The History Behind the Federal Reserve (Part 2)

Seven Men, Nine Days, One New Monetary Cartel, Pt. 2

Compliments of:  Phoenix Capital Research

Thus, on a wintery day in November 1910, seven men retreated to JP Morgan’s private Jekyll Island resort to plan a system of banking that would address all of these problems, while simultaneously expanding their power and influence over the US banking system.

G. Edward Griffin, in The Creature From Jekyll Island, puts their primary goals as the following:

1)    To stop the growing influence of smaller banks and increase the Anglo-American banking giants’ grip on the US financial system

2)    To shift US banking to a more “loan heavy” structure thereby expanding the monetary base more dramatically (making money more “elastic”)

3)    To pool all national banks reserves and set nation-wide standards for loans to reserves ratios, thereby minimizing the risks of bank runs and failure

4)    To establish a means of shifting the losses from bank failures away from the banks and onto the public

And finally…

5)    To develop a PR campaign that would result in the US populace accepting the implementation of a full-scale private banking cartel

I do not have time to detail the precise proceedings of the meetings these men held over their nine day stay at Jekyll Island, nor is there room to explain precisely how they infiltrated the US political system and managed to introduce a banking plan that was written by Frank Vanderlip and Benjamin Strong (who represented the Rockefeller and Morgan families, respectively) as if it were a bill produced by members of Congress.

However, a brief overview is as follows:

Initially Senator Aldrich proposed something quite similar to the Bank of England, in which there would be one single large bank. However, the Rockefeller interests (who had ample experience with the US populace’s reaction to monopolies) thought this would be too much for Americans to stomach. Instead, they proposed the creation of 12 regional banks largely to maintain the illusion that the Fed would be a union, not a single central bank.

This is where the expertise of Paul Warburg, who had the most experience with European-style central banking cartels, came in. Warburg proposed creating a banking structure that would be more conservative at first so that the general public would be more willing to accept it, then stripping away the conservative props once the system was in place.

For instance, Warburg proposed the Federal Reserve Board of Governors, a group of semi-elected officials who would meet and decide Fed policy on interest rates and the like. This created the illusion that the Fed would resemble a normal banking corporation with a board of directors. However, in point of fact the Fed Board was a means to keep all the key decision making centralized at one bank in Washington DC (close to New York where the Bank Oligarchs were headquartered).

Warburg also came up with the name “Federal Reserve” which evoked the sense that the organization was aligned with the Government and was secure. His view was that the words “central” and “bank” must be avoided at all costs.

However, the most daring and provocative of all Warburg’s proposals was that the Fed would take over the issuance of ALL money in the US. For the first time in US history, money would be produced by privately held banks, NOT the US Government.

From then on, US Federal Reserve notes would be legal tender for settling all debts public or private. Thus, if someone was owed money and refused to accept Federal Reserve Notes (Dollars) as payment, he or she could go to jail. The Dollar even says this in the top left corner of its face.

Obviously, getting the public to swallow this proposal wasn’t going to be easy. The bankers put together a special committee to investigate the plan. However, the Pujo Committee was largely a farce in which various members of Congress (all bought out by the banks) questioned the bankers on the more innocuous portions of the proposal.

As part of their PR campaign, the bankers also donated some $5 million to Harvard, Princeton, and the University of Chicago (the last of which was founded using contributions from John D Rockefeller) all of which began turning out studies and academic papers promoting the virtues of the proposed system.

However, the bill remained a tough pill to swallow especially given Senator Aldrich’s close affiliation with Wall Street (remember, he was an associate of JP Morgan). The “Aldrich Bill” as it was known never even made it to vote in the Senate.

Splitting the Vote… and Backing All Three Candidates

Bruised, but not defeated, the bankers knew that in order to get their plan put into action they needed support from the very TOP of the US Government: the President of the United States. Consequently, they engaged in one of the most sophisticated lobbying efforts in history, backing all THREE candidates (Taft, Wilson, and Roosevelt) in the 1912 election.

In fact, it was JP Morgan’s associates who pushed Roosevelt to run in the first place (giving him the monetary backing to do so) in order to pull voters from Taft who was publicly recognized as pro-Wall Street and so would not have been as effective at getting the bankers plan implemented without public outcry.

Thus the 1912 election consisted of three pro-Wall Street candidates, though only one of them (Taft) was publicly recognized as such. Roosevelt and Wilson were both backed by private banking money, though their backers urged them to sound out an “anti Wall Street” bank campaign (which they did with great success).

The results worked as hoped. Roosevelt served as the “anti-bank” foil to Taft’s pro-Wall Street/ Big Business status, splitting the vote and allowing Wilson to win with just 42% of votes (the other 58% were split between Taft and Roosevelt). The bankers now had a supporter in the White House, most importantly, one who was thought by the public to be against the banks and their “Aldrich Plan” plan as it had come to be known.

Officially Backed and Bailed Out By Uncle Sam

Ready to make a second attempt at implementing their plan, the bankers enlisted the Democratic Chairman of the House Banking and Currency Committee, Carter Glass, to draft a new banking bill. Glass, who by his own admission knew nothing about banking, was merely a front, a figurehead who denounced the Aldrich Plan, pointed out its biggest flaws to the public, and the proposed an identical plan with the very same flaws included.

The Glass-Owen bill (it was co-sponsored by Senator Robert Owen) moved along towards becoming law much more quickly than the Aldrich Plan, largely due to the fact that the Wall Street banks engaged in a massive PR campaign in whch they publicly decried it as wrong and evil and against their interests (despite the fact they themselves wrote it).

The final coup was accomplished when William Jennings Bryan, the most powerful Democrat in Congress, met with Glass and said he would pass the bill provided that the money issued by the Federal Reserve was backed by the US Government and that the Governor of the Federal Reserve would be appointed by the President and approved by the Senate: two clauses that the Wall Street bankers wanted but had intentionally left out of the draft so that they could be used as “bargaining chips” to make it appear as though compromises were made.

G. Edward Griffin, repeats a quote Fed mastermind Paul Warburg regarding their success:

While technically and legally the Federal Reserve note is an obligation of the United States Government, in reality it is an obligation, the sole responsibility for which rests on the reserve banks… The Government could only be called to take them up after the reserve banks failed.

Here lies the ultimate triumph of the cartel, not only would the Federal Reserve issue money (collecting interest on the loans since the money was technically being leant to the US), but should the system ever go bust, the US Government would be required to step in and bailout the Federal Reserve’s losses.

It had taken three years and countless strategies and deceptions, but on December 23 1913 the Federal Reserve Act was passed into law. From then on, the US monetary system would be controlled by private interests in a government-backed cartel.

The above account is a very condensed version of the history of the Federal Reserve’s creation. The actual story is even more rife with twists and power struggles. For those of you who are interested in knowing more about it, I highly recommend reading The Creature From Jekyll Island by G. Edward Griffin. It’s a stunning book and full of revelations that range from shocking to outright infuriating.