Excerpts from the first part of Eustace Mullins' famous book "Secrets of the Federal Reserve".
Paul M. Warburg
Consumer Price Index in the United States before and after the creation of the Federal Reserve System.
So what has changed?
For those unfamiliar with the origins of the Federal Reserve, below is the first chapter of the Secrets of the Federal Reserve:
“The issue of a flat discount rate was discussed and decided on Jekyll Island” - Paul M. Warburg
On the night of November 22, 1910, a group of journalists stood dejectedly at a train station in Hoboken, New Jersey. They had just watched as a delegation of the country's top financiers left the station and embarked on a covert mission. It is only many years later that they will know what the mission was, and even then they will not understand that the history of the United States has changed significantly since that night in Hoboken.
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The delegation set off in a sealed carriage with shutters down in an unknown direction. It was chaired by Senator Nelson Aldrich, head of the National Currency Commission. President Theodore Roosevelt signed a decree establishing the National Currency Commission in 1908, and in the wake of the tragic 1907 Panic, calls began to be heard to stabilize the country's monetary system. Aldrich took the Commissioners on a two-year trip to Europe, spending three thousand government dollars. He still has not prepared a report on the results of this trip, nor has he proposed any plan for banking reform.
Senator Aldrich was accompanied to the Hoboken station by his personal secretary Shelton, A. Piatt Andrew, Deputy Treasury Secretary and Special Assistant to the National Currency Commission, Frank Vanderlip, President of National City Bank New York, Henry P. Davison, Senior Partner at JP Morgan Company, generally regarded as Morgan's personal emissary, and Charles D. Norton, President of First National Bank of New York, where Morgan also ruled. Just before the train departed, the group was joined by Benjamin Strong, also known as J. P. Morgan's close associate, and Paul Warburg, who recently emigrated from Germany and went to work at the banking house Kuhn, Loeb & Company. …
Six years later, a financial journalist named Bertie Charles Forbes (who later founded Forbes magazine; the current editor, Malcom Forbes, is his son) wrote:
“Imagine a group of the nation’s greatest bankers, sneaking out of New York in a private train car under cover of night, sneaking hundreds of miles south to begin a mysterious business, sneaking onto an island with no one left but a few servants and there for a whole week in such strict secrecy that none of them once called each other by name, so that the servants could not recognize them and tell the world about this weirdest, most secret expedition in the history of American finance. I do not indulge in fantasies; I am telling the world for the first time the real story of how the famous Aldrich financial report was written, how our new monetary system was founded … Everything was carried out in an atmosphere of the strictest secrecy. The people should not have caught a hint of what was about to happen. Senator Aldrich warned each of them that they must secretly arrive at a private carriage that was to be pulled onto a rarely used platform. The group hit the road. The ubiquitous New York reporters were fooled … Nelson (Aldrich) told Henry, Frank, Paul and Piatt that he was going to keep them locked up on Jekyll Island, away from the rest of the world, until they developed and presented a scientific currency project. systems for the United States, the real birth of the current Federal Reserve, the plan implemented on Jekyll Island with Paul, Frank and Henry … Warburg is the link between the Aldrich system and the current system. He more than anyone else made this system possible in everyday reality. "which should have been submitted to a rarely used platform. The group hit the road. The ubiquitous New York reporters were fooled … Nelson (Aldrich) told Henry, Frank, Paul and Piatt that he was going to keep them locked up on Jekyll Island, away from the rest of the world, until they developed and presented a scientific currency project. systems for the United States, the real birth of the current Federal Reserve, the plan implemented on Jekyll Island with Paul, Frank and Henry … Warburg is the link between the Aldrich system and the current system. He more than anyone else made this system possible in everyday reality. "which should have been submitted to a rarely used platform. The group hit the road. The ubiquitous New York reporters were fooled … Nelson (Aldrich) told Henry, Frank, Paul and Piatt that he was going to keep them locked up on Jekyll Island, away from the rest of the world, until they developed and presented a scientific currency project. systems for the United States, the real birth of the current Federal Reserve, the plan implemented on Jekyll Island with Paul, Frank and Henry … Warburg is the link between the Aldrich system and the current system. He more than anyone else made this system possible in everyday reality. "that he is going to keep them locked up on Jekyll Island, away from the rest of the world, until they develop and submit a draft scientific monetary system for the United States, the real birth of the current Federal Reserve System, a plan implemented on Jekyll Island in conjunction with Paul, Frank and Henry … Warburg is the link between the Aldrich system and the current system. He more than anyone else made this system possible in everyday reality. "that he is going to keep them locked up on Jekyll Island, away from the rest of the world, until they develop and submit a draft scientific monetary system for the United States, the real birth of the current Federal Reserve System, a plan implemented on Jekyll Island in conjunction with Paul, Frank and Henry … Warburg is the link between the Aldrich system and the current system. He more than anyone else made this system possible in everyday reality. "He more than anyone else made this system possible in everyday reality. "He more than anyone else made this system possible in everyday reality."
Senator Nelson Aldrich's official biography reads:
“In the fall of 1910, six men went duck hunting: Aldrich, his secretary Shelton, Andrews, Davison, Vanderlip and Warburg. Journalists were waiting at Brunswick, Georgia station. Mr. Davison went out and spoke to them. The reporters dispersed, and the secret of the strange trip was not revealed. Mr. Aldrich asked him how he did it, but he gave no explanation."
Davison had an excellent reputation for reconciling warring parties, a role he played for J. P. Morgan in settling the 1907 Money Panic. Another Morgan partner, TW Lamont, says, "Henry P. Davison acted as arbiter of the Jekyll Island expedition."
From these materials, the following story can be pieced together. Aldrich's private car, which departed from Hoboken Station with the curtains drawn, took the financiers to Jekyll Island in Georgia. A few years earlier, a very limited group of millionaires led by J. P. Morgan had acquired the island as a winter dacha. They called themselves the "Jekyll Island Hunting Club," and at first the island was only used for hunting, until the millionaires realized that its beautiful climate offered them a warm refuge from the harsh New York winters and began building luxurious mansions, which they called "cottages. ", For the winter holidays of their families. The clubhouse itself, being quite secluded, was sometimes used for bachelor parties and other events unrelated to hunting. In such cases, club memberswho were not invited to these particular picnics were asked not to come for a certain number of days. Before Nelson Aldrich's group left New York, club members were notified that it would be busy for the next two weeks.
The Jekyll Island Club was selected as the site of the plan to control the money and trust of the people of the United States, not only because of its remoteness, but also because it was the private domain of the people who developed the plan. Later, on May 3, 1931, the New York Times noted, commenting on the death of George F. Baker, one of Morgan's closest associates: “The Jekyll Island Club has lost one of its distinguished members. One-sixth of the world's capital is concentrated in the hands of members of the Jekyll Island Club. Membership is inherited only.
Aldrich's group was not interested in hunting. Jekyll Island was chosen as the site of the central bank's development because it provided complete secrecy and also because there was not a single journalist in the area within fifty miles. So strong was the need for secrecy that before arriving on the island, the members of the group agreed not to use their last names during their two-week stay there. Later, the group began to call itself the "Name Club", because mentioning the names of Warburg, Strong, Vanderlip and others was prohibited. The regular staff of the club were sent on a two-week vacation, and for the sake of such an occasion new servants were brought from the mainland who did not know the names of those present. Even if they were interrogated after the Aldrich group went back to New York, they could not name names. This method proved to be so reliable that the club members - those who were actually present on Jekyll Island - later held several more informal meetings in New York.
Why was all this mystery necessary? Why was this trip a thousand miles in a closed carriage to a remote hunting club necessary? Presumably, it was carried out with the aim of developing a government program, preparing a banking reform that would be beneficial to the population of the United States, by order of the National Monetary Commission. Participants were not alien to public charitable deeds. Their names were often featured on brass plaques or on the facades of buildings for which they donated. On Jekyll Island, they did not follow this procedure. No copper plaque was ever erected to commemorate the dedication of those who met at their private hunting club in 1910 to improve the lives of every citizen of the United States.
In fact, no good deeds were performed on Jekyll Island. Aldrich's group went there in secret to privately create banking and currency legislation, which the National Currency Commission was told to openly draft. At stake was the future control of the United States' money and credit. If any real monetary reform were prepared and presented in Congress, it would end the rule of the elite creators of the single world currency. Jekyll Island ensured that a central bank would be established in the United States that would give these bankers everything they always wanted.
As the most technically savvy of those present, Paul Warburg was tasked with preparing most of the draft plan. His work was then to be discussed and reviewed among the rest of the group. Senator Nelson Audrich had to see to it that the completed plan was in a form that he could push through Congress, and the rest of the bankers had to add the necessary details to ensure that they got what they wanted to the completed project in one meeting. … After returning to New York, they might not have the opportunity to meet again. They could not hope to provide such secrecy for their work again.
The Jekyll Island group spent nine days at the club, working hard on their task. Despite the common interests of those present, the work did not always go smoothly. Senator Aldrich, being a domineering man, considered himself the elected leader of the group and could not resist commanding everyone else. Aldrich also felt a bit uncomfortable because he was the only one of the group who was not a professional banker. He had significant banking interests throughout his career, but only as a person who earned income from owning bank shares. He knew little about the technical aspects of financial transactions. His opponent, Paul Warburg, believed that every question that arose in the group required not only a simple answer, but a whole lecture. He rarely missed the opportunity to give colleagues lengthy explanations,to impress them with the depth of their banking knowledge. This was not to the liking of others, and often provoked sharp remarks from Aldrich.
Henry P. Davison's natural diplomacy proved to be the catalyst to keep the work going. Warburg's strong foreign accent annoyed them and constantly reminded them that they must tolerate his presence only because they needed a central bank project to guarantee future profits. Warburg made little effort to iron out their prejudices, and argued with them on any occasion on technical banking issues in which he considered himself a specialist.
There must be great secrecy in all conspiracies
The Jekyll Island "monetary reform" plan was to be presented to Congress as the work of the National Currency Commission. It was necessary that the real authors of the bill remained in the shadows. In the aftermath of the 1907 Panic, public animosity toward bankers was so great that no congressman would dare to vote for a bill that would tarnish Wall Street, no matter who paid his campaign costs. The Jekyll Island project was a central bank project, and this country has a long tradition of fighting against the imposition of a central bank on the American people. It began with Thomas Jefferson's battle against Alexander Hamilton's idea of the First Bank of the United States, backed by James Rothschild. It was followed up by President Andrew Jackson's successful war against Alexander Hamilton's idea of the Second Bank of the United States, where Nicholas Biddle acted as James Rothschild's agent from Paris. The result of this battle was the creation of the Independent Treasury Sub-System, which supposedly served to keep United States funds out of the hands of financiers. Research into the scares of 1873, 1893 and 1907 indicates that they arose from international banking in London. In 1908, the public demanded that Congress pass legislation to prevent the recurrence of artificially imposed financial panics. Now such a monetary reform seemed inevitable. To prevent panic and control this reform, the National Commission on Currency Circulation was created, headed by Nelson Aldrich, who was the majority leader in the Senate.
The main challenge, as Paul Warburg told his colleagues, was the need to avoid the name "Central Bank". For this reason, he decided to use the name "Federal Reserve System". This would mislead the public and no one would think that this is the central bank. However, the Jekyll Island project was still a project of a central bank that performs the basic functions of a central bank, its owners were private individuals who would profit from owning shares. As a currency issuing bank, it would control the country's money and loans.
In the chapter on Jekyll Island in his biography of Aldrich, Stephenson writes of the conference:
“How was the Reserve Bank supposed to be controlled? It was to be controlled by Congress. The government had to be present on the board of directors, it had to keep abreast of all the affairs of the Bank, but the majority of directors had to be elected, directly or indirectly, by the banks of the association."
Thus, the proposed Federal Reserve Bank was to be "controlled by Congress" and accountable to the government, but most directors were elected, directly or indirectly, by the association's banks. In the final version of the Warburg Plan, the Federal Reserve Board of Governors was appointed by the President of the United States, but the actual work of the Board was overseen by the Federal Advisory Board in a meeting with the Governors. The board was elected by the directors of the Federal Reserve Banks and remained unknown to the public.
The next task was to hide the fact that the proposed "Federal Reserve System" would be controlled by the masters of the New York money market. Congressmen from the South and West could not have survived if they had voted for the Wall Street project. Farmers and small businessmen in these regions have been hit hardest by financial panics. Eastern bankers incurred massive discontent, which in the 19th century evolved into a political movement known as "populism." Nicholas Biddle's personal notes, unpublished for more than a century after his death, demonstrate that the Eastern bankers were initially aware of the extent of public outcry against them.
On Jekyll Island, Paul Warburg proposed a major scam that would prevent the country's citizens from realizing that his plan involves the creation of a central bank. It was a regional reserve system. He proposed a system of four (later twelve) branches of the reserve banks located in different parts of the country. Few outside the world of bankers would understand that the existing concentration of the country's monetary and credit structure in New York made the regional reserve system a fiction.
Another proposal put forward by Paul Warburg on Jekyll Island concerned the way in which the administrators of the proposed regional reserve system would be elected. Senator Nelson Aldrich insisted that these positions should not be elected, but appointed, and that Congress should not play a role in their selection. His experience on Capitol Hill showed him that Congress opinion would often run counter to Wall Street's interests, because congressmen from the West and South might want to demonstrate to their constituents that they were protecting them from bankers from the East.
Warburg replied that the governors of the alleged central banks must be approved by the president. This apparent withdrawal of the system from congressional control meant that the Federal Reserve's project was unconstitutional from the outset because the Federal Reserve was to become the currency-issuing bank. The first article of the 8th section of part 5 of the Constitution unconditionally empowers Congress with "the power to mint a coin and regulate its value." Warburg's plan deprived Congress of its sovereignty, and the systems of checks and balances of power approved by Thomas Jefferson in the Constitution were now destroyed. The administrators of the proposed system would control the money and credit of the country, while they themselves would receive approval from the executive branch of the government. The judicial branch (the Supreme Court and so on) was already practically controlled by the executive branch through the presidential appointment of a panel of judges.
Paul Warburg later wrote a voluminous outline of his plan, The Federal Reserve System, Its Origins and Development, approximately 1,750 pages long, but the name Jekyll Island never appears in this text. He narrates (vol. 1, p. 58):
“But the conference ended, after a week of serious discussion, what would become the 'Aldrich Bill' was agreed upon, and a plan was developed that included the 'National Reserve Association', which would create a central reserve organization with flexible issuing power based on gold and commercial paper..
On page 60, Warburg writes: “The results of the conference were completely classified. Even the very fact of this meeting should not have become public knowledge. " He adds in a footnote: "Although eighteen years have passed [sic], I do not feel that I can without hesitation describe this most interesting meeting, in connection with which Senator Aldrich demanded secrecy from all participants."
Forbes's revelation of a secret expedition to Jekyll Island had surprisingly little impact. The material did not go to print until two years after Congress approved the Federal Reserve Act, so it was never read during the period when it could have an impact, that is, during the discussion of the bill in Congress. Forbes's account was also ignored by those who were "in the know" as absurd and simple invention. Stevenson mentions this on page 484 of his book on Aldrich.
“The curious episode about Jekyll Island was generally considered a myth. Forbes got some information from one of the journalists. It vaguely described the story of the island, but it did not make an impression and, in general, was perceived as an anecdote."
The silence of the Jekyll Island conference went in two directions, each of which was successful. The first, as Stevenson mentions, was to disprove the whole story as a romantic fiction that never really happened. Although there were references to Jekyll Island in later books on the Federal Reserve, they also received little public attention. As we have noted, Warburg's extensive work on the Federal Reserve makes no mention of Jekyll Island at all, although he admits that the conference did take place. None of his lengthy speeches or written works contain the words "Jekyll Island", with only one outstanding exception. He agreed to Stevenson's request for a short statement for Aldrich's biography. It appears on page 485 as part of the Warburg Memorandum. In this passage, Warburg writes:"The issue of a single discount rate was discussed and decided on Jekyll Island."
Another member of the Name Club was not so restrained. Frank Vanderlip later published several briefs about the conference. In the Saturday Evening Post of February 9, 1935, on page 25, Vanderlip wrote:
“Despite my views on the value for society of greater publicity in corporate matters, shortly before the end of 1910, a situation arose when I was secretive, like some kind of conspirator … After all, Senator Aldrich's plan would be doomed if someone found out what he called someone from Wall Street to help him prepare his bill, precautions were taken that would have delighted James Stillman (a flamboyant and secretive banker who was president of National City Bank during the Spanish-American War, and who was thought to have helped drag us into this war) … It is no exaggeration to say that our secret expedition to Jekyll Island led to the concept of what ultimately became the Federal Reserve."
On March 27, 1983, in the travel section of The Washington Post, Roy Hoopes writes:
"In 1910, when Aldrich and four financial experts needed a secret meeting place to reform the country's banking system, they went hunting for Jekyll and spent 10 days in the Club's premises, where they developed projects for what would become the Federal Reserve Bank."
Later, Vanderlip wrote in his autobiography From the Country Farmhand to the Financier:
“Our clandestine expedition to Jekyll Island was the occasion for the real concept of what eventually became the Federal Reserve. All the highlights of the Aldrich Plan were incorporated into the Federal Reserve Act when it was passed."
Professor E. R. A Seligman, a member of the J. & W. Seligman international banking family and head of the Department of Economics at Columbia University, wrote an essay published by the Academy of Political Science (Proceedings, Vol. 4, No. 4, pp. 387-90):
“Few people know what the United States owes to Mr. Warburg. After all, it's safe to say that he had more hand in drafting the fundamental provisions of the Federal Reserve Act than anyone else in this country. The Federal Reserve Board is, in fact, in everything but name, the real central bank. In two pillars on reserve management and interest rate policy, the Federal Reserve Act explicitly adopted the Aldrich Bill principle, and those principles, as stated, are the work of Mr. Warburg alone. It must not be forgotten that Mr. Warburg had a practical purpose. Formulating his plans and moving towards their implementation and from time to time slightly changing the recommendations, he had to remember that the introduction of a new concept into the country's consciousness should be gradual,and that his main task was to destroy prejudice and dispel suspicion. Therefore, his plans contained a variety of carefully crafted proposals designed to shield the public from far-fetched dangers and to convince the country that the entire project as a whole was fully feasible. Mr. Warburg hoped that over time it would be possible to remove from the law some of the provisions that were included there, by and large, at his proposal for educational purposes. "which were included there, by and large, at his suggestion for educational purposes. "which were included there, by and large, at his suggestion for educational purposes."
Now that the United States' national debt has surpassed the trillion dollar mark, we can truly acknowledge "how much the United States owes Mr. Warburg." At the time he created the Federal Reserve Act, there was almost no public debt.
Professor Seligman points to Warburg's astonishing foresight that the real task of the Jekyll Island conference was to prepare a bank project that would gradually "shape the country" and "shatter prejudice and dispel suspicion." The campaign to turn the plan into law has succeeded in just that.
