Sunday, March 25, 2007

[jeckyll island] one tuesday evening in november

... continued from the front page


Photo of Paul Warburg


Six years later, financial writer Bertie Charles Forbes, who later founded Forbes Magazine, [the present editor, Malcolm Forbes, is his son], wrote:

"Picture a party of the nation’s greatest bankers stealing out of New York on a private railroad car under cover of darkness, stealthily hieing hundred of miles South, embarking on a mysterious launch, sneaking onto an island deserted by all but a few servants, living there a full week under such rigid secrecy that the names of not one of them was once mentioned lest the servants learn the identity and disclose to the world this strangest, most secret expedition in the history of American finance.

I am not romancing; I am giving to the world, for the first time, the real story of how the famous Aldrich currency report, the foundation of our new currency system, was written . . . . The utmost secrecy was enjoined upon all. The public must not glean a hint of what was to be done. Senator Aldrich notified each one to go quietly into a private car of which the railroad had received orders to draw up on an unfrequented platform."


Some years earlier, a group of millionaires, led by J.P. Morgan, had purchased the island as a winter retreat. They called themselves the Jekyll Island Hunt Club, and, at first, the island was used only for hunting expeditions, until the millionaires realized that its pleasant climate offered a warm retreat from the rigors of winters in New York, and began to build mansions which they called "cottages" for their families’ winter vacations. Membership was by inheritance only.

The club building itself, being quite isolated, was sometimes in demand for stag parties and other pursuits unrelated to hunting. On such occasions, the club members who were not invited to these specific outings were asked not to appear there for a certain number of days. Before Nelson Aldrich’s party had left New York, the club’s members had been notified that the club would be occupied for the next two weeks.

The New York Times later noted, on May 3, 1931, in commenting on the death of George F. Baker, one of J.P. Morgan’s closest associates, that:

"Jekyll Island Club has lost one of its most distinguished members. One-sixth of the total wealth of the world was represented by the members of the Jekyll Island Club."

The members of the party agreed, before arriving at Jekyll Island, that no last names would be used at any time during their two week stay and later referred to themselves as the First Name Club.

As the most technically proficient of those present, Paul Warburg [a recent émigré] was charged with doing most of the drafting of a plan for a central bank to streamline the monetary issues and credit of the United States. His work would then be discussed and gone over by the rest of the group.

Senator Nelson Aldrich was there to see that the completed plan would come out in a form which he could get passed by Congress, and the other bankers were there to include whatever details would be needed to be certain that they got everything they wanted, in a finished draft composed during a one time stay.

The Jekyll Island group remained at the club for nine days but despite the common interests of those present, the work did not proceed without friction. Senator Aldrich, always a domineering person, considered himself the chosen leader of the group, Paul Warburg believed that every question raised by the group demanded a lecture and his thick accent grated on the others but the natural diplomacy of Henry P. Davison proved to be the catalyst which kept them at their work.

Another Morgan partner, T.W. Lamont, said of this:

"Henry P. Davison served as arbitrator of the Jekyll Island expedition." [T.W. Lamont, Henry P. Davison, Harper, 1933]

The monetary reform plan prepared at Jekyll Island was to be presented to Congress as the completed work of the National Monetary Commission. It was imperative that the real authors of the bill remain hidden. So great was popular resentment against bankers since the Panic of 1907 that no Congressman would dare to vote for a bill bearing the Wall Street taint, no matter who had contributed to his campaign expenses.

The Jekyll Island plan was a central bank plan and it was going to be tough getting it past the people. Thomas Jefferson’s fight against Alexander Hamilton’s scheme for the First Bank of the United States, backed by James Rothschild and President Andrew Jackson’s successful war against Hamilton’s scheme for the Second Bank of the United States, in which Nicholas Biddle was acting as the agent for James Rothschild of Paris were two events of the past which had led to such jaundiced popular opinion.

The result was the Independent Sub-Treasury System, which supposedly had served to keep the funds of the United States out of the hands of the financiers. Mullins states that studies of the panics of 1873, 1893, and 1907 indicated that these panics were the result of the international bankers’ operations in London.

Professor Elmus Wicker, of Indiana University, saw it a little differently, putting it down to the New York Clearing House:

"The NYCH had the power, the knowledge (at least initially) and the instruments to forestall banking panics. Both the size and distribution of the banking reserve among the NYCH banks was conducive to the recognition of the specific role played by the New York banks in the maintenance of banking stability. The ultimate banking reserve of the country was lodged in six or seven of the largest New York banks. The size of that reserve was greater than that held by any of Europe's central banks."

Either way, the public was demanding in 1908 that Congress enact legislation to prevent the recurrence of artificially induced money panics. The National Monetary Commission was formed with Nelson Aldrich at its head since he was majority leader of the Senate.

The main problem, as Paul Warburg informed his colleagues, was to avoid the name "Central Bank". For that reason, he had decided upon the designation of "Federal Reserve System", more acceptable to the public. As a bank of issue, it would control the nation’s money and credit.

Stephenson [Nathaniel Wright Stephenson, Nelson W. Aldrich, A Leader in American Politics, Scribners, N.Y. 1930, Chap. XXIV "Jekyll Island"p. 379] wrote:

"How was the Reserve Bank to be controlled? It must be controlled by Congress. The government was to be represented in the board of directors, it was to have full knowledge of all the Bank’s affairs, but a majority of the directors were to be chosen, directly or indirectly, by the banks of the association."

In the final refinement of Warburg’s plan, the Federal Reserve Board of Governors would be appointed by the President of the United States, but the real work of the Board would be controlled by a Federal Advisory Council, meeting with the Governors. The Council would be chosen by the directors of the Federal Reserve Banks, and would remain unknown to the public.

Farmers and small businessmen in those areas had suffered most from the money panics. The popular resentment against the Eastern bankers had become a political movement known as "populism" and the private papers of Nicholas Biddle, released over a century after his death, show that quite early on the Eastern bankers were fully aware of the widespread public opposition to them.

Paul Warburg advanced the regional reserve system. He proposed a system of four (later twelve) branch reserve banks located in different sections of the country although the primary coordinating power remained in New York.

The selection of administrators for the proposed regional reserve system came next. Senator Nelson Aldrich had insisted that the officials should be appointed, not elected, and that Congress should have no role in their selection. His Capitol Hill experience had taught him that congressional opinion would often be inimical to the Wall Street interests.

Warburg's solution was that the administrators of the proposed central banks should be subject to executive approval by the President. The judicial department (the Supreme Court, etc.) was already virtually controlled by the executive department through presidential appointment to the bench.

This removal of the system from Congressional control meant that the Federal Reserve proposal was unconstitutional from its inception, because the Federal Reserve System was to be a bank of issue. Article 1, Sec. 8, Par. 5 of the Constitution expressly charges Congress with "the power to coin money and regulate the value thereof."

Paul Warburg later wrote "Paul Warburg, The Federal Reserve System, Its Origin and Growth, Volume I, Macmillan, New York, 1930", but the name "Jekyll Island" appears nowhere in this text. He did write (Vol. 1, p. 58) however:

"But then the conference closed, after a week of earnest deliberation, the rough draft of what later became the Aldrich Bill had been agreed upon, and a plan had been outlined which provided for a ‘National Reserve Association,’ meaning a central reserve organization with an elastic note issue based on gold and commercial paper."

On page 60, Warburg wrote:

"The results of the conference were entirely confidential. Even the fact there had been a meeting was not permitted to become public."

He added in a footnote:

"Though eighteen [sic] years have since gone by, I do not feel free to give a description of this most interesting conference concerning which Senator Aldrich pledged all participants to secrecy."

Forbes’ revelation [Current Opinion, December, 1916, p. 382] of the Jekyll Island meeting did not appear in print until two years after the Federal Reserve Act had been passed by Congress; hence it was never read during the period when it could have had an effect, that is during the Congressional debate on the bill. Forbes’ story was also dismissed by the bankers as preposterous, and a mere invention.

Stephenson mentions this on page 484 of his book about Aldrich:

"This curious episode of Jekyll Island has been generally regarded as a myth. B.C. Forbes got some information from one of the reporters. It told in vague outline the Jekyll Island story, but made no impression and was generally regarded as a mere yarn."

Warburg did agree to Professor Stephenson’s request that he prepare a brief statement for the Aldrich biography. This appears on page 485 as part of "The Warburg Memorandum:

"The matter of a uniform discount rate was discussed and settled at Jekyll Island."

Frank Vanderlip of the "First Name Club" later published a few brief references to the conference. In the Saturday Evening Post, February 9, 1935, p. 25, Vanderlip wrote:

"Despite my views about the value to society of greater publicity for the affairs of corporations, there was an occasion near the close of 1910, when I was as secretive, indeed, as furtive, as any conspirator. . . I do not feel it is any exaggeration to speak of our secret expedition to Jekyll Island as the occasion of the actual conception of what eventually became the Federal Reserve System."

Professor E.R.A. Seligman, a member of the international banking family of J. & W. Seligman, and head of the Department of Economics at Columbia University, wrote in an essay published by the Academy of Political Science, Proceedings, v. 4, No. 4, p. 387-90:

"It is known to a very few how great is the indebtedness of the United States to Mr. Warburg. For it may be said without fear of contradiction that in its fundamental features the Federal Reserve Act is the work of Mr. Warburg more than any other man in the country. The existence of a Federal Reserve Board creates, in everything but in name, a real central bank.

In the two fundamentals of command of reserves and of a discount policy, the Federal Reserve Act has frankly accepted the principle of the Aldrich Bill … Mr. Warburg had a practical object in view. In formulating his plans and in advancing in them slightly varying suggestions from time to time, it was incumbent on him to remember that the education of the country must be gradual and that a large part of the task was to break down prejudices and remove suspicion.

His plans therefore contained all sorts of elaborate suggestions designed to guard the public against fancied dangers and to persuade the country that the general scheme was at all practicable. It was the hope of Mr. Warburg that with the lapse of time it might be possible to eliminate from the law a few clauses which were inserted largely at his suggestion for educational purposes."

In his biography of Aldrich, Stephenson [op.cit.] says:

"A pamphlet was issued January 16, 1911, ‘Suggested Plan for Monetary Legislation’, by Hon. Nelson Aldrich, based on Jekyll Island conclusions." Stephenson says on page 388, "An organization for financial progress has been formed. Mr. Warburg introduced a resolution authorizing the establishment of the Citizens’ League, later the National Citizens League . . . Professor Laughlin of the University of Chicago was given charge of the League’s propaganda."

Much of the five million dollars of the bankers slush fund was spent under the auspices of the National Citizens’ League, which was made up of college professors. The two most tireless propagandists for the Aldrich Plan were Professor O.M. Sprague of Harvard, and J. Laurence Laughlin of the University of Chicago.

Congressman Charles A. Lindbergh, Sr., [Charles A. Lindbergh, Sr., Banking, Currency and the Money Trust, 1913, p. 131], noted:

"J. Laurence Laughlin, Chairman of the Executive Committee of the National Citizens’ League since its organization, has returned to his position as professor of political economics in the University of Chicago. In June, 1911, Professor Laughlin was given a year’s leave from the university, that he might give all of his time to the campaign of education undertaken by the League . . . He has worked indefatigably, and it is largely due to his efforts and his persistence that the campaign enters the final stage with flattering prospects of a successful outcome . . . The reader knows that the University of Chicago is an institution endowed by John D. Rockefeller, with nearly fifty million dollars."

Testifying before the Committee on Rules, December 15, 1911, after the Aldrich plan had been introduced in Congress, Congressman Lindbergh stated:

"Our financial system is a false one and a huge burden on the people . . . I have alleged that there is a Money Trust. The Aldrich plan is a scheme plainly in the interest of the Trust . . . Why does the Money Trust press so hard for the Aldrich Plan now, before the people know what the money trust has been doing?"

After the National Monetary Commission had returned from Europe, it held no official meetings for nearly two years. The result was a library of documentation, such as a history of the Reichsbank, the central bank which controlled money and credit in Germany, and whose principal stockholders, were the Rothschilds and Paul Warburg’s family banking house of M.M. Warburg Company.

The Commission’s records show that it never functioned as a deliberative body. Indeed, its only "meeting" was Jekyll Island, and this conference was not mentioned in any publication of the Commission. Senator Cummins passed a resolution in Congress, ordering the Commission to report on January 8, 1912 and show some constructive results of its three years’ work. In the face of this challenge, the National Monetary Commission ceased to exist.

At the House Banking and Currency Committee of the American Bankers Association, a banker from Philadelphia, Leslie Shaw, dissented with other witnesses as to the real significance of the Aldrich plan:

"Under the Aldrich Plan the bankers are to have local associations and district associations, and when you have a local organization, the centered control is assured. Suppose we have a local association in Indianapolis; can you not name the three men who will dominate that association? And then can you not name the one man everywhere else. When you have hooked the banks together, they can have the biggest influence of anything in this country, with the exception of the newspapers."

Senator LaFollette publicly charged that a money trust of fifty men controlled the United States. George F. Baker, partner of J.P. Morgan, on being queried by reporters as to the truth of the charge, replied that it was absolutely in error. He said that he knew:

"from personal knowledge that not more than eight men run this country."


The Nation Magazine replied editorially to Senator LaFollette that:

"If there is a Money Trust, it will not be practical to establish that it exercises its influence either for good or for bad."

Congress appointed a committee to investigate the control of money and credit in the United States, known later as the Pujo Committee, a subcommittee of the House Banking and Currency Committee, which conducted the "Money Trust" hearings in 1912. It reached no negative conclusions about the Money Trust.

At all stages, the financiers answered questions in simplistic terms, such as J.P. Morgan's "Money is a commodity."

The Taft/Roosevelt/Wilson election followed and that's too large an issue to cover here but following that, Nelson Aldrich and Frank Vanderlip changed tack and denounced the proposed Federal Reserve Act as inimical to banking and to good government. As The Nation, on October 23, 1913, pointed out:

"Mr. Aldrich himself raised a hue and cry over the issue of government "fiat money", that is, money issued without gold or bullion back of it, although a bill to do precisely that had been passed in 1908 with his own name as author, and he knew besides, that the ‘government’ had nothing to do with it, that the Federal Reserve Board would have full charge of the issuing of such moneys."

Now into the picture came Colonel Edward Mandell House of Texas, whose story, including World War 1, the Titanic and sundry other issues and that takes this article way beyond its original focus - Jeckyll Island.

This blog concludes that one thing which stands out a mile in all this was the secrecy and collusion, together with funded propaganda in support of the plan and the international links of those supporting it. The plan for re-educating the public and for blocking opposition, together with furphies like the Aldrich/Vanderlip outcry after it was all over, show remarkable similarities to such projects as the current ID legislation and the progressive incursion of the EU into our affairs today.

If things were above board at Jeckyll Island, then why the need for secrecy? Similarly today, why would Blair lie outright when asked if he'd been to a Bilderberg Conference?

Essentially, the doings of such men and women are why things happen in the world, why wars are known beforehand, why panics occur and the root cause of depressions. While madmen like Iran's current leader certainly play their part in world unease, it is and always has been the financiers who are in the driving seat.

As Andrew Jackson famously said, in answer to the public's dismay when Nicholas Biddle, the head of Bank of the United States "tightened up credit, recalled loans and generally slowed down the American economy" [David C. Whitney, The American Presidents, Guild America, New York, 1975, p75]:

"Go to Nicholas Biddle."

Until the general public understands who is really in the driving seat and which international interests the drivers are themselves serving, the pantomime called democratic process which fuels the vast majority of weblogs remains a mere sideshow, one which distracts our attention from what is really going down.

The general public are never going to understand.

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