In 1930 Herbert Hoover (image left) 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
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
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
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. 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
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
REPRESENTATIVE MCFADDEN: Mr. Meyer is a brother-in-law of
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
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. (image right) 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
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
"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
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.
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 misdemeanor
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.
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
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 (image left) 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
This brought him to the favorable appreciation of a
homosexual set which travelled back and forth
between New York and Paris, and which was presided over by Bessie Marbury (image right), of a very old and prominent New York family.
"wife", who lived with her for a number of years, was
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.
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
West Indies Sugar 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
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 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.
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.
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
"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
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
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.
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
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.
Roosevelt Administration, The Federal Reserve Board,
insofar as the public was concerned, was Marriner Eccles (left image), 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
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
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
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
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:
"Does that mean that J.P. Morgan can go back into investment
"Well, why not?" replied
"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
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 (image right) 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
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
"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
SENATOR BULKLEY: It does not increase the circulating medium at all?
This is an explanation of the manner in which the
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
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
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."
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
"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.
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.
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?
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 only had some
ledgers and blank checks.
"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
91 Peter L. Bernstein, A Primer On Money, Banking and Gold, Vintage
Books, New York, 1965, p. 104
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)
"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
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
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
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
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.
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 mention this
because the velocity of circulation, or confidence in the economy,
also is greatly affected by the Federal Reserve actions.
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
"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
On September 30, 1941, before the same Committee,
was asked by Representative Patman:
"How did you get the money to buy those two billion dollars worth of
Government securities in
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
ECCLES: That is what our money system is. If there were no debts in
our money system, there
wouldn’t be any money."
On June 17, 1942, Governor Eccles was interrogated by
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
DEWEY: What are you going to use to buy them with? You are going to
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
"What do you mean by monetization of the public debt?
ECCLES: I mean the bank creating money by the purchase of Government
is created by debt--either private or public debt.
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
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
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,
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,
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."
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."
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
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
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
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
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
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.
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.
"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.
present chairman of the Federal Reserve Board of Governors is
Paul Volcker (image right).
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
"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
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
David Rockefeller and Robert Roosa had previously chosen
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
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
"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.
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
Rockefeller, appointed him Chairman of the Federal Reserve Board of
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
Trilateral Commission, the
Council on Foreign
Bilderbergers, and the Royal Economic Institute. He
is a trustee of the
Rockefeller Foundation *, and a director of Texaco and American
Dr. Martin Larson points out that,"
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."**
See Chart V
** See Chart I
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,
"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 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?
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
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?
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,
Number 1 is Citicorp, New York, with assets of $130 billion.
This is Baker and
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
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, 2nd 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
There are six ‘bank’ dealers:
First National City
Bank of New York
Corp. Exchange Bank, New York
Morgan Guaranty Trust Co., New York
Bankers Trust of New York
First National Bank of Chicago
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
"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
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
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
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.
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?
Washington Post, May 19, 1983, carried a story datelined Nairobi,
Kenya, noting the meeting of the African Development Bank.
British merchant bank, Morgan Grenfell and a syndicate of the United
States, Kuhn Loeb, Lehman Brothers International, the
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
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,
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,
2nd 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
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.
* 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.
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.
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
In his Foreword to the study, Chairman Henry S. Reuss, (D-Wis)
"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
Only two segments of American society--banking and big
business--have any substantial
representation on the boards, and often even these become merged
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
"This ‘club’ approach leads the Federal Reserve to consistently
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.
Southeast Banking Corporation
Federated Department Stores
Westinghouse Electric Corporation
Proctor and Gamble
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