secrets of the federal reserve

8/13/2019 Secrets of the Federal Reserve

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SECRETS

OF THE

FEDERAL RESERVE


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The London ConnectionBy

Eustace Mullins

Dedicated to two of the finest scholars of the twentieth century

EORE ST!M"SO#

and

E$RA "O%#D

who &enerously &a'e of their 'ast (nowled&e to a youn& writer to &uide hi) in afield which he could not ha'e )ana&ed alone*

AC+#O,LEDEME#TS

! wish to than( )y for)er fellow )e)-ers of the staff of the Li-rary of Con&ress

whose 'ery (ind assistance. coo/eration and su&&estions )ade the early 'ersionsof this -oo( /ossi-le* ! also wish to than( the staffs of the #ew-erry Li-rary.

Chica&o. the #ew 0or( City "u-lic Li-rary. the Alder)an Li-rary of the

%ni'ersity of Vir&inia. and the McCor)ic( Li-rary of ,ashin&ton and Lee

%ni'ersity. Le1in&ton. Vir&inia. for their in'alua-le assistance in the co)/letionof thirty years of further research for this definiti'e wor( on the Federal Reser'e

Syste)*

A-out the AuthorEustace Mullins is a 'eteran of the %nited States Air Force. with thirty2ei&ht

)onths of acti'e ser'ice durin& ,orld ,ar !!* A nati'e Vir&inian. he was

educated at ,ashin&ton and Lee %ni'ersity. #ew 0or( %ni'ersity. Ohio

%ni'ersity. the %ni'ersity of #orth Da(ota. the Escuelas des Bellas Artes. SanMi&uel de Allende. Me1ico. and the !nstitute of Conte)/orary Arts. ,ashin&ton.

D*C*

The ori&inal -oo(. /u-lished under the titleMullins On The Federal Reserve,was

co))issioned -y the /oet E3ra "ound in 4567* E3ra "ound was a /olitical

/risoner for thirteen and a half years at St* Eli3a-eth8s Hos/ital. ,ashin&ton. D*C*

9a Federal institution for the insane:* His release was acco)/lished lar&elythrou&h the efforts of Mr* Mullins*

The research at the Li-rary of Con&ress was directed and re'iewed daily -y

eor&e Sti)/son. founder of the #ational "ress Clu- in ,ashin&ton. who) The

New York Times on Se/te)-er ;7. 45


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"u-lished in 45


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Cha/ter Ten The Money reators445

Cha/ter Ele'en#ord Monta%u Norman44

Cha/ter Twel'e The (reat &e'ression46

Cha/ter Thirteen The )*+-s4


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4ress Club( 1ho 1as described b) The #e1 ?or, Times of Sep*ember /(

-.9 "eloved b) ashi+g*o+ +e1spaperme+ as our 1al,i+g Librar) of

Co+gress5( >r$ S*impso+ 1as a highl) regarded refere+ce source i+ *he

Capi*ol$ over+me+* officials( Co+gressme+ a+d repor*ers 1e+* *o him for

i+forma*io+ o+ a+) sub=ec*$"

I did research four hours each da) a* *he Librar) of Co+gress( a+d 1e+* *o

S*$ !li3abe*h5s Hospi*al i+ *he af*er+oo+$ 4ou+d a+d I 1e+* over *he previous

da)5s +o*es$ I *he+ had di++er 1i*h eorge S*impso+ a* Scholl5s Cafe*eria

1hile he 1e+* over m) ma*erial( a+d I *he+ 1e+* bac, *o m) room *o *)pe up

*he correc*ed +o*es$ o*h S*impso+ a+d 4ou+d made ma+) sugges*io+s i+

guidi+g me i+ a field i+ 1hich I had +o previous e;perie+ce$ he+ 4ou+d5s

resources ra+ lo1( I applied *o *he ugge+heim %ou+da*io+( Hu+*i+g*o+

Har*ford %ou+da*io+( a+d o*her fou+da*io+s *o comple*e m) research o+ *he

%ederal Reserve$ !ve+ *hough m) fou+da*io+ applica*io+s 1ere spo+sored b)

*he *hree leadi+g poe*s of America( !3ra 4ou+d( !$!$ Cummi+gs( a+d

!li3abe*h ishop( all of *he fou+da*io+s refused *o spo+sor *his research$ I

*he+ 1ro*e up m) fi+di+gs *o da*e( a+d i+ -.90 bega+ effor*s *o mar,e* *his

ma+uscrip* i+ #e1 ?or,$ !igh*ee+ publishers *ur+ed i* do1+ 1i*hou*

comme+*( bu* *he +i+e*ee+*h( &evi+ arri*)( preside+* of &evi+ Adair

4ublishi+g Compa+)( gave me some frie+dl) advice i+ his office$ "I li,e )our

boo,( bu* 1e ca+5* pri+* i*(" he *old me$ "#ei*her ca+ a+)bod) else i+ #e1

?or,$ h) do+5* )ou bri+g i+ a prospec*us for )our +ovel( a+d I *hi+, 1e

ca+ give )ou a+ adva+ce$ ?ou ma) as 1ell forge* abou* ge**i+g *he %ederal

Reserve boo, published$ I doub* if i* could ever be pri+*ed$"

This 1as devas*a*i+g +e1s( comi+g af*er *1o )ears of i+*e+sive 1or,$ I

repor*ed bac, *o 4ou+d( a+d 1e *ried *o fi+d a publisher i+ o*her par*s of *he

cou+*r)$ Af*er *1o )ears of frui*less submissio+s( *he boo, 1as published i+ asmall edi*io+ i+ -.9 b) *1o of 4ou+d5s disciples( Boh+ asper a+d &avid

Hor*o+( usi+g *heir priva*e fu+ds( u+der *he *i*le >ulli+s o+ *he %ederal

Reserve$ I+ -.92( a seco+d edi*io+( 1i*h u+au*hori3ed al*era*io+s( 1as

published i+ #e1 Berse)( as The %ederal Reserve Co+spirac)$ I+ -.99( uido

Roeder brough* ou* a erma+ edi*io+ i+ Oberammergau( erma+)$ The

boo, 1as sei3ed a+d *he e+*ire edi*io+ of -0(000 copies bur+ed b)

gover+me+* age+*s led b) &r$ O**o Boh+$

The bur+i+g of *he boo, 1as upheld April -( -.6- b) =udge Israel a*3 of

*he avaria+ Supreme Cour*$ The :$S$ over+me+* refused *o i+*erve+e(

because :$S$ High Commissio+er *o erma+)( Bames $ Co+a+* 7preside+* ofHarvard :+iversi*) -.DD *o -.9D8( had approved *he i+i*ial boo, bur+i+g

order$ This is *he o+l) boo, 1hich has bee+ bur+ed i+ erma+) si+ce orld

ar II$ I+ -.6/ a pira*ed edi*io+ of *his boo, appeared i+ Califor+ia$ o*h

*he %I a+d *he :$S$ 4os*al i+spec*ors refused *o ac*( despi*e +umerous

complai+*s from me duri+g *he +e;* decade$ I+ -./0 a +e1 erma+ edi*io+

appeared$ ecause *he :$S$ over+me+* appare+*l) +o lo+ger dic*a*ed *he


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i+*er+al affairs of erma+)( *he ide+*ical boo, 1hich had bee+ bur+ed i+

-.99 +o1 circula*es i+ erma+) 1i*hou* i+*erfere+ce$

I had collabora*ed o+ several boo,s 1i*h >r$ H$L$ Hu+* a+d he sugges*ed

*ha* I should co+*i+ue m) lo+gEdela)ed research o+ *he %ederal Reserve a+d

bri+g ou* a more defi+i*ive versio+ of *his boo,$ I had =us* sig+ed a co+*rac*

*o 1ri*e *he au*hori3ed biograph) of !3ra 4ou+d( a+d *he %ederal Reserve

boo, had *o be pos*po+ed$ >r$ Hu+* passed a1a) before I could ge* bac, *o

m) research( a+d o+ce agai+ I faced *he problem of fi+a+ci+g research for

*he boo,$

>) origi+al boo, had *raced a+d +amed *he shado1) figures i+ *he :+i*ed

S*a*es 1ho pla++ed *he %ederal Reserve Ac*$ I +o1 discovered *ha* *he me+

1hom I e;posed i+ -.9 as *he shado1) figures behi+d *he opera*io+ of *he

%ederal Reserve S)s*em 1ere *hemselves shado1s( *he America+ fro+*s for

*he u+,+o1+ figures 1ho became ,+o1+ as *he "Lo+do+ Co++ec*io+$" I

fou+d *ha* +o*1i*hs*a+di+g our successes i+ *he ars of I+depe+de+ce of

-/- agai+s* !+gla+d( 1e remai+ed a+ eco+omic a+d fi+a+cial colo+) ofrea* ri*ai+$ %or *he firs* *ime( 1e loca*ed *he origi+al s*oc,holders of *he

%ederal Reserve a+,s a+d *raced *heir pare+* compa+ies *o *he Lo+do+

Co++ec*io+$

This research is subs*a+*ia*ed b) ci*a*io+s a+d docume+*a*io+ from

hu+dreds of +e1spapers( periodicals a+d boo,s a+d char*s sho1i+g blood(

marriage( a+d busi+ess rela*io+ships$ >ore *ha+ a *housa+d issues of The

#e1 ?or, Times o+ microfilm have bee+ chec,ed +o* o+l) for origi+al

i+forma*io+( bu* verifica*io+ of s*a*eme+*s from o*her sources$

I* is a *ruism of *he 1ri*i+g professio+ *ha* a 1ri*er has o+l) o+e boo, 1i*hi+

him$ This seems applicable i+ m) case( because I am +o1 i+ *he fif*h decade

of co+*i+uous 1ri*i+g o+ a si+gle sub=ec*( *he i+side s*or) of *he %ederal

Reserve S)s*em$ This boo, 1as from i*s i+cep*io+ commissio+ed a+d guided

b) !3ra 4ou+d$ %our of his pro*FgFs have previousl) bee+ a1arded *he #obel

4ri3e for Li*era*ure( illiam u*ler ?ea*s for his la*er poe*r)( Bames Bo)ce

for ":l)sses"( !r+es* Hemi+g1a) for "The Su+ Also Rises"( a+d T$S$ !llio*

for "The as*e La+d"$ 4ou+d pla)ed a ma=or role i+ *he i+spira*io+ a+d i+

*he edi*i+g of *hese 1or,sEE1hich leads us *o believe *ha* *his prese+* 1or,(

also i+spired b) 4ou+d( represe+*s a+ o+goi+g li*erar) *radi*io+$

Al*hough *his boo, i+ i*s i+cep*io+ 1as e;pec*ed *o be a *or*uous 1or, o+

eco+omic a+d mo+e*ar) *ech+i


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*rial( as a poli*ical priso+er held i+ a+ i+sa+e as)lum a la $ His earlies*

vi+dica*io+ came 1he+ *he gover+me+* age+*s 1ho represe+*ed *he

co+spira*ors refused *o allo1 him *o *es*if) i+ his o1+ defe+seG *he seco+d

vi+dica*io+ came i+ -.9/ 1he+ *hese same age+*s dropped all charges agai+s*

him( a+d he 1al,ed ou* of S*$ !li3abe*h5s Hospi*al( a free ma+ o+ce more$

His *hird a+d fi+al vi+dica*io+ is *his 1or,( 1hich docume+*s ever) aspec* ofhis e;posure of *he ru*hless i+*er+a*io+al fi+a+ciers *o 1hom !3ra 4ou+d

became bu* o+e more vic*im( doomed *o serve )ears as *he >a+ i+ *he Iro+

>as,( because he had dared *o aler* his fello1EAmerica+s *o *heir fur*ive

ac*s of *reaso+ agai+s* all people of *he :+i*ed S*a*es$

I+ m) lec*ures *hroughou* *his +a*io+( a+d i+ m) appeara+ces o+ ma+) radio

a+d *elevisio+ programs( I have sou+ded *he *o;i+ *ha* *he %ederal Reserve

S)s*em is +o* %ederalG i* has +o reservesG a+d i* is +o* a s)s*em a* all( bu*

ra*her( a crimi+al s)+dica*e$ %rom #ovember( -.-0( 1he+ *he co+spira*ors

me* o+ Be,)ll Isla+d( eorgia( *o *he prese+* *ime( *he machi+a*io+s of *he

%ederal Reserve ba+,ers have bee+ shrouded i+ secrec)$ Toda)( *ha* secrec)

has cos* *he America+ people a *hree *rillio+ dollar deb*( 1i*h a++ual i+*eres*

pa)me+*s *o *hese ba+,ers amou+*i+g *o some *hree hu+dred billio+ dollars

per )ear( sums 1hich s*agger *he imagi+a*io+( a+d 1hich i+ *hemselves are

ul*ima*el) u+pa)able$ Officials of *he %ederal Reserve S)s*em rou*i+el) issue

remo+s*ra+ces *o *he public( much as *he Hi+du fa,ir pipes a+ i+sis*e+* *u+e

*o *he da3ed cobra 1hich s1a)s i*s head before him( +o* *o resolve *he

si*ua*io+( bu* *o preve+* i* from s*ri,i+g him$ Such 1as *he soo*hi+g le**er

1ri**e+ b) &o+ald B$ i++( Assis*a+* *o *he oard of over+ors i+ respo+se

*o a+ i+arch -0( -./D$ >r$ i++ s*a*es *ha* "The %ederal Reserve S)s*em 1as

es*ablished b) a+ ac* of Co+gress i+ -.-D a+d is +o* a priva*e corpora*io+5$"

O+ *he +e;* page( >r$ i++ co+*i+ues( "The s*oc, of *he %ederal Reservea+,s is held e+*irel) b) commercial ba+,s *ha* are members of *he %ederal

Reserve S)s*em$" He offers +o e;pla+a*io+ as *o 1h) *he gover+me+* has

+ever o1+ed a si+gle share of s*oc, i+ a+) %ederal Reserve a+,( or 1h) *he

%ederal Reserve S)s*em is +o* a "priva*e corpora*io+" 1he+ all of i*s s*oc, is

o1+ed b) "priva*e corpora*io+s"$

America+ his*or) i+ *he *1e+*ie*h ce+*ur) has recorded *he ama3i+g

achieveme+*s of *he %ederal Reserve ba+,ers$ %irs*( *he ou*brea, of orld

ar I( 1hich 1as made possible b) *he fu+ds available from *he +e1 ce+*ral

ba+, of *he :+i*ed S*a*es$ Seco+d( *he Agricul*ural &epressio+ of -.0$

Third( *he lac, %rida) Crash o+ all S*ree* of Oc*ober( -.. a+d *hee+sui+g rea* &epressio+$ %our*h( orld ar II$ %if*h( *he co+versio+ of *he

asse*s of *he :+i*ed S*a*es a+d i*s ci*i3e+s from real proper*) *o paper asse*s

from -.29 *o *he prese+*( *ra+sformi+g a vic*orious America a+d foremos*

1orld po1er i+ -.29 *o *he 1orld5s larges* deb*or +a*io+ i+ -..0$ Toda)( *his

+a*io+ lies i+ eco+omic rui+s( devas*a*ed a+d des*i*u*e( i+ much *he same dire

s*rai*s i+ 1hich erma+) a+d Bapa+ fou+d *hemselves i+ -.29$ ill

America+s ac* *o rebuild our +a*io+( as erma+) a+d Bapa+ have do+e 1he+


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*he) faced *he ide+*ical co+di*io+s 1hich 1e +o1 faceEEor 1ill 1e co+*i+ue *o

be e+slaved b) *he ab)lo+ia+ deb* mo+e) s)s*em 1hich 1as se* up b) *he

%ederal Reserve Ac* i+ -.-D *o comple*e our *o*al des*ruc*io+ This is *he

o+l) aga3i+e advised i*s readers

*o read *heir revie1 a+d save *heir mo+e)( poi+*i+g ou* *ha* "a reader 1ill

discover +o secre*s" a+d *ha* "This is o+e of *hose boo,s 1hose fa+fares far

e;ceed *heir meri*$" This 1as +o* accide+*al( as *his overblo1+ 1hi*e1ash of

*he %ederal Reserve ba+,ers 1as published b) *he mos* famous +o+boo,

publisher i+ *he 1orld$

Af*er m) i+i*ial shoc, a* discoveri+g *ha* *he mos* i+flue+*ial li*erar)

perso+ali*) of *he *1e+*ie*h ce+*ur)( !3ra 4ou+d( 1as impriso+ed i+ "*he

Hellhole" i+ ashi+g*o+( I immedia*el) 1ro*e for assis*a+ce *o a all S*ree*

fi+a+cier a* 1hose es*a*e I had fre

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*he) 1ere doi+g some*hi+g mome+*ous$ O+e ca++o* fa*hom me+5s mo*ives

a+d *his pair probabl) believed i+ 1ha* *he) 1ere up *o$ ha* *he) did +o*

believe i+ 1as represe+*a*ive gover+me+*$ The) believed i+ gover+me+* b)

a+ u+co+*rolled oligarch) 1hose ac*s 1ould o+l) become appare+* af*er a+

i+*erval so lo+g *ha* *he elec*ora*e 1ould be forever i+capable of doi+g

a+)*hi+g efficie+* *o remed) depreda*io+s$

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11/171

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12/171

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7A:THOR5S #OT! &r$ 4ou+d 1ro*e *his i+*roduc*io+ for *he earlies*

versio+ of *his boo,( published b) asper a+d Hor*o+( #e1 ?or,( -.9$

ecause he 1as bei+g held as a poli*ical priso+er 1i*hou* *rial b) *he %ederal

over+me+*( he could +o* afford *o allo1 his +ame *o appear o+ *he boo,

because of addi*io+al reprisals agai+s* him$ #ei*her could he allo1 *he boo,

*o be dedica*ed *o him( al*hough he had commissio+ed i*s 1ri*i+g$ The

au*hor is gra*ified *o be able *o remed) *hese +ecessar) omissio+s( *hir*)E

*hree )ears af*er *he eve+*s$8

B!%%!RSO#5S O4I#IO# O# TH!

CO#STIT:TIO#ALIT? O% TH! A#

%ebruar) -9( -J.-

7The ri*i+gs of Thomas Befferso+( ed$ b) H$ !$ ergh( 'ol$ III( p$ -29 ff$8

The bill for es*ablishi+g a +a*io+al ba+,( i+ -J.-( u+der*a,es( amo+g o*her

*hi+gs(EE

-$ To form *he subscribers i+*o a corpora*io+$

$ To e+able *hem( i+ *heir corpora*e capaci*ies( *o receive gra+*s of la+dsG

a+d( so far( is agai+s* *he la1s of mor*mai+$

D$ To ma,e alie+ subscribers capable of holdi+g la+dsG a+d so far is agai+s*

*he la1s of alie+age$

2$ To *ra+smi* *hese la+ds( o+ *he dea*h of a proprie*or( *o a cer*ai+ li+e of

successorsG a+d so far( cha+ges *he course of desce+*s$

9$ To pu* *he la+ds ou* of *he reach of forfei*ure( or eschea*G a+d so far( is

agai+s* *he la1s of forfei*ure a+d eschea*$

6$ To *ra+smi* perso+al cha**els *o successors( i+ a cer*ai+ li+eG a+d so far( is

agai+s* *he la1s of dis*ribu*io+$

J$ To give *hem *he sole a+d e;clusive righ* of ba+,i+g( u+der *he +a*io+al

au*hori*)G a+d( so far( is agai+s* *he la1s of mo+opol)$

/$ To commu+ica*e *o *hem a po1er *o ma,e la1s( paramou+* *o *he la1s of

*he s*a*esG for so *he) mus* be co+s*rued( *o pro*ec* *he i+s*i*u*io+ from *he

co+*rol of *he s*a*e legisla*uresG a+d so probabl) *he) 1ill be co+s*rued$


13/171

I co+sider *he fou+da*io+ of *he Co+s*i*u*io+ as laid o+ *his grou+dEE*ha* all

po1ers +o* delega*ed *o *he :+i*ed S*a*es( b) *he Co+s*i*u*io+( +or

prohibi*ed b) i* *o *he s*a*es( are reserved *o *he s*a*es( or *o *he people 7-*h

ame+d$8$ To *a,e a si+gle s*ep be)o+d *he bou+daries *hus speciall) dra1+

arou+d *he po1ers of Co+gress( is *o *a,e possessio+ of a bou+dless field of

po1er( +o lo+ger suscep*ible of a+) defi+i*io+$

The i+corpora*io+ of a ba+,( a+d *he po1ers assumed b) *his bill( have +o*(

i+ m) opi+io+( bee+ delega*ed *o *he :+i*ed S*a*es b) *he Co+s*i*u*io+$

CHA4T!R O#!

Be,)ll Isla+d"The ma**er of a u+iform discou+* ra*e 1as discussed a+d se**led a* Be,)ll

Isla+d$"EE4aul >$ arburg-

O+ *he +igh* of #ovember ( -.-0( a group of +e1spaper repor*ers s*ood

disco+sola*el) i+ *he rail1a) s*a*io+ a* Hobo,e+( #e1 Berse)$ The) had =us*

1a*ched a delega*io+ of *he +a*io+5s leadi+g fi+a+ciers leave *he s*a*io+ o+ a

secre* missio+$ I* 1ould be )ears before *he) discovered 1ha* *ha* missio+

1as( a+d eve+ *he+ *he) 1ould +o* u+ders*a+d *ha* *he his*or) of *he :+i*ed

S*a*es u+der1e+* a dras*ic cha+ge af*er *ha* +igh* i+ Hobo,e+$

The delega*io+ had lef* i+ a sealed rail1a) car( 1i*h bli+ds dra1+( for a+

u+disclosed des*i+a*io+$ The) 1ere led b) Se+a*or #elso+ Aldrich( head of

*he #a*io+al >o+e*ar) Commissio+$ 4reside+* Theodore Roosevel* had

sig+ed i+*o la1 *he bill crea*i+g *he #a*io+al >o+e*ar) Commissio+ i+ -.0/(

af*er *he *ragic 4a+ic of -.0J had resul*ed i+ a public ou*cr) *ha* *he +a*io+5s

mo+e*ar) s)s*em be s*abili3ed$ Aldrich had led *he members of *he

Commissio+ o+ a *1oE)ear *our of !urope( spe+di+g some *hree hu+dred

*housa+d dollars of public mo+e)$ He had +o* )e* made a repor* o+ *he

resul*s of *his *rip( +or had he offered a+) pla+ for ba+,i+g reform$

Accompa+)i+g Se+a*or Aldrich a* *he Hobo,e+ s*a*io+ 1ere his priva*e

secre*ar)( Shel*o+G A$ 4ia** A+dre1( Assis*a+* Secre*ar) of *he Treasur)( a+d

Special Assis*a+* of *he #a*io+al >o+e*ar) Commissio+G %ra+, 'a+derlip(

preside+* of *he #a*io+al Ci*) a+, of #e1 ?or,( He+r) 4$ &aviso+( se+ior

par*+er of B$4$ >orga+ Compa+)( a+d ge+erall) regarded as >orga+5sperso+al emissar)G a+d Charles &$ #or*o+( preside+* of *he >orga+E

domi+a*ed %irs* #a*io+al a+, of #e1 ?or,$ Boi+i+g *he group =us* before

*he *rai+ lef* *he s*a*io+ 1ere e+=ami+ S*ro+g( also ,+o1+ as a lieu*e+a+* of

B$4$ >orga+G a+d 4aul arburg( a rece+* immigra+* from erma+) 1ho

had =oi+ed *he ba+,i+g house of uh+( Loeb

KKKKKKKKKKKKKKKKKKKKKKKKKK


14/171

- 4rof$ #a*ha+iel righ* S*ephe+so+( 4aul arburg5s >emora+dum(

#elso+ Aldrich A Leader i+ America+ 4oli*ics( Scrib+ers( #$?$ -.D0

-

a+d Compa+)( #e1 ?or, as a par*+er ear+i+g five hu+dred *housa+d dollars

a )ear$

Si; )ears la*er( a fi+a+cial 1ri*er +amed er*ie Charles %orbes 71ho la*er

fou+ded *he %orbes >aga3i+eG *he prese+* edi*or( >alcom %orbes( is his so+8(

1ro*e

"4ic*ure a par*) of *he +a*io+5s grea*es* ba+,ers s*eali+g ou* of

#e1 ?or, o+ a priva*e railroad car u+der cover of dar,+ess(

s*eal*hil) hiei+g hu+dred of miles Sou*h( embar,i+g o+ a

m)s*erious

lau+ch( s+ea,i+g o+*o a+ isla+d deser*ed b) all bu* a fe1 serva+*s( livi+g

*here a full 1ee, u+der

such rigid secrec) *ha* *he +ames of +o* o+e of *hem 1as o+ce me+*io+ed les*

*he serva+*s lear+

*he ide+*i*) a+d disclose *o *he 1orld *his s*ra+ges*( mos* secre* e;pedi*io+ i+

*he his*or) of

America+ fi+a+ce$ I am +o* roma+ci+gG I am givi+g *o *he 1orld( for *he firs*

*ime( *he real s*or)

of ho1 *he famous Aldrich curre+c) repor*( *he fou+da*io+ of our +e1

curre+c) s)s*em( 1as

1ri**e+ $ $ $ $ The u*mos* secrec) 1as e+=oi+ed upo+ all$ The public mus* +o*

glea+ a hi+* of 1ha*

1as *o be do+e$ Se+a*or Aldrich +o*ified each o+e *o go


15/171


16/171

?or,( *he club5s members had bee+ +o*ified *ha* *he club 1ould be occupied

for *he +e;* *1o 1ee,s$

The Be,)ll Isla+d Club 1as chose+ as *he place *o draf* *he pla+ for co+*rol

of *he mo+e) a+d credi* of *he people of *he :+i*ed S*a*es( +o* o+l) because

of i*s isola*io+( bu* also because i* 1as *he priva*e preserve of *he people 1ho

1ere draf*i+g *he pla+$ The #e1 ?or, Times la*er +o*ed( o+ >a) D( -.D-( i+

comme+*i+g o+ *he dea*h of eorge %$ a,er( o+e of B$4$ >orga+5s closes*

associa*es( *ha* "Be,)ll Isla+d Club has los* o+e of i*s mos* dis*i+guished

members$ O+eEsi;*h of *he *o*al 1eal*h of *he 1orld 1as represe+*ed b) *he

members of *he Be,)ll Isla+d Club$" >embership 1as b) i+heri*a+ce o+l)$

The Aldrich group had +o i+*eres* i+ hu+*i+g$ Be,)ll Isla+d 1as chose+ for

*he si*e of *he prepara*io+ of *he ce+*ral ba+, because i* offered comple*e

privac)( a+d because *here 1as +o* a =our+alis* 1i*hi+ fif*) miles$ Such 1as

*he +eed for secrec) *ha* *he members of *he par*) agreed( before arrivi+g a*

Be,)ll Isla+d( *ha* +o las* +ames 1ould be used a* a+) *ime duri+g *heir *1o

1ee, s*a)$ The group la*er referred *o *hemselves as *he %irs* #ame Club( as*he las* +ames of arburg( S*ro+g( 'a+derlip a+d *he o*hers 1ere

prohibi*ed duri+g *heir s*a)$ The cus*omar) a**e+da+*s had bee+ give+ *1o

1ee, vaca*io+s from *he club( a+d +e1 serva+*s brough* i+ from *he

mai+la+d for *his occasio+ 1ho did +o* ,+o1 *he +ames of a+) of *hose

prese+*$ !ve+ if *he) had bee+ i+*erroga*ed af*er *he Aldrich par*) 1e+*

bac, *o #e1 ?or,( *he) could +o* have give+ *he +ames$ This arra+geme+*

proved *o be so sa*isfac*or) *ha* *he members( limi*ed *o *hose 1ho had

ac*uall) bee+ prese+* a* Be,)ll Isla+d( la*er had a +umber of i+formal ge*E

*oge*hers i+ #e1 ?or,$

h) all *his secrec) h) *his *housa+d mile *rip i+ a closed rail1a) car *o aremo*e hu+*i+g club Os*e+sibl)( i* 1as *o carr) ou* a program of public

service( *o prepare ba+,i+g reform 1hich 1ould be a boo+ *o *he people of

*he :+i*ed S*a*es( 1hich had bee+ ordered b) *he #a*io+al

D

>o+e*ar) Commissio+$ The par*icipa+*s 1ere +o s*ra+gers *o public

be+efac*io+s$ :suall)( *heir +ames 1ere i+scribed o+ brass pla


17/171

crea*ors$ Be,)ll Isla+d e+sured *ha* a ce+*ral ba+, 1ould be es*ablished i+

*he :+i*ed S*a*es 1hich 1ould give *hese ba+,ers ever)*hi+g *he) had al1a)s

1a+*ed$

As *he mos* *ech+icall) proficie+* of *hose prese+*( 4aul arburg 1as

charged 1i*h doi+g mos* of *he draf*i+g of *he pla+$ His 1or, 1ould *he+ be

discussed a+d go+e over b) *he res* of *he group$ Se+a*or #elso+ Aldrich 1as

*here *o see *ha* *he comple*ed pla+ 1ould come ou* i+ a form 1hich he could

ge* passed b) Co+gress( a+d *he o*her ba+,ers 1ere *here *o i+clude

1ha*ever de*ails 1ould be +eeded *o be cer*ai+ *ha* *he) go* ever)*hi+g *he)

1a+*ed( i+ a fi+ished draf* composed duri+g a o+e*ime s*a)$ Af*er *he)

re*ur+ed *o #e1 ?or,( *here could be +o seco+d ge* *oge*her *o re1or, *heir

pla+$ The) could +o* hope *o ob*ai+ such secrec) for *heir 1or, o+ a seco+d

=our+e)$

The Be,)ll Isla+d group remai+ed a* *he club for +i+e da)s( 1or,i+g

furiousl) *o comple*e *heir *as,$ &espi*e *he commo+ i+*eres*s of *hose

prese+*( *he 1or, did +o* proceed 1i*hou* fric*io+$ Se+a*or Aldrich( al1a)s adomi+eeri+g perso+( co+sidered himself *he chose+ leader of *he group( a+d

could +o* help orderi+g ever)o+e else abou*$ Aldrich also fel* some1ha* ou*

of place as *he o+l) member 1ho 1as +o* a professio+al ba+,er$ He had had

subs*a+*ial ba+,i+g i+*eres*s *hroughou* his career( bu* o+l) as a perso+ 1ho

profi*ed from his o1+ership of ba+, s*oc,$ He ,+e1 li**le abou* *he *ech+ical

aspec*s of fi+a+cial opera*io+s$ His opposi*e +umber( 4aul arburg( believed

*ha* ever)


18/171

pla+ 1as a ce+*ral ba+, pla+( a+d i+ *his cou+*r) *here 1as a lo+g *radi*io+

of s*ruggle agai+s* i+flic*i+g a ce+*ral ba+, o+ *he America+ people$ I* had

begu+ 1i*h Thomas Befferso+5s figh* agai+s* Ale;a+der Hamil*o+5s scheme

for *he %irs* a+, of *he :+i*ed S*a*es( bac,ed b) Bames Ro*hschild$ I* had

co+*i+ued 1i*h 4reside+* A+dre1 Bac,so+5s successful 1ar agai+s*

Ale;a+der Hamil*o+5s scheme for *he Seco+d a+, of *he :+i*ed S*a*es( i+1hich #icholas iddle 1as ac*i+g as *he age+* for Bames Ro*hschild of 4aris$

The resul* of *ha* s*ruggle 1as *he crea*io+ of *he I+depe+de+* SubETreasur)

S)s*em( 1hich supposedl) had served *o ,eep *he fu+ds of *he :+i*ed S*a*es

ou* of *he ha+ds of *he fi+a+ciers$ A s*ud) of *he pa+ics of -/JD( -/.D( a+d

-.0J i+dica*es *ha* *hese pa+ics 1ere *he resul* of *he i+*er+a*io+al ba+,ers5

opera*io+s i+ Lo+do+$ The public 1as dema+di+g i+ -.0/ *ha* Co+gress

e+ac* legisla*io+ *o preve+* *he recurre+ce of ar*ificiall) i+duced mo+e)

pa+ics$ Such mo+e*ar) reform +o1 seemed i+evi*able$ I* 1as *o head off a+d

co+*rol such reform *ha* *he #a*io+al >o+e*ar) Commissio+ had bee+ se* up

1i*h #elso+ Aldrich a* i*s head( si+ce he 1as ma=ori*) leader of *he Se+a*e$

The mai+ problem( as 4aul arburg i+formed his colleagues( 1as *o avoid

*he +ame "Ce+*ral a+,"$ %or *ha* reaso+( he had decided upo+ *he

desig+a*io+ of "%ederal Reserve S)s*em"$ This 1ould deceive *he people i+*o

*hi+,i+g i* 1as +o* a ce+*ral ba+,$ Ho1ever( *he Be,)ll Isla+d pla+ 1ould be

a ce+*ral ba+, pla+( fulfilli+g *he mai+ fu+c*io+s of a ce+*ral ba+,G i* 1ould

be o1+ed b) priva*e i+dividuals 1ho 1ould profi* from o1+ership of shares$

As a ba+, of issue( i* 1ould co+*rol *he +a*io+5s mo+e) a+d credi*$

I+ *he chap*er o+ Be,)ll Isla+d i+ his biograph) of Aldrich( S*ephe+so+

1ri*es of *he co+fere+ce

"Ho1 1as *he Reserve a+, *o be co+*rolled I* mus* be co+*rolled b)Co+gress$ The gover+me+*

1as *o be represe+*ed i+ *he board of direc*ors( i* 1as *o have full ,+o1ledge

of all *he a+,5s(

affairs( bu* a ma=ori*)


9 Clare+do+( His*$ Reb$ -62J

9

of *he direc*ors 1ere *o be chose+( direc*l) or i+direc*l)( b) *he ba+,s of *he

associa*io+$"6

Thus *he proposed %ederal Reserve a+, 1as *o be "co+*rolled b)

Co+gress" a+d a+s1erable *o *he gover+me+*( bu* *he ma=ori*) of *he

direc*ors 1ere *o be chose+( "direc*l) or i+direc*l)" b) *he ba+,s of *he

associa*io+$ I+ *he fi+al refi+eme+* of arburg5s pla+( *he %ederal Reserve


19/171

oard of over+ors 1ould be appoi+*ed b) *he 4reside+* of *he :+i*ed

S*a*es( bu* *he real 1or, of *he oard 1ould be co+*rolled b) a %ederal

Advisor) Cou+cil( mee*i+g 1i*h *he over+ors$ The Cou+cil 1ould be chose+

b) *he direc*ors of *he *1elve %ederal Reserve a+,s( a+d 1ould remai+

u+,+o1+ *o *he public$

The +e;* co+sidera*io+ 1as *o co+ceal *he fac* *ha* *he proposed "%ederal

Reserve S)s*em" 1ould be domi+a*ed b) *he mas*ers of *he #e1 ?or, mo+e)

mar,e*$ The Co+gressme+ from *he Sou*h a+d *he es* could +o* survive if

*he) vo*ed for a all S*ree* pla+$ %armers a+d small busi+essme+ i+ *hose

areas had suffered mos* from *he mo+e) pa+ics$ There had bee+ grea*

popular rese+*me+* agai+s* *he !as*er+ ba+,ers( 1hich duri+g *he

+i+e*ee+*h ce+*ur) became a poli*ical moveme+* ,+o1+ as "populism"$ The

priva*e papers of #icholas iddle( +o* released u+*il more *ha+ a ce+*ur)

af*er his dea*h( sho1 *ha*


20/171

Co+gress of i*s sovereig+*)( a+d *he s)s*ems of chec,s a+d bala+ces of po1er

se* up b) Thomas Befferso+ i+ *he Co+s*i*u*io+ 1ould +o1 be des*ro)ed$

Admi+is*ra*ors of *he proposed s)s*em 1ould co+*rol *he +a*io+5s mo+e) a+d

credi*( a+d 1ould *hemselves be approved b) *he e;ecu*ive depar*me+* of *he

gover+me+*$ The =udicial depar*me+* 7*he Supreme Cour*( e*c$8 1as alread)

vir*uall) co+*rolled b) *he e;ecu*ive depar*me+* *hrough preside+*ialappoi+*me+* *o *he be+ch$

4aul arburg la*er 1ro*e a massive e;posi*io+ of his pla+( The %ederal

Reserve S)s*em( I*s Origi+ a+d ro1*hJ of some -J90 pages( bu* *he +ame

"Be,)ll Isla+d" appears +o1here i+ *his *e;*$ He does s*a*e 7'ol$ -( p$ 9/8

"u* *he+ *he co+fere+ce closed( af*er a 1ee, of ear+es* delibera*io+( *he

rough draf* of 1ha* la*er

became *he Aldrich ill had bee+ agreed upo+( a+d a pla+ had

bee+ ou*li+ed 1hich provided for a #a*io+al Reserve

Associa*io+(5 mea+i+g a ce+*ral reserve orga+i3a*io+ 1i*h a+elas*ic +o*e issue based o+ gold a+d commercial paper$"

O+ page 60( arburg 1ri*es( "The resul*s of *he co+fere+ce 1ere e+*irel)

co+fide+*ial$ !ve+ *he fac* *here had bee+ a mee*i+g 1as +o* permi**ed *o

become public$" He adds i+ a foo*+o*e( "Though eigh*ee+ MsicN )ears have

si+ce go+e b)( I do +o* feel free *o give a descrip*io+ of *his mos* i+*eres*i+g

co+fere+ce co+cer+i+g 1hich Se+a*or Aldrich pledged all par*icipa+*s *o

secrec)$"

$C$ %orbes5 revela*io+/ of *he secre* e;pedi*io+ *o Be,)ll Isla+d( had had

surprisi+gl) li**le impac*$ I* did +o* appear i+ pri+* u+*il *1o )ears af*er *he

%ederal Reserve Ac* had bee+ passed b) Co+gress( he+ce i* 1as +ever readduri+g *he period 1he+ i* could have had a+ effec*( *ha*


J 4aul arburg( The %ederal Reserve S)s*em( I*s Origi+ a+d ro1*h(

'olume I( p$ 9/( >acmilla+( #e1 ?or,( -.D0

/ C:RR!#T O4I#IO#( &ecember( -.-6( p$ D/

J

is( duri+g *he Co+gressio+al deba*e o+ *he bill$ %orbes5 s*or) 1as alsodismissed( b) *hose "i+ *he ,+o1(" as prepos*erous( a+d a mere i+ve+*io+$

S*ephe+so+ me+*io+s *his o+ page 2/2 of his boo, abou* Aldrich$.

"This curious episode of Be,)ll Isla+d has bee+ ge+erall) regarded as a m)*h$

$C$ %orbes go*

some i+forma*io+ from o+e of *he repor*ers$ I* *old i+ vague ou*li+e *he

Be,)ll Isla+d s*or)( bu*


21/171

made +o impressio+ a+d 1as ge+erall) regarded as a mere )ar+$"

The coverup of *he Be,)ll Isla+d co+fere+ce proceeded alo+g *1o li+es( bo*h

of 1hich 1ere successful$ The firs*( as S*ephe+so+ me+*io+s( 1as *o dismiss

*he e+*ire s*or) as a roma+*ic co+coc*io+ 1hich +ever ac*uall) *oo, place$

Al*hough *here 1ere brief refere+ces *o Be,)ll Isla+d i+ la*er boo,s

co+cer+i+g *he %ederal Reserve S)s*em( *hese also a**rac*ed li**le public

a**e+*io+$ As 1e have +o*ed( arburg5s massive a+d supposedl) defi+i*e

1or, o+ *he %ederal Reserve S)s*em does +o* me+*io+ Be,)ll Isla+d a* all(

al*hough he does admi* *ha* a co+fere+ce *oo, place$ I+ +o+e of his

volumi+ous speeches or 1ri*i+gs do *he 1ords "Be,)ll Isla+d" appear( 1i*h a

si+gle +o*able e;cep*io+$ He agreed *o 4rofessor S*ephe+so+5s rearch J( -./D( "%ollo1 The

Rich *o Be,)ll Isla+d"( Ro) Hoopes 1ri*es

"I+ -.-0( 1he+ Aldrich a+d four fi+a+cial e;per*s 1a+*ed a place *o mee* i+

secre* *o reform *he

cou+*r)5s ba+,i+g s)s*em( *he) fa,ed a hu+*i+g *rip *o Be,)ll a+d for -0 da)s

holed up i+ *he


22/171

Clubhouse( 1here *he) made pla+s for 1ha* eve+*uall) 1ould become *he

%ederal Reserve a+,$"


. #a*ha+iel righ* S*ephe+so+( #elso+ $ Aldrich( A Leader i+ America+

4oli*ics( Scrib+ers( #$?$ -.D0( Chap$ I' "Be,)ll Isla+d" p$ DJ.

/

'a+derlip la*er 1ro*e i+ his au*obiograph)( %rom %armbo) *o %i+a+cier-0

"Our secre* e;pedi*io+ *o Be,)ll Isla+d 1as *he occasio+ of *he ac*ual

co+cep*io+ of 1ha*

eve+*uall) became *he %ederal Reserve S)s*em$ The esse+*ial poi+*s of *he

Aldrich 4la+ 1ere

all co+*ai+ed i+ *he %ederal Reserve Ac* as i* 1as passed$"

4rofessor !$R$A$ Seligma+( a member of *he i+*er+a*io+al ba+,i+g famil) of

B$ $ Seligma+( a+d head of *he &epar*me+* of !co+omics a* Columbia

:+iversi*)( 1ro*e i+ a+ essa) published b) *he Academ) of 4oli*ical Scie+ce(

4roceedi+gs( v$ 2( #o$ 2( p$ D/JE.0

"I* is ,+o1+ *o a ver) fe1 ho1 grea* is *he i+deb*ed+ess of *he :+i*ed S*a*es

*o >r$ arburg$ %or

i* ma) be said 1i*hou* fear of co+*radic*io+ *ha* i+ i*s fu+dame+*al fea*ures

*he %ederal Reserve

Ac* is *he 1or, of >r$ arburg more *ha+ a+) o*her ma+ i+ *he cou+*r)$

The e;is*e+ce of a

%ederal Reserve oard crea*es( i+ ever)*hi+g bu* i+ +ame( a real ce+*ral

ba+,$ I+ *he *1o

fu+dame+*als of comma+d of reserves a+d of a discou+* polic)( *he %ederal

Reserve Ac* has

fra+,l) accep*ed *he pri+ciple of *he Aldrich ill( a+d *hese

pri+ciples( as has bee+ s*a*ed( 1ere *he crea*io+ of >r$

arburg a+d >r$ arburg alo+e$ I* mus* +o* be forgo**e+*ha* >r$ arburg had a prac*ical ob=ec* i+ vie1$ I+

formula*i+g his pla+s a+d i+ adva+ci+g i+ *hem sligh*l)

var)i+g

sugges*io+s from *ime *o *ime( i* 1as i+cumbe+* o+ him *o remember *ha* *he

educa*io+ of *he


23/171

cou+*r) mus* be gradual a+d *ha* a large par* of *he *as, 1as

*o brea, do1+ pre=udices a+d remove suspicio+$ His pla+s

*herefore co+*ai+ed all sor*s of elabora*e sugges*io+s desig+ed

*o guard *he public agai+s* fa+cied da+gers a+d *o persuade

*he cou+*r) *ha* *he ge+eral scheme 1as a* all prac*icable$ I*

1as *he hope of >r$ arburg *ha* 1i*h *he lapse of *ime i*migh* be possible *o elimi+a*e from *he la1 a fe1 clauses 1hich

1ere i+ser*ed largel) a* his sugges*io+ for educa*io+al

purposes$"

#o1 *ha* *he public deb* of *he :+i*ed S*a*es has passed a *rillio+ dollars( 1e

ma) i+deed admi* "ho1 grea* is *he i+deb*ed+ess of *he :+i*ed S*a*es *o >r$

arburg$" A* *he *ime he 1ro*e *he %ederal Reserve Ac*( *he public deb*

1as almos* +o+e;is*e+*$

4rofessor Seligma+ poi+*s ou* arburg5s remar,able prescie+ce *ha* *he

real *as, of *he members of *he Be,)ll Isla+d co+fere+ce 1as *o prepare a

ba+,i+g pla+ 1hich 1ould graduall) "educa*e *he cou+*r)" a+d "brea,do1+ pre=udices a+d remove suspicio+"$ The campaig+ *o e+ac* *he pla+ i+*o

la1 succeeded i+ doi+g =us* *ha*$


-0 %ra+, 'a+derlip( %rom %armbo) *o %i+a+cier

.

CHA4T!R TO

The Aldrich 4la+"%i+a+ce a+d *he *ariff are reserved b) #elso+ Aldrich as falli+g 1i*hi+ his

sole purvie1 a+d =urisdic*io+$ >r$ Aldrich is e+deavori+g *o devise( *hrough

*he #a*io+al >o+e*ar) Commissio+( a ba+,i+g a+d curre+c) la1$ A grea*

ma+) hu+dred *housa+d perso+s are firml) of *he opi+io+ *ha* >r$ Aldrich

sums up i+ his perso+ali*) *he grea*es* a+d mos* si+is*er me+ace *o *he

popular 1elfare of *he :+i*ed S*a*es$ !r+es* #e1ma+ rece+*l) said( ha*

*he Sou*h visi*s o+ *he #egro i+ a poli*ical 1a)( Aldrich 1ould me*e ou* *o

*he mudsills of *he #or*h( if he could devise a safe a+d prac*ical 1a) *oaccomplish i*$5"EEHarper5s ee,l)( >a) J( -.-0$"

The par*icipa+*s i+ *he Be,)ll Isla+d co+fere+ce re*ur+ed *o #e1 ?or, *o

direc* a +a*io+1ide propaga+da campaig+ i+ favor of *he "Aldrich 4la+"$

Three of *he leadi+g u+iversi*ies( 4ri+ce*o+( Harvard( a+d *he :+iversi*) of

Chicago( 1ere used as *he rall)i+g poi+*s for *his propaga+da( a+d +a*io+al

ba+,s had *o co+*ribu*e *o a fu+d of five millio+ dollars *o persuade *he


24/171

America+ public *ha* *his ce+*ral ba+, pla+ should be e+ac*ed i+*o la1 b)

Co+gress$

oodro1 ilso+( gover+or of #e1 Berse) a+d former preside+* of 4ri+ce*o+

:+iversi*)( 1as e+lis*ed as a spo,esma+ for *he Aldrich 4la+$ &uri+g *he

4a+ic of -.0J( ilso+ had declared( "All *his *rouble could be aver*ed if 1e

appoi+*ed a commi**ee of si; or seve+ publicEspiri*ed me+ li,e B$4$ >orga+

*o ha+dle *he affairs of our cou+*r)$"

I+ his biograph) of #elso+ Aldrich i+ -.D0( S*ephe+so+ sa)s

"A pamphle* 1as issued Ba+uar) -6( -.--( Sugges*ed 4la+ for >o+e*ar)

Legisla*io+5( b) Ho+$ #elso+ Aldrich( based o+ Be,)ll Isla+d co+clusio+s$"

S*ephe+so+ sa)s o+ page D//( "A+ orga+i3a*io+ for fi+a+cial progress has

bee+ formed$ >r$ arburg i+*roduced a resolu*io+ au*hori3i+g *he

es*ablishme+* of *he Ci*i3e+s5 League( la*er *he #a*io+al Ci*i3e+s League $ $ $

4rofessor Laughli+ of *he :+iversi*) of Chicago 1as give+ charge of *he

League5s propaga+da$"--

I* is +o*able *ha* S*ephe+so+ charac*eri3es *he 1or, of *he #a*io+al Ci*i3e+s

League as "propaga+da"( i+ li+e 1i*h Seligma+5s e;posi*io+ of


-- #a*ha+iel righ* S*ephe+so+( #elso+ $ Aldrich( A Leader i+ America+

4oli*ics( Scrib+ers( #$?$ -.D0

-0

arburg5s 1or, as "*he educa*io+ of *he cou+*r)" a+d "*o brea, do1+

pre=udices"$

>uch of *he five millio+ dollars of *he ba+,ers slush fu+d 1as spe+* u+der

*he auspices of *he #a*io+al Ci*i3e+s5 League( 1hich 1as made up of college

professors$ The *1o mos* *ireless propaga+dis*s for *he Aldrich 4la+ 1ere

4rofessor O$>$ Sprague of Harvard( a+d B$ Laure+ce Laughli+ of *he

:+iversi*) of Chicago$

Co+gressma+ Charles A$ Li+dbergh( Sr$( +o*es

"B$ Laure+ce Laughli+( Chairma+ of *he !;ecu*ive Commi**ee of *he

#a*io+al Ci*i3e+s5 League si+ce i*s orga+i3a*io+( has re*ur+ed *o his posi*io+

as professor of poli*ical eco+omics i+ *he :+iversi*) of Chicago$ I+ Bu+e(

-.--( 4rofessor Laughli+ 1as give+ a )ear5s leave from *he u+iversi*)( *ha*

he migh* give all of his *ime *o *he campaig+ of educa*io+ u+der*a,e+ b) *he

League $ $ $ He has 1or,ed i+defa*igabl)( a+d i* is largel) due *o his effor*s

a+d his persis*e+ce *ha* *he campaig+ e+*ers *he fi+al s*age 1i*h fla**eri+g

prospec*s of a successful ou*come $ $ $ The reader ,+o1s *ha* *he :+iversi*)


25/171

of Chicago is a+ i+s*i*u*io+ e+do1ed b) Boh+ &$ Roc,efeller( 1i*h +earl) fif*)

millio+ dollars$"-

I+ his biograph) of #elso+ Aldrich( S*ephe+so+ reveals *ha* *he Ci*i3e+s5

League 1as also a Be,)ll Isla+d produc*$ I+ chap*er 2 1e fi+d *ha* The

Aldrich 4la+ 1as represe+*ed *o Co+gress as *he resul* of *hree )ears of

1or,( s*ud) a+d *ravel b) members of *he #a*io+al >o+e*ar) Commissio+(

1i*h e;pe+di*ures of more *ha+ *hree hu+dred *housa+d dollars$P

Tes*if)i+g before *he Commi**ee o+ Rules( &ecember -9( -.--( af*er *he

Aldrich pla+ had bee+ i+*roduced i+ Co+gress( Co+gressma+ Li+dbergh

s*a*ed(

"Our fi+a+cial s)s*em is a false o+e a+d a huge burde+ o+ *he people $ $ $ I

have alleged *ha* *here is a >o+e) Trus*$ The Aldrich pla+ is a scheme

plai+l) i+ *he i+*eres* of *he Trus* $ $ $ h) does *he >o+e) Trus* press so

hard for *he Aldrich 4la+ +o1( before *he people ,+o1 1ha* *he mo+e) *rus*

has bee+ doi+g"

Li+dbergh co+*i+ued his speech(

"The Aldrich 4la+ is *he all S*ree* 4la+$ I* is a broad challe+ge *o *he

over+me+* b) *he champio+ of *he >o+e) Trus*$ I* mea+s a+o*her pa+ic( if

+ecessar)( *o i+*imida*e *he people$ Aldrich( paid b) *he over+me+* *o

represe+* *he people( proposes a pla+ for *he *rus*s i+s*ead$ I* 1as b) a ver)

clever move *ha* *he #a*io+al >o+e*ar) Commissio+ 1as crea*ed$ I+ -.0J

+a*ure respo+ded mos* beau*ifull) a+d gave *his cou+*r) *he mos* bou+*iful

crop i* had ever had$ O*her i+dus*ries 1ere bus) *oo( a+d from a +a*ural

s*a+dpoi+* all *he co+di*io+s 1ere righ* for a mos*


- Charles A$ Li+dbergh( Sr$( a+,i+g( Curre+c) a+d *he >o+e) Trus*(

-.-D( p$ -D-

P I+ -.--( *he Aldrich 4la+ became par* of *he official pla*form of *he

Republica+ 4ar*)$

--

prosperous )ear$ I+s*ead( a pa+ic e+*ailed e+ormous losses upo+ us$ all

S*ree* ,+e1 *he America+ people 1ere dema+di+g a remed) agai+s* *herecurre+ce of such a ridiculousl) u++a*ural co+di*io+$ >os* Se+a*ors a+d

Represe+*a*ives fell i+*o *he all S*ree* *rap a+d passed *he Aldrich

'reela+d !merge+c) Curre+c) ill$ u* *he real purpose 1as *o ge* a

mo+e*ar) commissio+ 1hich 1ould frame a proposi*io+ for ame+dme+*s *o

our curre+c) a+d ba+,i+g la1s 1hich 1ould sui* *he >o+e) Trus*$ The

i+*eres*s are +o1 bus) ever)1here educa*i+g *he people i+ favor of *he

Aldrich 4la+$ I* is repor*ed *ha* a large sum of mo+e) has bee+ raised for


26/171

*his purpose$ all S*ree* specula*io+ brough* o+ *he 4a+ic of -.0J$ The

deposi*ors5 fu+ds 1ere loa+ed *o gamblers a+d a+)bod) *he >o+e) Trus*

1a+*ed *o favour$ The+ 1he+ *he deposi*ors 1a+*ed *heir mo+e)( *he ba+,s

did +o* have i*$ Tha* made *he pa+ic$"

!d1ard 'reela+d( coEau*hor of *he bill( 1ro*e i+ *he Augus* 9( -.-0

I+depe+de+* 71hich 1as o1+ed b) Aldrich8( ":+der *he proposed mo+e*ar)

pla+ of Se+a*or Aldrich( mo+opolies 1ill disappear( because *he) 1ill +o* be

able *o ma,e more *ha+ four perce+* i+*eres* a+d mo+opolies ca++o*

co+*i+ue a* such a lo1 ra*e$ Also( *his 1ill mar, *he disappeara+ce of *he

over+me+* from *he ba+,i+g busi+ess$"

'reela+d5s fa+*as*ic claims 1ere *)pical of *he propaga+da flood u+leashed

*o pass *he Aldrich 4la+$ >o+opolies 1ould disappear( *he over+me+*

1ould disappear from *he ba+,i+g busi+ess$ 4ie i+ *he s,)$

#a*io+ >aga3i+e( Ba+uar) -.( -.--( +o*ed( "The +ame of Ce+*ral a+, is

carefull) avoided( bu* *he %ederal Reserve Associa*io+5( *he +ame give+ *o*he proposed ce+*ral orga+i3a*io+( is e+do1ed 1i*h *he usual po1ers a+d

respo+sibili*ies of a !uropea+ Ce+*ral a+,$"

Af*er *he #a*io+al >o+e*ar) Commissio+ had re*ur+ed from !urope( i* held

+o official mee*i+gs for +earl) *1o )ears$ #o records or mi+u*es 1ere ever

prese+*ed sho1i+g 1ho had au*hored *he Aldrich 4la+$ Si+ce *he) held +o

official mee*i+gs( *he members of *he commissio+ could hardl) claim *he 4la+

as *heir o1+$ The sole *a+gible resul* of *he Commissio+5s *hree hu+dred

*housa+d dollar e;pe+di*ure 1as a librar) of *hir*) massive volumes o+

!uropea+ ba+,i+g$ T)pical of *hese 1or,s is a *housa+d page his*or) of *he

Reichsba+,( *he ce+*ral ba+, 1hich co+*rolled mo+e) a+d credi* i+

erma+)( a+d 1hose pri+cipal s*oc,holders( 1ere *he Ro*hschilds a+d 4aul

arburg5s famil) ba+,i+g house of >$>$ arburg Compa+)$ The

Commissio+5s records sho1 *ha* i* +ever fu+c*io+ed as a delibera*ive bod)$

I+deed( i*s o+l) "mee*i+g" 1as *he secre* co+fere+ce held a* Be,)ll Isla+d(

a+d *his co+fere+ce is +o* me+*io+ed i+ a+) publica*io+ of *he Commissio+$

Se+a*or Cummi+s passed a resolu*io+ i+ Co+gress orderi+g *he Commissio+

*o repor* o+ Ba+uar) /( -.-( a+d sho1 some co+s*ruc*ive resul*s of i*s *hree

)ears5 1or,$ I+ *he face of *his challe+ge( *he #a*io+al >o+e*ar) Commissio+

ceased *o e;is*$

-

i*h *heir five millio+ dollars as a 1ar ches*( *he Aldrich 4la+ propaga+dis*s

1aged a +oEholds barred 1ar agai+s* *heir opposi*io+$ A+dre1 %rame

*es*ified before *he House a+,i+g a+d Curre+c) Commi**ee of *he

America+ a+,ers Associa*io+$ He represe+*ed a group of es*er+ ba+,ers

1ho opposed *he Aldrich 4la+


27/171

CHAIR>A# CART!R LASS "h) did+5* *he es*er+ ba+,ers ma,e

*hemselves heard 1he+ *he America+ a+,ers Associa*io+ gave i*s

u+o+e*ar) Commissio+"

A#&R! %RA>! "I5m glad )ou called m) a**e+*io+ *o *ha*$ he+ *ha*

mo+e*ar) bill 1as give+ *o *he cou+*r)( i* 1as bu* a fe1 da)s previous *o *he

mee*i+g of *he America+ a+,ers Associa*io+ i+ #e1 Orlea+s i+ -.--$ There

1as +o* o+e ba+,er i+ a hu+dred 1ho had read *ha* bill$ e had *1elve

addresses i+ favor of i*$ e+eral Hamb) of Aus*i+( Te;as( 1ro*e a le**er *o

4reside+* a**s as,i+g for a heari+g agai+s* *he bill$ He did +o* ge* a ver)

cour*eous a+s1er$ I refused *o vo*e o+ i*( a+d a grea* ma+) o*her ba+,ers did

li,e1ise$"

>R$ :LL!? "&o )ou mea+ *ha* +o member of *he Associa*io+ could be

heard i+ opposi*io+ *o *he bill"

A#&R! %RA>! "The) *hro**led all argume+*$"

>R$ I#&R!& "u* *he repor* 1as give+ ou* *ha* i* 1as prac*icall)

u+a+imous$"

A#&R! %RA>! "The bill had alread) bee+ prepared b) Se+a*or

Aldrich a+d prese+*ed *o *he e;ecu*ive cou+cil of *he America+ a+,ers

Associa*io+ i+ >a)( -.--$ As a member of *ha* cou+cil( I received a cop) *he

da) before *he) ac*ed upo+ i*$ he+ *he bill came i+ a* #e1 Orlea+s( *he

ba+,ers of *he :+i*ed S*a*es had +o* read i*$"

>R$ I#&R!& "&id *he presidi+g officer simpl) rule ou* *hose 1ho

1a+*ed *o discuss i* +ega*ivel)"

A#&R! %RA>! "The) 1ould +o* allo1 a+)o+e o+ *he program 1ho 1as

+o* i+ favor of *he bill$"

CHAIR>A# LASS "ha* sig+ifica+ce has *he fac* *ha* a* *he +e;*

a++ual mee*i+g of *he America+ a+,ers Associa*io+ held a* &e*roi* i+ -.-(

*he Associa*io+ did +o* rei*era*e i*s e+dorseme+* of *he pla+ of *he #a*io+al

>o+e*ar) Commissio+( ,+o1+ as *he Aldrich scheme"

A#&R! %RA>! "I* did +o* rei*era*e *he e+dorseme+* for *he simple fac*

*ha* *he bac,ers of *he Aldrich 4la+ ,+e1 *ha* *he Associa*io+ 1ould +o*

e+dorse i*$ e 1ere read) for *hem( bu* *he) did +o* bri+g i* up$"

-D

A+dre1 %rame e;posed *he collusio+ 1hich i+ -.-- procured a+

e+dorseme+* of *he Aldrich 4la+ from *he America+ a+,ers Associa*io+ bu*

1hich i+ -.- did +o* eve+ dare *o repea* i*s e+dorseme+*( for fear of a+

ho+es* a+d ope+ discussio+ of *he meri*s of *he pla+$


28/171

Chairma+ lass *he+ called as 1i*+ess o+e of *he *e+ mos* po1erful ba+,ers

i+ *he :+i*ed S*a*es( eorge lume+*hal( par*+er of *he i+*er+a*io+al

ba+,i+g house of La3ard %reres a+d bro*herEi+Ela1 of !uge+e >e)er( Br$

Car*er lass effusivel) 1elcomed lume+*hal( s*a*i+g *ha* "Se+a*or

O5orma+ of #e1 ?or, 1as ,i+d e+ough *o sugges* )our +ame *o us$" A

)ear la*er( O5orma+ preve+*ed a Se+a*e Commi**ee from as,i+g his mas*er(4aul arburg( a+) embarrassi+g o+e*ar) Commissio+$ His House Repor* i+ -.-D said( "Se+a*or >ac'eagh

fi;es *he cos* of *he #a*io+al >o+e*ar) Commissio+ *o >a) -( -.-- a*

Q0J(-D0$ The) have si+ce spe+* a+o*her hu+dred *housa+d dollars of *he

*a;pa)er5s mo+e)$ The 1or, do+e a* such cos* ca++o* be ig+ored( bu*( havi+g

e;ami+ed *he e;*e+sive li*era*ure published b) *he Commissio+( *he a+,i+g

a+d Curre+c) Commi**ee fi+ds li**le *ha* bears upo+ *he prese+* s*a*e of *he

credi* mar,e* of *he :+i*ed S*a*es$ e ob=ec* *o *he Aldrich ill o+ *hefollo1i+g poi+*s

-2

I*s e+*ire lac, of ade


29/171

I*s *e+de+c) *o *hro1 vo*i+g co+*rol i+*o *he ha+ds of *he large ba+,s of *he

s)s*em$

The e;*reme da+ger of i+fla*io+ of curre+c) i+here+* i+ *he s)s*em$

The i+si+ceri*) of *he bo+dEfu+di+g pla+ provided for b) *he measure( *here

bei+g a barefaced pre*e+se *ha* *his s)s*em 1as *o cos* *he gover+me+*+o*hi+g$

The da+gerous mo+opolis*ic aspec*s of *he bill$

Our Commi**ee a* *he ou*se* of i*s 1or, 1as me* b) a 1ellEdefi+ed se+*ime+*

i+ favor of a ce+*ral ba+, 1hich 1as *he ma+ifes* ou*gro1*h of *he 1or, *ha*

had bee+ do+e b) *he #a*io+al >o+e*ar) Commissio+$"

lass5s de+u+cia*io+ of *he Aldrich ill as a ce+*ral ba+, pla+ ig+ored *he

fac* *ha* his o1+ %ederal Reserve Ac* 1ould fulfill all *he fu+c*io+s of a

ce+*ral ba+,$ I*s s*oc, 1ould be o1+ed b) priva*e s*oc,holders 1ho could

use *he credi* of *he over+me+* for *heir o1+ profi*G i* 1ould have co+*rolof *he +a*io+5s mo+e) a+d credi* resourcesG a+d i* 1ould be a ba+, of issue

1hich 1ould fi+a+ce *he gover+me+* b) "mobili3i+g" credi* i+ *ime of 1ar$

I+ "The Ra*io+ale of Ce+*ral a+,i+g(" 'era C$ Smi*h 7Commi**ee for

>o+e*ar) Research a+d !duca*io+( Bu+e( -./-8 1ri*es( "The primar)

defi+i*io+ of a ce+*ral ba+, is a ba+,i+g s)s*em i+ 1hich a si+gle ba+, has

ei*her a comple*e or residuar) mo+opol) i+ *he +o*e issue$ A ce+*ral ba+, is

+o* a +a*ural produc* of ba+,i+g developme+*$ I* is imposed from ou*side or

comes i+*o bei+g as *he resul* of over+me+* favors$"

Thus a ce+*ral ba+, a**ai+s i*s comma+di+g posi*io+ from i*s gover+me+*

gra+*ed mo+opol) of *he +o*e issue$ This is *he ,e) *o i*s po1er$ Also( *he ac*of es*ablishi+g a ce+*ral ba+, has a direc* i+fla*io+ar) impac* because of *he

frac*io+al reserve s)s*em( 1hich allo1s *he crea*io+ of boo,Ee+*r) loa+s a+d

*hereb)( mo+e)( a +umber of *imes *he ac*ual "mo+e)" 1hich *he ba+, has

i+ i*s deposi*s or reserves$

The Aldrich 4la+ +ever came *o a vo*e i+ Co+gress( because *he Republica+s

los* co+*rol of *he House i+ -.-0( a+d subse


30/171

"Our fi+a+cial s)s*em is a false o+e a+d a huge burde+ o+ *he people $ $ $ This

Ac* es*ablishes *he mos* giga+*ic *rus* o+ ear*h$"EECo+gressma+ Charles

Augus*us Li+dbergh( Sr$

The speeches of Se+a*or La%olle**e a+d Co+gressma+ Li+dbergh became

rall)i+g poi+*s of opposi*io+ *o *he Aldrich 4la+ i+ -.-$ The) also aroused

popular feeli+g agai+s* *he >o+e) Trus*$ Co+gressma+ Li+dbergh said( o+

&ecember -9( -.--( "The gover+me+* prosecu*es o*her *rus*s( bu* suppor*s

*he mo+e) *rus*$ I have bee+ 1ai*i+g pa*ie+*l) for several )ears for a+

oppor*u+i*) *o e;pose *he false mo+e) s*a+dard( a+d *o sho1 *ha* *he

grea*es* of all favori*ism is *ha* e;*e+ded b) *he gover+me+* *o *he mo+e)

*rus*$"

Se+a*or La%olle**e publicl) charged *ha* a mo+e) *rus* of fif*) me+

co+*rolled *he :+i*ed S*a*es$ eorge %$ a,er( par*+er of B$4$ >orga+( o+

bei+g aga3i+e replied edi*oriall) *o Se+a*or La%olle**e *ha* "If *here

is a >o+e) Trus*( i* 1ill +o* be prac*ical *o es*ablish *ha* i* e;ercises i*s

i+flue+ce ei*her for good or for bad$"

Se+a*or La%olle**e remar,s i+ his memoirs *ha* his speech agai+s* *he >o+e)

Trus* la*er cos* him *he 4reside+c) of *he :+i*ed S*a*es( =us* as oodro1

ilso+5s earl) suppor* of *he Aldrich 4la+ had brough* him i+*o

co+sidera*io+ for *ha* office$

Co+gress fi+all) made a ges*ure *o appease popular feeli+g b) appoi+*i+g a

commi**ee *o i+ves*iga*e *he co+*rol of mo+e) a+d credi* i+ *he :+i*ed S*a*es$This 1as *he 4u=o Commi**ee ( a subcommi**ee of *he House a+,i+g a+d

Curre+c) Commi**ee( 1hich co+duc*ed *he famous ">o+e) Trus*" heari+gs

i+ -.-( u+der *he leadership of Co+gressma+ Arse+e 4u=o of Louisia+a( 1ho

1as regarded as a spo,esma+ for *he oil i+*eres*s$ These heari+gs 1ere

delibera*el) dragged o+ for five mo+*hs( a+d resul*ed i+ si;E*housa+d pages

of pri+*ed *es*imo+) i+ four volumes$ >o+*h af*er mo+*h( *he ba+,ers made

*he *rai+ *rip from #e1 ?or, *o ashi+g*o+( *es*ified before *he Commi**ee

a+d re*ur+ed *o #e1 ?or,$ The heari+gs 1ere e;*remel) dull( a+d +o

s*ar*li+g i+forma*io+ *ur+ed up a* *hese sessio+s$ The ba+,ers solem+l)

admi**ed *ha* *he)

-6

1ere i+deed ba+,ers( i+sis*ed *ha* *he) al1a)s opera*ed i+ *he public

i+*eres*( a+d claimed *ha* *he) 1ere a+ima*ed o+l) b) *he highes* ideals of

public service( li,e *he Co+gressme+ before 1hom *he) 1ere *es*if)i+g$

The parado;ical +a*ure of *he 4u=o >o+e) Trus* Heari+gs ma) be**er be

u+ders*ood if 1e e;ami+e *he ma+ 1ho si+gleEha+dedl) carried o+ *hese


31/171

heari+gs( Samuel :+*erm)er$ He 1as o+e of *he pri+cipal co+*ribu*ors *o

oodro1 ilso+5s 4reside+*ial campaig+ fu+d( a+d 1as o+e of *he

1eal*hies* corpora*io+ la1)ers i+ #e1 ?or,$ He s*a*es i+ his au*obiograph)

i+ "ho5s ho" of -.6 *ha* he o+ce received a QJJ9(000 fee for a si+gle

legal *ra+sac*io+( *he successful merger of *he :*ah Copper Compa+) a+d

*he os*o+ Co+solida*ed a+d #evada Compa+)( a firm 1i*h a mar,e* valueof o+e hu+dred millio+ dollars$ He refused *o as, ei*her Se+a*or La%olle**e

or Co+gressma+ Li+dbergh *o *es*if) i+ *he i+ves*iga*io+ 1hich *he) alo+e

had forced Co+gress *o hold$ As Special Cou+sel for *he 4u=o Commi**ee(

:+*erm)er ra+ *he heari+gs as a o+eEma+ opera*io+$ The Co+gressio+al

members( i+cludi+g i*s chairma+( Co+gressma+ Arse+e 4u=o( seemed *o have

bee+ s*ruc, dumb from *he comme+ceme+* of *he heari+gs *o *heir

co+clusio+$ O+e of *hese sile+* serva+*s of *he public 1as Co+gressma+

Bames )r+es( of Sou*h Caroli+a( represe+*i+g er+ard aruch5s home

dis*ric*( 1ho la*er achieved fame as "aruch5s ma+"( a+d 1as placed b)

aruch i+ charge of *he Office of ar >obili3a*io+ duri+g *he Seco+d orld

ar$

Al*hough he 1as a specialis* i+ such ma**ers( :+*erm)er did +o* as, a+) of

*he ba+,ers abou* *he s)s*em of i+*erloc,i+g direc*ora*es *hrough 1hich *he)

co+*rolled i+dus*r)$ He did +o* go i+*o i+*er+a*io+al gold moveme+*s( 1hich

1ere ,+o1+ as a fac*or i+ mo+e) pa+ics( or *he i+*er+a*io+al rela*io+ships

be*1ee+ America+ ba+,ers a+d !uropea+ ba+,ers$ The i+*er+a*io+al

ba+,i+g houses of !uge+e >e)er( La3ard %reres( B$ $ Seligma+(

Lade+burg Thalma++( Spe)er ro*hers( >$ >$ arburg( a+d *he Ro*hschild

ro*hers did +o* arouse Samuel :+*erm)er5s curiosi*)( al*hough i* 1as 1ell

,+o1+ i+ *he #e1 ?or, fi+a+cial 1orld *ha* all of *hese famil) ba+,i+g

houses ei*her had bra+ches or co+*rolled subsidiar) houses i+ all S*ree*$

he+ Bacob Schiff appeared before *he 4u=o Commi**ee( >r$ :+*erm)er5sadroi* r$ Schiff *o *al, for ma+) mi+u*es 1i*hou*

reveali+g a+) i+forma*io+ abou* *he opera*io+s of *he ba+,i+g house of

uh+ Loeb Compa+)( of 1hich he 1as se+ior par*+er( a+d 1hich Se+a*or

Rober* L$ O1e+ had ide+*ified as *he represe+*a*ive of *he !uropea+

Ro*hschilds i+ *he :+i*ed S*a*es$

The agi+g B$4$ >orga+( 1ho had o+l) a fe1 more mo+*hs *o live( appeared

before *he Commi**ee *o =us*if) his decades of i+*er+a*io+al fi+a+cial deals$

He s*a*ed for >r$ :+*erm)er5s edifica*io+ *ha* ">o+e) is a commodi*)$"

This 1as a favori*e plo) of *he mo+e) crea*ors( as *he) 1ished *o ma,e *he

public believe *ha* *he crea*io+ of mo+e) 1as a +a*ural occurE

-J

re+ce a,i+ *o *he gro1i+g of a field of cor+( al*hough i* 1as ac*uall) a bou+*)

co+ferred upo+ *he ba+,ers b) gover+me+*s over 1hich *he) had gai+ed

co+*rol$


32/171


33/171


34/171

O+e of *he cri*ics of *he proposed "dece+*rali3ed" s)s*em 1as a la1)er from

Clevela+d( Ohio( Alfred Cro3ier Cro3ier 1as called *o *es*if) for *he Se+a*e

Commi**ee because he had 1ri**e+ a provoca*ive boo, i+ -.-( :$S$ >o+e)

vs$ Corpora*io+ Curre+c)$P He a**ac,ed *he AldrichE'reela+d Ac* of -.0/ as

a all S*ree* i+s*rume+*( a+d he poi+*ed ou* *ha* 1he+ our gover+me+* had

*o issue mo+e) based o+ priva*el) o1+ed securi*ies( 1e 1ere +o lo+ger a free+a*io+$

Cro3ier *es*ified before *he Se+a*e Commi**ee *ha*( "I* should prohibi* *he

gra+*i+g or calli+g i+

of loa+s for *he purpose of i+flue+ci+g cAdoo( Secre*ar) of

*he Treasur) of *he

:+i*ed S*a*es 1as repor*ed i+ *he ope+ press as chargi+g specificall) *ha*

*here 1as a co+spirac)

amo+g cer*ai+ of *he large ba+,i+g i+*eres*s *o pu* a co+*rac*io+ upo+ *he

curre+c) a+d *o raise

i+*eres* ra*es for *he sa,e of ma,i+g *he public force Co+gress i+*o passi+g

curre+c) legisla*io+

desired b) *hose i+*eres*s$ The soEcalled admi+is*ra*io+ curre+c) bill gra+*s

=us* 1ha* all S*ree*

a+d *he big ba+,s for *1e+*)Efive )ears have bee+ s*rivi+g for( *ha* is(

4RI'AT! I#ST!A& O%

4:LIC CO#TROL O% C:RR!#C?$ I* does *his as comple*el) as *he

Aldrich ill$ o*h

measures rob *he gover+me+* a+d *he people of all effec*ive co+*rol over *he

public5s mo+e)( a+d

ves* i+ *he ba+,s e;clusivel) *he da+gerous po1er *o ma,e mo+e) amo+g *he

people scarce or

ple+*)$ The Aldrich ill pu*s *his po1er i+ o+e ce+*ral ba+,$ The

Admi+is*ra*io+ ill pu*s i* i+

*1elve regio+al ce+*ral ba+,s( all o1+ed e;clusivel) b) *he ide+*ical priva*e

i+*eres*s *ha* 1ould


35/171

have o1+ed a+d opera*ed *he Aldrich a+,$ 4reside+* arfield shor*l)

before his assassi+a*io+

declared *ha* 1hoever co+*rols *he suppl) of curre+c) 1ould co+*rol *he

busi+ess a+d ac*ivi*ies of

*he people$ Thomas Befferso+ 1ar+ed us a hu+dred )ears ago *ha* a priva*ece+*ral ba+, issui+g

*he public curre+c) 1as a grea*er me+ace *o *he liber*ies of *he people *ha+ a

s*a+di+g arm)$"

I* is i+*eres*i+g *o +o*e ho1 ma+) assassi+a*io+s of 4reside+*s of *he :+i*ed

S*a*es follo1 *heir co+cer+ 1i*h *he issui+g of public curre+c)G Li+col+ 1i*h

his ree+bac,( +o+Ei+*eres*Ebeari+g +o*es( a+d arfield( ma,i+g a

pro+ou+ceme+* o+ curre+c) problems =us* before he 1as assassi+a*ed$

e +o1 begi+ *o u+ders*a+d 1h) such a le+g*h) campaig+ of pla++ed

decep*io+ 1as +ecessar)( from *he secre* co+fere+ce a* Be,)ll Isla+d *o *heide+*ical "reform" pla+s proposed b) *he &emocra*ic a+d


P Cro3ier5s boo, e;posed *he fi+a+ciers pla+ *o subs*i*u*e "corpora*io+

curre+c)" for *he la1ful mo+e) of *he :$S$ as guara+*eed b) Ar*icle I( Sec$ /

4ara$ 9( of *he Co+s*i*u*io+$

0

Republica+ par*ies u+der differe+* +ames$ The ba+,ers could +o* 1res*

co+*rol of *he issua+ce of mo+e) from *he ci*i3e+s of *he :+i*ed S*a*es( *o1hom i* had bee+ desig+a*ed *hrough i*s Co+gress b) *he Co+s*i*u*io+( u+*il

*he Co+gress gra+*ed *hem *heir mo+opol) for a ce+*ral ba+,$ Therefore(

much of *he i+flue+ce e;er*ed *o ge* *he %ederal Reserve Ac* passed 1as do+e

behi+d *he sce+es( pri+cipall) b) *1o shado1)( +o+Eelec*ed perso+s The

erma+ immigra+*( 4aul arburg( a+d Colo+el !d1ard >a+dell House of

Te;as$

4aul arburg made a+ appeara+ce before *he House a+,i+g a+d Curre+c)

Commi**ee i+ -.-D( i+ 1hich he briefl) s*a*ed his bac,grou+d "I am a

member of *he ba+,i+g house of uh+( Loeb Compa+)$ I came over *o *his

cou+*r) i+ -.0( havi+g bee+ bor+ a+d educa*ed i+ *he ba+,i+g busi+ess i+Hamburg( erma+)( a+d s*udied ba+,i+g i+ Lo+do+ a+d 4aris( a+d have

go+e all arou+d *he 1orld$ I+ *he 4a+ic of -.0J( *he firs* sugges*io+ I made

1as Le* us ge* a +a*io+al cleari+g house$5 The Aldrich 4la+ co+*ai+s some

*hi+gs 1hich are simpl) fu+dame+*al rules of ba+,i+g$ ?our aim i+ *his pla+

7*he O1e+Elass bill8 mus* be *he sameEEce+*rali3i+g of reserves( mobili3i+g

commercial credi*( a+d ge**i+g a+ elas*ic +o*e issue$"


36/171

arburg5s phrase( "mobili3a*io+ of credi*" 1as a+ impor*a+* o+e( because

*he %irs* orld ar 1as due *o begi+ shor*l)( a+d *he firs* *as, of *he

%ederal Reserve S)s*em 1ould be *o fi+a+ce *he orld ar$ The !uropea+

+a*io+s 1ere alread) ba+,rup*( because *he) had mai+*ai+ed large s*a+di+g

armies for almos* fif*) )ears( a si*ua*io+ crea*ed b) *heir o1+ ce+*ral ba+,s(

a+d *herefore *he) could +o* fi+a+ce a 1ar$ A ce+*ral ba+, al1a)s imposes a*reme+dous burde+ o+ *he +a*io+ for "rearmame+*" a+d "defe+se"( i+ order

*o crea*e i+e;*i+guishable deb*( simul*a+eousl) crea*i+g a mili*ar)

dic*a*orship a+d e+slavi+g *he people *o pa) *he "i+*eres*" o+ *he deb* 1hich

*he ba+,ers have ar*ificiall) crea*ed$

I+ *he Se+a*e deba*e o+ *he %ederal Reserve Ac*( Se+a*or S*o+e said o+

&ecember -( -.-D(

"The grea* ba+,s for )ears have sough* *o have a+d co+*rol age+*s i+ *he

Treasur) *o serve *heir

purposes$ Le* me r$ >cAdoocame *o

ashi+g*o+( a 1oma+ 1hom *he #a*io+al Ci*) a+, had i+s*alled i+ *he

Treasur) &epar*me+* *o

ge* adva+ce i+forma*io+ o+ *he co+di*io+ of ba+,s( a+d o*her ma**ers of

i+*eres* *o *he big all

S*ree* group( 1as removed$ Immedia*el) *he Secre*ar) a+d *he Assis*a+*

Secre*ar)( Boh+ S,el*o+

illiams( 1ere cri*ici3ed severel) b) *he age+*s of *he all S*ree* group$5"

"I m)self have ,+o1+ more *ha+ o+e occasio+ 1he+ ba+,ers refused credi*

*o me+ 1ho opposed

*heir poli*ical vie1s a+d purposes$ he+ Se+a*or Aldrich a+d o*hers 1ere

goi+g arou+d *he

cou+*r) e;ploi*i+g *his scheme( *he big ba+,s of #e1 ?or, a+d Chicago 1ere

e+gaged i+

-

raisi+g a mu+ifice+* fu+d *o bols*er up *he Aldrich propaga+da$ I have bee+*old b) ba+,ers of

m) o1+ s*a*e *ha* co+*ribu*io+s *o *his e;ploi*a*io+ fu+d had bee+ dema+ded

of *hem a+d *ha*

*he) had co+*ribu*ed because *he) 1ere afraid of bei+g blac,lis*ed or

bo)co**ed$ There are


37/171

ba+,ers of *his cou+*r) 1ho are e+emies of *he public 1elfare$ I+ *he pas*( a

fe1 grea* ba+,s have

follo1ed policies a+d pro=ec*s *ha* have paral)3ed *he i+dus*rial e+ergies of

*he cou+*r) *o

perpe*ua*e *heir *reme+dous po1er over *he fi+a+cial a+d busi+ess i+dus*riesof America$"

Car*er lass s*a*es i+ his au*obiograph) *ha* he 1as summo+ed b) oodro1

ilso+ *o *he hi*e House( a+d *ha* ilso+ *old him he i+*e+ded *o ma,e

*he reserve +o*es obliga*io+s of *he :+i*ed S*a*es$ lass sa)s( "I 1as for a+

i+s*a+* speechless$ I remo+s*ra*ed$ There is +o* a+) gover+me+* obliga*io+

here( >r$ 4reside+*$ ilso+ said he had had *o compromise o+ *his poi+* i+

order *o save *he bill$"

The *erm "compromise" o+ *his poi+* came direc*l) from 4aul arburg$

Col$ !lisha !l) arriso+( i+ Roosevel*(P ilso+ a+d *he %ederal Reserve La1

1ro*e(

"I+ -.--( La1re+ce Abbo*( >r$ Roosevel*5s priva*e officer a* The Ou*loo,5

ha+ded me a cop) of

*he soEcalled Aldrich 4la+ for curre+c) reform$ I said( I could +o* believe

*ha* >r$ arburg 1as

*he au*hor$ This pla+ is +o*hi+g more *ha+ *he AldrichE'reela+d legisla*io+

1hich provided for

curre+c) issue agai+s* securi*ies$ arburg ,+o1s *ha* as 1ell as I do$ I am

goi+g *o see him a*

o+ce a+d as, him abou* i*$ All righ*( *he *ru*h$ ?es( I 1ro*e i*( he said$ h)

I as,ed$ I* 1as a

compromise( a+s1ered arburg$"-D

arriso+ sa)s *ha* arburg 1ro*e him o+ %ebruar) /( -.-$

"I have +o doub* *ha* a* *he e+d of a *horough discussio+( ei*her )ou 1ill see

i* m) 1a) or I 1ill

see i* )oursEEbu* I hope )ou 1ill see i* mi+e$"

This 1as a+o*her famous arburg sa)i+g 1he+ he secre*l) lobbied

Co+gressme+ *o suppor* his i+*eres*( *he veiled *hrea* *ha* *he) should "see i*

his 1a)"$ Those 1ho did +o* fou+d large sums co+*ribu*ed *o *heir oppo+e+*s

a* *he +e;* elec*io+s( a+d usuall) 1e+* do1+ i+ defea*$

Col$ arriso+( a+ age+* of ro1+ ro*hers ba+,ers( la*er ro1+ ro*hers

Harrima+( had e+*ree ever)1here i+ *he fi+a+cial commu+i*)$ He 1ri*es of


38/171


39/171

admi+is*ra*io+s$ I* 1as published "a+o+)mousl)" b) $ $ Huebsch of #e1

?or,( a+d 1idel) circula*ed amo+g gover+me+* officials( 1ho 1ere lef* i+ +o

doub* as *o i*s au*horship$ eorge S)lves*er 'ierec,PP( 1ho ,+e1 House for

)ears( la*er 1ro*e a+ accou+* of *he ilso+EHouse rela*io+ship( The

S*ra+ges* %rie+dship i+ His*or)$-2 I+ -.99( es*broo, 4egler( *he Hears*

colum+is* from -.D *o -.96( heard of *he 4hilip &ru boo, a+d called'ierec, *o as, if he had a cop)$ 'ierec, se+* 4egler his cop) of *he boo,( a+d

4egler 1ro*e a colum+ abou* i*( s*a*i+g

"O+e of *he i+s*i*u*io+s ou*li+ed i+ 4hilip &ru is *he %ederal Reserve S)s*em$

The Schiffs( *he

arburgs( *he ah+s( *he Roc,efellers a+d >orga+s pu* *heir fai*h i+

House$ The Schiff(

arburg( Roc,efeller a+d >orga+ i+*eres*s 1ere perso+all) represe+*ed i+

*he m)s*erious

co+fere+ce a* Be,)ll Isla+d$ %ra+,fur*er la+ded o+ *he Harvard la1 facul*)(

*ha+,s *o a fi+a+cial

co+*ribu*io+ *o Harvard b) %eli; arburg a+d 4aul


P See House +o*e i+ "iographies"

PP See 'ierec, +o*e i+ "iographies"

-2 eorge S)lves*er 'ierec,( The S*ra+ges* %rie+dship i+ His*or)( oodro1

ilso+ a+d Col$ House( Liverigh*( #e1 ?or,( -.D

D

arburg( a+d so 1e go* Alger a+d &o+ald Hiss( Lee 4ressma+( Harr) &e;*er

hi*e a+d ma+)

o*her pro*FgFs of Li**le ee+ie$"P

House5s ope+l) Socialis*ic vie1s 1ere for*hrigh*l) e;pressed i+ 4hilip &ru(

Admi+is*ra*orG o+ pages 9JE9/( House 1ro*e

"I+ a direc* a+d forceful ma++er( he poi+*ed ou* *ha* our civili3a*io+ 1asfu+dame+*all) 1ro+g(

i+asmuch( amo+g o*her *hi+gs( as i* res*ric*ed efficie+c)G *ha* if socie*) 1ere

properl) orga+i3ed(

*here 1ould be +o+e 1ho 1ere +o* sufficie+*l) clo*hed a+d fed$ The resul*(

*ha* *he la1s( habi*s


40/171

a+d e*hical *rai+i+g i+ vogue 1ere ali,e respo+sible for *he i+e


41/171

*o become for / )ears 1i*h ilso+( *he 4reside+*5s closes* advisor$ La*er he

co+*i+ued his i+flue+ce i+ *he %ra+,li+ &$ Roosevel* admi+is*ra*io+$ %rom

his home i+ >ag+olia( >ass$( House advised %&R *hrough frea+dell House had *he obliga*or) "Lo+do+ co++ec*io+"$ Origi+all) a &u*ch

famil)( "Huis"( his a+ces*ors had lived i+ !+gla+d for *hree hu+dred )ears(

af*er 1hich his fa*her se**led i+ Te;as( 1here he made a for*u+e i+ bloc,adeE

ru++i+g duri+g *he Civil ar( shippi+g co**o+ a+d o*her co+*raba+d *o his

ri*ish co++ec*io+s( i+cludi+g *he Ro*hschilds( a+d bri+gi+g bac, supplies

for *he beleaguered Te;a+s$ The se+ior House( +o* *rus*i+g *he vola*ile Te;assi*ua*io+( prude+*l) deposi*ed all his profi*s from his bloc,adeEru++i+g i+

gold 1i*h ari+g ba+,i+g house i+ Lo+do+P$ A* *he close of *he Civil ar( he

1as o+e of *he 1eal*hies* me+ i+ Te;as$ He +amed his so+ ">a+dell" af*er

o+e of his mercha+* associa*es$ Accordi+g *o Ar*hur Ho1de+ Smi*h( 1he+

House5s fa*her died i+ -//0( his es*a*e 1as dis*ribu*ed amo+g his so+s as

follo1s Thomas illiam go* *he ba+,i+g busi+essG Boh+( *he sugar

pla+*a*io+G a+d !d1ard >$ *he co**o+ pla+*a*io+s( 1hich brough* him a+

i+come of Q0(000 a )ear$-6

A* *he age of *1elve( *he )ou+g !d1ard >a+dell House had brai+ fever( a+d

1as la*er fur*her crippled b) su+s*ro,e$ He 1as a semiEi+valid( a+d his

ailme+*s gave him a+ odd Orie+*al appeara+ce$ He +ever e+*ered a+)

professio+( bu* used his fa*her5s mo+e) *o become *he ,i+gma,er of Te;as

poli*ics( successivel) elec*i+g five gover+ors from -/.D *o -.--$ I+ -.-- he

bega+ *o suppor* ilso+ for preside+*( a+d *hre1 *he crucial Te;as

delega*io+ *o him 1hich e+sured his +omi+a*io+$ House me* ilso+ for *he

firs* *ime a* *he Ho*el o*ham( >a) D-( -.-$

I+ The S*ra+ges* %rie+dship I+ His*or)( oodro1 ilso+ a+d Col$ House(

b) eorge S)lves*er 'ierec,( 'ierec, 1ri*es

"ha*(" I as,ed House( "ceme+*ed )our frie+dship" "The ide+*i*) of our

*emperame+*s a+d our

public policies(" a+s1ered House$ "ha* 1as )our purpose a+d his" "To

*ra+sla*e i+*o

legisla*io+ cer*ai+ liberal a+d progressive ideas$"-J

House *old 'ierec, *ha* 1he+ he 1e+* *o ilso+ a* *he hi*e


42/171


P &ope( I+c$( ide+*ifies ari+gs as follo1s "ari+g ro*hers( *he premier

mercha+* ba+, of *he opium *rade from -J/D *o *he prese+* da)( also

mai+*ai+ed close co+*ac* 1i*h *he os*o+ families $ $ $ The group5s leadi+g

ba+,er became( a* *he close of *he -.*h ce+*ur)( *he House of >orga+EE1hich also *oo, i*s cu* i+ !as*er+

opium *raffic $ $ $ >orga+5s %ar !as*er+ opera*io+s 1ere *he officiall) co+duc*ed ri*ish opium *raffic $ $ $ >orga+5s case deserves

special scru*i+) from America+ police a+d regula*or) age+cies( for *he i+*ima*e associa*io+s of >orga+ uara+*) Trus* 1i*h *he

ide+*ified leadership of *he ri*ish dope ba+,s$"

-6 Ar*hur Ho1de+ Smi*h( The Real Col$ House( &ora+ Compa+)( #e1 ?or,( -.-/

-J eorge S)lves*er 'ierec,( The S*ra+ges* %rie+dship i+ His*or)( oodro1 ilso+ a+d Col$ House( Liverigh*( #e1 ?or,( -.D

9

House( he ha+ded him QD9(000$ This 1as e;ceeded o+l) b) *he Q90(000 1hich er+ard aruch had give+ ilso+$

The successful e+ac*me+* of House5s programs did +o* escape *he +o*ice of o*her ilso+ associa*es$ I+ 'ol$ -( page -9J of The

I+*ima*e 4apers of Col$ House( House +o*es( "Cabi+e* members li,e >r$ La+e a+d >r$ r)a+ comme+*ed upo+ *he i+flue+ce of &ru

1i*h *he 4reside+*$ All *ha* *he boo, has said should be(5 1ro*e La+e( comes abou*$ The 4reside+* comes *o 4hilip &ru5 i+ *he

e+d$5"-/

House recorded some of his effor*s o+ behalf of *he %ederal Reserve Ac* i+ The I+*ima*e 4apers of Col$ House(

"&ecember -.( -.-$ I *al,ed 1i*h 4aul arburg over *he pho+e co+cer+i+g curre+c) reform$ I

*old of m) *rip *o ashi+g*o+ a+d 1ha* I had do+e *here *o ge* i* i+ 1or,i+g order$ I *old him

*ha* *he Se+a*e a+d *he Co+gressme+ seemed a+;ious *o do 1ha* he desired( a+d *ha* 4reside+*E

elec* ilso+ *hough* s*raigh* co+cer+i+g *he issue$"-.

Thus 1e have arburg5s age+* i+ ashi+g*o+( Col$ House( assuri+g him *ha* *he Se+a*e a+d Co+gressme+ 1ill do 1ha* he desires(

a+d *ha* *he 4reside+*Eelec* "*hough* s*raigh* co+cer+i+g *he issue$" I+ *his co+*e;*( represe+*a*ive gover+me+* seems *o have ceased

*o e;is*$ House co+*i+ues i+ his "4apers"

">arch -D( -.-D$ arburg a+d I had a+ i+*ima*e discussio+ co+cer+i+g curre+c) reform$

>arch J( -.-D$ >r$ B$4$ >orga+( Br$ a+d >r$ &e++) of his firm came promp*l) a* five$

>cAdoo came abou* *e+ mi+u*es af*er1ard$ >orga+ had a curre+c) pla+ alread) pri+*ed$ I sugges*ed he

have i* *)pe1ri**e+( so i* 1ould +o* seem *oo prearra+ged( a+d se+d i* *o ilso+ a+d m)self *oda)$

Bul) D( -.-D$ I *ried *o sho1 >a)or ui+c) 7of os*o+8 *he foll) of *he !as*er+ ba+,ers *a,i+g

a+ a+*ago+is*ic a**i*ude *o1ards *he Curre+c) ill$ I e;plai+ed *o >a=or He+r) Higgi+so+P 1i*h 1ha* care

*he bill had bee+ framed$ Bus* before he arrived( I had fi+ished a revie1 b) 4rofessor Sprague of Harvard of

4aul arburg5s cri*icism of *he lassEO1e+ ill( a+d 1ill *ra+smi* i* *o ashi+g*o+ *omorro1$ !ver)

ba+,er ,+o1+ *o arburg( 1ho ,+o1s *he sub=ec* prac*icall)( has bee+ called up abou* *he ma,i+g of *he

bill$


43/171

Oc*ober -D( -.-D$ 4aul arburg 1as m) firs* caller *oda)$ He came *o discuss *he curre+c) measure$ There

are ma+) fea*ures of *he O1e+Elass ill *ha* he does +o* approve$ I promised *o pu* him i+ *ouch 1i*h

>cAdoo a+d Se+a*or O1e+ so *ha* he migh* discuss i* 1i*h *hem$

#ovember -J( -.-D$ 4aul arburg *elepho+ed abou* his *rip *o ashi+g*o+$ La*er( he a+d >r$ Bacob Schiff

came over for a fe1 mi+u*es$


-/ Col$ !d1ard >a+dell House( The I+*ima*e 4apers of Col$ House( edi*ed b) Charles Se)mour( Hough*o+ >iffli+ Co$( -.6E/( 'ol$

-( p$ -9J

-. Ibid$ 'ol$ -( p$ -6D

P The mos* promi+e+* ba+,er i+ os*o+$

6

arburg did mos* of *he *al,i+g$ He had a +e1 sugges*io+ i+ regard *o groupi+g *he regular reserve ba+,s

so as *o ge* *he u+i*s 1elded *oge*her a+d i+ easier *ouch 1i*h *he %ederal Reserve oard$"

eorge S)lves*er 'ierec, i+ The S*ra+ges* %rie+dship i+ His*or)( oodro1 ilso+ a+d Col$ House 1ro*e "The Schiffs( *he

arburgs( *he ah+s( *he Roc,efellers( *he >orga+s pu* *heir fai*h i+ House$ he+ *he %ederal Reserve legisla*io+ a* las* assumed

defi+i*e shape( House 1as *he i+*ermediar) be*1ee+ *he hi*e House a+d *he fi+a+ciers$"0

O+ page 29( 'ierec, +o*es( "Col$ House loo,s upo+ *he reform of *he mo+e*ar) s)s*em as *he cro1+i+g i+*er+al achieveme+* of *he

ilso+ Admi+is*ra*io+$"-

The lass ill 7*he House versio+ of *he fi+al %ederal Reserve Ac*8 had passed *he House o+ Sep*ember -/( -.-D b) /J *o /9$ O+

&ecember -.( -.-D( *he Se+a*e passed *heir versio+ b) a vo*e of 92ED2$ >ore *ha+ for*) impor*a+* differe+ces i+ *he House a+d Se+a*e

versio+s remai+ed *o be se**led( a+d *he oppo+e+*s of *he bill i+ bo*h houses of Co+gress 1ere led *o believe *ha* ma+) 1ee,s 1ould

)e* elapse before *he Co+fere+ce bill 1ould be read) for co+sidera*io+$ The Co+gressme+ prepared *o leave ashi+g*o+ for *he

a++ual Chris*mas recess( assured *ha* *he Co+fere+ce bill 1ould +o* be brough* up u+*il *he follo1i+g )ear$ #o1 *he mo+e) crea*ors

prepared a+d e;ecu*ed *he mos* brillia+* s*ro,e of *heir pla+$ I+ a si+gle da)( *he) iro+ed ou* all for*) of *he dispu*ed passages i+ *he

bill a+d o+da)( &ecember ( -.-D( *he bill 1as passed b) *he House /E60 a+d *he Se+a*e 2DED$

O+ &ecember -( -.-D( The #e1 ?or, Times comme+*ed edi*oriall) o+ *he ac*( "#e1 ?or, 1ill be o+ a firmer basis of fi+a+cial

gro1*h( a+d 1e shall soo+ see her *he mo+e) ce+*re of *he 1orld$"

The #e1 ?or, Times repor*ed o+ *he fro+* page( >o+da)( &ecember ( -.-D i+ headli+es >O#!? ILL >A? ! LA

TO&A?EECO#%!R!!S HA& A&B:ST!& #!ARL? ALL &I%%!R!#C!S AT -D0 THIS >OR#I#EE#O &!4OSIT

:ARA#T!!SEES!#AT! ?I!L&S O# THIS 4OI#T :T 4:TS THRO:H >A#? OTH!R CHA#!S "i*h almos*

u+precede+*ed speed( *he co+fere+ce *o ad=us* *he House a+d Se+a*e differe+ces o+ *he Curre+c) ill prac*icall) comple*ed i*s

labours earl) *his mor+i+g$ O+ Sa*urda) *he Co+ferees did li**le more *ha+ dispose of *he prelimi+aries( leavi+g for*) esse+*ial

differe+ces *o be *hrashed ou* Su+da)$ $ $ $ #o o*her legisla*io+ of impor*a+ce 1ill be *a,e+ up i+ ei*her House of Co+gress *his 1ee,$

>embers of bo*h houses are alread) prepari+g *o leave ashi+g*o+$"


0 eorge S)lves*er 'ierec,( The S*ra+ges* %rie+dship I+ His*or)( oodro1 ilso+ a+d Col$ House( Liverigh*( #e1 ?or,( -.D


44/171

- Ibid$

J

":+precede+*ed speed"( sa)s The #e1 ?or, Times$ O+e sees *he fi+e ha+d of 4aul arburg i+ *his fi+al s*ra*eg)$ Some of *he bill5s

mos* vocal cri*ics had alread) lef* ashi+g*o+$ I* 1as a lo+gEs*a+di+g poli*ical cour*es) *ha* impor*a+* legisla*io+ 1ould +o* be ac*ed

upo+ duri+g *he 1ee, before Chris*mas( bu* *his *radi*io+ 1as rudel) sha**ered i+ order *o perpe*ra*e *he %ederal Reserve Ac* o+ *he

America+ people$

The Times buried a brief


45/171

*o *he hi*e House a+d assured ilso+ *ha* *his 1as a mi+or ma**er( 1hich could be fi;ed up la*er *hrough "admi+is*ra*ive

processes"$ The impor*a+* *hi+g 1as *o ge* *he %ederal Reserve Ac* sig+ed i+*o la1 a* o+ce$ i*h *his reassura+ce( ilso+ sig+ed *he

%ederal Reserve Ac* o+ &ecember D( -.-D$ His*or) proved *ha* o+ *ha* da)( *he Co+s*i*u*io+ ceased *o be *he gover+i+g cove+a+* of

*he America+ people( a+d our liber*ies 1ere ha+ded over *o a small group of i+*er+a*io+al ba+,ers$

The &ecember 2( -.-D #e1 ?or, Times carried a fro+* page headli+e "ILSO# SI#S TH! C:RR!#C? ILL" elo1 i*( also

i+ capi*al le**ers( 1ere *1o fur*her headli+es( "4ROS4!RIT? TO ! %R!!" a+d "ILL H!L4 !'!R? CLASS"$ ho could

ob=ec* *o a+) la1 1hich provided be+efi*s *o ever)o+e The Times described *he fes*ive a*mosphere 1hile ilso+5s famil) a+d

gover+me+* officials 1a*ched him sig+ *he bill$ "The Chris*mas spiri* pervaded *he ga*heri+g(" e;ul*ed The Times$

I+ his biograph) of Car*er lass( Ri;e) Smi*h s*a*es *ha* *hose prese+* a* *he sig+i+g of *he bill i+cluded 'ice 4reside+* >arshall(

Secre*ar) r)a+( Car*er lass( Se+a*or O1e+( Secre*ar) >cAdoo( Spea,er Champ Clar,( a+d o*her Treasur) officials$ #o+e of *he

real 1ri*ers of *he bill( *he draf*ees of Be,)ll Isla+d( 1ere prese+*$ The) had prude+*l) abse+*ed *hemselves from *he sce+e of *heir

vic*or)$ Ri;e) Smi*h also 1ro*e( "I* 1as as *hough Chris*mas had come *1o da)s earl)$" O+ &ecember 2( -.-D( Bacob Schiff 1ro*e

*o Col$ House(

">) dear Col$ House$ I 1a+* *o sa) a 1ord *o )ou for *he sile+*( bu* +o doub* effec*ive 1or, )ou

have do+e i+ *he i+*eres* of curre+c) legisla*io+ a+d *o co+gra*ula*e )ou *ha* *he measure

has fi+all) bee+ e+ac*ed i+*o la1$ I am 1i*h good 1ishes( fai*hfull) )ours( BACO SCHI%%$"

Represe+*a*ive >oore of a+sas( i+ comme+*i+g o+ *he passage of *he Ac*( said *o *he House of Represe+*a*ives

"The 4reside+* of *he :+i*ed S*a*es +o1 becomes *he absolu*e dic*a*or of all *he fi+a+ces of *he

cou+*r)$ He appoi+*s a co+*rolli+g board of seve+ me+( all of 1hom belo+g *o his poli*ical par*)(

eve+ *hough i* is a mi+ori*)$ The Secre*ar) of *he Treasur) is *o rule supreme 1he+ever *here is

a differe+ce of opi+io+ be*1ee+ himself a+d *he %ederal Reserve oard$ A#&( o+l) o+e member

of *he oard is *o pass ou* of office 1hile *he 4reside+* is i+ office$"

The *e+ )ear *erms of office of *he members of *he oard 1ere le+g*he+ed b) *he a+,i+g Ac* of -.D9 *o four*ee+ )ears( 1hich mea+*

*ha* *hese direc*ors of *he +a*io+5s fi+a+ces( al*hough +o* elec*ed b) *he people( held office lo+ger *ha+ *hree preside+*s$

hile Col$ House( Bacob Schiff a+d 4aul arburg bas,ed i+ *he glo1 of a =ob 1ell do+e( *he o*her ac*ors i+ *his drama 1ere sub=ec*

*o la*er af*er*hough*s$ oodro1 ilso+ 1ro*e i+ -.-6( #a*io+al !co+om) a+d *he a+,i+g S)s*em( Se+$ &oc$ #o$ D( #o$ D( J6*h

Co+gress( -s* sessio+( -.D. "Our s)s*em of credi* is co+ce+*ra*ed 7i+ *he %ederal Reserve

.

S)s*em8$ The gro1*h of *he +a*io+( *herefore( a+d all our ac*ivi*ies( are i+ *he ha+ds of a fe1 me+$"

he+ he 1as as,ed b) Clare+ce $ arro+ 1he*her he approved of *he bill as i* 1as fi+all) passed$ arburg remar,ed( "ell( i*

has+5* go*


46/171

"As far as *he &emocra*ic 4ar*) 1as co+cer+ed( oodro1 ilso+ 1as 1i*hou* i+flue+ce( save for

*he pa*ro+age he possessed$ I* 1as r)a+ 1ho 1hipped Co+gress i+*o li+e o+ *he *ariff bill( o+

*he 4a+ama Ca+al *olls repeal( a+d o+ *he curre+c) bill$" >r$ r)a+ la*er 1ro*e( "Tha* is *he o+e

*hi+g i+ m) public career *ha* I regre*EEm) 1or, *o secure *he e+ac*me+* of *he %ederal Reserve

La1$"

O+ &ecember 9( -.-D( The #a*io+ poi+*ed ou* *ha* "The #e1 ?or, S*oc, >ar,e* bega+ *o rise s*eadil) upo+ +e1s *ha* *he Se+a*e

1as read) *o pass *he %ederal Reserve Ac*$"

This belies *he claim *ha* *he %ederal Reserve Ac* 1as a mo+e*ar) reform bill$ The #e1 ?or, S*oc, !;cha+ge is ge+erall) co+sidered

a+ accura*e barome*er of *he *rue mea+i+g of a+) fi+a+cial legisla*io+ passed i+ ashi+g*o+$ Se+a*or Aldrich also decided *ha* he +o

lo+ger had misgivi+gs abou* *he %ederal Reserve Ac*$ I+ a maga3i+e 1hich he o1+ed( a+d 1hich he called The I+depe+de+*( he 1ro*e

i+ Bul)( -.-2 "efore *he passage of *his Ac*( *he #e1 ?or, ba+,ers could o+l) domi+a*e *he reserves of #e1 ?or,$ #o1 1e are able

*o domi+a*e *he ba+, reserves of *he e+*ire cou+*r)$"

H$$ Louc,s de+ou+ced *he %ederal Reserve Ac* i+ The rea* Co+spirac) of *he House of >orga+(

"I+ *he %ederal Reserve La1( *he) have 1res*ed from *he people a+d secured for *hemselves *he

co+s*i*u*io+al po1er *o issue mo+e) a+d regula*e *he value *hereof$" O+ page D-( Louc,s 1ri*es(

"The House of >orga+ is +o1 i+ supreme co+*rol of our i+dus*r)( commerce a+d poli*ical affairs$

The) are i+ comple*e co+*rol of *he polic) ma,i+g of *he &emocra*ic( Republica+ a+d 4rogressive

par*ies$ The prese+* e;*raordi+ar) propaga+da for prepared+ess5 is pla++ed more for home

coercio+ *ha+ for defe+se agai+s* foreig+ aggressio+$"

The sig+i+g of *he %ederal Reserve Ac* b) oodro1 ilso+ represe+*ed *he culmi+a*io+ of )ears of collusio+ 1i*h his i+*ima*e

frie+d( Col$ House( a+d 4aul arburg$ O+e of *he me+ 1i*h 1hom House became acorga+( 4riva*el) pri+*ed( -.-6

D0

Roosevel*( Assis*a+* Secre*ar) of #av)$ As soo+ as he ob*ai+ed *he &emocra*ic +omi+a*io+ for 4reside+*( i+ -.D( %ra+,li+ &$

Roosevel* made a "pilgrimage" *o Col$ House5s home a* >ag+olia( >ass$ Roosevel*( af*er *he Republica+ hia*us of *he -.0s( filled i+

*he goals of 4hilip &ru( Admi+is*ra*or(D 1hich ilso+ had +o* bee+ able *o carr) ou*$ The la*e Roosevel* achieveme+*s i+cluded *he

e+ac*me+* of *he social securi*) program( e;cess profi*s *a;( a+d *he e;pa+sio+ of *he gradua*ed i+come *a; *o .0 of ear+ed i+come$

House5s biographer( Charles Se)mour( 1ro*e "He 1as 1earied b) *he de*ails of par*) poli*ics

a+d appoi+*me+*s$ !ve+ *he share he had *a,e+ i+ co+s*ruc*ive domes*ic legisla*io+ 7*he


47/171

%ederal Reserve Ac*( *ariff revisio+( a+d *he I+come Ta; ame+dme+*8 did +o* sa*isf) him$ %rom

*he begi++i+g of -.-2 he gave more a+d more of his *ime *o 1ha* he regarded as *he highes*

form of poli*ics a+d *ha* for 1hich he 1as par*icularl) sui*edEEi+*er+a*io+al affairs$"2

I+ -.D/( shor*l) before he died( House *old Charles Se)mour( "&uri+g *he las* fif*ee+ )ears I have bee+ close *o *he ce+*er of *hi+gs(

al*hough fe1 people suspec* i*$ #o impor*a+* foreig+er has come *o *he :+i*ed S*a*es 1i*hou* *al,i+g *o me$ I 1as close *o *he

moveme+* *ha* +omi+a*ed Roosevel*$ He has give+ me a free ha+d i+ advisi+g him$ All *he Ambassadors have repor*ed *o me

fre


48/171


49/171

arburg5s salar) from his priva*e busi+ess has bee+ appro;ima*el) a half millio+ a )ear$ >r$

arburg5s mo*ives had bee+ purel) *hose of pa*rio*ic selfEsacrifice$"

The *rue purposes of *he %ederal Reserve Ac* soo+ bega+ *o disillusio+ ma+) 1ho had a* firs* believed i+ i*s claims$ $ H$ Alle+

1ro*e i+ >ood)5s >aga3i+e( -.-6(

"The purpose of *he %ederal Reserve Ac* 1as *o preve+* co+ce+*ra*io+ of mo+e) i+ *he #e1 ?or,

ba+,s b) ma,i+g i* profi*able for cou+*r) ba+,ers *o use *heir fu+ds a* home( bu* *he

moveme+* of curre+c) sho1s


9 %erdi+a+d Lu+dberg( America5s Si;*) %amilies( -.DJ

6 B$ Laure+ce Laughli+( The %ederal Reserve Ac*( I*5s Origi+s a+d 4urposes

DD

*ha* *he #e1 ?or, ba+,s gai+ed from *he i+*erior i+ ever) mo+*h e;cep* &ecember( -.-9( si+ce

*he Ac* 1e+* i+*o effec*$ The s*abili3a*io+ of ra*es has *a,e+ place i+ #e1 ?or, alo+e$ I+ o*her

par*s( high ra*es co+*i+ue$ The Ac*( 1hich 1as *o deprive all S*ree* of i*s fu+ds for specula*io+(

has reall) give+ *he bulls a+d *he bears such a suppl) as *he) have +ever had before$ The *ru*h is

*ha* far from havi+g clogged *he cha++el *o all S*ree*( as >r$ lass so co+fide+*l) boas*ed( i*

ac*uall) 1ide+ed *he old cha++els a+d ope+ed up *1o +e1 o+es$ The firs* of *hese leads direc*l)

*o ashi+g*o+ a+d gives all S*ree* a s*ri+g o+ all *he surplus cash i+ *he :+i*ed S*a*es

Treasur)$ esides( i+ *he po1er *o issue ba+,E+o*e curre+c)( i* fur+ishes a+ i+e;haus*ible suppl)

of credi* mo+e)G *he seco+d cha++el leads *o *he grea* ce+*ral ba+,s of !urope( 1hereb)( *hrough

*he sale of accep*a+ces( vir*uall) guara+*eed b) *he :+i*ed S*a*es over+me+*( all S*ree* is

gra+*ed immu+i*) from foreig+ dema+ds for gold 1hich have precipi*a*ed ever) grea* crisis i+

our his*or)$"

%or ma+) )ears( *here has bee+ co+siderable m)s*er) abou* 1ho ac*uall) o1+s *he s*oc, of *he %ederal Reserve a+,s$ Co+gressma+

righ* 4a*ma+( leadi+g cri*ic of *he S)s*em( *ried *o fi+d ou* 1ho *he s*oc,holders 1ere$ The s*oc, i+ *he origi+al *1elve regio+al

%ederal Reserve a+,s 1as purchased b) +a*io+al ba+,s i+ *hose *1elve regio+s$ ecause *he %ederal Reserve a+, of #e1 ?or, 1as

*o se* *he i+*eres* ra*es a+d direc* ope+ mar,e* opera*io+s( *hus co+*rolli+g *he dail) suppl) a+d price of mo+e) *hroughou* *he

:+i*ed S*a*es( i* is *he s*oc,holders of *ha* ba+, 1ho are *he real direc*ors of *he e+*ire s)s*em$ %or *he firs* *ime( i* ca+ be revealed

1ho *hose s*oc,holders are$ This 1ri*er has *he origi+al orga+i3a*io+ cer*ifica*es of *he *1elve %ederal Reserve a+,s( givi+g *he

o1+ership of shares b) *he +a*io+al ba+,s i+ each dis*ric*$ The %ederal Reserve a+, of #e1 ?or, issued 0D(09D shares( a+d( as

filed 1i*h *he Comp*roller of *he Curre+c) >a) -.( -.-2( *he large #e1 ?or, Ci*) ba+,s *oo, more *ha+ half of *he ou*s*a+di+g


50/171

shares$ The Roc,efeller uh+( LoebEco+*rolled #a*io+al Ci*) a+, *oo, *he larges* +umber of shares of a+) ba+,( D0(000 shares$ B$4$

>orga+5s %irs* #a*io+al a+, *oo, -9(000 shares$ he+ *hese *1o ba+,s merged i+ -.99( *he) o1+ed i+ o+e bloc, almos* o+e four*h

of *he shares i+ *he %ederal Reserve a+, of #e1 ?or,( 1hich co+*rolled *he e+*ire s)s*em( a+d *hus *he) could +ame 4aul 'olc,er

or a+)o+e else *he) chose *o be Chairma+ of *he %ederal Reserve oard of over+ors$ Chase #a*io+al a+, *oo, 6(000 shares$ The

>ari+e #a*io+ a+, of uffalo( la*er ,+o1+ as >ari+e >idla+d( *oo, 6(000 shares$ This ba+, 1as o1+ed b) *he Schoell,opf famil)(

1hich co+*rolled #iagara 4o1er Compa+) a+d o*her large i+*eres*s$ #a*io+al a+, of Commerce of #e1 ?or, Ci*) *oo, -(000

shares$ The shareholders of *hese ba+,s 1hich o1+ *he s*oc, of *he %ederal Reserve a+, of #e1 ?or, are *he people 1ho have

co+*rolled our poli*ical a+d eco+omic des*i+ies si+ce -.-2$ The) are *he Ro*hschilds( of !urope( La3ard %reres 7!uge+e >e)er8(

uh+ Loeb Compa+)( arburg Compa+)( Lehma+ ro*hers(

D2

oldma+ Sachs( *he Roc,efeller famil)( a+d *he B$4$ >orga+ i+*eres*s$ These i+*eres*s have merged a+d co+solida*ed i+ rece+* )ears(

so *ha* *he co+*rol is much more co+ce+*ra*ed$ #a*io+al a+, of Commerce is +o1 >orga+ uara+*) Trus* Compa+)$ Lehma+

ro*hers has merged 1i*h uh+( Loeb Compa+)( %irs* #a*io+al a+, has merged 1i*h *he #a*io+al Ci*) a+,( a+d i+ *he o*her

eleve+ %ederal Reserve &is*ric*s( *hese same shareholders i+direc*l) o1+ or co+*rol shares i+ *hose ba+,s( 1i*h *he o*her shares

o1+ed b) *he leadi+g families i+ *hose areas 1ho o1+ or co+*rol *he pri+cipal i+dus*ries i+ *hese regio+s$P The "local" families se* up

regio+al cou+cils( o+ orders from #e1 ?or,( of such groups as *he Cou+cil o+ %oreig+ R

secrets of the federal reserve

Documents