CHAPTER THIRTEEN - The 1930’s
In 1930 Herbert Hoover (image left) appointed to the Federal Reserve Board an old friend from World War I days, Eugene Meyer, Jr., who had a long record of public service dating from 1915, when he went into partnership with Bernard Baruch in the Alaska-Juneau Gold Mining Company. Meyer had been a Special Advisor to the War Industries Board on Non-Ferrous Metals (gold, silver, etc.); Special Assistant to the Secretary of War on aircraft production; in 1917 he was appointed to the National Committee on War Savings, and was made Chairman of the War Finance Corporation from 1918-1926.

 

He then was appointed chairman of the Federal Farm Loan Board from 1927-29. Hoover put him on the Federal Reserve Board in 1930, and Franklin D. Roosevelt created the Reconstruction Bank for Reconstruction and Development in 1946. Meyer must have been a man of exceptional ability to hold so many important posts. However, there were some Senators who did not believe he should hold any Government office, because of his family background as an international gold dealer and his mysterious operations in billions of dollars of Government securities in the First World War. Consequently, the Senate held Hearings to determine whether Meyer ought to be on the Federal Reserve Board.

At these Hearings, Representative Louis T. McFadden, Chairman of the House Banking and Currency Committee, said:

"Eugene Meyer, Jr. has had his own crowd with him in the government since he started in 1917. His War Finance Corporation personnel took over the Federal Farm Loan System, and almost immediately afterwards, the Kansas City Join Stock Land Bank and the Ohio Joint Stock Land Bank failed."

REPRESENTATIVE RAINEY: Mr. Meyer, when he nominally resigned as head of the Federal Farm Loan Board, did not really cease his activities there. He left behind him an able body of wreckers. They are continuing his policies and consulting with him. Before his appointment, he was frequently in consultation with Assistant Secretary of the Treasury Dewey. Just before his appointment, the Chicago Joint Land Stock Bank, the Dallas Joint Stock Land Bank, the Kansas City Joint Land Stock Bank, and the Des Moines Land Bank were all functioning. Their bonds were selling at par. The then farm commissioner had an understanding with Secretary Dewey that nothing would be done without the consent and approval of the Federal Farm Loan Board. A few days afterwards, United States Marshals, with pistols strapped at their sides, and sometimes with drawn pistols, entered these five banks and demanded that the banks be turned over to them. Word went out all over the United States, through the newspapers, as to what had happened, and these banks were ruined. This led to the breach with the old Federal Farm Loan Board, and to the resignation of three of its members, and the appointment of Mr. Meyer to be head of that Board.

SENATOR CAREY: Who authorized the marshals to take over the banks?

REP. RAINEY: Assistant Secretary of the Treasury Dewey. That started the ruin of all these rural banks, and the Gianninis bought them up in great numbers."

World’s Work of February 1931, said:

When the World War began for us in 1917, Mr. Eugene Meyer, Jr. was among the first to be called to Washington. In April, 1918, President Wilson named him Director of the War Finance Corporation. This corporation loaned out 700 million dollars to banking and financial institutions."

The Senate Hearings on Eugene Meyer, Jr. continued:

REPRESENTATIVE MCFADDEN: "Lazard Freres, the international banking house of New York and Paris, was a Meyer family banking house. It frequently figures in imports and exports of gold, and one of the important functions of the Federal Reserve System has to do with gold movements in the maintenance of its own operations. In looking over the minutes of the hearing we had last Thursday, Senator Fletcher had asked Mr. Meyer, ‘Have you any connections with international banking?’ Mr. Meyer had answered, ‘Me? Not personally.’ This last question and answer do not appear in the stenographic transcript. Senator Fletcher remembers asking the question and the answer. It is an odd omission.

SENATOR BROOKHART: I understand that Mr. Meyer looked it over for corrections.

REPRESENTATIVE MCFADDEN: Mr. Meyer is a brother-in-law of George Blumenthal, a member of the firm of J.P. Morgan Company, which represents the Rothschild interests. He also is a liaison officer between the French Government and J.P. Morgan. Edmund Platt, who had eight years to go on a term of ten years as Governor of the Federal Reserve Board, resigned to make room for Mr. Meyer. Platt was given a Vice-Presidency of Marine Midland Corporation by Meyer’s brother-in-law Alfred A. Cook. Eugene Meyer, Jr. as head of the War Finance Corporation, engaged in the placing of two billion dollars in Government securities, placed many of those orders first with the banking house now located at 14 Wall Street in the name of Eugene Meyer, Jr. Mr. Meyer is now a large stockholder in the Allied Chemical Corporation. I call your attention to House Report No. 1635, 68th Congress, 2nd Session, which reveals that at least twenty-four million dollars in bonds were duplicated. Ten billion dollars worth of bonds surreptitiously destroyed. Our committee on Banking and Currency found the records of the War Finance Corporation under Eugene Meyer, Jr. extremely faulty. While the books were being brought before our committee by the people who were custodians of them and taken back to the Treasury at night, the committee discovered that alterations were being made in the permanent records."

The record of public service did not prevent Eugene Meyer, Jr. (image right) from continuing to serve the American people on the Federal Reserve Board, as Chairman of the Reconstruction Finance Corporation, and as head of the International Bank.

President Rand, of the Marine Midland Corporation, questioned about his sudden desire for the services of Edmund Platt, said:

"We pay Mr. Platt $22,000 a year, and we took his secretary over, of course."

This meant another five thousand a year. Senator Brookhart showed that Eugene Meyer, Jr. administered the Federal Farm Loan Board against the interests of the American farmer, saying:

"Mr. Meyer never loaned more than 180 million dollars of the capital stock of 500 million dollars of the farm loan board, so that in aiding the farmers he was not even able to use half of the capital."

MR. MEYER: Senator Kenyon wrote me a letter which showed that I cooperated with great advantage to the people of Iowa.

SENATOR BROOKHART: "You went out and took the opposite side from the Wall Street crowd. They always send somebody out to do that. I have not yet discovered in your statements much interest in making loans to the farmers at large, or any real effort to help their condition. In your two years as head of the Federal Farm Loan Board you made very few loans compared to your capital. You loaned only one-eighth of the demand, according to your own statement."

Despite the damning evidence uncovered at these Senate Hearings, Eugene Meyer, Jr. remained on the Federal Reserve Board.

During this tragic period, chairman Louis McFadden of the House Banking and Currency Committee continued his lone crusade against the "London Connection" which had wrecked the nation. On June 10, 1932, McFadden addressed the House of Representatives:

"Some people think the Federal Reserve banks are United States Government institutions. They are not government institutions. They are private credit monopolies which prey upon the people of the United States for the benefit of themselves and their foreign customers. The Federal Reserve banks are the agents of the foreign central banks. Henry Ford has said, ‘The one aim of these financiers is world control by the creation of inextinguishable debts.’ The truth is the Federal Reserve Board has usurped the Government of the United States by the arrogant credit monopoly which operates the Federal Reserve Board and the Federal Reserve Banks."

On January 13, 1932, McFadden had introduced a resolution indicting the Federal Reserve Board of Governors for "Criminal Conspiracy":

"Whereas I charge them, jointly and severally, with the crime of having treasonably conspired and acted against the peace and security of the United States and having treasonably conspired to destroy constitutional government in the United States. Resolved, that the Committee on the Judiciary is authorized and directed as a whole or by subcommittee to investigate the official conduct of the Federal Reserve Board and agents to determine whether, in the opinion of the said committee, they have been guilty of any high crime or misdemeanor which in the contemplation of the Constitution requires the interposition of the Constitutional powers of the House."

No action was taken on this Resolution. McFadden came back on December 13, 1932 with a motion to impeach President Herbert Hoover. Only five Congressmen stood with him on this, and the resolution failed. The Republican majority leader of the House remarked, "Louis T. McFadden is now politically dead."

On May 23, 1933, McFadden introduced House Resolution No. 158, Articles of Impeachment against the Secretary of the Treasury, two Assistant Secretaries of the Treasury, the Federal Reserve Board of Governors, and officers and directors of the Federal Reserve Banks for their guilt and collusion in causing the Great Depression.

"I charge them with having unlawfully taken over 80 billion dollars from the United States Government in the year 1928, the said unlawful taking consisting of the unlawful recreation of claims against the United States Treasury to the extent of over 80 billion dollars in the year 1928, and in each year subsequent, and by having robbed the United States Government and the people of the United States by their theft and sale of the gold reserve of the United States."

The Resolution never reached the floor. A whispering campaign that McFadden was insane swept Washington, and in the next Congressional elections, he was overwhelmingly defeated by thousands of dollars poured into his home district of Canton, Pennsylvania.

In 1932, the American people elected Franklin D. Roosevelt (image left) President of the United States. This was hailed as the freeing of the American people from the evil influence which had brought on the Great Depression, the ending of Wall Street domination, and the disappearance of the banker from Washington.

Roosevelt owed his political career to a fortuitous circumstance. As Assistant Secretary of the Navy during World War I, because of old school ties, he had intervened to prevent prosecution of a large ring of homosexuals in the Navy which included several Groton and Harvard chums. This brought him to the favorable appreciation of a wealthy international homosexual set which travelled back and forth between New York and Paris, and which was presided over by Bessie Marbury (image right), of a very old and prominent New York family.

 

Bessie’s "wife", who lived with her for a number of years, was Elsie de Wolfe, later Lady Mendl in a "mariage de convenance", the arbiter of the international set. They recruited J.P. Morgan’s youngest daughter, Anne Morgan, into their circle, and used her fortune to restore the Villa Trianon in Paris, which became their headquarters. During World War I, it was used as a hospital. Bessie Marbury expected to be awarded the Legion of Honor by the French Government as a reward, but J.P. Morgan, Jr., who despised her for corrupting his youngest sister, requested the French Government to withhold the award, which they did. Smarting from this rebuff, Bessie Marbury threw herself into politics, and became a power in the Democratic National Party. She had also recruited Eleanor Roosevelt into her circle, and, during a visit to Hyde Park, Eleanor confided that she was desperate to find something for "poor Franklin" to do, as he was confined to a wheelchair, and was very depressed.

"I know what we’ll do," exclaimed Bessie, "We’ll run him for Governor of New York!" Because of her power, she succeeded in this goal, and Roosevelt later became President.

One of the men Roosevelt brought down from New York with him as a Special Advisor to the Treasury was Earl Bailie of J & W Seligman Company, who had become notorious as the man who handed the $415,000 bribe to Juan Leguia, son of the President of Peru, in order to get the President to accept a loan from J & W Seligman Company. There was a great deal of criticism of this appointment, and Mr. Roosevelt, in keeping with his new role as defender of the people, sent Earl Bailie back to @bringing in New York.

Franklin D. Roosevelt himself was an international banker of ill repute, having floated large issues of foreign bonds in this country in the 1920s. These bonds defaulted, and our citizens lost millions of dollars, but they still wanted Mr. Roosevelt as President. The New York Directory of Directors lists Mr. Roosevelt as President and Director of United European Investors, Ltd., in 1923 and 1924, which floated many millions of German marks in this country, all of which defaulted. Poor’s Directory of Directors lists him as a director of The International Germanic Trust Company in 1928. Franklin D. Roosevelt was also an advisor to the Federal International Banking Corporation, an Anglo-American outfit dealing in foreign securities in the United States.

Roosevelt’s law firm of Roosevelt and O’Connor during the 1920s represented many international corporations. His law partner, Basil O’Connor, was a director in the following corporations:

  • Cuban-American Manganese Corporation

  • Venezuela-Mexican Oil Corporation

  • West Indies Sugar Corporation

  • American Reserve Insurance Corporation

  • Warm Springs Foundation

He was director in other corporations, and later head of the American Red Cross.

 

When Franklin D. Roosevelt took office as President of the United States, he appointed as Director of the Budget James Paul Warburg, son of Paul Warburg, and Vice President of the International Acceptance Bank and other corporations. Roosevelt appointed as Secretary of the Treasury W.H. Woodin, one of the biggest industrialists in the country, Director of the American Car Foundry Company and numerous other locomotive works, Remington Arms, The Cuba Company, Consolidated Cuba Railroads, and other big corporations. Woodin was later replaced by Henry Morgenthau, Jr., son of the Harlem real estate operator who had helped put Woodrow Wilson in the White House. With such a crew as this, Roosevelt’s promises of radical social changes showed little likelihood of fulfillment. One of the first things he did was to declare a bankers’ moratorium, to help the bankers get their records in order.

World’s Work says:

"Congress has left Charles G. Dawes and Eugene Meyer, Jr. free to appraise, by their own methods, the security which prospective borrowers of the two billion dollar capital may offer."

Roosevelt also set up the Securities Exchange Commission, to see to it that no new faces got into the Wall Street gang, which caused the following colloquy in Congress:

REPRESENTATIVE WOLCOTT: At hearings before this committee in 1933, the economists showed us charts which proved beyond all doubt that the dollar value commodities followed the price level of gold. It did not, did it?

LEON HENDERSON: No.

REPRESENTATIVE GIFFORD: Wasn’t Joe Kennedy put in [as Chairman of the Securities Exchange Committee] by President Roosevelt because he was sympathetic with big business?

LEON HENDERSON: I think so.

Paul Einzig pointed out in 1935 that:

"President Roosevelt was the first to declare himself openly in favor of a monetary policy aiming at a deliberately engineered rise in prices. In a negative sense his policy was successful. Between 1933 and 1935 he succeeded in reducing private indebtedness, but this was done at the cost of  increasing public indebtedness."

In other words, he eased the burden of debts off of the rich onto the poor, since the rich are few and the poor many.

Senator Robert L. Owen, testifying before the House Committee on Banking and Currency in 1938, said:

"I wrote into the bill which was introduced by me in the Senate on June 26, 1913, a provision that the powers of the System should be employed to promote a stable price level, which meant a dollar of stable purchasing, debt-paying power. It was stricken out. The powerful money interests got control of the Federal Reserve Board through Mr. Paul Warburg, Mr. Albert Strauss, and Mr. Adolph C. Miller and they were able to have that secret meeting of May 18, 1920, and bring about a contraction of credit so violent it threw five million people out of employment. In 1920 that Reserve Board deliberately caused the Panic of 1921. The same people, unrestrained in the stock market, expanding credit to a great excess between 1926 and 1929, raised the price of stocks to a fantastic point where they could not possibly earn dividends, and when the people realized this, they tried to get out, resulting in the Crash of October 24, 1929."

Senator Owen did not go into the question of whether the Federal Reserve Board could be held responsible to the public. Actually, they cannot. They are public officials who are appointed by the President, but their salaries are paid by the private stockholders of the Federal Reserve Banks.

Governor W.P.G. Harding of the Federal Reserve Board testified in 1921 that:

"The Federal Reserve Bank is an institution owned by the stockholding member banks. The Government has not a dollar’s worth of stock in it."

However, the Government does give the Federal Reserve System the use of its billions of dollars of credit, and this gives the Federal Reserve its characteristic of a central bank, the power to issue currency on the Government’s credit. We do not have Federal Government notes or gold certificates as currency. We have Federal Reserve Bank notes, issued by the Federal Reserve Banks, and every dollar they print is a dollar in their pocket.

W. Randolph Burgess, of the Federal Reserve Bank of New York, stated before the Academy of Political Science in 1930 that:

"In its major principles of operation the Federal Reserve System is no different from other banks of issue, such as the Bank of England, the Bank of France, or the Reichsbank."

All of these central banks have the power of issuing currency in their respective countries. Thus, the people do not own their own money in Europe, nor do they own it here. It is privately printed for private profit. The people have no sovereignty over their money, and it has developed that they have no sovereignty over other major political issues such as foreign policy.

As a central bank of issue, the Federal Reserve System has behind it all the enormous wealth of the American people. When it began operations in 1913, it created a serious threat to the central banks of the impoverished countries of Europe. Because it represented this great wealth, it attracted far more gold than was desirable in the 1920s, and it was apparent that soon all of the world’s gold would be piled up in this country. This would make the gold standard a joke in Europe, because they would have no gold over there to back their issue of money and credit. It was the Federal Reserve’s avowed aim in 1927, after the secret meeting with the heads of the foreign central banks, to get large quantities of that gold sent back to Europe, and its methods of doing so, the low interest rate and heavy purchases of Government securities, which created vast sums of new money, intensified the stock market speculation and made the stock market crash and resultant depression a national disaster.

Since the Federal Reserve System was guilty of causing this disaster, we might suppose that they would have tried to alleviate it. However, through the dark years of 1931 and 1932, the Governors of the Federal Reserve Board saw the plight of the American people worsening and did nothing to help them. This was more criminal than the original plotting of the Depression. Anyone who lived through those years in this country remembers the widespread unemployment, the misery, and the hunger of our people. At any time during those years the Federal Reserve Board could have acted to relieve this situation.

The problem was to get some money back into circulation. So much of the money normally used to pay rent and food bills had been sucked into Wall Street that there was no money to carry on the business of living. In many areas, people printed their own money on wood and paper for use in their communities, and this money was good, since it represented obligations to each other which people fulfilled.

The Federal Reserve System was a central bank of issue. It had the power to, and did, when it suited its owners, issue millions of dollars of money. Why did it not do so in 1931 and 1932? The Wall Street bankers were through with Mr. Herbert Hoover, and they wanted Franklin D. Roosevelt to come in on a wave of glory as the saviour of the nation. Therefore, the American people had to starve and suffer until March of 1933, when the White Knight came riding in with his crew of Wall Street bribers and put some money into circulation. That was all there was to it. As soon as Mr. Roosevelt took office, the Federal Reserve began to buy Government securities at the rate of ten million dollars a week for ten weeks, and created a hundred million dollars in new money, which alleviated the critical famine of money and credit, and the factories started hiring people again.

During the Roosevelt Administration, The Federal Reserve Board, insofar as the public was concerned, was Marriner Eccles (left image), an emulator and admirer of "the Chief". Eccles was a Utah banker, President of the First Securities Corporation, a family investment trust consisting of a number of banks which Eccles had picked up cheap during the Agricultural Depression of 1920-21. Eccles also was a director of such corporations as Pet Milk Company, Mountain States Implement Company, and Amalgamated Sugar. As a big banker, Eccles fitted in well with the group of powerful men who were operating Roosevelt.

There was some discussion in Congress as to whether Eccles ought to be on the Federal Reserve Board at the same time he had all of these banks in Utah, but he testified that he had very little to do with the First Securities Corporation besides being President of it, and so he was confirmed as Chairman of the Board.

Eugene Meyer, Jr. now resigned from the Board to spend more of his time lending the two billion dollar capital of the Reconstruction Finance Corporation, and determining the value of collateral by his own methods.

The Banking Act of 1935, which greatly increased Roosevelt’s power over the nation’s finances, was an integral part of the legislation by which he proposed to extend his reign in the United States. It was not opposed by the people as was the National Recovery Act, because it was not so naked an infringement of their liberties. It was, however, an important measure. First of all, it extended the terms of office of the Federal Reserve Board of Governors to fourteen years, or, three and a half times the length of a Presidential term. This meant that a President assuming office who might be hostile to the Board could not appoint a majority to it who would be favorable to him. Thus, a monetary policy inaugurated before a President came into the White House would go on regardless of his wishes.

The Banking Act of 1935 also repealed the clause of the Glass-Steagall Banking Act of 1933, which had provided that a banking house could not be on the Stock Exchange and also be involved in investment banking. This clause was a good one, since it prevented a banking house from lending money to a corporation which it owned. Still it is to be remembered that this clause covered up some other provisions in that Act, such as the creation of the Federal Deposit Insurance Corporation, providing insurance money to the amount of 150 million dollars, to guarantee fifteen billion dollars worth of deposits. This increased the power of the big bankers over small banks and gave them another excuse to investigate them. The Banking Act of 1933 also legislated that all earnings of the Federal Reserve Banks must by law go to the banks themselves. At last the provision in the Act that the Government share in the profits was gotten rid of. It had never been observed, and the increase in the assets of the Federal Reserve Banks from 143 million dollars in 1913 to 45 billion dollars in 1949 went entirely to the private stockholders of the banks. Thus, the one constructive provision of the Banking Act of 1933 was repealed in 1935, and also the Federal Reserve Banks were now permitted to loan directly to industry, competing with the member banks, who could not hope to match their capacity in arranging large loans.

When the provision that banks could not be involved in investment banking and operate on the Stock Exchange was repealed in 1935, Carter Glass, originator of that provision, was asked by reporters:

"Does that mean that J.P. Morgan can go back into investment banking?"

 

"Well, why not?" replied Senator Glass.

 

"There has been an outcry all over the country that the banks will not make loans. Now the Morgans can go back to underwriting."

Because that provision was unfavorable to them, the bankers had simply clamped down on making loans until it was repealed.

Newsweek of March 14, 1936, noted that:

"The Federal Reserve Board fired nine chairmen of Reserve Banks, explaining that ‘it intended to make the chairmanships of the Reserve Banks largely a part-time job on an honorary basis.’"

This was another instance of the centralization of control in the Federal Reserve System. The regional district system had never been an important factor in the administration of monetary policy, and the Board was not cutting down on its officials outside of Washington. The Chairman of the Senate Committee on Banking and Currency had asked, during the Gold Reserve Hearings of 1934:

"Is it not true, Governor Young, that the Secretary of the Treasury for the past twelve years has dominated the policy of the Federal Reserve Banks and the Federal Reserve Board with respect to the purchase of United States bonds?"

Governor Young had denied this, but it had already been brought out that on both of his hurried trips to this country in 1927 and 1929 to dictate Federal Reserve policy, Governor Montagu Norman (image right) of the Bank of England had gone directly to Andrew Mellon, Secretary of the Treasury, to get him to purchase Government securities on the open market and start the movement of gold out of this country back to Europe.

The Gold Reserve Hearings had also brought in other people who had more than a passing interest in the operations of the Federal Reserve System. James Paul Warburg, just back from the London Economic Conference with Professor O.M.W. Sprague and Henry L. Stimson, came in to declare that he thought we ought to modernize the gold standard. Frank Vanderlip suggested that we do away with the Federal Reserve Board and set up a Federal Monetary Authority. This would have made no difference to the New York bankers, who would have selected the personnel anyway. And Senator Robert L. Owen, longtime critic of the system, made the following statement:

"The people did not know the Federal Reserve Banks were organized for profit-making. They were intended to stabilize the credit and currency supply of the country. That end has not been accomplished. Indeed, there has been the most remarkable variation in the purchasing power of money since the System went into effect. The Federal Reserve men are chosen by the big banks, through discreet little campaigns, and they naturally follow the ideals which are portrayed to them as the soundest from a financial point of view."

Benjamin Anderson, economist for the Chase National Bank of New York, said:

"At the moment, 1934, we have 900 million dollars excess reserves. In 1924, with increased reserves of 300 million, you got some three or four billion in bank expansion of credit very quickly. That extra money was put out by the Federal Reserve Banks in 1924 through buying government securities and was the cause of the rapid expansion of bank credit. The banks continued to get excess reserves because more gold came in, and because, whenever there was a slackening, the Federal Reserve people would put out some more. They held back a bit in 1926.

Things firmed up a bit that year. And then in 1927 they put out less than 300 million additional reserves, set the wild stock market going, and that led us right into the smash of 1929."

Dr. Anderson also stated that:

"The money of the Federal Reserve Banks is money they created. When they buy Government securities they create reserves. They pay for the Government securities by giving checks on themselves, and those checks come to the commercial banks and are by them deposited in the Federal Reserve Banks, and then money exists which did not exist before."

 

SENATOR BULKLEY: It does not increase the circulating medium at all?

ANDERSON: No.

This is an explanation of the manner in which the Federal Reserve Banks increased their assets from 143 million dollars to 45 billion dollars in thirty-five years. They did not produce anything, they were non-productive enterprises, and yet they had this enormous profit, merely by creating money, 95 percent of it in the form of credit, which did not add to the circulating medium. It was not distributed among the people in the form of wages, nor did it increase the buying power of the farmers and workers. It was credit-money created by bankers for the use and profit of bankers, who increased their wealth by more than forty billion dollars in a few years because they had obtained control of the Government’s credit in 1913 by passing the Federal Reserve Act.

Marriner Eccles also had much to say about the creation of money. He considered himself an economist, and had been brought into the Government service by Stuart Chase and Rexford Guy Tugwell, two of Roosevelt’s early brain-trusters. Eccles was the only one of the Roosevelt crowd who stayed in office throughout his administration.

Before the House Banking and Currency Committee on June 24, 1941, Governor Eccles said:

"Money is created out of the right to issue credit-money."

Turning over the Government’s credit to private bankers in 1913 gave them unlimited opportunities to create money. The Federal Reserve System could also destroy money in large quantities through open market operations. Eccles said, at the Silver Hearings of 1939:

"When you sell bonds on the open market, you extinguish reserves."

Extinguishing reserves means wiping out a basis for money and credit issue, or, tightening up on money and credit, a condition which is usually even more favorable to bankers than the creation of money. Calling in or destroying money gives the banker immediate and unlimited control of the financial situation, since he is the only one with money and the only one with the power to issue money in a time of money shortage. The money panics of 1873, 1893, 1920-21, and 1929-31, were characterized by a drawing in of the circulating medium. In economical terms, this does not sound like such a terrible thing, but when it means that people do not have money to pay their rent or buy food, and when it means that an employer has to lay off three-fourths of his help because he cannot borrow the money to pay them, the enormous guilt of the bankers and the long record of suffering and misery for which they are responsible would suggest that no punishment might be too severe for their crimes against their fellowmen.

On September 30, 1940, Governor Eccles said:

"If there were no debts in our money system, there would be no money."

This is an accurate statement about our money system. Instead of money being created by the production of the people, the annual increase in goods and services, it is created by the bankers out of the debts of the people. Because it is inadequate, it is subject to great fluctuations and is basically unstable. These fluctuations are also a source of great profit. For that reason, the Federal Reserve Board has consistently opposed any legislation which attempts to stabilize the monetary system. Its position has been set forth definitively in Chairman Eccles’ letter to Senator Wagner on March 9, 1939, and the Memorandum issued by the Board on March 13, 1939.

Chairman Eccles wrote that:

". . . you are advised that the Board of Governors of the Federal Reserve System does not favor the enactment of Senate Bill No. 31, a bill to amend the Federal Reserve Act, or any other legislation of this general character."

The Memorandum of the Board stated, in its "Memorandum on Proposals to maintain prices at fixed levels":

"The Board of Governors opposes any bill which proposes a stable price level, on the grounds that prices do not depend primarily on the price or cost of money; that the Board’s control over money cannot be made complete; and that steady average prices, even if obtainable by official action, would not insure lasting prosperity."

Yet William McChesney Martin, the Chairman of the Board of Governors in 1952, said before the Subcommittee on Debt Control, the Patman Committee, on March 10, 1952 that,

"One of the fundamental purposes of the Federal Reserve Act is to protect the value of the dollar."

Senator Flanders questioned him:

"Is that specifically stated in the original legislation setting up the Federal Reserve System?"

"No," replied Mr. Martin, "but it is inherent in the entire legislative history and in the surrounding circumstances."

Senator Robert L. Owen has told us how it was taken out of the original legislation against his will, and that the Board of Governors has opposed such legislation. Apparently Mr. Martin does not know this.

Steady average prices, indeed, are impossible so long as we have the speculators on the stock exchange driving prices up and down in order to reap profits for themselves. Despite Governor Eccles’ insistence that steady average prices would not insure lasting prosperity, they could do much to bring about this condition. A man on a yearly wage of $2,500 is not more prosperous if the price of bread increases five cents a loaf during the year.

In 1935, Eccles said before the House Committee on Banking and Currency:

"The Government controls the gold reserve, that is, the power to issue money and credit, thus largely regulating the price structure."

This is an almost direct contradiction of Eccles’ statement in 1939 that prices do not depend, primarily, on the price or cost of money.

In 1935, Governor Eccles stated before the House Committee:

"The Federal Reserve Board has the power of open market operations. Open-market operations are the most important single instrument of control over the volume and cost of credit in this country. When I say "credit" in this connection, I mean money, because by far the largest part of money in use by the people of this country is in the form of bank credit or bank deposits. When the Federal Reserve Banks buy bills or securities in the open market, they increase the volume of the people’s money and lower its cost; and when they sell in the open market they decrease the volume of money and increase its cost. Authority over these operations, which affect the welfare of the whole people, must be invested in a body representing the national interest."

Governor Eccles testimony exposes the heart of the money machine which Paul Warburg revealed to his incredulous fellow bankers at Jekyll Island in 1910. Most Americans comment that they cannot understand how the Federal Reserve System operates. It remains beyond understanding, not because it is complex, but because it is so simple. If a confidence man comes up to you and offers to demonstrate his marvelous money machine, you watch while he puts in a blank piece of paper, and cranks out a $100 bill. That is the Federal Reserve System. You then offer to buy this marvelous money machine, but you cannot. It is owned by the private stockholders of the Federal Reserve Banks, whose identities can be traced partially, but not completely, to "the London Connection."

At the House Banking and Currency Committee Hearings on June 6, 1960, Congressman Wright Patman, Chairman, questioned Carl E. Allen, President of the Federal Reserve Bank of Chicago. (p. 4).

PATMAN: "Now Mr. Allen, when the Federal Reserve Open Market Committee buys a million dollar bond you create the money on the credit of the Nation to pay for that bond, don’t you?

ALLEN: That is correct.

PATMAN: And the credit of the Nation is represented by Federal Reserve Notes in that case, isn’t it? If the banks want the actual money, you give Federal Reserve notes in payment, don’t you?

ALLEN: That could be done, but nobody wants the Federal Reserve notes.

PATMAN: Nobody wants them, because the banks would rather have the credit as reserves."

This is the most incredible part of the Federal Reserve operation and one which is difficult for anyone to understand. How can any American citizen grasp the concept that there are people in this country who have the power to make an entry in a ledger that the government of the United States now owes them one billion dollars, and to collect the principal and interest on this "loan"?

Congressman Wright Patman tells us in "The Primer of Money", p. 38 of going into a Federal Reserve Bank and asking to see their bonds on which the American people are paying interest. After being shown the bonds, he asked to see their cash, but they only had some ledgers and blank checks. Patman says,

"The cash, in truth, does not exist and has never existed. What we call ‘cash reserves’ are simply bookkeeping credits entered upon ledgers of the Federal Reserve Banks. The credits are created by the Federal Reserve Banks and then passed along through the banking system."

Peter L. Bernstein, in A Primer On Money, Banking and Gold says:

"The trick in the Federal Reserve notes is that the Federal reserve banks lose no cash when they pay out this currency to the member banks. Federal Reserve notes are not redeemable in anything except what the Government calls ‘legal tender’ -- that is, money that a creditor must be willing to accept from a debtor in payment of sums owed him. But since all Federal Reserve notes are themselves declared by law to be legal money, they are really redeemable only in themselves... they are an irredeemable obligation issued by the Federal Reserve Banks." 91

91 Peter L. Bernstein, A Primer On Money, Banking and Gold, Vintage Books, New York, 1965, p. 104

 

As Congressman Patman puts it,

"The dollar represents a one dollar debt to the Federal Reserve System. The Federal Reserve Banks create money out of thin air to buy Government bonds from the United States Treasury, lending money into circulation at interest, by bookkeeping entries of checkbook credit to the United States Treasury. The Treasury writes up an interest bearing bond for one billion dollars. The Federal Reserve gives the Treasury a one billion dollar credit for the bond, and has created out of nothing a one billion dollar debt which the American people are obligated to pay with interest."

(Money Facts, House Banking and Currency Committee, 1964, p. 9)

Patman continues,

"Where does the Federal Reserve system get the money with which to create Bank Reserves?

Answer. It doesn’t get the money, it creates it. When the Federal Reserve writes a check, it is creating money. The Federal Reserve is a total moneymaking machine. It can issue money or checks."

In 1951, the Federal Reserve Bank of New York published a pamphlet, "A Day’s Work at the Federal Reserve Bank of New York." On page 22, we find that:

"There is still another and more important element of public interest in the operation of banks besides the safekeeping of money; banks can ‘create’ money. One of the most important factors to remember in this connection is that the supply of money affects the general level of prices  -- the cost of living. The Cost of Living Index and money supply are parallel."

The decisions of the Federal Reserve Board, or rather, the decisions which they are told to make by "parties unknown", affect the daily lives of every American by the effect of these decisions on prices. Raising the interest rate, or causing money to became "dearer" acts to limit the amount of money available in the market, as does the raising of reserve requirements by the Federal Reserve System. Selling bonds by the Open Market Committee also extinguishes and lowers the money supply. Buying government securities on the open market "creates" more money, as does lowering the interest rate and making money "cheaper". It is axiomatic that an increase in the money supply brings prosperity, and that a decrease in the money supply brings on a depression. Dramatic increases in the money which outstrip the supply of goods brings on inflation, "too much money chasing too few goods".

 

A more esoteric aspect of the monetary system is "velocity of circulation", which sounds much more technical than it is. This is the speed at which money changes hands; if it is gold buried in the peasant’s garden, that is a slow velocity of circulation, caused by a lack of confidence in the economy or the nation. Very rapid velocity of circulation, such as the stock market boom of the late 1920s, means quick turnover, spending and investment of money, and its stems from confidence, or overconfidence, in the economy. With a high velocity of circulation, a smaller money supply circulates among as many people and goods as a larger money supply would circulate with a slower velocity of circulation. We mention this because the velocity of circulation, or confidence in the economy, also is greatly affected by the Federal Reserve actions. Milton Friedman comments in Newsweek, May 2, 1983,

"The Federal Reserve’s major function is to determine the money supply. It has the power to increase or decrease the money supply at any rate it chooses."

This is an enormous power, because increasing the money supply can cause the re-election of an administration, while decreasing it can cause an administration to be defeated. Friedman goes on to criticize the Federal Reserve,

"How is it that an institution which has so poor a record of performance nevertheless has so high a public reputation and even commands a considerable measure of credibility for its forecasts?"

All open market transactions, which affect the money supply, are conducted for a single System account by the Federal Reserve Bank of New York on the behalf of all the Federal Reserve Banks, and supervised by an officer of the Federal Reserve Bank of New York. The conferences at which decisions are made to buy or sell securities by the Open Market Committee remain closed to the public, and the deliberations also remain a mystery. On May 8, 1928, The New York Times reported that Adolph C. Miller, Governor of the Federal Reserve Board, testifying before the House Banking and Currency Committee, stated that open market purchases and rediscount rates were established through "conversations". At that time, the purchases on the open market amounted to seventy or eighty million dollars a day, and would be ten times that today. These are vast sums to be manipulated on the basis of mere "conversations", but that is as much information as we can obtain.

Because of these mysterious transactions which affect the life, liberty and happiness of every American citizen, there have been numerous proposals such as Senate Document No. 23, presented by Mr. Logan on January 24, 1939, that

"The Government should create, issue and circulate all the currency and credit needed to satisfy the spending power of the Government and the buying power of the consumers. The privilege of creating and issuing money is not only the supreme prerogative of Government, but it is the Government’s greatest creative opportunity."

On March 21, 1960, Congressman Wright Patman used a simple illustration in the Congressional Record of how banks "create money".

"If I deposit $100 with my bank and the reserve requirements imposed by the Federal Reserve Bank are 20% then the bank can make a loan to John Doe of up to $80. Where does the $80 come from? It does not come out of my deposit of $100; on the contrary, the bank simply credits John Doe’s account with $80. The bank can acquire Government obligations by the same procedure, by simply creating deposits to the credit of the government. Money creating is a power of the commercial banks... Since 1917 the Federal Reserve has given the private banks forty-six billion dollars of reserves."

How this is done is best revealed by Governor Eccles at Hearings before the House Committee on Banking and Currency on June 24, 1941:

ECCLES: "The banking system as a whole creates and extinguishes the deposits as they make loans and investments, whether they buy Government Bonds or whether they buy utility bonds or whether they make Farmer’s loans.

MR. PATMAN: I am thoroughly in accord with what you say, Governor, but the fact remains that they created the money, did they not?

ECCLES: Well, the banks create money when they make loans and investments."

On September 30, 1941, before the same Committee, Governor Eccles was asked by Representative Patman:

"How did you get the money to buy those two billion dollars worth of Government securities in 1933?

ECCLES: We created it.

MR. PATMAN: Out of what?

ECCLES: Out of the right to issue credit money.

MR. PATMAN: And there is nothing behind it, is there, except our Government’s credit?

ECCLES: That is what our money system is. If there were no debts in our money system, there wouldn’t be any money."

On June 17, 1942, Governor Eccles was interrogated by Mr. Dewey.

ECCLES: "I mean the Federal Reserve, when it carries out an open market operation, that is, if it purchases Government securities in the open market, it puts new money into the hands of the banks which creates idle deposits.

DEWEY: There are no excess reserves to use for this purpose?

ECCLES: Whenever the Federal Reserve System buys Government securities in the open market, or buys them direct from the Treasury, either one, that is what it does.

DEWEY: What are you going to use to buy them with? You are going to create credit?

ECCLES: That is all we have ever done. That is the way the Federal Reserve System operates. The Federal Reserve System creates money. It is a bank of issue."

At the House Hearing of 1947, Mr. Kolburn asked Mr. Eccles:

"What do you mean by monetization of the public debt?

ECCLES: I mean the bank creating money by the purchase of Government securities. All is created by debt--either private or public debt.

FLETCHER: Chairman Eccles, when do you think there is a possibility of returning to a free and open market, instead of this pegged and artificially controlled financial market we now have?

ECCLES: Never. Not in your lifetime or mine."

Congressman Jerry Voorhis is quoted in U.S. News, August 31, 1959, as questioning Secretary of Treasury Anderson,

"Do you mean that Banks, in buying Government securities, do not lend out their customers’ deposits? That they create the money they use to buy the securities?

ANDERSON: That is correct. Banks are different from other lending institutions. When a savings association, an insurance company, or a credit union makes a loan, it lends the very dollar that its customers have previously paid in. But when a bank makes a loan, it simply adds to the borrower’s deposit account in the bank by the amount of the loan. The money is not taken from anyone. It is new money, recreated by the bank, for the use of the borrower."

Strangely enough, there has never been a court trial on the legality or Constitutionality of the Federal Reserve Act. Although it is on much the same shaky grounds as the National Recovery Act, or NRA, which was challenged in Schechter Poultry v. United States of America, 29 U.S. 495, 55 US 837.842 (1935), the NRA was ruled unconstitutional by the Supreme Court on the grounds that,

"Congress may not abdicate or transfer to others its legitimate functions. Congress cannot Constitutionally delegate its legislative authority to trade or industrial associations or groups so as to empower them to make laws."

Article 1, Sec. 8 of the Constitution provides that,

"The Congress shall have power to borrow money on the credit of the United States . . . and to coin Money, regulate the value thereof, and of foreign Coin, and fix the Standard of Weights and Measures."

According to the NRA decision, Congress cannot delegate this power to the Federal Reserve System, nor can it delegate its legislative authority to the Federal Reserve System to allow the System to fix the rate of bank reserves, the rediscount rate, or the volume of money. All of these are "legislated" by the Federal Reserve Board, meeting in legislative sessions to determine these matters and to issue "laws" or regulations fixing them.

The Second World War gave the big bankers who owned the Federal Reserve System a chance to unload on the country billions of dollars printed early in 1930, in the biggest counterfeiting operation in history, all legalized by Roosevelt’s government, of course. Henry Hazlitt writes in the January 4, 1943 issue of Newsweek Magazine:

"The money that began to appear in circulation a week ago, December 21, 1942, was really printing press money in the fullest sense of the term, that is, money which has no collateral of any kind behind it. The Federal Reserve statement that ‘The Board of Governors, after consultation with the Treasury Department, has authorized Federal Reserve Banks to utilize at this time the existing stocks of currency printed in the early thirties, known as ‘Federal Reserve Banknotes’. We repeat, these notes have absolutely no collateral of any kind behind them."

Governor Eccles also testified to some other interesting matters of the Federal Reserve and war finance at the Senate Hearings on the Office of Price Administration in 1944:

"The currency in circulation was increased from seven billion dollars in four years to twenty-one and a half billion. We are losing some considerable amounts of gold during the war period. As our exports have gone out, largely on a lend-lease basis, we have taken imports on which we have given dollar balances. These countries are now drawing off these dollar balances in the form of gold.

MR. SMITH: Governor Eccles, what is the objective that the foreign governments are after in this projected program whereby we would contribute gold to an international fund?

GOVERNOR ECCLES: I would like to discuss OPA, and leave the stabilization fund for a time when I am prepared to go into it.

MR. SMITH: Just a minute. I feel that this fund is very pertinent to what we are talking about today.

MR. FORD: I believe that the stabilization fund is entirely off the @OPA and consequently we ought to stick to the business at hand."

The Congressmen never did get to discuss the Stabilization Fund, another setup whereby we would give the impoverished countries of Europe back the gold which had been sent over here. In 1945, Henry Hazlitt, commenting in Newsweek of January 22, on Roosevelt’s annual budget message to Congress, quoted Roosevelt as saying:

"I shall later recommend legislation reducing the present high gold reserve requirements of the Federal Reserve Banks."

Hazlitt pointed out that the reserve requirement was not high, it was just what it had been for the past thirty years. Roosevelt’s purpose was to free more gold from the Federal Reserve System and make it available for the Stabilization Fund, later called the International Monetary Fund, part of the World Bank for Reconstruction and Development, the equivalent of the League Finance Committee which would have swallowed the financial sovereignty of the United States if the Senate had let us join it.

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CHAPTER FOURTEEN - Congressional Exposé

"Mr. Volcker’s politics is something of an enigma."

--New York Times

Since 1933 when Eugene Meyer resigned from the Federal Reserve Board of Governors, no member of the international banking families has personally served on the Board of Governors. They have chosen to work from behind the scenes through carefully selected presidents of the Federal Reserve Bank of New York and other employees.

The present chairman of the Federal Reserve Board of Governors is Paul Volcker (image right). His appointment was greeted by one well-known economist with the following prediction,

"Volcker’s selection has been by far the worst. Carter has put Dracula in charge of the blood bank. To us, it means a crash and depression in the 80s is more certain than ever."

Col. E.C. Harwood’s Research Report, August 6, 1979, gave much the same view.

 "Paul Volcker is from the same mold as the unsound money men who have misguided the monetary actions of this nation for the past five decades. The outcome probably will be equally disastrous for the dollar and the U.S. economy."

Despite these gloomy views, the report from The New York Times on the selection of Volcker was positively ecstatic. On July 26, 1979, The Times commented that Volcker learned "the business" from Robert Roosa, now partner of Brown Brothers Harriman, and that Volcker had been part of the Roosa Brain Trust at the Federal Reserve Bank of New York, and, later, at the Treasury in the Kennedy administration.

"David Rockefeller, the chairman of Chase, and Mr. Roosa were strong influences in the Mr. Carter decision to name Mr. Volcker for the Reserve Board chairmanship."

The New York Times did not point out that David Rockefeller and Robert Roosa had previously chosen Mr. Carter, a member of the Trilateral Commission, as the presidential candidate of the Democratic Party, or that Mr. Carter would hardly refuse to appoint their choice of Paul Volcker as the new Chairman of the Federal Reserve Board. Nor is it straining the point to be reminded that this manner of selection of the Chairman of the Board of Governors is directly in the line of royal prerogative going back to George Peabody’s initial agreement with N.M. Rothschild, to the Jekyll Island meeting, and to the enactment of the Federal Reserve Act.

The Times noted that "Volcker’s choice was approved by European banks in Bonn, Frankfurt and Zurich." William Simon, former Secretary of Treasury, was quoted as saying "a marvelous choice." The Times further noted that the Dow market rose on Volcker’s nomination, registering the best gains in three weeks for a rise of 9.73 points, and that the dollar rose sharply on foreign exchange at home and abroad.

Who was Volcker, that his appointment could have such an effect on the stock market and the value of the dollar in foreign exchange? He represented the most powerful house of "the London Connection," Brown Brothers Harriman, and the London houses which directed the Rockefeller empire. On July 29, 1979, The Times had said of Volcker, "New Man Will Chart His Own Course".

Volcker’s background shows that this was nonsense. His course has always been charted for him by his masters in London. He attended Princeton, obtained an M.A. at Harvard, and went to the London School of Economics 1951-52, the banker’s graduate school. He then came to the Federal Reserve Bank of New York as an economist from 1952-57, economist at Chase Manhattan Bank, 1957-61, with Treasury Department 1961-65, as deputy under secretary for monetary affairs, 1963-65, and under secretary for monetary affairs, 1969-74. He then became President of the Federal Reserve Bank of New York from 1975-79, when Carter, at the behest of Robert Roosa and David Rockefeller, appointed him Chairman of the Federal Reserve Board of Governors. He was succeeded as President of Federal Reserve Bank of New York by Anthony Solomon, a Harvard Ph.D. who was with the OPA 1941-42 and with the government financial mission to Iran 1942-46. He operated a canned food company in Mexico from 1951-61, was president of International Investment Corp. for Yugoslavia 1969-72 (a communist country), under secretary for monetary affairs at Treasury 1977-80. In short, Solomon’s background was much the same as Paul Volcker’s.

The New York Times stated on December 2, 1981,

"For years the Federal Reserve was the second or third most secret institution in town. The Sunshine Act of 1976 penetrated the curtain a trifle. The board now holds a public meeting once a week on Wednesday at 10 a.m., but not to discuss Monetary policy, which is still regarded as top secret and not to be discussed in public."

The Times mentioned that when Open Market Committee meetings are held, Solomon and Volcker sit together at the head of the table and relay the instructions which they have received from abroad.

Behind Volcker and Solomon stands Robert Roosa, Secretary of the Treasury in Carter’s shadow cabinet, and representing Brown Brothers Harriman, the Trilateral Commission, the Council on Foreign Relations, the Bilderbergers, and the Royal Economic Institute. He is a trustee of the Rockefeller Foundation *, and a director of Texaco and American Express companies. Dr. Martin Larson points out that,"

The international consortium of financiers known as the Bilderbergers, who meet annually in profound secrecy to determine the destiny of the western world, is a creature of the Rockefeller-Rothschild alliance, and that it held its third meeting on St. Simons Island, only a short distance from Jekyll Island."

 

Larson also states that "The Rockefeller interests work in close alliance with the Rothschilds and other central banks."**

* See Chart V
** See Chart I
 

On June 18, 1983, President Ronald Reagan ended months of speculation by announcing that he was reappointing Paul Volcker as Chairman of the Federal Reserve Board of Governors for another four year term, although Volcker’s term was not up until August 6, 1983. Reagan’s reappointment of a Carter appointee puzzled some political observers, but apparently he had succumbed to considerable pressure, as indicated by a lead editorial in The Washington Post, June 10, 1983,

"There is no one who matches Mr. Volcker in both political standing and grasp of the intricate networks that make up the world’s financial system."

The anonymous writer gave no documentation for his elevation of Volcker to the standing of the world’s greatest financier, and as for his political standing, The New York Times commented on June 19, 1983,

"Mr. Volcker’s politics is something of an enigma." His "non-political" stance conforms with the Washington tradition of "the political independence of the Fed" which has been maintained for many years. However, the problem of its dependence on "the London connection" has never been discussed in Washington.

In reality, Volcker is more of a politician than an economist. After attending the London School of Economics, and finding out who issues the orders of the international financial community, Volcker has ever since played the game. Not once has he failed to carry out the orders of the "London Connection".

Can it really be possible that "The London Connection" exists, and that men like Volcker and Solomon receive their instructions, in however devious or indirect a manner, from foreign bankers? Let us look at the evidence, circumstantial, to be sure, but circumstantial evidence of the quality which has often sent men to the penitentiary or to the electric chair. John Moody pointed out in 1911 that seven men of the Morgan group, allied with the Standard Oil-Kuhn, Loeb group, ruled the United States. Where do these groups stand in the financial picture today?

U.S. News published on April 11, 1983, a list of the largest bank holding companies in the United States by assets as of December 31, 1982.

  • Number 1 is Citicorp, New York, with assets of $130 billion. This is Baker and Morgan’s First National Bank of New York, merged with National City Bank in 1955, two of the largest purchasers of Federal Reserve Bank of New York stock in 1914.

  • Number 3, is Chase Manhattan, New York, with assets of $80.9 billion. This is Chase and Bank of Manhattan merged, the Rockefeller and Kuhn Loeb group, also purchasers of Federal Reserve Bank of New York stock in 1914.

  • Number 4 is Manufacturers Hanover of New York $64 billion, also purchaser of Federal Reserve Bank of New York stock in 1914.

  • Number 5 is J.P. Morgan Company of New York, $58.6 billion in assets and holder of considerable Federal Reserve Bank stock.

  • Number 6 is Chemical Bank of New York, $48.3 billion also purchaser of Federal Reserve stock in 1914.

  • And Number 11, First Chicago Corporation, the First National Bank of Chicago which was principal correspondent of the Morgan-Baker bank in New York, and which furnished the first two presidents of the Federal Advisory Council.

The direct line which leads from the participants in the Jekyll Island Conference of 1910 to the present day is illustrated by a passage from "A Primer on Money", Committee on Banking and Currency, U.S. House of Representatives, 88th Congress, 2nd session, August 5, 1964, p. 75:

"The practical effect of requiring all purchases to be made through the open market is to take money from the taxpayer and give it to the dealers. It forces the Government to pay a toll for borrowing money. There are six ‘bank’ dealers:

  • First National City Bank of New York

  • Chemical Corp. Exchange Bank, New York

  • Morgan Guaranty Trust Co., New York

  • Bankers Trust of New York

  • First National Bank of Chicago

  • Continental Illinois Bank of Chicago"

Thus the banks which receive a "toll" on all money borrowed by the Government of the United States are the same banks which planned the Federal Reserve Act of 1913. There is ample evidence demonstrating the present preeminence of the same banks which set up the Federal Reserve System in 1914. For instance, Warren Brookes writes on the editorial page of The Washington Post, June 6, 1983:

"Citicorp (National City Bank and First National Bank of New York, merged in 1955) just recorded an 18.6% return on equity, J.P. Morgan, 17%, Chemical Bank and Bankers Trust, nearly 16%, an exceptional rate of return."

These are the banks which bought the first issue of Federal Reserve Bank stock in 1914, and which owned the controlling interest in the Federal Reserve Bank of New York, which sets the interest rate and is the bank for all open market operations.

These banks also profit steadily from the otherwise inexplicable fluctuations in monetary growth and interest rates. Brookes further comments on,

"actual monetary growth rates alternately gyrating from 0 to 17% in successive six month periods for three recession-wracked years. The two measures of money growth most admired by Milton Friedman M2 and M3, have actually shown little change on a year to year basis in the 1972-82 period."

Thus we have money growth rates gyrating from 0 to 17% but no actual year to year changes, which raises the question of why we cannot have stability of monetary growth throughout the year. The answer is that the big profits are made by these gyrations, and the next question is, who sets in motion these gyrations? The answer is "the London Connection".

To draw attention from the continued control of the bankers and their heirs, who obtained the government monopoly of the nation’s money and credit in 1913, the paid propagandists of the controlled media monopoly and academia are constantly trotting forth new and more exotic theories of economics. Thus James Burnham, one of the National Review propagandists, won fame with a ridiculous theory of "the managers". He postulated that the old arbiters of wealth, the J.P. Morgans, the Warburgs and the Rothschilds had, by 1950, disappeared from the scene, being replaced by a new class of "managers". This theory, which had no foundation in fact, served to obscure the fact that the same people still controlled the monetary system of the world. The "managers" were just that, executives like Volcker who were front men, paid employees who would continue to receive their paychecks only as long as they carried out their employers’ instructions. Burnham remains a well-paid propagandist at the National Review, which many prominent leaders, including President Reagan, believe to be a "conservative" publication.

From 1914 to 1982, a period in which many thousands of American banks went bankrupt, the original purchasers of Federal Reserve Bank stock have not only survived but they have consolidated their power. And what of "the London Connection"? Does it still exist, and is it still dictating the economic destiny of the United States? The Washington Post, May 19, 1983, carried a story datelined Nairobi, Kenya, noting the meeting of the African Development Bank.

"The British merchant bank, Morgan Grenfell and a syndicate of the United States, Kuhn Loeb, Lehman Brothers International, the French Lazard Freres and Britain’s Warburg are discreetly acting as financial advisors to about ten debt-plagued African states."

There are the same names we encountered in 1914, still managing the finances of the world, with profits for themselves but with disastrous results for everyone else. Perhaps we can look for relief to the present Administration of President Reagan. Unfortunately, before reaching him we have to run the gamut of the long list of his principal staff, composed of men from J. Henry Schroder, Brown Brothers Harriman, and other leading components of "The London Connection".

Lopez Portillo, President of Mexico, in addressing the Mexican National Congress of Mexico in September, 1982, called the world credit boom of the past decade a financial pestilence akin to the Black Death which swept Europe in the fourteenth century.

"As in mediaeval times, it flattens country after country. It is transmitted by rats and it yields unemployment and misery, industrial bankruptcy and enrichment by speculation. The remedy prescribed by faith healers is forced inactivity and depriving the patient of food."

Forbes Magazine stated October 11, 1982,

"The world gasps for liquidity, not because the supply of money has contracted but because too much of it now goes to pay off old debts rather than fund new productive investments."

The policy of high interest rates and tight money has been disastrous for the United States. In early 1983, a slight easing of money and credit promises some relief, but as long as the Federal Reserve System and its unseen manipulators continue their control of the money supply, we can expect more problems. The Nation on December 11, 1982, in commenting on economic problems, stated,

"The blame for all this lies at the door of the Federal Reserve System working as usual on behalf of the international banking system."

The evidence of how the Federal Reserve System works on behalf of the international banking system is graphically illustrated by a series of charts drawn up by the staff of the Committee on Banking, Currency and Housing of the House of Representatives, 94th Congress, 2nd session, August, 1976, "FEDERAL RESERVE DIRECTORS: A STUDY OF CORPORATE AND BANKING INFLUENCE".*

 

We present as our Chart V page 49 of this study, showing the interlocking directorates of David Rockefeller.

 

As our Chart VI we reproduce page 55 of this study, showing the interlocking directorates of Frank R. Milliken, one of the Class C Directors** of the Federal Reserve Bank of New York. In this chart are all the main personages in our story of the Jekyll Island conference: Citibank, J.P. Morgan and Company, Kuhn Loeb and Company, and many related firms.

 

* Due to space limitations, only five of the seventy-five charts in the study, all of which show the connections between prominent, powerful individuals with control in the Federal Reserve System have been selected to illustrate the connections between officers and directors of the twelve Federal Reserve Banks in 1976 and the firms listed in this book.

** "The three Class C Directors are appointed by the Board of Governors as representatives of the public interest as a whole." p. 34, Congressional Study, 1976.

 

As Chart VII we reproduce page 53 of this study, showing the interlocking directorates of another Class C Director of the Federal Reserve Bank of New York, Alan Pifer. As President of the Carnegie Corporation of New York, he interlocks with J. Henry Schroder Trust Company, J. Henry Schroder Banking Corporation, Rockefeller Center, Inc., Federal Reserve Bank of Boston, Equitable Life Assurance Society (J.P. Morgan), and others. Thus an August, 1976 study from the House Committee on Banking, Currency and Housing, brings before us all of our main cast of personages, functioning today just as they did in 1914.

This 120 page Congressional study details public policy functions of the Federal Reserve District Banks, how directors are selected, who is selected, the public relations lobbying factor, bank domination and bank examination, and corporate interlocks with Reserve banks. Charts were used to illustrate Class A, Class B, and Class C directorships of each district bank. For each branch bank a chart was designed giving information regarding bank appointed directors and those appointed by the Board of Governors of the Federal Reserve System.
In his Foreword to the study, Chairman Henry S. Reuss, (D-Wis) wrote:

"This Committee has observed for many years the influence of private interests over the essentially public responsibilities of the Federal Reserve System.

As the study makes clear, it is difficult to imagine a more narrowly based board of directors for a public agency than has been gathered together for the twelve banks of the Federal Reserve System.

Only two segments of American society--banking and big business--have any substantial representation on the boards, and often even these become merged through interlocking directorates... Small farmers are absent. Small business is barely visible. No women appear on the district boards and only six among the branches. Systemwide -- including district and branch boards -- only thirteen members from minority groups appear.

The study raises a substantial question about the Federal Reserve’s oft-repeated claim of "independence". One might ask, independent from what? Surely not banking or big business, if we are to judge from the massive interlocks revealed by this analysis of the district boards.

The big business and banking dominance of the Federal Reserve System cited in this report can be traced, in part, to the original Federal Reserve Act, which gave member commercial banks the right to select two-thirds of the directors of each district bank. But the Board of Governors in Washington must share the responsibility for this imbalance. They appoint the so-called "public" members of the boards of each district bank, appointments which have largely reflected the same narrow interests of the bank-elected members... Until we have basic reforms, the Federal Reserve System will be handicapped in carrying out its public responsibilities as an economic stabilization and bank regulatory agency. The System’s mandate is too essential to the nation’s welfare to leave so much of the machinery under the control of narrow private interests.

Concentration of economic and financial power in the United States has gone too far."

In a section of the text entitled "The Club System", the Committee noted:

"This ‘club’ approach leads the Federal Reserve to consistently dip into the same pools -- the same companies, the same universities, the same bank holding companies -- to fill directorships."

This Congressional study concludes as follows:

"Many of the companies on these tables, as mentioned earlier, have multiple interlocks to the Federal Reserve System. 

  • First Bank Systems

  • Southeast Banking Corporation

  • Federated Department Stores

  • Westinghouse Electric Corporation

  • Proctor and Gamble

  • Alcoa

  • Honeywell, Inc.

  • Kennecott Copper

  • Owens-Corning Fiberglass

  • all have two or more director ties to district or branch banks

In Summary, the Federal Reserve directors are apparently representatives of a small elite group which dominates much of the economic life of this nation."

END OF CONGRESSIONAL REPORT

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