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De d ic a te d to two o f the fine st sc ho la rs o f the twe ntie th c e ntury G EO RG E STIMPSO N a nd EZRA PO UND
a nd b o o ks g ive c o rro b o ra ting insig ht into the c o nne c tio ns o f the inte rna tio na l b a nking ho use s.*
While re se a rc hing this ma te ria l, Eusta c e Mullins wa s o n the sta ff o f the Lib ra ry o f C o ng re ss. Mullins la te r wa s a c o nsulta nt o n hig hwa y fina nc e fo r the Ame ric a n Pe tro le um Institute , c o nsulta nt o n ho te l d e ve lo p me nt fo r Institutio ns Ma g a zine , a nd e d ito ria l d ire c to r fo r the C hic a g o Mo to r C lub ’ s fo ur p ub lic a tio ns.
* The Lo nd o n Ac c e p ta nc e C o unc il is limite d to se ve nte e n inte rna tio na l b a nking ho use s a utho rize d b y the Ba nk o f Eng la nd to ha nd le fo re ig n e xc ha ng e .
ABO UT THE C O VER
The c o ve r re p ro d uc e s the o utline o f the e a g le fro m the re d shie ld , the c o a t o f a rms o f the c ity o f Fra nkfurt, G e rma ny, a d a p te d b y Ma ye r Amsc he l Ba ue r (1744-1812) who c ha ng e d his na me fro m Ba ue r to Ro thsc hild ("Re d Shie ld "). Ro thsc hild a d d e d five g o ld e n a rro ws he ld in the e a g le ’ s ta lo ns, sig nifying his five so ns who o p e ra te d the five b a nking ho use s o f the inte rna tio na l Ho use o f Ro thsc hild : Fra nkfurt, Lo nd o n, Pa ris, Vie nna , a nd Na p le s.
Ta b le o f C o nte nts
C ha pte r O ne Je ky ll Island 1 C ha pte r Two The A ldric h Plan 10 C ha pte r Thre e The Fe de ral Re se rve A c t 16 C ha pte r Fo ur The Fe de ral A dviso ry C o unc il 40
C ha pte r Five The Ho use o f Ro thsc hild 47 C ha pte r Six The Lo ndo n C o nne c tio n 63 C ha pte r Se ve n The Hitle r C o nne c tio n 69
C ha pte r Eig ht Wo rld War O ne 82
C ha pte r Thirte e n The 1930's 151
C ha pte r Fo urte e n C o ng re ssio nal Exp o se 171 Adde ndum 179
Appe ndix I 181 Bio g ra phie s 186 Bib lio g ra phy 193
Inde x 197
@ The a b o ve fa c simile is re p ro d uc e d fro m p a g e 60 o f "HISTO RIC AL BEG INNING S . . . . THE FEDERAL RESERVE", p ub lishe d b y the Fe d e ra l
a llo w Po und to re ma in in suc h inhuma n c a p tivity. His re p ly sho c ke d me e ve n mo re . He wro te b a c k tha t "yo ur frie nd c a n we ll sta y whe re he is." It wa s so me ye a rs b e fo re I wa s a b le to und e rsta nd tha t, fo r this inve stme nt b a nke r a nd his c o lle a g ue s, Ezra Po und wo uld a lwa ys b e "the e ne my".
Intro d uc tio n
He re a re the simp le fa c ts o f the g re a t b e tra ya l. Wilso n a nd Ho use kne w tha t the y we re d o ing so me thing mo me nto us. O ne c a nno t fa tho m me n’ s mo tive s a nd this p a ir p ro b a b ly b e lie ve d in wha t the y we re up to . Wha t the y d id no t b e lie ve in wa s re p re se nta tive g o ve rnme nt. The y b e lie ve d in g o ve rnme nt b y a n unc o ntro lle d o lig a rc hy who se a c ts wo uld o nly b e c o me a p p a re nt a fte r a n inte rva l so lo ng tha t the e le c to ra te wo uld b e fo re ve r inc a p a b le o f d o ing a nything e ffic ie nt to re me d y d e p re d a tio ns.
C lub ho use , whe re the y ma d e p la ns fo r wha t e ve ntua lly wo uld b e c o me the Fe d e ra l Re se rve Ba nk."
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9 Na tha nie l Wrig ht Ste p he nso n, Ne lso n W. Ald ric h, A Le a d e r in Ame ric a n Po litic s, Sc rib ne rs, N.Y. 1930, C ha p . XXIV "Je kyll Isla nd " p . 379
8
Va nd e rlip la te r wro te in his a uto b io g ra p hy, Fro m Fa rmb o y to Fina nc ie r:10
"O ur se c re t e xp e d itio n to Je kyll Isla nd wa s the o c c a sio n o f the a c tua l c o nc e p tio n o f wha t
e ve ntua lly b e c a me the Fe d e ra l Re se rve Syste m. The e sse ntia l p o ints o f the Ald ric h Pla n we re
a ll c o nta ine d in the Fe d e ra l Re se rve Ac t a s it wa s p a sse d ."
Pro fe sso r E.R.A. Se lig ma n, a me mb e r o f the inte rna tio na l b a nking fa mily o f J. & W. Se lig ma n, a nd he a d o f the De p a rtme nt o f Ec o no mic s a t C o lumb ia Unive rsity, wro te in a n e ssa y p ub lishe d b y the Ac a d e my o f Po litic a l Sc ie nc e , Pro c e e d ing s, v. 4, No . 4, p . 387-90:
"It is kno wn to a ve ry fe w ho w g re a t is the ind e b te d ne ss o f the Unite d Sta te s to Mr. Wa rb urg . Fo r
it ma y b e sa id witho ut fe a r o f c o ntra d ic tio n tha t in its fund a me nta l fe a ture s the Fe d e ra l Re se rve
Ac t is the wo rk o f Mr. Wa rb urg mo re tha n a ny o the r ma n in the c o untry. The e xiste nc e o f a
Fe d e ra l Re se rve Bo a rd c re a te s, in e ve rything b ut in na m e , a re a l c e ntra l b a nk. In the two
fund a me nta ls o f c o mma nd o f re se rve s a nd o f a d isc o unt p o lic y, the Fe d e ra l Re se rve Ac t ha s
vie w. In fo rmula ting his p la ns a nd in a d va nc ing in the m slig htly va rying
sug g e stio ns fro m tim e to tim e , it wa s inc umb e nt o n him to re me mb e r tha t the e d uc a tio n o f the
c o untry must b e g ra d ua l a nd tha t a la rg e p a rt o f the ta sk wa s to b re a k d o wn p re jud ic e s a nd re mo ve susp ic io n. His p la ns the re fo re c o nta ine d a ll so rts o f e la b o ra te sug g e stio ns d e sig ne d to g ua rd the p ub lic a g a inst fa nc ie d d a ng e rs a nd to p e rsua d e the c o untry tha t the g e ne ra l sc he me wa s a t a ll p ra c tic a b le . It wa s the ho p e o f Mr. Wa rb urg tha t with the la p se o f time it mig ht b e p o ssib le to e limina te fro m the la w a fe w c la use s whic h we re inse rte d la rg e ly a t his sug g e stio n fo r e d uc a tio na l p urp o se s."
No w tha t the p ub lic d e b t o f the Unite d Sta te s ha s p a sse d a trillio n d o lla rs, we ma y ind e e d a d mit "ho w g re a t is the ind e b te d ne ss o f the Unite d Sta te s to Mr. Wa rb urg ." At the time he wro te the Fe d e ra l Re se rve Ac t, the p ub lic d e b t wa s a lmo st no ne xiste nt.
Pro fe sso r Se lig ma n p o ints o ut Wa rb urg ’ s re ma rka b le p re sc ie nc e tha t the re a l ta sk o f the me mb e rs o f the Je kyll Isla nd c o nfe re nc e wa s to p re p a re a b a nking p la n whic h wo uld g ra d ua lly "e d uc a te the c o untry" a nd "b re a k d o wn p re jud ic e s a nd re mo ve susp ic io n". The c a mp a ig n to e na c t the p la n into la w suc c e e d e d in d o ing just tha t.
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numb e r o f time s the a c tua l "mo ne y" whic h the b a nk ha s in its d e p o sits o r re se rve s.
The Ald ric h Pla n ne ve r c a me to a vo te in C o ng re ss, b e c a use the Re p ub lic a ns lo st c o ntro l o f the Ho use in 1910, a nd sub se q ue ntly lo st the Se na te a nd the Pre sid e nc y in 1912.
17 G e o rg e Sylve ste r Vie re c k, The Stra ng e st Frie nd ship in Histo ry, Wo o d ro w Wilso n a nd C o l. Ho use , Live rig ht, Ne w Yo rk, 1932
25
Ho use , he ha nd e d him $35,000. This wa s e xc e e d e d o nly b y the $50,000 whic h Be rna rd Ba ruc h ha d g ive n Wilso n.
The suc c e ssful e na c tme nt o f Ho use ’ s p ro g ra ms d id no t e sc a p e the no tic e o f o the r Wilso n a sso c ia te s. In Vo l. 1, p a g e 157 o f The Intima te Pa p e rs o f C o l. Ho use , Ho use no te s, "C a b ine t me mb e rs like Mr. La ne a nd Mr. Brya n c o mme nte d up o n the influe nc e o f Dru with the Pre sid e nt. ‘ All tha t the b o o k ha s sa id sho uld b e ,’ wro te La ne , ‘ c o me s a b o ut. The Pre sid e nt c o me s to ‘ Philip Dru’ in the e nd .’ "18
Ho use re c o rd e d so me o f his e ffo rts o n b e ha lf o f the Fe d e ra l Re se rve
Ac t in The Intima te Pa p e rs o f C o l. Ho use , "De c e mb e r 19, 1912. I ta lke d
with Pa ul Wa rb urg o ve r the p ho ne c o nc e rning c urre nc y re fo rm. I to ld
o f my trip to Wa shing to n a nd wha t I ha d d o ne the re to g e t it in wo rking
o rd e r. I to ld him tha t the Se na te a nd the C o ng re ssme n se e me d
a nxio us to d o wha t he d e sire d , a nd tha t Pre sid e nt-e le c t Wilso n tho ug ht
stra ig ht c o nc e rning the issue ."19 Thus we ha ve Wa rb urg ’ s a g e nt in
Wa shing to n, C o l. Ho use , a ssuring him tha t the Se na te a nd
C o ng re ssme n will d o wha t he d e sire s, a nd tha t the Pre sid e nt-e le c t
"tho ug ht stra ig ht c o nc e rning the issue ." In this c o nte xt, re p re se nta tive
g o ve rnme nt se e ms to ha ve c e a se d to e xist. Ho use c o ntinue s in his
"Pa p e rs":
"Ma rc h 13, 1913. Wa rb urg a nd I ha d a n intima te d isc ussio n c o nc e rning
c urre nc y re fo rm.
Mc Ad o o c a me a b o ut te n minute s a fte rwa rd . Mo rg a n
ha d a c urre nc y p la n a lre a d y p rinte d . I sug g e ste d he ha ve
it typ e writte n, so it wo uld no t se e m to o p re a rra ng e d , a nd
se nd it to Wilso n a nd myse lf to d a y.
July 23, 1913. I trie d to sho w Ma yo r Q uinc y (o f Bo sto n) the
fo lly o f the Ea ste rn b a nke rs ta king a n a nta g o nistic
a ttitud e to wa rd s the C urre nc y Bill. I e xp la ine d to Ma jo r
He nry Hig g inso n* with wha t c a re the b ill ha d b e e n
fra me d . Just b e fo re he a rrive d , I ha d finishe d a re vie w b y
Pro fe sso r Sp ra g ue o f Ha rva rd o f Pa ul Wa rb urg ’ s c ritic ism
o f the G la ss-O we n Bill, a nd will tra nsmit it to Wa shing to n
to mo rro w. Eve ry b a nke r kno wn to Wa rb urg , who kno ws
the sub je c t p ra c tic a lly, ha s b e e n c a lle d up a b o ut the
ma king o f the b ill.
O c to b e r 13, 1913. Pa ul Wa rb urg wa s my first c a lle r to d a y.
He c a me to d isc uss the c urre nc y me a sure . The re a re
ma ny fe a ture s o f the O we n-G la ss Bill tha t he d o e s no t
a p p ro ve . I p ro mise d to p ut him in to uc h with Mc Ad o o
a nd Se na to r O we n so tha t he mig ht d isc uss it with the m.
No ve mb e r 17, 1913. Pa ul Wa rb urg te le p ho ne d a b o ut his
trip to Wa shing to n. La te r, he a nd Mr. Ja c o b Sc hiff c a me
o ve r fo r a fe w minute s.
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18 C o l. Ed wa rd Ma nd e ll Ho use , The Intima te Pa p e rs o f C o l. Ho use ,
* The mo st p ro mine nt b a nke r in Bo sto n.
26
Wa rb urg d id mo st o f the ta lking . He ha d a ne w
sug g e stio n in re g a rd to g ro up ing the re g ula r re se rve
b a nks so a s to g e t the units we ld e d to g e the r a nd in e a sie r
to uc h with the Fe d e ra l Re se rve Bo a rd ."
G e o rg e Sylve ste r Vie re c k in The Stra ng e st Frie nd ship in Histo ry,
Wo o d ro w Wilso n a nd C o l. Ho use wro te : "The Sc hiffs, the Wa rb urg s, the
Ka hns, the Ro c ke fe lle rs, the Mo rg a ns p ut the ir fa ith in Ho use . Whe n the
Fe d e ra l Re se rve le g isla tio n a t la st a ssume d d e finite sha p e , Ho use wa s
the inte rme d ia ry b e twe e n the White Ho use a nd the fina nc ie rs."20
O n p a g e 45, Vie re c k no te s, "C o l. Ho use lo o ks up o n the re fo rm o f the
mo ne ta ry syste m a s the c ro wning inte rna l a c hie ve me nt o f the Wilso n
Ad ministra tio n."21
The G la ss Bill (the Ho use ve rsio n o f the fina l Fe d e ra l Re se rve Ac t) ha d
p a sse d the Ho use o n Se p te mb e r 18, 1913 b y 287 to 85. O n De c e mb e r
19, 1913, the Se na te p a sse d the ir ve rsio n b y a vo te o f 54-34. Mo re tha n
fo rty imp o rta nt d iffe re nc e s in the Ho use a nd Se na te ve rsio ns re ma ine d
to b e se ttle d , a nd the o p p o ne nts o f the b ill in b o th ho use s o f C o ng re ss
we re le d to b e lie ve tha t ma ny we e ks wo uld ye t e la p se b e fo re the
C o nfe re nc e b ill wo uld b e re a d y fo r c o nsid e ra tio n. The C o ng re ssme n
p re p a re d to le a ve Wa shing to n fo r the a nnua l C hristma s re c e ss,
a ssure d tha t the C o nfe re nc e b ill wo uld no t b e b ro ug ht up until the
fo llo wing ye a r. No w the mo ne y c re a to rs p re p a re d a nd e xe c ute d the
mo st b rillia nt stro ke o f the ir p la n. In a sing le d a y, the y iro ne d o ut a ll
vo te . O n Mo nd a y, De c e mb e r 22, 1913, the b ill wa s p a sse d b y the
Ho use 282-60 a nd the Se na te 43-23.O n De c e mb e r 21, 1913, The Ne w
Yo rk Time s c o mme nte d e d ito ria lly o n the a c t, "Ne w Yo rk will b e o n a
firme r b a sis o f fina nc ia l g ro wth, a nd we sha ll so o n se e he r the mo ne y
c e ntre o f the wo rld ."
The Ne w Yo rk Time s re p o rte d o n the fro nt p a g e , Mo nd a y, De c e mb e r
22, 1913 in he a d line s: MO NEY BILL MAY BE LAW TO DAY--C O NFEREES
HAD ADJUSTED NEARLY ALL DIFFERENC ES AT 1:30 THIS MO RNING --NO
DEPO SIT G UARANTEES--SENATE YIELDS O N THIS PO INT BUT PUTS
THRO UG H MANY O THER C HANG ES "With a lmo st unp re c e d e nte d
sp e e d , the c o nfe re nc e to a d just the Ho use a nd Se na te d iffe re nc e s o n
the C urre nc y Bill p ra c tic a lly c o mp le te d its la b o urs e a rly this mo rning .
O n Sa turd a y the C o nfe re e s d id little mo re tha n d isp o se o f the
p re limina rie s, le a ving fo rty e sse ntia l d iffe re nc e s to b e thra she d o ut
Sund a y. . . . No o the r le g isla tio n o f imp o rta nc e will b e ta ke n up in e ithe r
Ho use o f C o ng re ss this we e k. Me mb e rs o f b o th ho use s a re a lre a d y
p re p a ring to le a ve Wa shing to n."
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20 G e o rg e Sylve ste r Vie re c k, The Stra ng e st Frie nd ship In Histo ry,
Wo o d ro w Wilso n a nd C o l. Ho use , Live rig ht, Ne w Yo rk, 1932
21 Ib id .
27
"Unp re c e d e nte d sp e e d ", sa ys The Ne w Yo rk Time s. O ne se e s the fine
ha nd o f Pa ul Wa rb urg in this fina l stra te g y. So me o f the b ill’ s mo st vo c a l
the we e k b e fo re C hristma s, b ut this tra d itio n wa s rud e ly sha tte re d in
o rd e r to p e rp e tra te the Fe d e ra l Re se rve Ac t o n the Ame ric a n p e o p le .
The Time s b urie d a b rie f q uo te fro m C o ng re ssma n Lind b e rg h tha t "the
b ill wo uld e sta b lish the mo st g ig a ntic trust o n e a rth," a nd q uo te d
Re p re se nta tive G ue rnse y o f Ma ine , a Re p ub lic a n o n the Ho use
Ba nking a nd C urre nc y C o mmitte e , tha t "This is a n infla tio n b ill, the o nly
q ue stio n b e ing the e xte nt o f the infla tio n."
C o ng re ssma n Lind b e rg h sa id o n tha t histo ric d a y, to the Ho use :
"This Ac t e sta b lishe s the mo st g ig a ntic trust o n e a rth. Whe n the
Pre sid e nt sig ns this b ill, the invisib le g o ve rnme nt b y the Mo ne ta ry Po we r
will b e le g a lize d . The p e o p le ma y no t kno w it imme d ia te ly, b ut the d a y
o f re c ko ning is o nly a fe w ye a rs re mo ve d . The trusts will so o n re a lize
tha t the y ha ve g o ne to o fa r e ve n fo r the ir o wn g o o d . The p e o p le must
ma ke a d e c la ra tio n o f ind e p e nd e nc e to re lie ve the mse lve s fro m the
Mo ne ta ry Po we r. This the y will b e a b le to d o b y ta king c o ntro l o f
C o ng re ss. Wa ll Stre e te rs c o uld no t c he a t us if yo u Se na to rs a nd
Re p re se nta tive s d id no t ma ke a humb ug o f C o ng re ss. . . . If we ha d a
p e o p le ’ s C o ng re ss, the re wo uld b e sta b ility.
The g re a te st c rime o f C o ng re ss is its c urre nc y syste m. The wo rst
le g isla tive c rime o f the a g e s is p e rp e tra te d b y this b a nking b ill. The
c a uc us a nd the p a rty b o sse s ha ve a g a in o p e ra te d a nd p re ve nte d the
p e o p le fro m g e tting the b e ne fit o f the ir o wn g o ve rnme nt."
The De c e mb e r 23, 1913 Ne w Yo rk Time s e d ito ria lly c o mme nte d , in
c o ntra st to C o ng re ssma n Lind b e rg h’ s c ritic ism o f the b ill, "The Ba nking
fro m o ne e nd o f the C a p ito l to the o the r. C o ng re ss wo rke d und e r
p ub lic sup e rvisio n in ma king the b ill."
By "p ub lic sup e rvisio n", The Time s a p p a re ntly me a nt Pa ul Wa rb urg , who
fo r se ve ra l d a ys ha d ma inta ine d a sma ll o ffic e in the C a p ito l b uild ing ,
whe re he d ire c te d the suc c e ssful p re -C hristma s c a mp a ig n to p a ss the
b ill, a nd whe re Se na to rs a nd C o ng re ssme n c a me ho urly a t his b id d ing
to c a rry o ut his stra te g y.
The "unp re c e d e nte d sp e e d " with whic h the Fe d e ra l Re se rve Ac t ha d
b e e n p a sse d b y C o ng re ss d uring wha t b e c a me kno wn a s "the
C hristma s ma ssa c re " ha d o ne unfo re se e n a sp e c t. Wo o d ro w Wilso n
wa s ta ke n una wa re , a s he , like ma ny o the rs, ha d b e e n a ssure d the b ill
wo uld no t c o me up fo r a vo te until a fte r C hristma s. No w he re fuse d to
sig n it, b e c a use he o b je c te d to the p ro visio ns fo r the se le c tio n o f C la ss
B. Dire c to rs. Willia m L. White re la te s in his b io g ra p hy o f Be rna rd Ba ruc h
tha t Ba ruc h, a p rinc ip a l c o ntrib uto r to Wilso n’ s c a mp a ig n fund , wa s
stunne d whe n he wa s info rme d tha t Wilso n re fuse d to sig n the b ill. He
hurrie d
28
to the White Ho use a nd a ssure d Wilso n tha t this wa s a mino r ma tte r,
whic h c o uld b e fixe d up la te r thro ug h "a d ministra tive p ro c e sse s". The
imp o rta nt thing wa s to g e t the Fe d e ra l Re se rve Ac t sig ne d into la w a t
o nc e . With this re a ssura nc e , Wilso n sig ne d the Fe d e ra l Re se rve Ac t o n
De c e mb e r 23, 1913. Histo ry p ro ve d tha t o n tha t d a y, the C o nstitutio n
c e a se d to b e the g o ve rning c o ve na nt o f the Ame ric a n p e o p le , a nd
The De c e mb e r 24, 1913 Ne w Yo rk Time s c a rrie d a fro nt p a g e he a d line
"WILSO N SIG NS THE C URRENC Y BILL!" Be lo w it, a lso in c a p ita l le tte rs,
we re two furthe r he a d line s, "PRO SPERITY TO BE FREE" a nd "WILL HELP
EVERY C LASS". Who c o uld o b je c t to a ny la w whic h p ro vid e d b e ne fits
to e ve ryo ne ? The Time s d e sc rib e d the fe stive a tmo sp he re while
Wilso n’ s fa mily a nd g o ve rnme nt o ffic ia ls wa tc he d him sig n the b ill. "The
C hristma s sp irit p e rva d e d the g a the ring ," e xulte d The Time s.
In his b io g ra p hy o f C a rte r G la ss, Rixe y Smith sta te s tha t tho se p re se nt a t
the sig ning o f the b ill inc lud e d Vic e Pre sid e nt Ma rsha ll, Se c re ta ry Brya n,
C a rte r G la ss, Se na to r O we n, Se c re ta ry Mc Ad o o , Sp e a ke r C ha mp
C la rk, a nd o the r Tre a sury o ffic ia ls. No ne o f the re a l write rs o f the b ill,
the d ra fte e s o f Je kyll Isla nd , we re p re se nt. The y ha d p rud e ntly
a b se nte d the mse lve s fro m the sc e ne o f the ir vic to ry. Rixe y Smith a lso
wro te , "It wa s a s tho ug h C hristma s ha d c o me two d a ys e a rly." O n
De c e mb e r 24, 1913, Ja c o b Sc hiff wro te to C o l. Ho use ,
"My d e a r C o l. Ho use . I wa nt to sa y a wo rd to yo u fo r the sile nt, b ut no
d o ub t e ffe c tive wo rk yo u ha ve d o ne in the inte re st o f c urre nc y
le g isla tio n a nd to c o ng ra tula te yo u tha t the me a sure ha s fina lly b e e n
e na c te d into la w. I a m with g o o d wishe s, fa ithfully yo urs, JAC O B
SC HIFF."
Re p re se nta tive Mo o re o f Ka nsa s, in c o mme nting o n the p a ssa g e o f
the Ac t, sa id to the Ho use o f Re p re se nta tive s: "The Pre sid e nt o f the
Unite d Sta te s no w b e c o me s the a b so lute d ic ta to r o f a ll the fina nc e s o f
the c o untry. He a p p o ints a c o ntro lling b o a rd o f se ve n me n, a ll o f
who m b e lo ng to his p o litic a l p a rty, e ve n tho ug h it is a mino rity. The
Se c re ta ry o f the Tre a sury is to rule sup re me whe ne ve r the re is a
AND, o nly o ne me mb e r o f the Bo a rd is to p a ss o ut o f o ffic e while the
Pre sid e nt is in o ffic e ."
The te n ye a r te rms o f o ffic e o f the me mb e rs o f the Bo a rd we re
le ng the ne d b y the Ba nking Ac t o f 1935 to fo urte e n ye a rs, whic h me a nt
tha t the se d ire c to rs o f the na tio n’ s fina nc e s, a ltho ug h no t e le c te d b y
the p e o p le , he ld o ffic e lo ng e r tha n thre e p re sid e nts.
While C o l. Ho use , Ja c o b Sc hiff a nd Pa ul Wa rb urg b a ske d in the g lo w
o f a jo b we ll d o ne , the o the r a c to rs in this d ra ma we re sub je c t to la te r
a fte rtho ug hts. Wo o d ro w Wilso n wro te in 1916, Na tio na l Ec o no my a nd
the Ba nking Syste m, Se n. Do c . No . 3, No . 223, 76th C o ng re ss, 1st
se ssio n, 1939: "O ur syste m o f c re d it is c o nc e ntra te d (in the Fe d e ra l
Re se rve
29
Syste m). The g ro wth o f the na tio n, the re fo re , a nd a ll o ur a c tivitie s, a re
in the ha nd s o f a fe w me n."
Whe n he wa s a ske d b y C la re nc e W. Ba rro n whe the r he a p p ro ve d o f
the b ill a s it wa s fina lly p a sse d . Wa rb urg re ma rke d , "We ll, it ha sn’ t g o t
q uite e ve rything we wa nt, b ut the la c k c a n b e a d juste d la te r b y
a d ministra tive p ro c e sse s."
Wo o d ro w Wilso n a nd C a rte r G la ss a re g ive n c re d it fo r the Ac t b y mo st
c o nte mp o ra ry histo ria ns, b ut o f a ll tho se c o nc e rne d , Wilso n ha d le a st
to d o with C o ng re ssio na l a c tio n o n the b ill. G e o rg e C re e l, a ve te ra n
Wa shing to n c o rre sp o nd e nt, wro te in Ha rp e r’ s We e kly, June 26, 1915:
who whip p e d C o ng re ss into line o n the ta riff b ill, o n the Pa na ma C a na l
to lls re p e a l, a nd o n the c urre nc y b ill." Mr. Brya n la te r wro te , "Tha t is the
o ne thing in my p ub lic c a re e r tha t I re g re t--my wo rk to se c ure the
e na c tme nt o f the Fe d e ra l Re se rve La w."
O n De c e mb e r 25, 1913, The Na tio n p o inte d o ut tha t "The Ne w Yo rk
Sto c k Ma rke t b e g a n to rise ste a d ily up o n ne ws tha t the Se na te wa s
re a d y to p a ss the Fe d e ra l Re se rve Ac t."
This b e lie s the c la im tha t the Fe d e ra l Re se rve Ac t wa s a mo ne ta ry
re fo rm b ill. The Ne w Yo rk Sto c k Exc ha ng e is g e ne ra lly c o nsid e re d a n
a c c ura te b a ro me te r o f the true me a ning o f a ny fina nc ia l le g isla tio n
p a sse d in Wa shing to n. Se na to r Ald ric h a lso d e c id e d tha t he no lo ng e r
ha d misg iving s a b o ut the Fe d e ra l Re se rve Ac t. In a ma g a zine whic h he
o wne d , a nd whic h he c a lle d The Ind e p e nd e nt, he wro te in July, 1914:
"Be fo re the p a ssa g e o f this Ac t, the Ne w Yo rk b a nke rs c o uld o nly
d o mina te the re se rve s o f Ne w Yo rk. No w we a re a b le to d o mina te the
b a nk re se rve s o f the e ntire c o untry."
H.W. Lo uc ks d e no unc e d the Fe d e ra l Re se rve Ac t in The G re a t
C o nsp ira c y o f the Ho use o f Mo rg a n, "In the Fe d e ra l Re se rve La w, the y
ha ve wre ste d fro m the p e o p le a nd se c ure d fo r the mse lve s the
c o nstitutio na l p o we r to issue mo ne y a nd re g ula te the va lue the re o f."
O n p a g e 31, Lo uc ks write s, "The Ho use o f Mo rg a n is no w in sup re me
c o ntro l o f o ur ind ustry, c o mme rc e a nd p o litic a l a ffa irs.
The y a re in c o mp le te c o ntro l o f the p o lic y ma king o f the De mo c ra tic ,
Re p ub lic a n a nd Pro g re ssive p a rtie s. The p re se nt e xtra o rd ina ry
p ro p a g a nd a fo r ‘ p re p a re d ne ss’ is p la nne d mo re fo r ho me c o e rc io n
o f ye a rs o f c o llusio n with his intima te frie nd , C o l. Ho use , a nd Pa ul
Wa rb urg . O ne o f the me n with who m Ho use b e c a me a c q ua inte d in
the Wilso n Ad ministra tio n wa s Fra nklin D.
__________________________
22 H.W. Lo uc ks, The G re a t C o nsp ira c y o f the Ho use o f Mo rg a n,
Priva te ly p rinte d , 1916
30
Ro o se ve lt, Assista nt Se c re ta ry o f Na vy. As so o n a s he o b ta ine d the
De mo c ra tic no mina tio n fo r Pre sid e nt, in 1932, Fra nklin D. Ro o se ve lt
ma d e a "p ilg rima g e " to C o l. Ho use ’ s ho me a t Ma g no lia , Ma ss.
Ro o se ve lt, a fte r the Re p ub lic a n hia tus o f the 1920s, fille d in the g o a ls o f
Philip Dru, Ad ministra to r,23 whic h Wilso n ha d no t b e e n a b le to c a rry
o ut. The la te Ro o se ve lt a c hie ve me nts inc lud e d the e na c tme nt o f the
so c ia l se c urity p ro g ra m, e xc e ss p ro fits ta x, a nd the e xp a nsio n o f the
g ra d ua te d inc o me ta x to 90% o f e a rne d inc o me .
Ho use ’ s b io g ra p he r, C ha rle s Se ymo ur, wro te : "He wa s we a rie d b y the
d e ta ils o f p a rty p o litic s a nd a p p o intme nts. Eve n the sha re he ha d
ta ke n in c o nstruc tive d o me stic le g isla tio n (the Fe d e ra l Re se rve Ac t,
ta riff re visio n, a nd the Inc o me Ta x a me nd me nt) d id no t sa tisfy him.
Fro m the b e g inning o f 1914 he g a ve mo re a nd mo re o f his time to
wha t he re g a rd e d a s the hig he st fo rm o f p o litic s a nd tha t fo r whic h he
wa s p a rtic ula rly suite d --inte rna tio na l a ffa irs."24
In 1938, sho rtly b e fo re he d ie d , Ho use to ld C ha rle s Se ymo ur, "During the
la st fifte e n ye a rs I ha ve b e e n c lo se to the c e nte r o f thing s, a ltho ug h
no mina te d Ro o se ve lt. He ha s g ive n me a fre e ha nd in a d vising him. All
the Amb a ssa d o rs ha ve re p o rte d to me fre q ue ntly."
A c o mp a ra tive p rint o f the Fe d e ra l Re se rve Ac t o f 1913 a s p a sse d b y
the Ho use o f Re p re se nta tive s a nd a me nd e d b y the Se na te sho ws the
fo llo wing striking c ha ng e :
The Se na te struc k o ut, "To susp e nd the o ffic ia ls o f Fe d e ra l Re se rve
b a nks fo r c a use , sta te d in writing with o p p o rtunity o f he a ring , re q uire
the re mo va l o f sa id o ffic ia l fo r inc o mp e te nc y, d e re lic tio n o f d uty, fra ud
o r d e c e it, suc h re mo va l to b e sub je c t to a p p ro va l b y the Pre sid e nt o f
the Unite d Sta te s." This wa s c ha ng e d b y the Se na te to re a d "To
susp e nd o r re mo ve a ny o ffic e r o r d ire c to r o f a ny Fe d e ra l Re se rve Ba nk,
the c a use o f suc h re mo va l to b e fo rthwith c o mmunic a te d in writing b y
the Fe d e ra l Re se rve Bo a rd to the re mo ve d o ffic e r o r d ire c to r a nd to
sa id b a nk." This c o mp le te ly a lte re d the c o nd itio ns und e r whic h a n
o ffic e r o r d ire c to r mig ht b e re mo ve d . We no lo ng e r kno w wha t the
c o nd itio ns fo r re mo va l a re , o r the c a use . Ap p a re ntly inc o mp e te nc y,
d e re lic tio n o f d uty, fra ud o r d e c e it d o no t ma tte r to the Fe d e ra l
Re se rve Bo a rd . Also , the re mo ve d o ffic e r d o e s no t ha ve the
o p p o rtunity o f a p p e a l to the Pre sid e nt. In a nswe r to writte n inq uiry, the
Assista nt Se c re ta ry o f the Fe d e ra l Re se rve Bo a rd re p lie d tha t o nly o ne
o ffic e r ha s b e e n re mo ve d "fo r c a use " in the thirty-six ye a rs, the na me
a nd d e ta ils o f this ma tte r b e ing a "p riva te c o nc e rn" b e twe e n the
ind ivid ua l, the Re se rve Ba nk c o nc e rne d , a nd the Fe d e ra l Re se rve
Bo a rd .
__________________________
24 C o l. E.M. Ho use , The Intima te Pa p e rs o f C o l. Ho use , 4 v. 1926-1928,
Ho ug hto n Mifflin C o .
31
The Fe d e ra l Re se rve Syste m b e g a n its o p e ra tio ns in 1914 with the
a c tivity o f the O rg a niza tio n C o mmitte e , a p p o inte d b y Wo o d ro w
Wilso n, a nd c o mp o se d o f Se c re ta ry o f the Tre a sury Willia m Mc Ad o o ,
who wa s his so n-in-la w, Se c re ta ry o f Ag ric ulture Ho usto n a nd
C o mp tro lle r o f the C urre nc y Jo hn Ske lto n Willia ms.
O n Ja nua ry 6, 1914. J.P. Mo rg a n me t with the O rg a nizing C o mmitte e in
Ne w Yo rk. He info rme d the m tha t the re sho uld no t b e mo re tha n se ve n
re g io na l d istric ts in the ne w syste m.
This c o mmitte e wa s to se le c t the lo c a tio ns o f the "d e c e ntra lize d "
re se rve b a nks. The y we re e mp o we re d to se le c t fro m e ig ht to twe lve
re se rve b a nks, a ltho ug h J.P. Mo rg a n ha d te stifie d he tho ug ht tha t no t
mo re tha n fo ur sho uld b e se le c te d . Muc h p o litic king we nt into the
se le c tio n o f the se site s, a s the twe lve c itie s thus fa vo re d wo uld
b e c o me e no rmo usly imp o rta nt a s c e nte rs o f fina nc e . Ne w Yo rk, o f
c o urse , wa s a fo re g o ne c o nc lusio n. Ric hmo nd wa s the ne xt se le c tio n,
a s a p a yo ff to C a rte r G la ss a nd Wo o d ro w Wilso n, the two Virg inia ns
who ha d b e e n g ive n p o litic a l c re d it fo r the Fe d e ra l Re se rve Ac t. The
o the r se le c tio ns o f the C o mmitte e we re Bo sto n, Phila d e lp hia ,
C le ve la nd , C hic a g o , St. Lo uis, Atla nta , Da lla s, Minne a p o lis, Ka nsa s C ity,
a nd Sa n Fra nc isc o . All o f the se c itie s la te r d e ve lo p e d imp o rta nt
"fina nc ia l d istric ts" a s the re sult o f this se le c tio n.
Fe rd ina nd Lund b e rg p o inte d o ut, in Ame ric a ’ s Sixty Fa milie s, tha t, "In
p ra c tic e , the Fe d e ra l Re se rve Ba nk o f Ne w Yo rk b e c a me the
fo unta inhe a d o f the syste m o f twe lve re g io na l b a nks, fo r Ne w Yo rk wa s
the mo ne y ma rke t o f the na tio n. The o the r e le ve n b a nks we re so ma ny
e xp e nsive ma uso le ums e re c te d to sa lve the lo c a l p rid e a nd q ue ll the
Ja c kso nia n fe a rs o f the hinte rla nd . Be nja min Stro ng , p re sid e nt o f the
Ba nke rs Trust (J.P. Mo rg a n) wa s se le c te d a s the first G o ve rno r o f the
Ne w Yo rk Fe d e ra l Re se rve Ba nk. Ad e p t in hig h fina nc e , Stro ng fo r
ma ny ye a rs ma nip ula te d the c o untry’ s mo ne ta ry syste m a t the
d isc re tio n o f d ire c to rs re p re se nting the le a d ing Ne w Yo rk b a nks. Und e r
Stro ng , the Re se rve Syste m wa s b ro ug ht into inte rlo c king re la tio ns with
the Ba nk o f Eng la nd a nd the Ba nk o f Fra nc e . Be nja min Stro ng he ld his
p o sitio n a s G o ve rno r o f the Fe d e ra l Re se rve Ba nk o f Ne w Yo rk until his
sud d e n d e a th in 1928, d uring a C o ng re ssio na l inve stig a tio n o f the
se c re t me e ting s b e twe e n Re se rve G o ve rno rs a nd
32
he a d s o f Euro p e a n c e ntra l b a nks whic h b ro ug ht o n the G re a t
De p re ssio n o f 1929-31."25 Stro ng ha d ma rrie d the d a ug hte r o f the
Pre sid e nt o f Ba nke rs Trust, whic h b ro ug ht him into the line o f suc c e ssio n
in the d yna stic intrig ue s whic h p la y suc h a n imp o rta nt ro le in the wo rld
o f hig h fina nc e . He a lso ha d b e e n a me mb e r o f the o rig ina l Je kyll
Isla nd g ro up , the First Na me C lub , a nd wa s thus q ua lifie d fo r the
hig he st p o sitio n in the Fe d e ra l Re se rve Syste m, a s the G o ve rno r o f the
Fe d e ra l Re se rve Ba nk o f Ne w Yo rk whic h d o mina te d the e ntire syste m.
Pa ul Wa rb urg a lso is me ntio ne d in J. La ure nc e La ug hlin’ s d e finitive
vo lume , The Fe d e ra l Re se rve Ac t, Its O rig ins a nd Purp o se s, "Mr. Pa ul
tho ug ht o ut p la n to b e kno wn a s the Unite d Re se rve Ba nk o f the Unite d
Sta te s. This wa s p ub lishe d in The Ne w Yo rk Time s o f Ma rc h 24, 1910. The
g ro up inte re ste d in the p urp o se s o f the Na tio na l Mo ne ta ry C o mmissio n
me t se c re tly a t Je kyll Isla nd fo r a b o ut two we e ks in De c e mb e r, 1910,
a nd
c o nc e ntra te d o n the p re p a ra tio n o f a b ill to b e p re se nte d to
C o ng re ss b y the Na tio na l Mo ne ta ry C o mmissio n. The me n who we re
p re se nt a t Je kyll Isla nd we re Se na to r Ald ric h, H. P. Da viso n o f J.P.
Mo rg a n C o mp a ny, Pa ul Wa rb urg o f Kuhn, Lo e b C o mp a ny, Fra nk
Va nd e rlip o f the Na tio na l C ity Ba nk, a nd C ha rle s D. No rto n o f the First
Na tio na l Ba nk. No d o ub t the a b le st b a nking mind in the g ro up wa s
tha t o f Mr. Wa rb urg , who ha d ha d a Euro p e a n b a nking tra ining .
Se na to r Ald ric h ha d no sp e c ia l tra ining in b a nking ."26
A me ntio n o f Pa ul Wa rb urg , writte n b y Ha ro ld Ke llo c h, a nd title d ,
"Wa rb urg the Re vo lutio nist" a p p e a re d in the C e ntury Ma g a zine , Ma y,
1915. Ke llo c h write s:
"He imp o se d his id e a s o n a na tio n o f a hund re d millio n p e o p le . . .
Witho ut Mr. Wa rb urg the re wo uld ha ve b e e n no Fe d e ra l Re se rve Ac t.
The b a nking ho use o f Wa rb urg a nd Wa rb urg in Ha mb urg ha s a lwa ys
b e e n stric tly a fa mily b usine ss. No ne b ut a Wa rb urg ha s b e e n e lig ib le
fo r it, b ut a ll Wa rb urg s ha ve b e e n b o rn into it. In 1895 he ma rrie d the
d a ug hte r o f the la te So lo mo n Lo e b o f Kuhn Lo e b C o mp a ny. He
b e c a me a me mb e r o f Kuhn Lo e b C o mp a ny in 1902. Mr. Wa rb urg ’ s
sa la ry fro m his p riva te b usine ss ha s b e e n a p p ro xima te ly a ha lf millio n a
ye a r. Mr.Wa rb urg ’ s mo tive s ha d b e e n p ure ly tho se o f p a trio tic se
lf-sa c rific e ."
Mo o d y’ s Ma g a zine , 1916, "The p urp o se o f the Fe d e ra l Re se rve Ac t wa s
to p re ve nt c o nc e ntra tio n o f mo ne y in the Ne w Yo rk b a nks b y ma king it
p ro fita b le fo r c o untry b a nke rs to use the ir fund s a t ho me , b ut the
mo ve me nt o f c urre nc y sho ws
__________________________
25 Fe rd ina nd Lund b e rg , Ame ric a ’ s Sixty Fa milie s, 1937
26 J. La ure nc e La ug hlin, The Fe d e ra l Re se rve Ac t, It’ s O rig ins a nd
Purp o se s
33
tha t the Ne w Yo rk b a nks g a ine d fro m the inte rio r in e ve ry mo nth
e xc e p t De c e mb e r, 1915, sinc e the Ac t we nt into e ffe c t. The
sta b iliza tio n o f ra te s ha s ta ke n p la c e in Ne w Yo rk a lo ne . In o the r p a rts,
hig h ra te s c o ntinue . The Ac t, whic h wa s to d e p rive Wa ll Stre e t o f its
fund s fo r sp e c ula tio n, ha s re a lly g ive n the b ulls a nd the b e a rs suc h a
sup p ly a s the y ha ve ne ve r ha d b e fo re . The truth is tha t fa r fro m ha ving
c lo g g e d the c ha nne l to Wa ll Stre e t, a s Mr. G la ss so c o nfid e ntly
b o a ste d , it a c tua lly wid e ne d the o ld c ha nne ls a nd o p e ne d up two
ne w o ne s. The first o f the se le a d s d ire c tly to Wa shing to n a nd g ive s Wa ll
Stre e t a string o n a ll the surp lus c a sh in the Unite d Sta te s Tre a sury.
Be sid e s, in the p o we r to issue b a nk-no te c urre nc y, it furnishe s a n
ine xha ustib le sup p ly o f c re d it mo ne y; the se c o nd c ha nne l le a d s to the
g re a t c e ntra l b a nks o f Euro p e , whe re b y, thro ug h the sa le o f
a c c e p ta nc e s, virtua lly g ua ra nte e d b y the Unite d Sta te s G o ve rnme nt,
Wa ll Stre e t is g ra nte d immunity fro m fo re ig n d e ma nd s fo r g o ld whic h
Fo r ma ny ye a rs, the re ha s b e e n c o nsid e ra b le myste ry a b o ut who
a c tua lly o wns the sto c k o f the Fe d e ra l Re se rve Ba nks. C o ng re ssma n
Wrig ht Pa tma n, le a d ing c ritic o f the Syste m, trie d to find o ut who the
sto c kho ld e rs we re . The sto c k in the o rig ina l twe lve re g io na l Fe d e ra l
Re se rve Ba nks wa s p urc ha se d b y na tio na l b a nks in tho se twe lve
re g io ns. Be c a use the Fe d e ra l Re se rve Ba nk o f Ne w Yo rk wa s to se t the
inte re st ra te s a nd d ire c t o p e n ma rke t o p e ra tio ns, thus c o ntro lling the
d a ily sup p ly a nd p ric e o f mo ne y thro ug ho ut the Unite d Sta te s, it is the
sto c kho ld e rs o f tha t b a nk who a re the re a l d ire c to rs o f the e ntire
syste m. Fo r the first time , it c a n b e re ve a le d who tho se sto c kho ld e rs
a re . This write r ha s the o rig ina l o rg a niza tio n c e rtific a te s o f the twe lve
Fe d e ra l Re se rve Ba nks, g iving the o wne rship o f sha re s b y the na tio na l
b a nks in e a c h d istric t. The Fe d e ra l Re se rve Ba nk o f Ne w Yo rk issue d
203,053 sha re s, a nd , a s file d with the C o mp tro lle r o f the C urre nc y Ma y
19, 1914, the la rg e Ne w Yo rk C ity b a nks to o k mo re tha n ha lf o f the
o utsta nd ing sha re s. The Ro c ke fe lle r Kuhn, Lo e b -c o ntro lle d Na tio na l
C ity Ba nk to o k the la rg e st numb e r o f sha re s o f a ny b a nk, 30,000 sha re s.
J.P. Mo rg a n’ s First Na tio na l Ba nk to o k 15,000 sha re s. Whe n the se two
b a nks me rg e d in 1955, the y o wne d in o ne b lo c k a lmo st o ne fo urth o f
the sha re s in the Fe d e ra l Re se rve Ba nk o f Ne w Yo rk, whic h c o ntro lle d
the e ntire syste m, a nd thus the y c o uld na me Pa ul Vo lc ke r o r a nyo ne
e lse the y c ho se to b e C ha irma n o f the Fe d e ra l Re se rve Bo a rd o f
G o ve rno rs. C ha se Na tio na l Ba nk to o k 6,000 sha re s. The Ma rine Na tio n
Ba nk o f Buffa lo , la te r kno wn a s Ma rine Mid la nd , to o k 6,000 sha re s. This
b a nk wa s o wne d b y the Sc ho e llko p f fa mily, whic h c o ntro lle d Nia g a ra
Po we r C o mp a ny a nd o the r la rg e inte re sts. Na tio na l Ba nk o f
Yo rk a re the p e o p le who ha ve c o ntro lle d o ur p o litic a l a nd e c o no mic
d e stinie s sinc e 1914. The y a re the Ro thsc hild s, o f Euro p e , La za rd Fre re s
(Eug e ne Me ye r), Kuhn Lo e b C o mp a ny, Wa rb urg C o mp a ny, Le hma n
Bro the rs,
34
G o ld ma n Sa c hs, the Ro c ke fe lle r fa mily, a nd the J.P. Mo rg a n inte re sts.
The se inte re sts ha ve me rg e d a nd c o nso lid a te d in re c e nt ye a rs, so tha t
the c o ntro l is muc h mo re c o nc e ntra te d . Na tio na l Ba nk o f C o mme rc e is
no w Mo rg a n G ua ra nty Trust C o mp a ny. Le hma n Bro the rs ha s me rg e d
with Kuhn, Lo e b C o mp a ny, First Na tio na l Ba nk ha s me rg e d with the
Na tio na l C ity Ba nk, a nd in the o the r e le ve n Fe d e ra l Re se rve Distric ts,
the se sa me sha re ho ld e rs ind ire c tly o wn o r c o ntro l sha re s in tho se
b a nks, with the o the r sha re s o wne d b y the le a d ing fa milie s in tho se
a re a s who o wn o r c o ntro l the p rinc ip a l ind ustrie s in the se re g io ns.* The
"lo c a l" fa milie s se t up re g io na l c o unc ils, o n o rd e rs fro m Ne w Yo rk, o f
suc h g ro up s a s the C o unc il o n Fo re ig n Re la tio ns, The Trila te ra l
C o mmissio n, a nd o the r instrume nts o f c o ntro l d e vise d b y the ir ma ste rs.
The y fina nc e a nd c o ntro l p o litic a l d e ve lo p me nts in the ir a re a , na me
c a nd id a te s, a nd a re se ld o m suc c e ssfully o p p o se d in the ir p la ns.
With the se tting up o f the twe lve "fina nc ia l d istric ts" thro ug h the Fe d e ra l
Re se rve Ba nks, the tra d itio na l d ivisio n o f the Unite d Sta te s into the fo
rty-e ig ht sta trty-e s wa s o vrty-e rthro wn, a nd wrty-e rty-e ntrty-e rrty-e d thrty-e rty-e ra o f "rrty-e g io na lism",
o r twe lve re g io ns whic h ha d no re la tio n to the tra d itio na l sta te
b o und a rie s.
The se d e ve lo p me nts fo llo wing the p a ssing o f the Fe d e ra l Re se rve Ac t
Re se rve Ba nk sto c k ha d fo rme d a c o rp o ra tio n, who se sto c k c o uld b e
a nd wa s he ld b y a lie ns; tha t this sto c k wo uld b e tra nsmitte d to a
c e rta in line o f suc c e sso rs; tha t it wo uld b e p la c e d b e yo nd fo rfe iture
a nd e sc he a t; tha t the y wo uld re c e ive a mo no p o ly o f b a nking , whic h
wa s a g a inst the la ws o f mo no p o ly; a nd tha t the y no w ha d the p o we r
to ma ke la ws, p a ra mo unt to the la ws o f the sta te s. No sta te le g isla ture
c a n c o unte rma nd a ny o f the la ws la id d o wn b y the Fe d e ra l Re se rve
Bo a rd o f G o ve rno rs fo r the b e ne fit o f the ir p riva te sto c kho ld e rs. This
b o a rd issue s la ws a s to wha t the inte re st ra te sha ll b e , wha t the
q ua ntity o f mo ne y sha ll b e a nd wha t the p ric e o f mo ne y sha ll b e . All o f
the se p o we rs a b ro g a te the p o we rs o f the sta te le g isla ture s a nd the ir
re sp o nsib ility to the c itize ns o f tho se sta te s.
The Ne w Yo rk Time s sta te d tha t the Fe d e ra l Re se rve Ba nks wo uld b e
re a d y fo r b usine ss o n Aug ust 1, 1914, b ut the y a c tua lly b e g a n
o p e ra tio ns o n No ve mb e r 16, 1914. At tha t time , the ir to ta l a sse ts we re
liste d a t $143,000,000, fro m the sa le o f sha re s in the Fe d e ra l Re se rve
Ba nks to sto c kho ld e rs o f the na tio na l b a nks whic h sub sc rib e d to it.
The a c tua l p a rt o f this $143,000,000 whic h wa s p a id in fo r the se sha re s
re ma ins shro ud e d in myste ry. So me histo ria ns b e lie ve tha t the
sha re ho ld e rs o nly p a id a b o ut ha lf o f the a mo unt in c a sh; o the rs
b e lie ve
__________________________
Se e c ha rts V thro ug h IX
35
tha t fro m the ve ry o utse t, the Fe d e ra l Re se rve o p e ra tio ns we re "p a p e r
issue d a g a inst p a p e r", tha t b o o kke e p ing e ntrie s c o mp rise d the o nly
va lue s whic h c ha ng e d ha nd s.
The me n who m Pre sid e nt Wo o d ro w Wilso n c ho se to ma ke up the first
Fe d e ra l Re se rve Bo a rd o f G o ve rno rs we re me n d ra wn fro m the
b a nking g ro up . He ha d b e e n no mina te d fo r the Pre sid e nc y b y the
De mo c ra tic Pa rty, whic h ha d c la ime d to re p re se nt the "c o mmo n ma n"
a g a inst the "ve ste d inte re sts". Ac c o rd ing to Wilso n himse lf, he wa s
a llo we d to c ho o se o nly o ne ma n fo r the Fe d e ra l Re se rve Bo a rd . The
o the rs we re c ho se n b y the Ne w Yo rk b a nke rs. Wilso n’ s c ho ic e wa s
Tho ma s D. Jo ne s, a truste e o f Princ e to n a nd d ire c to r o f Inte rna tio na l
Ha rve ste r a nd o the r c o rp o ra tio ns. The o the r me mb e rs we re Ad o lp h C .
Mille r, e c o no mist fro m Ro c ke fe lle r’ s Unive rsity o f C hic a g o a nd
Mo rg a n’ s Ha rva rd Unive rsity, a nd a lso se rving a s Assista nt Se c re ta ry o f
the Inte rio r; C ha rle s S. Ha mlin, who ha d se rve d p re vio usly a s a n
Assista nt Se c re ta ry to the Tre a sury fo r e ig ht ye a rs; F.A. De la no , a
Ro o se ve lt re la tive , a nd ra ilro a d o p e ra to r who to o k o ve r a numb e r o f
ra ilro a d s fo r Kuhn, Lo e b C o mp a ny, W.P.G . Ha rd ing , Pre sid e nt o f the
First Na tio na l Ba nk o f Atla nta ; a nd Pa ul Wa rb urg o f Kuhn, Lo e b
C o mp a ny. Ac c o rd ing to The Intima te Pa p e rs o f C o l. Ho use , Wa rb urg
wa s a p p o inte d b e c a use "The Pre sid e nt a c c e p te d (Ho use ’ s) sug g e stio n
o f Pa ul Wa rb urg o f Ne w Yo rk b e c a use o f his inte re st a nd e xp e rie nc e in
c urre nc y p ro b le ms und e r b o th Re p ub lic a n a nd De mo c ra tic
Ad ministra tio ns."27 Like Wa rb urg , De la no ha d a lso b e e n b o rn o utsid e
the c o ntine nta l limits o f the Unite d Sta te s, a ltho ug h he wa s a n
Ame ric a n c itize n. De la no ’ s fa the r, Wa rre n De la no , a c c o rd ing to Dr.
C hine se o p ium tra d e , a nd Fre d e ric k De la no wa s b o rn in Ho ng Ko ng in
1863.
In The Mo ne y Po we r o f Euro p e , Pa ul Emd e n write s tha t "The Wa rb urg s
re a c he d the ir o utsta nd ing e mine nc e d uring the la st twe nty ye a rs o f
the p a st c e ntury, simulta ne o usly with the g ro wth o f Kuhn, Lo e b
C o mp a ny in Ne w Yo rk, with who m the y sto o d in a p e rso na l unio n a nd
fa mily re la tio nship . Pa ul Wa rb urg with ma g nific e nt suc c e ss c a rrie d
thro ug h in 1913 the re o rg a niza tio n o f the Ame ric a n b a nking syste m, a t
whic h he ha d with Se na to r Ald ric h b e e n wo rking sinc e 1911, a nd thus
mo st tho ro ug hly c o nso lid a te d the c urre nc y a nd fina nc e s o f the Unite d
Sta te s."28
__________________________
27 C ha rle s Se ymo ur, The Intima te Pa p e rs o f C o l. Ho use , 4 v. 1926-1928,
Ho ug hto n Mifflin C o .
28 Pa ul Emd e n, The Mo ne y Po we r o f Euro p e in the 19th a nd 20th
C e ntury, S. Lo w, Ma rsto n C o ., Lo nd o n, 1937
36
The Ne w Yo rk Time s* ha d no te d o n Ma y 6, 1914 tha t Pa ul Wa rb urg ha d
"re tire d " fro m Kuhn, Lo e b C o mp a ny in o rd e r to se rve o n the Fe d e ra l
Re se rve Bo a rd , a ltho ug h he ha d no t re sig ne d his d ire c to rship s o f
Ame ric a n Sure ty C o mp a ny, Ba ltimo re a nd O hio Ra ilro a d , Na tio na l
Ra ilwa ys o f Me xic o , We lls Fa rg o , o r We sting ho use Ele c tric C o rp o ra tio n,
b ut wo uld c o ntinue to se rve o n the se b o a rd s o f d ire c to rs. "Who ’ s Who "
liste d him a s ho ld ing the se d ire c to rship s a nd in a d d itio n, Ame ric a n I.G .
Amste rd a m, c ha irma n o f the Bo a rd o f Inte rna tio na l Ac c e p ta nc e Ba nk,
a nd nume ro us o the r b a nks, ra ilwa ys a nd c o rp o ra tio ns. "Kuhn Lo e b &
C o . with Wa rb urg ha ve fo ur vo te s o r the ma jo rity o f the Fe d e ra l
Re se rve Bo a rd ."29
De sp ite his re tire me nt fro m Kuhn, Lo e b C o mp a ny in Ma y o f 1914 to
se rve o n the Fe d e ra l Re se rve Bo a rd o f G o ve rno rs, Wa rb urg wa s a ske d
to a p p e a r b e fo re a Se na te Sub c o mmitte e in June o f 1914 a nd a nswe r
so me q ue stio ns a b o ut his b e hind -the -sc e ne s ro le in g e tting the Fe d e ra l
Re se rve Ac t thro ug h C o ng re ss. This mig ht ha ve me a nt so me q ue stio ns
a b o ut the se c re t c o nfe re nc e in Je kyll Isla nd , a nd Wa rb urg re fuse d to
a p p e a r. O n July 7, 1914 he wro te a le tte r to G .M. Hitc hc o c k, C ha irma n
o f the Se na te Ba nking a nd C urre nc y C o mmitte e , sta ting tha t it mig ht
imp a ir his use fulne ss o n the Bo a rd if he we re re q uire d to a nswe r a ny
q ue stio ns, a nd tha t he wo uld the re fo re withd ra w his na me . It se e me d
tha t Wa rb urg wa s p re p a re d to b luff the Se na te C o mmitte e into
c o nfirming him witho ut a ny q ue stio ns a ske d . O n July 10, 1914, The Ne w
Yo rk Time s d e fe nd e d Wa rb urg o n the e d ito ria l p a g e a nd d e no unc e d
the "Se na to ria l Inq uisitio n". Sinc e Wa rb urg ha d no t ye t b e e n a ske d a ny
q ue stio ns, the te rm "Inq uisitio n" se e me d re ma rka b ly ina p p ro p ria te , no r
wa s the re a ny re a l d a ng e r tha t the Se na to rs we re p re p a ring to use
instrume nts o f to rture o n Mr. Wa rb urg . The imb ro g lio wa s re so lve d whe n
the Se na te C o mmitte e , in a b je c t surre nd e r, a g re e d tha t Mr. Wa rb urg
wo uld b e g ive n a list o f q ue stio ns in a d va nc e o f his a p p e a ra nc e so
tha t he c o uld g o o ve r the m, a nd tha t he c o uld b e e xc use d fro m
a nswe ring a ny q ue stio ns whic h mig ht te nd to imp a ir his se rvic e o n the
Bo a rd o f G o ve rno rs. The Na tio n re p o rte d o n July 23, 1914 tha t "Mr.
with a vie w to c o ming to a n und e rsta nd ing , a nd to g iving the m a ny
re a so na b le info rma tio n the y mig ht d e sire . The o p inio n in Wa shing to n is
tha t Mr. Wa rb urg ’ s c o nfirma tio n is a ssure d ." The Na tio n
__________________________
* The Ne w Yo rk Time s Ap ril 30, 1914, re p o rte d tha t the 12 d istric ts ha d
sub sc rip tio ns o f $74,740,800 a nd tha t the sub sc rib ing b a nks wo uld p a y
o ne -ha lf o f this sum in six mo nths.
29 C la re nc e W. Ba rro n, Mo re The y To ld Ba rro n, Arno Pre ss, Ne w Yo rk
Time s, 1973, June 12, 1914. p . 204
37
wa s c o rre c t. Mr. Wa rb urg wa s c o nfirme d , the wa y ha ving b e e n
smo o the d b y his "fixe r", Se na to r O ’ G o rma n o f Ne w Yo rk, mo re fa milia rly
kno wn a s "the Se na to r fro m Wa ll Stre e t". Se na to r Ro b e rt L. O we n ha d
p re vio usly c ha rg e d tha t Wa rb urg wa s the Ame ric a n re p re se nta tive o f
the Ro thsc hild fa mily, b ut q ue stio ning him a b o ut this wo uld ind e e d
ha ve sma c ke d o f the me d ia e va l "Inq uisitio n", a nd his fe llo w Se na to rs
we re to o c ivilize d to ind ulg e in suc h b a rb a rity*.
During the Se na te He a ring s o n Pa ul Wa rb urg b e fo re the Se na te
Ba nking a nd C urre nc y C o mmitte e , Aug ust 1, 1914, Se na to r Bristo w
a ske d , "Ho w ma ny o f the se p a rtne rs (o f Kuhn, Lo e b C o mp a ny) a re
Ame ric a n c itize ns? " WARBURG : "The y a re a ll Ame ric a n c itize ns e xc e p t
Mr. Ka hn. He is a British sub je c t." BRISTO W: "He wa s a t o ne time a
c a nd id a te fo r Pa rlia me nt, wa s he no t? " WARBURG : "The re wa s ta lk
Pa ul Wa rb urg a lso sta te d to the C o mmitte e , "I we nt to Eng la nd , whe re
I sta ye d fo r two ye a rs, first in the b a nking a nd d isc o unt firm o f Sa mue l
Mo nta g ue & C o mp a ny. Afte r tha t I we nt to Fra nc e , whe re I sta ye d in a
Fre nc h b a nk."
C HAIRMAN: "Wha t Fre nc h b a nk wa s tha t? " WARBURG : "It is the Russia n
b a nk fo r fo re ig n tra d e whic h ha s a n a g e nc y in Pa ris."
BRISTO W: "I und e rsta nd yo u to sa y tha t yo u we re a Re p ub lic a n, b ut
whe n Mr. The o d o re Ro o se ve lt c a me a ro und , yo u the n b e c a me a
symp a thize r with Mr. Wilso n a nd sup p o rte d him? " WARBURG : "Ye s."
BRISTO W: "While yo ur b ro the r (Fe lix Wa rb urg ) wa s sup p o rting Ta ft? "
WARBURG : "Ye s." Thus thre e p a rtne rs o f Kuhn, Lo e b C o mp a ny we re
sup p o rting thre e d iffe re nt c a nd id a te s fo r Pre sid e nt o f the Unite d Sta te s.
Pa ul Wa rb urg wa s sup p o rting Wilso n, Fe lix Wa rb urg wa s sup p o rting Ta ft,
a nd O tto Ka hn wa s sup p o rting The o d o re Ro o se ve lt. Pa ul Wa rb urg
e xp la ine d this c urio us situa tio n b y te lling the C o mmitte e tha t the y ha d
no influe nc e o ve r e a c h o the r’ s p o litic a l b e lie fs, "a s fina nc e a nd p o litic s
d o n’ t mix."
Q ue stio ns a b o ut Wa rb urg ’ s a p p o intme nt va nishe d in a hue a nd c ry
with Wilso n’ s so le a p p o intme nt to the Bo a rd o f G o ve rno rs, Tho ma s B.
Jo ne s. Re p o rte rs ha d d isc o ve re d tha t Jo ne s, a t the time o f his
a p p o intme nt, wa s und e r ind ic tme nt b y the Atto rne y G e ne ra l o f the
Unite d Sta te s. Wilso n le a p e d to the d e fe nse o f his c ho ic e , te lling
re p o rte rs tha t "The ma jo rity o f the me n c o nne c te d with wha t we ha ve
c o me to c a ll ‘ b ig b usine ss’ a re ho ne st, inc o rrup tib le a nd p a trio tic ."
De sp ite Wilso n’ s p ro te sta tio ns, the Se na te Ba nking a nd C urre nc y
* Wa rb urg wa s c o nfirme d Aug ust 8, 1914, 38-11, a nd p rinc ip a lly
o p p o se d b y Se n. Bristo w o f Ka nsa s, who wa s d e no unc e d b y The Ne w
Yo rk Time s a s a "ra d ic a l Re p ub lic a n", a nd who se e xc e lle nt lib ra ry o f
ra re b o o ks o n b a nking we re a c q uire d b y the p re se nt write r in 1983 fo r
re se a rc h o n this wo rk.
38
he a ring s o n the fitne ss o f Tho ma s D. Jo ne s to b e a me mb e r o f the
Bo a rd o f G o ve rno rs. Wilso n the n wro te a le tte r to Se na to r Ro b e rt L.
O we n, C ha irma n o f tha t C o mmitte e :
White Ho use
June 18, 1914
De a r Se na to r O we n:
Mr. Jo ne s ha s a lwa ys sto o d fo r the rig hts o f the p e o p le a g a inst the
rig hts o f p rivile g e . His c o nne c tio n with the Ha rve ste r C o mp a ny wa s a
p ub lic se rvic e , no t a p riva te inte re st. He is the o ne ma n o f the who le
numb e r who wa s in a p e c ulia r se nse my p e rso na l c ho ic e .
Sinc e re ly,
Wo o d ro w Wilso n
Wo o d ro w Wilso n sa id , "The re is no re a so n to b e lie ve tha t the
unfa vo ra b le re p o rt re p re se nts the a ttitud e o f the Se na te itse lf." Afte r
se ve ra l we e ks, Tho ma s D. Jo ne s withd re w his na me , a nd the c o untry
The o the r me mb e rs o f the first Bo a rd o f G o ve rno rs we re Se c re ta ry o f
the Tre a sury, Willia m Mc Ad o o , Wilso n’ s so n-in-la w, a nd Pre sid e nt o f the
Hud so n-Ma nha tta n Ra ilro a d , a Kuhn, Lo e b C o mp a ny c o ntro lle d
e nte rp rise , a nd C o mp tro lle r o f the C urre nc y Jo hn Ske lto n Willia ms.
Whe n the Fe d e ra l Re se rve Ba nks we re o p e ne d fo r b usine ss o n
No ve mb e r 16, 1914, Pa ul Wa rb urg sa id , "This d a te ma y b e c o nsid e re d
a s the Fo urth o f July in the e c o no mic histo ry o f the Unite d Sta te s."
C HAPTER FO UR
The Fe d e ra l Ad viso ry C o unc il
In ste a mro lling the Fe d e ra l Re se rve Ac t thro ug h the Ho use o f
Re p re se nta tive s, C o ng re ssma n C a rte r G la ss d e c la re d o n Se p te mb e r
30, 1913 o n the flo o r o f the Ho use tha t the inte re sts o f the p ub lic wo uld
b e p ro te c te d b y a n a d viso ry c o unc il o f b a nke rs. "The re c a n b e no thing
siniste r a b o ut its tra nsa c tio ns. Me e ting with it a t le a st fo ur time s a ye a r
will b e a b a nke rs’ a d viso ry c o unc il re p re se nting e ve ry re g io na l re se rve
d istric t in the syste m. Ho w c o uld we ha ve e xe rc ise d g re a te r c a utio n in
sa fe g ua rd ing the p ub lic inte re st?
C a rte r G la ss ne ithe r the n no r la te r g a ve a ny sub sta ntia tio n fo r his b e lie f
tha t a g ro up o f b a nke rs wo uld p ro te c t the inte re sts o f the p ub lic , no r is
the re a ny e vid e nc e in the histo ry o f the Unite d Sta te s tha t a ny g ro up o f
b a nke rs ha s e ve r d o ne so . In fa c t, the Fe d e ra l Ad viso ry C o unc il p ro ve d
to b e the "a d ministra tive p ro c e ss" whic h Pa ul Wa rb urg ha d inse rte d
into the Fe d e ra l Re se rve Ac t to p ro vid e just the typ e o f re mo te b ut
unse e n c o ntro l o ve r the Syste m whic h he d e sire d . Whe n he wa s a ske d
b y fina nc ia l re p o rte r C .W. Ba rro n, just a fte r the Fe d e ra l Re se rve Ac t
wa s e na c te d into la w b y C o ng re ss, whe the r he a p p ro ve d o f the b ill a s
it wa s fina lly p a sse d , Wa rb urg re p lie d , "We ll, it ha sn’ t g o t q uite
e ve rything we wa nt, b ut the la c k c a n b e a d juste d la te r b y
a d ministra tive p ro c e sse s." The c o unc il p ro ve d to b e the id e a l ve hic le
fo r Wa rb urg ’ s p urp o se s, a s it ha s func tio ne d fo r se ve nty ye a rs in a lmo st
Se na to r Ro b e rt O we n, c ha irma n o f the Se na te Ba nking a nd C urre nc y
C o mmitte e , ha d sa id , a s q uo te d in The Ne w Yo rk Time s, Aug ust 3, 1913
b e fo re p a ssa g e o f the a c t:
"The Fe d e ra l Re se rve Ac t will furnish the b a nk a nd ind ustria l a nd
c o mme rc ia l inte re sts with the d isc o unt o f q ua lifie d c o mme rc ia l p a p e r
a nd thus sta b ilize o ur c o mme rc ia l a nd ind ustria l life . The Fe d e ra l
Re se rve b a nks a re no t inte nd e d a s mo ne y ma king b a nks, b ut to se rve
a g re a t na tio na l p urp o se o f a c c o mmo d a ting c o mme rc e a nd
b usine ssme n a nd b a nks, sa fe g ua rd a fixe d ma rke t fo r ma nufa c ture d
g o o d s, fo r a g ric ultura l p ro d uc ts a nd fo r la b o r. The re is no re a so n why
the b a nks sho uld b e in c o ntro l o f the Fe d e ra l Re se rve syste m. Sta b ility
will ma ke o ur c o mme rc e e xp a nd he a lthfully in e ve ry d ire c tio n."
40
Se na to r O we n’ s o p timism wa s d o o me d b y the d o mina tio n o f the Je kyll
Isla nd p ro mo te rs o ve r the initia l c o mp o sitio n o f the Fe d e ra l Re se rve
Syste m. No t o nly d id the Mo rg a n-Kuhn, Lo e b a llia nc e p urc ha se the
d o mina nt c o ntro l o f sto c k in the Fe d e ra l Re se rve Ba nk o f Ne w Yo rk,
with a lmo st ha lf o f the sha re s o wne d b y the five Ne w Yo rk b a nks und e r
the ir c o ntro l, First Na tio na l Ba nk, Na tio na l C ity Ba nk, Na tio na l Ba nk o f
C o mme rc e , C ha se Na tio na l Ba nk a nd Ha no ve r Na tio na l Ba nk, b ut
the y a lso p e rsua d e d Pre sid e nt Wo o d ro w Wilso n to a p p o int o ne o f the
Je kyll Isla nd g ro up , Pa ul Wa rb urg , to the Fe d e ra l Re se rve Bo a rd o f
G o ve rno rs.
Ea c h o f the twe lve Fe d e ra l Re se rve Ba nks wa s to e le c t a me mb e r o f
the Fe d e ra l Ad viso ry C o unc il, whic h wo uld me e t with the Fe d e ra l
a b so lute d e mo c ra c y, a s e a c h o f the twe lve "a d viso rs", re p re se nting a
d iffe re nt re g io n o f the Unite d Sta te s, wo uld b e e xp e c te d to sp e a k up
fo r the e c o no mic inte re sts o f his a re a , a nd e a c h o f the twe lve
me mb e rs wo uld ha ve a n e q ua l vo te . The the o ry ma y ha ve b e e n
a d mira b le in its c o nc e p t, b ut the ha rd fa c ts o f e c o no mic life re sulte d in
a q uite d iffe re nt p ic ture . The p re sid e nt o f a sma ll b a nk in St. Lo uis o r
C inc inna ti, sitting in c o nfe re nc e with Pa ul Wa rb urg a nd J.P. Mo rg a n to
"a d vise " the m o n mo ne ta ry p o lic y, wo uld b e unlike ly to c o ntra d ic t two
o f the mo st p o we rful inte rna tio na l fina nc ie rs in the wo rld , a s a sc rib b le d
no te fro m e ithe r o ne o f the m wo uld b e suffic ie nt to p lung e his little
b a nk into b a nkrup tc y. In fa c t, the sma ll b a nks o f the twe lve Fe d e ra l
Re se rve d istric ts e xiste d o nly a s sa te llite s o f the b ig Ne w Yo rk fina nc ia l
inte re sts, a nd we re c o mp le te ly a t the ir me rc y. Ma rtin Ma ye r, in The
Ba nke rs, p o ints o ut tha t "J.P. Mo rg a n ma inta ine d c o rre sp o nd e nt
re la tio nship s with ma ny sma ll b a nks a ll o ve r the c o untry."30 The b ig
Ne w Yo rk b a nks d id no t c o nfine the mse lve s to multi-millio n d o lla r d e a ls
with o the r g re a t fina nc ia l inte re sts, b ut c a rrie d o n ma ny sma lle r a nd
mo re ro utine d e a ling s with the ir "c o rre sp o nd e nt" b a nks a c ro ss the
Unite d Sta te s.
Ap p a re ntly se c ure in the ir b e lie f tha t the ir a c tivitie s wo uld ne ve r b e
e xp o se d to the p ub lic , the Mo rg a n-Kuhn, Lo e b inte re sts b o ld ly
se le c te d the me mb e rs o f the Fe d e ra l Ad viso ry C o unc il fro m the ir
c o rre sp o nd e nt b a nks a nd fro m b a nks in whic h the y o wne d sto c k. No
o ne in the fina nc ia l c o mmunity se e me d to no tic e , a s no thing wa s sa id
a b o ut it d uring se ve nty ye a rs o f the Fe d e ra l Re se rve Syste m’ s
To a vo id a ny susp ic io n tha t Ne w Yo rk inte re sts mig ht c o ntro l the
Fe d e ra l Ad viso ry C o unc il, its first p re sid e nt, e le c te d in 1914 b y the o the r
me mb e rs, wa s J.B. Fo rg a n, p re sid e nt o f the First Na tio na l Ba nk o f
__________________________
30 Ma rtin Ma ye r, The Ba nke rs, We yb rig ht a nd Ta lle y, Ne w Yo rk, 1974, p .
207.
41
C hic a g o . Ra nd Mc Na lly Ba nke rs Dire c to ry fo r 1914 lists the p rinc ip a l
c o rre sp o nd e nts o f the la rg e b a nks. The p rinc ip a l c o rre sp o nd e nt b a nk
o f the Ba ke r-Mo rg a n c o ntro lle d First Na tio na l Ba nk o f Ne w Yo rk is liste d
a s the First Na tio na l Ba nk o f C hic a g o . The p rinc ip a l c o rre sp o nd e nt
liste d b y the First Na tio na l Ba nk o f C hic a g o is the Ba nk o f Ma nha tta n in
Ne w Yo rk, c o ntro lle d b y Ja c o b Sc hiff a nd Pa ul Wa rb urg o f Kuhn, Lo e b
C o mp a ny. Ja me s B. Fo rg a n a lso wa s liste d a s a d ire c to r o f Eq uita b le
Life Insura nc e C o mp a ny, a lso c o ntro lle d b y Mo rg a n. Ho we ve r, the
re la tio nship b e twe e n First Na tio na l Ba nk o f C hic a g o a nd the se Ne w
Yo rk b a nks wa s e ve n c lo se r tha n the se listing s ind ic a te .
O n p a g e 701 o f The G ro wth o f C hic a g o Ba nks b y F. C yril Ja me s, we
find me ntio n o f "the First Na tio na l Ba nk o f C hic a g o ’ s p ro fita b le
c o nne c tio n with the Mo rg a n inte re sts. A g o o d will a mb a ssa d o r wa s
ha stily se nt to Ne w Yo rk to invite G e o rg e F. Ba ke r to b e c o me a d ire c to r
o f the First Na tio na l Ba nk o f C hic a g o ."31 (J.B. Fo rg a n to Re a m, Ja nua ry
7, 1903.) In e ffe c t, Ba ke r a nd Mo rg a n ha d p e rso na lly c ho se n the first
p re sid e nt o f the Fe d e ra l Ad viso ry C o unc il.
And re w’ s, Sc o tla nd , he b e g a n his b a nking c a re e r the re with the Ro ya l
Ba nk o f Sc o tla nd , a c o rre sp o nd e nt o f the Ba nk o f Eng la nd . He c a me
to C a na d a fo r the Ba nk o f British No rth Ame ric a , wo rke d fo r the Ba nk
o f No va Sc o tia , whic h se nt him to C hic a g o in the 1880’ s, a nd b y 1900
he ha d b e c o me p re sid e nt o f the First Na tio na l Ba nk o f C hic a g o . He
se rve d fo r six ye a rs a s p re sid e nt o f the Fe d e ra l Ad viso ry C o unc il, a nd
whe n he le ft the c o unc il, he wa s re p la c e d b y Fra nk O . We tm o re , who
ha d a lso re p la c e d him a s p re sid e nt o f the First Na tio na l Ba nk o f
C hic a g o whe n Fo rg a n wa s na me d c ha irma n o f the b o a rd .
Re p re se nting the Ne w Yo rk Fe d e ra l Re se rve d istric t o n the first Fe d e ra l
Ad viso ry C o unc il wa s J.P. Mo rg a n. He wa s na me d c ha irma n o f the
Exe c utive C o mmitte e . Thus, Pa ul Wa rb urg a nd J.P. Mo rg a n sa t in
c o nfe re nc e a t the me e ting s o f the Fe d e ra l Re se rve Bo a rd d uring the
first fo ur ye a rs o f its o p e ra tio n, surro und e d b y the o the r G o ve rno rs a nd
me mb e rs o f the c o unc il, who c o uld ha rd ly ha ve b e e n una wa re tha t
the ir future s wo uld b e g uid e d b y the se two p o we rful b a nke rs.
Ano the r me mb e r o f the Fe d e ra l Ad viso ry C o unc il in 1914 wa s Le vi L.
Rue , re p re se nting the Phila d e lp hia d istric t. Rue wa s p re sid e nt o f the
Phila d e lp hia Na tio na l Ba nk. Ra nd Mc Na lly Ba nke rs Dire c to ry o f 1914
liste d a s p rinc ip a l c o rre sp o nd e nt o f the First Na tio na l Ba nk o f Ne w Yo rk,
__________________________
31 F. C yril Ja me s, The G ro wth o f C hic a g o Ba nks, Ha rp e r, Ne w Yo rk,
1938.
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