The history of the FRS: "conceived in vice, born in sin"

2024 Author: Seth Attwood | [email protected]. Last modified: 2023-12-16 15:55

Excerpts from the first part of Eustace Mullins' famous book Secrets of the Federal Reserve.

Senator Nelson Aldrich's official biography reads:

Davison had an excellent reputation for reconciling warring parties, a role he played for J. P. Morgan in settling the 1907 Money Scare. Morgan's other partner, T. W. Lamont, says: "Henry P. Davison acted as arbiter of the expedition to Jekyll Island."

From these materials, the following story can be pieced together. Aldrich's private car, which departed from Hoboken Station with the curtains drawn, took the financiers to Jekyll Island in Georgia. A few years earlier, a very limited group of millionaires led by J. P. Morgan had acquired the island as a winter dacha. They called themselves the "Jekyll Island Hunting Club" and at first the island was only used for hunting, until the millionaires realized that its beautiful climate offered them a warm refuge from the harsh New York winters and started building luxurious mansions, which they called "cottages. ", For the winter holidays of their families. The clubhouse itself, being quite secluded, was sometimes used for bachelor parties and other events unrelated to hunting. In such cases, club members who were not invited to these particular picnics were asked not to show up for a certain number of days. Before Nelson Aldrich's group left New York, club members were notified that it would be busy for the next two weeks.

The Jekyll Island Club was chosen as the site of the plan to control the money and trust of the people of the United States, not only because of its remoteness, but also because it was the private fiefdom of the people who developed the plan. Later, on May 3, 1931, The New York Times noted commenting on the death By George F. Baker, one of Morgan's closest associates: “The Jekyll Island Club has lost one of its distinguished members. One-sixth of the world's capital is concentrated in the hands of the Jekyll Island Club members. Membership is inherited only.

Aldrich's group was not interested in hunting. Jekyll Island was chosen as the site of the central bank's development because it provided complete secrecy and because there was not a single journalist in the area within a fifty-mile radius. So strong was the need for secrecy that before arriving on the island, the members of the group agreed not to use surnames during their two-week stay there. Later, the group began to call itself "The Name Club" because it was forbidden to mention the names of Warburg, Strong, Vanderlip and others. The regular staff of the club were sent on a two-week vacation, and for the sake of such an occasion, new servants were brought from the mainland who did not know the names of those present. Even if they were interrogated after Aldrich's group departed back to New York, they could not name names. This method proved to be so reliable that the club members - those who were actually present on Jekyll Island - later held several more informal meetings in New York.

Why was all this mystery necessary?Why was this trip a thousand miles in a closed carriage to a remote hunting club necessary? Presumably, it was carried out with the aim of developing a government program, preparing a banking reform that would be beneficial to the people of the United States, by order of the National Monetary Commission. Participants were not alien to public charitable deeds. Their names were often featured on copper plaques or on the facades of buildings for which they donated. On Jekyll Island, they did not follow this procedure. No copper plaque was ever erected to commemorate the dedication of those who met at their private hunting club in 1910 to improve the lives of every citizen of the United States.

In fact, no good deeds were performed on Jekyll Island. Aldrich's group went there in secret to privately create banking and currency legislation, which the National Currency Commission was told to openly draft. At stake was the future control of the United States' money and credit. If any real monetary reform were prepared and presented in Congress, it would end the rule of the elite creators of the single world currency. Jekyll Island guaranteed that a central bank would be created in the United States that would give these bankers everything they always wanted.

As the most technically savvy of those present, Paul Warburg was tasked with preparing most of the draft plan. His work was then to be discussed and reviewed among the rest of the group. Senator Nelson Audrich had to make sure that the completed plan was in a form he could push through Congress, and the rest of the bankers had to add the necessary details to ensure they got what they wanted to the completed project in one meeting. … After returning to New York, they might not have the opportunity to meet again. They could not hope to provide similar secrecy for their work again.

The Jekyll Island group spent nine days at the club, working hard on their task. Despite the common interests of those present, the work did not always go smoothly. Senator Aldrich, being a domineering man, considered himself the elected leader of the group and could not resist commanding everyone else. Aldrich also felt a little uncomfortable because he was the only one of the group who was not a professional banker. He had significant banking interests throughout his career, but only as a person who earned income from owning bank shares. He knew little about the technical aspects of financial transactions. His opponent, Paul Warburg, believed that every question that arose in the group required not only a simple answer, but a whole lecture. He rarely missed an opportunity to give colleagues a lengthy explanation to impress them with the depth of his knowledge of banking. This was not to the liking of others, and often provoked sharp remarks from Aldrich.

Henry P. Davison's natural diplomacy proved to be the catalyst to keep the work going. Warburg's strong foreign accent annoyed them and constantly reminded them that they had to tolerate his presence only because they needed a central bank project to guarantee future profits. Warburg made little effort to iron out their prejudices, and argued with them on every point about technical banking in which he considered himself a specialist.

There must be great secrecy in all conspiracies

The Jekyll Island "monetary reform" plan was to be presented to Congress as the work of the National Currency Commission. It was necessary that the real authors of the bill remain in the shadows. In the aftermath of the 1907 Panic, public animosity toward bankers was so great that no congressman would dare to vote for a bill that would tarnish Wall Street, no matter who paid his campaign costs. The Jekyll Island Project was a central bank project, and that country had a long tradition of fighting against the imposition of a central bank on the American people. It started with a battle Thomas Jefferson against the idea Alexander Hamilton about the First Bank of the United States, secured by James Rothschild … Its continuation was the successful war of the president Andrew Jackson against Alexander Hamilton's idea of the Second Bank of the United States, where Nicholas Biddle acted as agent for James Rothschild from Paris. The result of this battle was the creation of the Independent Treasury Sub-System, which supposedly served to keep United States funds out of the clutches of financiers. Research into the scares of 1873, 1893 and 1907 indicates that they arose from international banking in London. In 1908, the public demanded that Congress pass legislation to prevent a recurrence of artificially imposed financial panics. Now such a monetary reform seemed inevitable. To prevent panic and control this reform, the National Commission on Currency Circulation was created, headed by Nelson Aldrich, who was the majority leader in the Senate.

The main task, as Paul Warburg told his colleagues, was the need to avoid the name "Central Bank". For this reason, he chose to use the name "Federal Reserve System". This would mislead the public and no one would think that this is the central bank. However, the Jekyll Island project was still a project of a central bank that performs the main functions of a central bank, its owners were private individuals who would profit from owning shares. As a currency issuing bank, it would control the country's money and loans.

In the chapter on Jekyll Island in his biography of Aldrich Stephenson writes about the conference:

“How was the Reserve Bank supposed to be controlled? It was supposed to be controlled by Congress. The government had to be present on the board of directors, it had to keep abreast of all the affairs of the Bank, but most of the directors had to be elected, directly or indirectly, by the banks of the association."

Thus, the proposed Federal Reserve Bank was to be "controlled by Congress" and accountable to the government, but most of the directors were elected, directly or indirectly, by the banks of the association. In the final version of the Warburg Plan, the Federal Reserve Board was appointed by the President of the United States, but the actual work of the Board was overseen by the Federal Advisory Board in a meeting with the Governors. The board was elected by the directors of the Federal Reserve Banks and remained unknown to the public.

The next task was to hide the fact that the proposed "Federal Reserve System" would be controlled by the masters of the New York money market. Congressmen from the South and West could not have survived if they had voted for the Wall Street project. Farmers and small businessmen in these regions have been hit hardest by financial panics. Eastern bankers incurred massive discontent, which in the 19th century evolved into a political movement known as "populism." The personal notes of Nicholas Biddle, unpublished for over a century after his death, demonstrate that the Eastern bankers were initially aware of the extent of public outcry against them.

On Jekyll Island, Paul Warburg proposed a major scam that would prevent the country's citizens from realizing that his plan was to create a central bank. It was a regional backup system. He proposed a system of four (later twelve) reserve bank branches located in different parts of the country. Few outside the world of bankers would understand that the existing concentration of the country's monetary and credit structure in New York made the regional reserve system a fiction.

Another proposal put forward by Paul Warburg on Jekyll Island was the way in which the administrators of the proposed regional reserve system would be elected. Senator Nelson Aldrich insisted that these positions should not be elected, but appointed, and that Congress should not play a role in their selection. His experience on Capitol Hill showed him that Congress opinion would often run counter to Wall Street's interests because congressmen from the West and South might want to demonstrate to their constituents that they were protecting them from the bankers from the East.

Warburg responded that the governors of the alleged central banks must be approved by the president. This apparent withdrawal of the system from congressional control meant that the Federal Reserve's project was unconstitutional from the start, because the Federal Reserve was to become the currency-issuing bank. The first article of the 8th section of part 5 of the Constitution unconditionally empowers Congress with "the power to mint a coin and regulate its value." Warburg's plan stripped Congress of its sovereignty, and the systems of checks and balances of power approved by Thomas Jefferson in the Constitution were now destroyed. The administrators of the proposed system would control the country's money and credit, while they themselves would receive approval from the executive branch of the government. The judicial branch (the Supreme Court and so on) was already practically controlled by the executive branch through the presidential appointment of a panel of judges.

Paul Warburg later wrote a voluminous exposition of his plan, The Federal Reserve System, Its Origins and Development, approximately 1,750 pages long, but the name Jekyll Island never appears in this text. He narrates (vol. 1, p. 58):

“But the conference ended, after a week of serious discussion, what would become the 'Aldrich Bill' was agreed upon, and a plan was drawn up that included the 'National Reserve Association' to create a central reserve organization with flexible issuing power based on gold and commercial paper.

On page 60, Warburg writes: “The results of the conference were completely classified. Even the very fact of this meeting should not have become the property of the public. " He adds in a footnote: “Although it has been eighteen years since so in original] years, I do not feel that I can give without hesitation a description of this most interesting meeting, in connection with which Senator Aldrich demanded that all participants observe secrecy. "

Forbes' revelation of a secret expedition to Jekyll Island had surprisingly little effect. The material did not go to press until two years after Congress approved the Federal Reserve Act, so it was never read during the period when it could have an impact, that is, during the discussion of the bill in Congress. Forbes's account was also ignored by those who were "in the know" as absurdity and sheer fiction. Stevenson mentions this on page 484 of his book on Aldrich.

“The curious episode about Jekyll Island was generally considered a myth. Forbes got some information from one of the journalists. It vaguely described the story of the island, but it did not make an impression and, in general, was perceived as an anecdote."

The silence on the Jekyll Island conference went in two directions, each of which was successful. The first, as Stevenson mentions, was to disprove the whole story as a romantic fiction that never really happened. Although there were references to Jekyll Island in later books on the Federal Reserve, they also received little public attention. As we have noted, Warburg's extensive work on the Federal Reserve makes no mention of Jekyll Island at all, although he admits that the conference did take place. None of his lengthy speeches or writings contain the word "Jekyll Island" with one notable exception. He agreed to Stevenson's request to prepare a short statement for Aldrich's biography. It appears on page 485 as part of the Warburg Memorandum. In this passage, Warburg writes: "The issue of a single discount rate was discussed and decided on Jekyll Island."

Another member of the Name Club was less reserved. Frank Vanderlip later published several briefs on the conference. In the Saturday Evening Post of February 9, 1935, on page 25, Vanderlip wrote:

“Despite my views on the value for society of greater publicity in corporate matters, shortly before the end of 1910 a situation arose when I was secretive, like some kind of conspirator … After all, Senator Aldrich's plan would have been doomed if anyone knew what he had called someone from Wall Street to help him prepare his bill, precautions were taken, which would delight James Stillman (the flamboyant and secretive banker who was president of National City Bank during the Spanish-American War and who was believed to have helped drag us into this war) … It is no exaggeration to say that our secret expedition to Jekyll Island led to the concept of what ultimately became the Federal Reserve System."

March 27, 1983 in the travel section of The Washington Post, Roy Hoopes writes:

"In 1910, when Aldrich and four financial experts needed a secret meeting place to reform the country's banking system, they hunted Jekyll and sat for 10 days in the Club's premises, where they developed projects for what would become the Federal Reserve Bank."

Later, Vanderlip wrote in his autobiography From the Country Laborer to the Financier:

“Our clandestine expedition to Jekyll Island was the occasion for the real concept of what eventually became the Federal Reserve. All the highlights of the Aldrich Plan were incorporated into the Federal Reserve Act when it was passed."

Professor E. R. A. Seligman, a member of the J. & W. Seligman international banking family and head of the economics department at Columbia University, wrote an essay published by the Academy of Political Science (Proceedings, Volume 4, # 4, pp. 387-90):

“Few people know what the United States owes to Mr. Warburg. After all, it's safe to say that he had more hand in drafting the fundamental provisions of the Federal Reserve Act than anyone else in this country. The Federal Reserve Board is, in fact, in everything but name, the real central bank. In two pillars on reserve management and interest rate policy, the Federal Reserve Act explicitly embraced the Aldrich Bill principle, and those principles, as stated, are the work of Mr. Warburg alone. It must not be forgotten that Mr. Warburg had a practical purpose. Formulating his plans and moving towards their implementation and from time to time slightly changing the recommendations, he had to remember that the introduction of the new concept into the consciousness of the country should be gradual, and that his main task was to destroy prejudices and dispel suspicions. Therefore, his plans contained a variety of carefully crafted proposals designed to shield the public from far-fetched dangers and to convince the country that the entire project as a whole was fully feasible. Mr. Warburg hoped that over time it would be possible to remove from the law some of the provisions that were included there, by and large, at his proposal for educational purposes."

Now that the United States national debt has surpassed the trillion dollar mark, we can truly acknowledge "how much the United States owes Mr. Warburg." At the time he created the Federal Reserve Act, government debt was almost non-existent.