In 1949, while I was visiting Ezra Pound who was a political
prisoner at St. Elizabeth’s Hospital, Washington, D.C. (a Federal
institution for the insane), Dr. Pound asked me if I had ever heard
of the Federal Reserve System. I replied that I had not, as of the
age of 25. He then showed me a ten dollar bill marked "Federal
Reserve Note" and asked me if I would do some research at the
Library of Congress on the Federal Reserve System which had issued
this bill. Pound was unable to go to the Library himself, as he was
being held without trial as a political prisoner by the United
States government. After he was denied broadcasting time in the
U.S., Dr. Pound broadcast from Italy in an effort to persuade people
of the United States not to enter World War II. Franklin D.
Roosevelt had personally ordered Pound’s indictment, spurred by the
demands of his three personal assistants, Harry Dexter White,
Lauchlin Currie, and Alger Hiss, all of whom were subsequently
identified as being connected with Communist espionage.
I had no interest in money or banking as a subject, because I was
working on a novel. Pound offered to supplement my income by ten
dollars a week for a few weeks. My initial research revealed
evidence of an international banking group which had secretly
planned the writing of the Federal Reserve Act and Congress’
enactment of the plan into law. These findings confirmed what Pound
had long suspected. He said, "You must work on it as a detective
story." I was fortunate in having my research at the Library of
Congress directed by a prominent scholar, George Stimpson, founder
of the National Press Club, who was described by The New York Times
of September 28, 1952:
"Beloved by Washington newspapermen as ‘our
walking Library of Congress’, Mr. Stimpson was a highly regarded
reference source in the Capitol. Government officials, Congressmen
and reporters went to him for information on any subject."
I did research four hours each day at the Library of Congress, and
went to St. Elizabeth’s Hospital in the afternoon. Pound and I went
over the previous day’s notes. I then had dinner with George Stimpson at Scholl’s Cafeteria while he went over my material, and I
then went back to my room to type up the corrected notes. Both
Stimpson and Pound made many suggestions in guiding me in a field in
which I had no previous experience. When Pound’s resources ran low,
I applied to the Guggenheim Foundation, Huntington Hartford
Foundation, and other foundations to complete my research on the
Federal Reserve. Even though my foundation applications were
sponsored by the three leading poets of America, Ezra Pound,
Cummings, and Elizabeth Bishop, all of the foundations refused to
sponsor this research. I then wrote up my findings to date, and in
1950 began efforts to market this manuscript in New York. Eighteen
publishers turned it down without comment, but the nineteenth, Devin Garrity, president of
Devin Adair Publishing Company, gave me some
friendly advice in his office.
"I like your book, but we can’t print
it," he told me. "Neither can anybody else in New York. Why don’t
you bring in a prospectus for your novel, and I think we can give
you an advance. You may as well forget about getting the Federal
Reserve book published. I doubt if it could ever be printed."
This was devastating news, coming after two years of intensive work.
I reported back to Pound, and we tried to find a publisher in other
parts of the country. After two years of fruitless submissions, the
book was published in a small edition in 1952 by two of Pound’s
disciples, John Kasper and David Horton, using their private funds,
under the title Mullins on the Federal Reserve. In 1954, a second
edition, with unauthorized alterations, was published in New Jersey,
as The Federal Reserve Conspiracy. In 1955, Guido Roeder brought out
a German edition in Oberammergau, Germany. The book was seized and
the entire edition of 10,000 copies burned by government agents led
by Dr. Otto John.
The burning of the book was upheld April 21, 1961 by judge Israel
Katz of the Bavarian Supreme Court. The U.S. Government refused to
intervene, because U.S. High Commissioner to Germany, James B. Conant (president of Harvard University 1933 to 1953), had approved
the initial book burning order. This is the only book which has been
burned in Germany since World War II. In 1968 a pirated edition of
this book appeared in California. Both the FBI and the U.S. Postal
inspectors refused to act, despite numerous complaints from me
during the next decade. In 1980 a new German edition appeared.
Because the U.S. Government apparently no longer dictated the
internal affairs of Germany, the identical book which had been
burned in 1955 now circulates in Germany without interference.
I had collaborated on several books with Mr. H.L. Hunt and he
suggested that I should continue my long-delayed research on the
Federal Reserve and bring out a more definitive version of this
book. I had just signed a contract to write the authorized biography
of Ezra Pound, and the Federal Reserve book had to be postponed.
Hunt passed away before I could get back to my research, and once
again I faced the problem of financing research for the book.
My original book had traced and named the shadowy figures in the
United States who planned the Federal Reserve Act. I now discovered
that the men whom I exposed in 1952 as the shadowy figures behind
the operation of the Federal Reserve System were themselves
the American fronts for the unknown figures who became known as the
"London Connection." I found that notwithstanding our successes in
the Wars of Independence of 1812 against England, we remained an
economic and financial colony of Great Britain. For the first time,
we located the original stockholders of the Federal Reserve Banks
and traced their parent companies to the London Connection.
This research is substantiated by citations and documentation from
hundreds of newspapers, periodicals and books and charts showing
blood, marriage, and business relationships. More than a thousand
issues of The New York Times on microfilm have been checked not only
for original information, but verification of statements from other
It is a truism of the writing profession that a writer has only one
book within him. This seems applicable in my case, because I am now
in the fifth decade of continuous writing on a single subject, the
inside story of the Federal Reserve System. This book was from its
inception commissioned and guided by Ezra Pound. Four of his
protégés have previously been awarded the Nobel Prize for
Literature, William Butler Yeats for his later poetry, James Joyce
for "Ulysses", Ernest Hemingway for "The Sun Also Rises", and
Elliot for "The Waste Land". Pound played a major role in the
inspiration and in the editing of these works -- which leads us to
believe that this present work, also inspired by Pound, represents
an ongoing literary tradition.
Although this book in its inception was expected to be a tortuous
work on economic and monetary techniques, it soon developed into a
story of such universal and dramatic appeal that from the outset,
Ezra Pound urged me to write it as a detective story, a genre which
was invented by my fellow Virginian, Edgar Allan Poe.
I believe that
the continuous circulation of this book during the past forty years
has not only exonerated Ezra Pound for his much condemned political
and monetary statements, but also that it has been, and will
continue to be, the ultimate weapon against the powerful
conspirators who compelled him to serve thirteen and a half years
without trial, as a political prisoner held in an insane asylum a la
KGB. His earliest vindication came when the government agents who
represented the conspirators refused to allow him to testify in his
own defense; the second vindication came in 1958 when these same
agents dropped all charges against him, and he walked out of St.
Elizabeth’s Hospital, a free man once more.
His third and final
vindication is this work, which documents every aspect of his
exposure of the ruthless international financiers to whom Ezra Pound
became but one more victim, doomed to serve years as the Man in the
Iron Mask, because he had dared to alert his fellow-Americans to
their furtive acts of treason against all people of the United
In my lectures throughout this nation, and in my appearances on many
radio and television programs, I have sounded the toxin that the
Federal Reserve System is not Federal; it has no reserves; and
not a system at all, but rather, a criminal syndicate. From
November, 1910, when the conspirators met on Jekyll Island,
Georgia (click image left),
to the present time, the machinations of the Federal Reserve bankers
have been shrouded in secrecy.
Today, that secrecy has cost the
American people a three trillion dollar debt, with annual interest
payments to these bankers amounting to some three hundred billion
dollars per year, sums which stagger the imagination, and which in
themselves are ultimately unpayable.
Officials of the Federal
Reserve System routinely issue remonstrances to the public, much as
the Hindu fakir pipes an insistent tune to the dazed cobra which
sways its head before him, not to resolve the situation, but to
prevent it from striking him.
Such was the soothing letter written
by Donald J. Winn, Assistant to the Board of Governors in response
to an inquiry by a Congressman, the Honorable Norman D. Shumway, on
March 10, 1983. Mr. Winn states that,
"The Federal Reserve System was
established by an act of Congress in 1913 and is not a ‘private
On the next page, Mr. Winn continues,
"The stock of
the Federal Reserve Banks is held entirely by commercial banks that
are members of the Federal Reserve System."
He offers no explanation
as to why the government has never owned a single share of stock in
any Federal Reserve Bank, or why the Federal Reserve System is not a
"private corporation" when all of its stock is owned by "private
American history in the twentieth century has recorded the amazing
achievements of the Federal Reserve bankers.
First, the outbreak of
World War I, which was made possible by the funds available from the
new central bank of the United States.
Second, the Agricultural
Depression of 1920.
Third, the Black Friday Crash on Wall Street of
October, 1929 and the ensuing Great Depression.
Fourth, World War
Fifth, the conversion of the assets of the United States and its
citizens from real property to paper assets from 1945 to the
present, transforming a victorious America and foremost world power
in 1945 to the world’s largest debtor nation in 1990.
nation lies in economic ruins, devastated and destitute, in much the
same dire straits in which Germany and Japan found themselves in
1945. Will Americans act to rebuild our nation, as Germany and Japan
have done when they faced the identical conditions which we now
face--or will we continue to be enslaved by the Babylonian debt
money system which was set up by the Federal Reserve Act in 1913 to
complete our total destruction? This is the only question which we
have to answer, and we do not have much time left to answer it.
Because of the depth and the importance of the information which I
had developed at the Library of Congress under the tutelage of Ezra
Pound, this work became the happy hunting ground for many other
would-be historians, who were unable to research this material for
themselves. Over the past four decades, I have become accustomed to
seeing this material appear in many other books, invariably
attributed to other writers, with my name never mentioned. To add
insult to injury, not only my material, but even my title has been
appropriated, in a massive, if obtuse, work called "Secrets of the
Temple--the Federal Reserve".
This heavily advertised book received
reviews ranging from incredulous to hilarious. Forbes Magazine
advised its readers to read their review and save their money,
pointing out that "a reader will discover no secrets" and that "This
is one of those books whose fanfares far exceed their merit." This
was not accidental, as this overblown whitewash of the Federal
Reserve bankers was published by the most famous nonbook publisher
in the world.
After my initial shock at discovering that the most influential
literary personality of the twentieth century, Ezra Pound, was
imprisoned in "the Hellhole" in Washington, I immediately wrote for
assistance to a Wall Street financier at whose estate I had
frequently been a guest. I reminded him that as a patron of the
arts, he could not afford to allow Pound to remain in such inhuman
captivity. His reply shocked me even more. He wrote back that "your
friend can well stay where he is."
It was some years before I was
able to understand that, for this investment banker and his
colleagues, Ezra Pound would always be "the enemy".
Jackson Hole, Wyoming
Here are the simple facts of the great betrayal. Wilson and
knew that they were doing something momentous. One cannot fathom
men’s motives and this pair probably believed in what they were up
to. What they did not believe in was representative government. They
believed in government by an uncontrolled oligarchy whose acts would
only become apparent after an interval so long that the electorate
would be forever incapable of doing anything efficient to remedy
(St. Elizabeth’s Hospital,
Washington, D.C. 1950)
(AUTHOR’S NOTE: Dr. Pound wrote this introduction for the earliest
version of this book, published by Kasper and Horton, New York,
1952. Because he was being held as a political prisoner without
trial by the Federal Government, he could not afford to allow his
name to appear on the book because of additional reprisals against
him. Neither could he allow the book to be dedicated to him,
although he had commissioned its writing. The author is gratified to
be able to remedy these necessary omissions, thirty-three years
after the events.)
JEFFERSON’S OPINION ON THE
CONSTITUTIONALITY OF THE BANK
February 15, 1791
Writings of Thomas Jefferson, ed. by H. E. Bergh, Vol. III, p.
The bill for establishing a national bank, in 1791, undertakes,
among other things,--
1. To form the subscribers into a corporation.
2. To enable them, in their corporate capacities, to receive grants
of lands; and, so far, is against the laws of mortmain.
3. To make alien subscribers capable of holding lands; and so far is
against the laws of alienage.
4. To transmit these lands, on the death of a proprietor, to a
certain line of successors; and so far, changes the course of
5. To put the lands out of the reach of forfeiture, or escheat; and
so far, is against the laws of forfeiture and escheat.
6. To transmit personal chattels to successors, in a certain line;
and so far, is against the laws of distribution.
7. To give them the sole and exclusive right of banking, under the
national authority; and, so far, is against the laws of monopoly.
8. To communicate to them a power to make laws, paramount to the
laws of the states; for so they must be construed, to protect the
institution from the control of the state legislatures; and so
probably they will be construed.
I consider the foundation of the Constitution as laid on this
ground--that all powers not delegated to the United States, by the
Constitution, nor prohibited by it to the states, are reserved to
the states, or to the people (12th amend.). To take a single step
beyond the boundaries thus specially drawn around the powers of
Congress, is to take possession of a boundless field of power, no
longer susceptible of any definition.
The incorporation of a bank, and the powers assumed by this bill,
have not, in my opinion, been delegated to the United States by the
"The matter of a uniform discount rate was discussed and settled at
--Paul M. Warburg 1
On the night of November 22, 1910, a group of newspaper reporters
stood disconsolately in the railway station at Hoboken, New Jersey.
They had just watched a delegation of the nation’s leading
financiers leave the station on a secret mission. It would be years
before they discovered what that mission was, and even then they
would not understand that the history of the United States underwent
a drastic change after that night in Hoboken.
The delegation had left in a sealed railway car, with blinds drawn,
for an undisclosed destination. They were led by Senator Nelson
Aldrich, head of the National Monetary Commission. President
Theodore Roosevelt had signed into law the bill creating the
National Monetary Commission in 1908, after the tragic Panic of 1907
had resulted in a public outcry that the nation’s monetary system be
stabilized. Aldrich had led the members of the Commission on a
two-year tour of Europe, spending some three hundred thousand
dollars of public money. He had not yet made a report on the results
of this trip, nor had he offered any plan for banking reform.
Accompanying Senator Aldrich at the Hoboken station were his private
secretary, Shelton; A. Piatt Andrew, Assistant Secretary of the
Treasury, and Special Assistant of the National Monetary Commission;
Frank Vanderlip, president of the National City Bank of New York,
Henry P. Davison, senior partner of J.P. Morgan Company, and
generally regarded as Morgan’s personal emissary; and Charles D.
Norton, president of the Morgan-dominated First National Bank of New
York. Joining the group just before the train left the station were
Benjamin Strong, also known as a lieutenant of J.P. Morgan; and
Warburg, a recent immigrant from Germany who had joined the banking
house of Kuhn, Loeb
and Company, New York as a partner earning five hundred thousand
dollars a year.
Nathaniel Wright Stephenson, Paul Warburg’s Memorandum,
Nelson Aldrich A Leader in American Politics, Scribners, N.Y. 1930
Six years later, a financial writer named Bertie Charles Forbes (who
later founded the Forbes Magazine; the present editor, Malcom
Forbes, is his son), wrote:
"Picture a party of the nation’s greatest bankers stealing out of
New York on a private railroad car under cover of darkness,
stealthily hieing hundred of miles South, embarking on a mysterious
launch, sneaking onto an island deserted by all but a few servants,
living there a full week under such rigid secrecy that the names of
not one of them was once mentioned lest the servants learn the
identity and disclose to the world this strangest, most secret
expedition in the history of American finance. I am not romancing; I
am giving to the world, for the first time, the real story of how
the famous Aldrich currency report, the foundation of our new
currency system, was written . . . .
The utmost secrecy was enjoined
upon all. The public must not glean a hint of what was to be done.
Senator Aldrich notified each one to go quietly into a private car
of which the railroad had received orders to draw up on an
unfrequented platform. Off the party set. New York’s ubiquitous
reporters had been foiled . . . Nelson (Aldrich) had confided to
Henry, Frank, Paul and Piatt that he was to keep them locked up at
Jekyll Island, out of the rest of the world, until they had evolved
and compiled a scientific currency system for the United States, the
real birth of the present Federal Reserve System, the plan done on
Jekyll Island in the conference with Paul, Frank and Henry . . . . Warburg is the link that binds the Aldrich system and the present
system together. He more than any one man has made the system
possible as a working reality." 2
The official biography of Senator Nelson Aldrich states:
"In the autumn of 1910, six men went out to shoot ducks, Aldrich,
his secretary Shelton, Andrews, Davison, Vanderlip and Warburg.
Reporters were waiting at the Brunswick (Georgia) station. Mr.
Davison went out and talked to them. The reporters dispersed and the
secret of the strange journey was not divulged. Mr. Aldrich asked
him how he had managed it and he did not volunteer the
Davison had an excellent reputation as the person who could
conciliate warring factions, a role he had performed for J.P. Morgan
during the settling of the Money Panic of 1907. Another Morgan
partner, T.W. Lamont, says:
"Henry P. Davison served as arbitrator of the Jekyll Island
2 "CURRENT OPINION", December, 1916, p. 382.
3 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in
American Politics, Scribners, N.Y. 1930, Chap. XXIV "Jekyll Island"
4 T.W. Lamont, Henry P. Davison, Harper, 1933
From these references, it is possible to piece together the story.
Aldrich’s private car, which had left Hoboken station with its
shades drawn, had taken the financiers to Jekyll Island, Georgia.
Some years earlier, a very exclusive group of millionaires, led by J.P. Morgan, had purchased the island as a winter retreat. They
called themselves the Jekyll Island Hunt Club, and, at first, the
island was used only for hunting expeditions, until the millionaires
realized that its pleasant climate offered a warm retreat from the
rigors of winters in New York, and began to build splendid mansions,
which they called "cottages", for their families’ winter vacations.
The club building itself, being quite isolated, was sometimes in
demand for stag parties and other pursuits unrelated to hunting. On
such occasions, the club members who were not invited to these
specific outings were asked not to appear there for a certain number
of days. Before Nelson Aldrich’s party had left New York, the club’s
members had been notified that the club would be occupied for the
next two weeks.
The Jekyll Island Club was chosen as the place to draft the plan for
control of the money and credit of the people of the United States,
not only because of its isolation, but also because it was the
private preserve of the people who were drafting the plan. The New
York Times later noted, on May 3, 1931, in commenting on the death
of George F. Baker, one of J.P. Morgan’s closest associates, that
"Jekyll Island Club has lost one of its most distinguished members.
One-sixth of the total wealth of the world was represented by the
members of the Jekyll Island Club." Membership was by inheritance
The Aldrich group had no interest in hunting. Jekyll Island was
chosen for the site of the preparation of the central bank because
it offered complete privacy, and because there was not a journalist
within fifty miles. Such was the need for secrecy that the members
of the party agreed, before arriving at Jekyll Island, that no last
names would be used at any time during their two week stay. The
group later referred to themselves as the First Name Club, as the
last names of Warburg, Strong, Vanderlip and the others were
prohibited during their stay.
The customary attendants had been
given two week vacations from the club, and new servants brought in
from the mainland for this occasion who did not know the names of
any of those present. Even if they had been interrogated after the
Aldrich party went back to New York, they could not have given the
names. This arrangement proved to be so satisfactory that the
members, limited to those who had actually been present at Jekyll
Island, later had a number of informal get-togethers in New York.
Why all this secrecy? Why this thousand mile trip in a closed
railway car to a remote hunting club? Ostensibly, it was to carry
out a program of public service, to prepare banking reform which
would be a boon to the people of the United States, which had been
ordered by the National
Monetary Commission. The participants were no strangers to public
benefactions. Usually, their names were inscribed on brass plaques,
or on the exteriors of buildings which they had donated. This was
not the procedure which they followed at Jekyll Island. No brass
plaque was ever erected to mark the selfless actions of those who
met at their private hunt club in 1910 to improve the lot of every
citizen of the United States.
In fact, no benefaction took place at Jekyll Island. The
group journeyed there in private to write the banking and currency
legislation which the National Monetary Commission had been ordered
to prepare in public. At stake was the future control of the money
and credit of the United States. If any genuine monetary reform had
been prepared and presented to Congress, it would have ended the
power of the elitist one world money creators. Jekyll Island ensured
that a central bank would be established in the United States which
would give these bankers everything they had always wanted.
As the most technically proficient of those present, Paul Warburg
was charged with doing most of the drafting of the plan. His work
would then be discussed and gone over by the rest of the group.
Senator Nelson Aldrich was there to see that the completed plan
would come out in a form which he could get passed by Congress, and
the other bankers were there to include whatever details would be
needed to be certain that they got everything they wanted, in a
finished draft composed during a onetime stay. After they returned
to New York, there could be no second get together to rework their
plan. They could not hope to obtain such secrecy for their work on a
The Jekyll Island group remained at the club for nine days, working
furiously to complete their task. Despite the common interests of
those present, the work did not proceed without friction. Senator
Aldrich, always a domineering person, considered himself the chosen
leader of the group, and could not help ordering everyone else
about. Aldrich also felt somewhat out of place as the only member
who was not a professional banker. He had had substantial banking
interests throughout his career, but only as a person who profited
from his ownership of bank stock.
He knew little about the technical
aspects of financial operations. His opposite number, Paul Warburg,
believed that every question raised by the group demanded, not
merely an answer, but a lecture. He rarely lost an opportunity to
give the members a long discourse designed to impress them with the
extent of his knowledge of banking. This was resented by the others,
and often drew barbed remarks from Aldrich.
The natural diplomacy of Henry P. Davison proved to be the catalyst which kept them at their
work. Warburg’s thick alien accent grated on them, and constantly
reminded them that they had to accept his presence if a central bank
plan was to be devised which would guarantee them their future profits.
Warburg made little effort to smooth over their prejudices,
and contested them on every possible occasion on technical banking
questions, which he considered his private preserve.
"In all conspiracies there must be great secrecy."
The "monetary reform" plan prepared at Jekyll Island was to be
presented to Congress as the completed work of the National Monetary
Commission. It was imperative that the real authors of the bill
remain hidden. So great was popular resentment against bankers since
the Panic of 1907 that no Congressman would dare to vote for a bill
bearing the Wall Street taint, no matter who had contributed to his
campaign expenses. The Jekyll Island plan was a central bank plan,
and in this country there was a long tradition of struggle against
inflicting a central bank on the American people.
It had begun with Thomas Jefferson’s fight against Alexander Hamilton’s scheme for the First Bank of the United States, backed by James Rothschild. It had
continued with President Andrew Jackson’s successful war against
Alexander Hamilton’s scheme for the Second Bank of the United
States, in which Nicholas Biddle was acting as the agent for
Rothschild of Paris. The result of that struggle was the creation of
the Independent Sub-Treasury System, which supposedly had served to
keep the funds of the United States out of the hands of the
financiers. A study of the panics of 1873, 1893, and 1907 indicates
that these panics were the result of the international bankers’
operations in London.
The public was demanding in 1908 that Congress
enact legislation to prevent the recurrence of artificially induced
money panics. Such monetary reform now seemed inevitable. It was to
head off and control such reform that the National Monetary
Commission had been set up with Nelson Aldrich at its head, since he
was majority leader of the Senate.
The main problem, as Paul Warburg informed his colleagues, was to
avoid the name "Central Bank". For that reason, he had decided upon
the designation of "Federal Reserve System".
This would deceive the
people into thinking it was not a central bank. However, the Jekyll
Island plan would be a central bank plan, fulfilling the main
functions of a central bank; it would be owned by private
individuals who would profit from ownership of shares. As a bank of
issue, it would control the nation’s money and credit.
5 Clarendon, Hist. Reb. 1647
In the chapter on Jekyll Island in his biography of Aldrich,
Stephenson writes of the conference:
"How was the Reserve Bank to be controlled? It must be controlled by
Congress. The government was to be represented in the board of
directors, it was to have full knowledge of all the Bank’s, affairs,
but a majority
of the directors were to be chosen, directly or indirectly, by the
banks of the association." 6
Thus the proposed Federal Reserve Bank was to be "controlled by
Congress" and answerable to the government, but the majority of the
directors were to be chosen, "directly or indirectly" by the banks
of the association. In the final refinement of Warburg’s plan,
Federal Reserve Board of Governors would be appointed by the
President of the United States, but the real work of the Board would
be controlled by a Federal Advisory Council, meeting with the
Governors. The Council would be chosen by the directors of the
twelve Federal Reserve Banks, and would remain unknown to the
The next consideration was to conceal the fact that the proposed
"Federal Reserve System" would be dominated by the masters of the
New York money market. The Congressmen from the South and the West
could not survive if they voted for a Wall Street plan. Farmers and
small businessmen in those areas had suffered most from the money
panics. There had been great popular resentment against the Eastern
bankers, which during the nineteenth century became a political
movement known as "populism". The private papers of Nicholas Biddle,
not released until more than a century after his death, show that
quite early on the Eastern bankers were fully aware of the
widespread public opposition to them.
Paul Warburg advanced at Jekyll Island the primary deception which
would prevent the citizens from recognizing that his plan set up a
central bank. This was the regional reserve system. He proposed a
system of four (later twelve) branch reserve banks located in
different sections of the country. Few people outside the banking
world would realize that the existing concentration of the nation’s
money and credit structure in New York made the proposal of a
regional reserve system a delusion.
Another proposal advanced by Paul Warburg at Jekyll Island was the
manner of selection of administrators for the proposed regional
reserve system. Senator Nelson Aldrich had insisted that the
officials should be appointive, not elected, and that Congress
should have no role in their selection. His Capitol Hill experience
had taught him that congressional opinion would often be inimical to
the Wall Street interests, as Congressmen from the West and South
might wish to demonstrate to their constituents that they were
protecting them against the Eastern bankers.
6 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in
American Politics, Scribners, N.Y. 1930, Chap. XXIV "Jekyll Island"
Warburg responded that the administrators of the proposed central
banks should be subject to executive approval by the President. This
patent removal of the system from Congressional control meant that
the Federal Reserve proposal was unconstitutional from its inception,
because the Federal Reserve System was to be a bank of issue.
Article 1, Sec. 8, Par. 5 of the Constitution expressly charges
Congress with "the power to coin money and regulate the value
thereof.". Warburg’s plan would deprive Congress of its sovereignty,
and the systems of checks and balances of power set up by Thomas
Jefferson in the Constitution would now be destroyed. Administrators
of the proposed system would control the nation’s money and credit,
and would themselves be approved by the executive department of the
government. The judicial department (the Supreme Court, etc.) was
already virtually controlled by the executive department through
presidential appointment to the bench.
7 Paul Warburg, The Federal Reserve System, Its Origin and Growth,
Volume I, p. 58, Macmillan, New York, 1930
Paul Warburg later wrote a massive exposition of his plan,
The Federal Reserve System, Its Origin and Growth 7 of some 1750 pages,
but the name "Jekyll Island" appears nowhere in this text. He does
state (Vol. 1, p. 58):
"But then the conference closed, after a week of earnest
deliberation, the rough draft of what later became the Aldrich Bill
had been agreed upon, and a plan had been outlined which provided
for a ‘National Reserve Association,’ meaning a central reserve
organization with an elastic note issue based on gold and commercial
On page 60, Warburg writes,
"The results of the conference were entirely confidential. Even the
fact there had been a meeting was not permitted to become public."
He adds in a footnote, "Though eighteen [sic] years have since gone
by, I do not feel free to give a description of this most
interesting conference concerning which Senator Aldrich pledged all
participants to secrecy."
B.C. Forbes’ revelation 8 of the secret expedition to Jekyll Island,
had had surprisingly little impact. It did not appear in print until
two years after the Federal Reserve Act had been passed by Congress,
hence it was never read during the period when it could have had an
is, during the Congressional debate on the bill. Forbes’ story was
also dismissed, by those "in the know," as preposterous, and a mere
invention. Stephenson mentions this on page 484 of his book about
"This curious episode of Jekyll Island has been generally regarded
as a myth. B.C. Forbes got some information from one of the
reporters. It told in vague outline the Jekyll Island story, but
made no impression and was generally regarded as a mere yarn."
The coverup of the Jekyll Island conference proceeded along two
lines, both of which were successful. The first, as Stephenson
mentions, was to dismiss the entire story as a romantic concoction
which never actually took place. Although there were brief
references to Jekyll Island in later books concerning the
Reserve System, these also attracted little public attention.
have noted, Warburg’s massive and supposedly definite work on the
Federal Reserve System does not mention Jekyll Island at all,
although he does admit that a conference took place. In none of his
voluminous speeches or writings do the words "Jekyll Island" appear,
with a single notable exception. He agreed to Professor Stephenson’s
request that he prepare a brief statement for the Aldrich biography.
This appears on page 485 as part of "The Warburg Memorandum". In
this excerpt, Warburg writes,
"The matter of a uniform discount rate was discussed and settled at
Another member of the "First Name Club" was less reticent.
Frank Vanderlip later published a few brief references to the conference.
In the Saturday Evening Post, February 9, 1935, p. 25, Vanderlip
"Despite my views about the value to society of greater publicity
for the affairs of corporations, there was an occasion near the
close of 1910, when I was as secretive, indeed, as furtive, as any
conspirator. . . .
Since it would have been fatal to Senator
Aldrich’s plan to have it known that he was calling on anybody from
Wall Street to help him in preparing his bill, precautions were
taken that would have delighted the heart of James Stillman (a
colorful and secretive banker who was President of the National City
Bank during the Spanish-American War, and who was thought to have
been involved in getting us into that war) . . .
I do not feel it is any exaggeration to speak of our secret
expedition to Jekyll Island as the occasion of the actual conception
of what eventually became the Federal Reserve System."
In a Travel feature in The Washington Post, March 27, 1983, "Follow
The Rich to Jekyll Island", Roy Hoopes writes:
"In 1910, when Aldrich and four financial experts wanted a place to
meet in secret to reform the country’s banking system, they faked a
hunting trip to Jekyll and for 10 days holed up in the Clubhouse,
where they made plans for what eventually would become the Federal
Vanderlip later wrote in his autobiography,
From Farmboy to
"Our secret expedition to Jekyll Island was the occasion of the
actual conception of what eventually became the Federal Reserve
System. The essential points of the Aldrich Plan were all contained
in the Federal Reserve Act as it was passed."
Professor E.R.A. Seligman, a member of the international banking
family of J. & W. Seligman, and head of the Department of Economics
at Columbia University, wrote in an essay published by the Academy
of Political Science, Proceedings, v. 4, No. 4, p. 387-90:
"It is known to a very few how great is the indebtedness of the
United States to Mr. Warburg. For it may be said without fear of
contradiction that in its fundamental features the Federal Reserve
Act is the work of Mr. Warburg more than any other man in the
country. The existence of a Federal Reserve Board creates, in
everything but in name, a real central bank. In the two fundamentals
of command of reserves and of a discount policy, the Federal Reserve
Act has frankly accepted the principle of the Aldrich Bill, and
these principles, as has been stated, were the creation of Mr.
Warburg and Mr. Warburg alone.
It must not be forgotten that Mr.
Warburg had a practical object in view. In formulating his plans and
in advancing in them slightly varying suggestions from time to time,
it was incumbent on him to remember that the education of the
country must be gradual and that a large part of the task was to
break down prejudices and remove suspicion. His plans therefore
contained all sorts of elaborate suggestions designed to guard the
public against fancied dangers and to persuade the country that the
general scheme was at all practicable. It was the hope of Mr.
Warburg that with the lapse of time it might be possible to
eliminate from the law a few clauses which were inserted largely at
his suggestion for educational purposes."
8 CURRENT OPINION, December, 1916, p. 382
9 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in
American Politics, Scribners, N.Y. 1930, Chap. XXIV "Jekyll Island"
10 Frank Vanderlip, From Farmboy to Financier
Now that the public debt of the United States has passed a trillion
dollars, we may indeed admit "how great is the indebtedness of the
United States to Mr. Warburg." At the time he wrote the
Reserve Act, the public debt was almost nonexistent.
Professor Seligman points out Warburg’s remarkable prescience that
the real task of the members of the Jekyll Island conference was to
prepare a banking plan which would gradually "educate the country"
and "break down prejudices and remove suspicion". The campaign to
enact the plan into law succeeded in doing just that.
The Aldrich Plan
"Finance and the tariff are reserved by
Nelson Aldrich as falling
within his sole purview and jurisdiction. Mr. Aldrich is endeavoring
to devise, through the National Monetary Commission, a banking and
currency law. A great many hundred thousand persons are firmly of
the opinion that Mr. Aldrich sums up in his personality the greatest
and most sinister menace to the popular welfare of the United
States. Ernest Newman recently said, ‘What the South visits on the
Negro in a political way, Aldrich would mete out to the mudsills of
the North, if he could devise a safe and practical way to accomplish
--Harper’s Weekly, May 7, 1910."
The participants in the Jekyll Island conference returned to New
York to direct a nationwide propaganda campaign in favor of the
"Aldrich Plan". Three of the leading universities, Princeton,
Harvard, and the University of Chicago, were used as the rallying
points for this propaganda, and national banks had to contribute to
a fund of five million dollars to persuade the American public that
this central bank plan should be enacted into law by Congress.
Woodrow Wilson, governor of New Jersey and former president of
Princeton University, was enlisted as a spokesman for the Aldrich
Plan. During the Panic of 1907, Wilson had declared,
trouble could be averted if we appointed a committee of six or seven
public-spirited men like J.P. Morgan to handle the affairs of our
In his biography of Nelson Aldrich in 1930,
"A pamphlet was issued January 16, 1911, ‘Suggested Plan for
Monetary Legislation’, by Hon. Nelson Aldrich, based on Jekyll
Stephenson says on page 388, "An organization
for financial progress has been formed. Mr. Warburg introduced a
resolution authorizing the establishment of the Citizens’ League,
later the National Citizens League . . . Professor Laughlin of the
University of Chicago was given charge of the League’s
11 Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in
American Politics, Scribners, N.Y. 1930
It is notable that Stephenson characterizes the work of the National
Citizens League as "propaganda", in line with Seligman’s exposition
Warburg’s work as "the education of the country" and "to break down
Much of the five million dollars of the bankers slush fund was spent
under the auspices of the National Citizens’ League, which was made
up of college professors. The two most tireless propagandists for
the Aldrich Plan were Professor O.M. Sprague of Harvard, and
Laurence Laughlin of the University of Chicago.
Congressman Charles A. Lindbergh, Sr., notes:
"J. Laurence Laughlin, Chairman of the Executive Committee of the
National Citizens’ League since its organization, has returned to
his position as professor of political economics in the University
of Chicago. In June, 1911, Professor Laughlin was given a year’s
leave from the university, that he might give all of his time to the
campaign of education undertaken by the League . . . He has worked
indefatigably, and it is largely due to his efforts and his
persistence that the campaign enters the final stage with flattering
prospects of a successful outcome . . . The reader knows that the
University of Chicago is an institution endowed by
Rockefeller, with nearly fifty million dollars."12
12 Charles A. Lindbergh, Sr., Banking, Currency and the Money Trust,
1913, p. 131
In his biography of Nelson Aldrich,
Stephenson reveals that the Citizens’ League was also a
Jekyll Island product. In chapter 24 we find that: The Aldrich Plan
was represented to Congress as the result of three years of work,
study and travel by members of the National Monetary Commission,
with expenditures of more than three hundred thousand dollars (In
1911, the Aldrich Plan became part of the official platform of the
Testifying before the Committee on Rules, December 15, 1911, after
the Aldrich plan had been introduced in Congress, Congressman
"Our financial system is a false one and a huge burden on the people
. . . I have alleged that there is a Money Trust. The Aldrich plan
is a scheme plainly in the interest of the Trust . . . Why does the
Money Trust press so hard for the Aldrich Plan now, before the
people know what the money trust has been doing?"
Lindbergh continued his speech,
"The Aldrich Plan is the Wall Street Plan. It is a broad challenge
to the Government by the champion of the Money Trust. It means
another panic, if necessary, to intimidate the people. Aldrich, paid
by the Government to represent the people, proposes a plan for the
trusts instead. It was by a very clever move that the National
Monetary Commission was created. In 1907 nature responded most
beautifully and gave this country the most bountiful crop it had
ever had. Other industries were busy too, and from a natural
standpoint all the conditions were right for a most
prosperous year. Instead, a panic entailed enormous losses upon us.
Wall Street knew the American people were demanding a remedy against
the recurrence of such a ridiculously unnatural condition. Most
Senators and Representatives fell into the Wall Street trap and
passed the Aldrich Vreeland Emergency Currency Bill. But the real
purpose was to get a monetary commission which would frame a
proposition for amendments to our currency and banking laws which
would suit the Money Trust.
The interests are now busy everywhere
educating the people in favor of the Aldrich Plan. It is reported
that a large sum of money has been raised for this purpose. Wall
Street speculation brought on the Panic of 1907. The depositors’
funds were loaned to gamblers and anybody the Money Trust wanted to favour. Then when the depositors wanted their money, the banks did
not have it. That made the panic."
Edward Vreeland, co-author of the bill, wrote in the August 25, 1910
Independent (which was owned by Aldrich),
"Under the proposed monetary plan of
Senator Aldrich, monopolies
will disappear, because they will not be able to make more than four
percent interest and monopolies cannot continue at such a low rate.
Also, this will mark the disappearance of the Government from the
Vreeland’s fantastic claims were typical of the propaganda flood
unleashed to pass the Aldrich Plan. Monopolies would disappear, the
Government would disappear from the banking business. Pie in the
Nation Magazine, January 19, 1911, noted,
"The name of Central Bank is
carefully avoided, but the ‘Federal
Reserve Association’, the name given to the proposed central
organization, is endowed with the usual powers and responsibilities
of a European Central Bank."
After the National Monetary Commission had returned from Europe, it
held no official meetings for nearly two years. No records or
minutes were ever presented showing who had authored the Aldrich
Plan. Since they held no official meetings, the members of the
commission could hardly claim the Plan as their own. The sole
tangible result of the Commission’s three hundred thousand dollar
expenditure was a library of thirty massive volumes on European
Typical of these works is a thousand page history of the
Reichsbank, the central bank which controlled money and credit in
Germany, and whose principal stockholders, were the
Paul Warburg’s family banking house of M.M. Warburg Company. The
Commission’s records show that it never functioned as a deliberative
body. Indeed, its only "meeting" was the secret conference held at
Jekyll Island, and this conference is not mentioned in any
publication of the Commission.
Senator Cummins passed a resolution
in Congress ordering the Commission to report on January 8, 1912,
and show some constructive results of its three years’ work. In the
face of this challenge, the National Monetary Commission ceased to
With their five million dollars as a war chest, the Aldrich Plan
propagandists waged a no-holds barred war against their opposition.
Andrew Frame testified before the House Banking and Currency
Committee of the American Bankers Association.
He represented a
group of Western bankers who opposed the Aldrich Plan:
CHAIRMAN CARTER GLASS: "Why didn’t the Western bankers make
themselves heard when the American Bankers Association gave its
unqualified and, we are assured, unanimous approval of the scheme
proposed by the National Monetary Commission?"
ANDREW FRAME: "I’m glad you called my attention to that. When that
monetary bill was given to the country, it was but a few days
previous to the meeting of the American Bankers Association in New
Orleans in 1911. There was not one banker in a hundred who had read
that bill. We had twelve addresses in favor of it. General Hamby of
Austin, Texas, wrote a letter to President Watts asking for a
hearing against the bill. He did not get a very courteous answer. I
refused to vote on it, and a great many other bankers did likewise."
MR. BULKLEY: "Do you mean that no member of the Association could be
heard in opposition to the bill?"
ANDREW FRAME: "They throttled all argument."
MR. KINDRED: "But the report was given out that it was practically
ANDREW FRAME: "The bill had already been prepared by
and presented to the executive council of the American Bankers
Association in May, 1911. As a member of that council, I received a
copy the day before they acted upon it. When the bill came in at New
Orleans, the bankers of the United States had not read it."
MR. KINDRED: "Did the presiding officer simply rule out those who
wanted to discuss it negatively?"
ANDREW FRAME: "They would not allow anyone on the program who was
not in favor of the bill."
CHAIRMAN GLASS: "What significance has the fact that at the next
annual meeting of the American Bankers Association held at Detroit
in 1912, the Association did not reiterate its endorsement of the
plan of the National Monetary Commission, known as the Aldrich
ANDREW FRAME: "It did not reiterate the endorsement for the simple
fact that the backers of the Aldrich Plan knew that the Association
would not endorse it. We were ready for them, but they did not bring
Andrew Frame exposed the collusion which in 1911 procured an
endorsement of the Aldrich Plan from the American Bankers
Association but which in 1912 did not even dare to repeat its
endorsement, for fear of an honest and open discussion of the merits
of the plan.
Chairman Glass then called as witness one of the ten most powerful
bankers in the United States, George Blumenthal, partner of the
international banking house of Lazard Freres and brother-in-law of
Eugene Meyer, Jr. Carter Glass effusively welcomed Blumenthal,
stating that "Senator O’Gorman of New York was kind enough to
suggest your name to us." A year later, O’Gorman prevented a Senate
Committee from asking his master, Paul Warburg, any embarrassing
questions before approving his nomination as the first Governor of
the Federal Reserve Board.
George Blumenthal stated,
"Since 1893 my firm of Lazard Freres has
been foremost in importations and exportations of gold and has
thereby come into contact with everybody who had anything to do with
Congressman Taylor asked, "Have you a statement there as to the part
you have had in the importation of gold into the United States?"
Taylor asked this because the Panic of 1893 is known to economists
as a classic example of a money panic caused by gold movements.
"No," replied George Blumenthal, "I have nothing at all on that,
because it is not bearing on the question."
A banker from Philadelphia, Leslie Shaw, dissented with other
witnesses at these hearings, criticizing the much vaunted
"decentralization" of the System. He said,
"Under the Aldrich Plan
the bankers are to have local associations and district
associations, and when you have a local organization, the centered
control is assured. Suppose we have a local association in
Indianapolis; can you not name the three men who will dominate that
association? And then can you not name the one man everywhere else.
When you have hooked the banks together, they can have the biggest
influence of anything in this country, with the exception of the
To promote the Democratic currency bill,
Carter Glass made public
the sorry record of the Republican efforts of Senator Aldrich’s
National Monetary Commission. His House Report in 1913 said,
"Senator MacVeagh fixes the cost of the National Monetary Commission
to May 12, 1911 at $207,130. They have since spent another hundred
thousand dollars of the taxpayer’s money. The work done at such cost
cannot be ignored, but, having examined the extensive literature
published by the Commission, the Banking and Currency Committee
finds little that bears upon the present state of the credit market
of the United States.
We object to the Aldrich Bill on the following
Its entire lack of adequate government or public control of the
banking mechanism it sets up.
Its tendency to throw voting control into the hands of the large
banks of the system.
The extreme danger of inflation of currency inherent in the system.
The insincerity of the bond-funding plan provided for by the
measure, there being a barefaced pretense that this system was to
cost the government nothing.
The dangerous monopolistic aspects of the bill.
Our Committee at the outset of its work was met by a well-defined
sentiment in favor of a central bank which was the manifest
outgrowth of the work that had been done by the National Monetary
Glass’s denunciation of the Aldrich Bill as a central bank plan
ignored the fact that his own Federal Reserve Act would fulfill all
the functions of a central bank. Its stock would be owned by private
stockholders who could use the credit of the Government for their
own profit; it would have control of the nation’s money and credit
resources; and it would be a bank of issue which would finance the
government by "mobilizing" credit in time of war.
In "The Rationale
of Central Banking," Vera C. Smith (Committee for Monetary Research
and Education, June, 1981) writes,
"The primary definition of a
central bank is a banking system in which a single bank has either a
complete or residuary monopoly in the note issue. A central bank is
not a natural product of banking development. It is imposed from
outside or comes into being as the result of Government favors."
Thus a central bank attains its commanding position from its
government granted monopoly of the note issue. This is the key to
its power. Also, the act of establishing a central bank has a direct
inflationary impact because of the fractional reserve system, which
allows the creation of book-entry loans and thereby, money, a number
of times the actual "money" which the bank has in its deposits or
The Aldrich Plan never came to a vote in Congress, because the
Republicans lost control of the House in 1910, and subsequently lost
the Senate and the Presidency in 1912.