Now, let’s continue with the NPR Christmas tale on the Fed’s 100th anniversary. When we last left off, JP Morgan had rescued America from the panic of 1907. The yarn continues:
Goldstein: One very powerful guy in particular decides this is a problem – Senator Nelson Aldrich, Republican from Rhode Island. Aldrich knows there’s something American can do so that it will no longer have to rely on one guy when these panics can happen. The U.S. can create a central bank.
Smith: And this isn’t a new invention. Countries in Europe already had central banks, and during panics they basically did what J.P. Morgan did; they acted as a lender of last resort for healthy banks. So if you’re a bank and you’re basically sound, you can go to the central bank when depositors are lined up out the door yelling for money.
Goldstein: But just consider that name, central bank. Throughout American history, both of those words, central and bank, have been deeply unpopular. The thought of a bunch of rich bankers in New York City controlling the economy did not inspire confidence.
Smith: Still, Aldrich worried that the only people who could actually help design a central bank were rich bankers in New York City. They knew that was not going to look good. So in 1910, Nelson Aldrich comes up with a plan.
What was Left Out About the Aldrich Plan
After the crash, Theodore Roosevelt and Congress created the National Monetary Commission. The purpose of the commission was to study the banking problem and create a report for Congress.
The committee was packed with J.P. Morgan’s allies.
For example, the Chairman was Senator Nelson Aldrich from Rhode Island. Rhode Island was the location of homes of America’s wealthiest families.
Aldrich was a business associate of J.P. Morgan with extensive holdings in banking. His daughter married John D. Rockefeller Jr. Together they had five sons. John, Nelson Aldrich Rockefeller who would become vice president in 1964, Lawrence, Winthrop and David, the current Honorary Chairman of the Council of Foreign Relations and former Chairman of Chase Manhattan Bank.
After the National Monetary Commission was set up, Senator Aldrich embarked on a two-year tour to Europe, where he consulted in length with the private central bankers in England, France and Germany. The total cost of his trip was $300,000 USD, a considerable amount of money in those days.
Goldstein: We’re standing here at the Hoboken Train Station in Hoboken, New Jersey, and we’re here because this place or someplace right near here was key to Aldrich’s plan. He told some of the most powerful bankers in the country, I want you to gather at the train station. He told these bankers do not travel together, come alone. And most importantly, don’t come here in your top hat and your monocle looking like a million bucks. They came here dressed as duck hunters.
They were told that when they got here, they would find Aldrich’s private rail car attached to the back of a southbound train. The car itself was bound for Georgia because they were going to meet in a private club on an island off the coast of Georgia, a private club, by the way, that J.P. Morgan used to be a member of. The name of that private club, the name of the island? Jekyll Island.
Smith: Apparently the name Jekyll Island didn’t seem quite so sinister back in 1910. The bankers at Jekyll Island knew Americans thought a central bank could become too powerful, too influential in the economy, too much like J.P. Morgan. So they came up with a classic American workaround. The U.S. is not going to have one central bank in New York. It’s going to have lots of little central banks scattered all around the country.
Now, the plan they came up with still had a long way to go. It was shot down the first time in Congress, got tweaked, debated, rewritten, but the basic idea they came up with at Jekyll Island held up, and 100 years ago today, President Woodrow Wilson signed the Federal Reserve Act into law.
What NPR Left Out About the Jekll Island Secret Meeting
Leading the group which met on Jekyll Island was Paul Warburg- the Daddy Warbucks character of Annie.
Warburg had been given a $500,000 annual salary to lobby for the passage of a privately owned central bank in America by the investment firm, Kuhn, Lobe and Co.
Warburg’s partner in this firm was a man named Jacob Schiff, the grandson of the man who shared the green shield house with the Rothschild family in Frankfurt, Germany.
Schiff was in the process of spending $20 million dollars to finance the overthrow of the Czar of Russia.
These three European banking families, the Rothschild’s, the Warburg’s and the Schiff’s, were interconnected in marriage down through the years, just as their American banking counterparts, the Morgan’s, Rockefeller’s and Aldrich’s were.
The Tight Secrecy of the Meeting
Secrecy was so tight that all seven primary participants were cautioned to use only first names, to prevent servants from learning their identities.
Years later one participant, Frank Vanderlip the president of National City Bank of New York, and a representative of the Rockefeller family confirmed the Jekyll Island trip in a February 9th addition of the Saturday Evening Post:
The participants had gone to Jekyll Island to solve one problem, and that problem was, how to bring back a privately owned central bank. But there were other problems that needed to be addressed as well.
Cartel Problems Solved
The market share of the big national banks were shrinking fast. In the first ten years of the century, the number of national banks had doubled to over 20,000.
By 1913, only 29% of all banks were national banks and they held only 57% of all deposits. Senator Aldrich would later admit in a magazine article:
In the mind of the plotting bankers, something had to be done to bring these new banks under their control.
Corporations were so strong that were beginning to finance their expansions out of profits, instead of taking out huge loans from large banks.
In the first ten years of the new century, 70% of corporate spending came from profits.
In other words, American industry was becoming independent of the money changers and that trend had to be stopped
If At First You Don’t Succeed…
After the first bill of the Jekyll Island plan was introduced, the bankers saw that they didn’t have enough congressional votes to have the Aldrich Bill passed. Therefore, the bill was never brought to a vote.
The bankers were not defeated however.
They decided to move toward financing a new effort, placing a man who was sympathetic to the bankers in the highest office of government.
Woodrow Wilson was hand-picked to become the Democratic nominee. Wall Street financier Bernard Baruch was put in charge of Wilson’s education. Historian James Perloff, author of Shadows of Power notes:
Wilson won the election. Now, the stage was set. The international financiers were now poised to install their privately owned central bank once again.
Opponents of the banking monopoly were led by William Jennings Bryan. The opponents of the money changers, ignorant of Baruch’s tutelage, now threw themselves behind the Democratic representative Woodrow Wilson. The Americans and Bryan would soon be betrayed.
During the Democratic campaign, the supporters of Woodrow Wilson “appeared” to oppose the Aldrich Bill. The appearance was the illusion.
As Rep. Louis McFadden, a democrat and chairman of the House of Banking and Currency Committee explained it twenty years after the fact:
Once Wilson was elected- Morgan, Warburg, Baruch and other bankers hatched a new plan, which Warburg named the Federal Reserve System.
The Democratic leadership hailed the new bill known as the Glass-Owen Bill as something radically different from the Aldrich Bill. In fact, the bill was virtually identical in every important detail.
However, the Democrats were so convincing in denial of the similarities of the bill that Warburg (the architect of both bills) had to step in and reassure his paid friends in Congress that the two bills were in fact identical:
Warburg’s admission was for private consumption only.
Publicly the money trust used Aldrich and Frank Vanderlip, the president of Rockefeller’s National City Bank of New York, and one of the Jekyll island seven secret conspirators, to oppose the new federal reserve system.