to Federal reserve banks... The said notes shall be
obligations of the United States. They shall be redeemed in gold on demand at the Treasury Department of the United States in
the District of Columbia." Tourists visiting the Bureau of Printing and Engraving on the Mall in Washington, D.C. view the
printing of Federal Reserve notes at this governmental agency on contract from the Federal Reserve System for the nominal sum
of .00260 each in units of 1,000, at the same price regardless of the denomination. These notes, printed for a private bank, then
become liabilities and obligations of the United States government and are added to our present $4 trillion debt. The government
had no debt when the Federal Reserve Act was passed in 1913.
Q: Who owns the stock of the Federal Reserve Banks?
A: The dynastic families of the ruling World Order, internationalists who are loyal to no race, religion, or nation. They are
families such as the Rothschilds, the Warburgs, the Schiffs, the Rockefellers, the Harrimans, the Morgans and others known as
the elite, or "the big rich".
Q: Can I buy this stock?
A: No. The Federal Reserve Act stipulates that the stock of the Federal Reserve Banks cannot be bought or sold on any stock
exchange. It is passed on by inheritance as the fortune of the "big rich". Almost half of the owners of Federal Reserve Bank
stock are not Americans.
Q: Is the Internal Revenue Service a governmental agency?
A: Although listed as part of the Treasury Department, the IRS is actually a private collection agency for the Federal Reserve
System. It originated as the Black Hand in mediaeval Italy, collectors of debt by force and extortion for the ruling Italian mob
families. All personal income taxes collected by the IRS are required by law to be deposited in the nearest Federal Reserve
Bank, under Sec. 15 of the Federal Reserve Act, "The moneys held in the general fund of the Treasury may be ....deposited in
Federal reserve banks, which banks, when required by the Secretary of the Treasury, shall act as fiscal agents of the United
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States."
Q: Does the Federal Reserve Board control the daily price and quantity of money?
A: The Federal Reserve Board of Governors, meeting in private as the Federal Open Market Committee with presidents of the
Federal Reserve Banks, controls all economic activity throughout the United States by issuing orders to buy government bonds
on the open market, creating money out of nothing and causing inflationary pressure, or, conversely, by selling government
bonds on the open market and extinguishing debt, creating deflationary pressure and causing the stock market to drop.
Q: Can Congress abolish the Federal Reserve System?
A: The last provision of the Federal Reserve Act of 1913, Sec. 30, states, "The right to amend, alter or repeal this Act is
expressly reserved." This language means that Congress can at any time move to abolish the Federal Reserve System, or buy
back the stock and make it part of the Treasury Department, or to altar the System as it sees fit. It has never done so.
Q: Are there many critics of the Federal Reserve beside yourself?
A: When I began my researches in 1948, the Fed was only thirty-four years old. It was never mentioned in the press. Today the
Fed is discussed openly in the news section and the financial pages. There are bills in congress to have the Fed audited by the
Government Accounting Office. Because of my expose, it is no longer a sacred cow, although the Big Three candidates for
President in 1992, Bush, Clinton and Perot, joined in a unanimous chorus during the debates that they were pledged not to touch
the Fed.
Q: Have you suffered any personal consequences because of your expose of the Fed?
A: I was fired from the staff of the Library of Congress after I published this expose in 1952, the only person ever discharged
from the staff for political reasons. When I sued, the court refused to hear the case. The entire German edition of this book was
burned in 1955, the only book burned in Europe since the Second World War. I have endured continuous harassment by
government agencies, as detailed in my books "A WRIT FOR MARTYRS" and "MY LIFE IN CHRIST". My family also
suffered harassment. When I spoke recently in Wembley Arena in London, the press denounced me as "a sinister lunatic".
Q: Does the press always support the Fed?
A: There have been some encouraging defections in recent months. A front page story in the Wall Street Journal, Feb. 8, 1993,
stated, "The current Fed structure is difficult to justify in a democracy. It’s an oddly undemocratic institution. Its organization is
so dated that there is only one Reserve bank west of the Rockies, and two in Missouri...Having a central bank with a monopoly
over the issuance of the currency in a democratic society is a very difficult balancing act."
Congressman McFadden
on the Federal Reserve Corporation
Remarks in Congress, 1934
AN ASTOUNDING EXPOSURE
http://home.hiwaay.net/%7Ebecraft/mcfadden.html
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