Creation and establishment of the Federal Reserve System

¶ … Fed

Study in Economics

The objective of this research is to discuss the role and influences of big industrialists such as Rockefeller, Carnegie, and other big bosses of the trust that led to the creation of the Fed and to further discuss their role in the creation of the Fed or the United States Federal Reserve Bank.

The Federal Reserve System online states that the Federal Reserve is "the central bank of the United States. Its 'unique structure' includes:

A federal government agency, the Board of Governors, in Washington, D.C.; and 2) Twelve regional Reserve Banks." (2006)

In the document entitled "The Board of Governors of the Federal Reserve System" also located at the Federal Reserve System online describes the aforementioned 'unique structure' as being one in which: "...seven members of the Board of Governors are appointed by the President and confirmed by the Senate to serve 14-year terms of office. Members may serve only one full term, but a member who has been appointed to complete an unexpired term may be reappointed to a full term. The President designates, and the Senate confirms, two members of the Board to be Chairman and Vice Chairman, for four-year terms." (Federal Reserve System, 2006)

The responsibilities of the board are stated to be as follows:

1) The Board sets reserve requirements and shares the responsibility with the Reserve Banks for discount rate policy. These two functions plus open market operations constitute the monetary policy tools of the Federal Reserve System. (Federal Reserve System, 2006)

2) The Federal Reserve Board has regulatory and supervisory responsibilities over banks that are members of the System, bank holding companies, and international banking facilities in the United States, Edge Act and agreement corporations, foreign activities of member banks, and the U.S. activities of foreign-owned banks. The Board also sets margin requirements, which limit the use of credit for purchasing or carrying securities. (Federal Reserve System, 2006) (Federal Reserve System, 2006)

3) The Board plays a key role in assuring the smooth functioning and continued development of the nation's vast payments system.

4) Development and administration of regulations that implement major federal laws governing consumer credit such as the Truth in Lending Act, the Equal Credit Opportunity Act, the Home Mortgage Disclosure Act and the Truth in Savings Act." (Federal Reserve System, 2006)

The Federal Reserve System was created on December 23, 1913 and was."..created by an act of Congress entitled 'The Federal Reserve Act' 12 USC; Chapter 6-38 Stat. 251 [December 23, 1913] " (The Federal Reserve System, 2006)

I. THE PANIC OF 1907

The Federal Reserve Act was signed into law by President Woodrow Wilson and has been."..described by economist Hans Sennholz as 'probably the most tragic blunder ever committed by Congress." (French, 1994) To support this statement made by Sennholz, French states that: "The Federal Reserve's worst crime is its decimation of the dollar. The buying power of the dollar has shrunk 99% since the Fed's creation in 1913." (1994) French relates that: "The idea of having a central bank in America waxed and waned during the 19th century. But, as Wall Street analyst and historian James Grant wrote, it took the Panic of 1907 to produce 'a critical mass of disillusionment with the financial system as it was.' " (1994)

In the work of French it is related that "...a run..." On the New York company, specifically "Knickerbocker Trust Company" was that which set off the panic. The president of that company had sunk heavy investments into United Copper Company stock, a stock which collapsed resulting in "the 18,000 Knickerbocker depositors" demanding their money be returned to them and the failing of Knickerbocker. Because of this event those who had funds deposited at other trust companies got nervous, panicked and demanded their money from their banks. According to French "Pierpont Morgan came to the rescue in November 1907, orchestrating a deal that saved the trust companies." (1994) "But," states French, "as author Ron Chernow writes in "The House of Morgan": 'Everybody saw that thrilling rescue by corpulent old tycoons were a tenuous prop for the banking system. Senator Nelson W. Aldrich declared: Something has got to be done. We may not always have Pierpont Morgan with us to meet a banking crisis. That "something" began to take shape three years later when J.P. Morgan partner Harry Davison called together other key Wall Street bankers for a "duck-shooting holiday" at the Jekyll Island Club off the Georgia coast." (1994)

II. JEKYLL ISLAND

Eustace Mullins in the work entitled: "The London Connection" relates that: "On the night of November 22, 1910, a group of newspaper reporters stood disconsolately in the railway station at Hoboken, New Jersey. They had just watched a delegation of the nation's leading financiers leave the station on a secret mission. It would be years before they discovered what that mission was, and even then they would not understand that the history of the United States underwent a drastic change after that night in Hoboken." (1982) Mullins relates that the delegation that "had left in a sealed railway car, with blinds drawn, for an undisclosed destination" was inclusive of: (1) Senator Nelson Aldrich, head of the National Monetary Commission in 1908; (2) Shelton (private secretary of Senator Aldrich); (3) A. Piatt Andrew, Assistant Secretary of the Treasury and Special Assistant of the National Monetary Commission; (4) Frank Vanderlip, president of the National City Bank of New York; (5) Henry P. Davison, senior partner of J.P. Morgan; (6) Charles D. Norton, president of the "Morgan-dominated First National Bank of New York; (7) Benjamin Strong, lieutenant of J.P. Morgan; and (8) Paul Warburg, a recent immigrant from Germany who had joined the banking house of Kuhn, Loeb. And Company, New York as a partner earning five hundred thousand dollars a year." (Mullins, 1982)

III. ROCKEFELLER'S ROLE IN THE CREATION OF THE FED

While the personal memoirs of Senator Aldrich states: "In the autumn of 1910, six men went out to shoot ducks, Aldrich, his secretary Shelton, Andrews, Davison, Vanderlip and Warburg. Reporters were waiting at the Brunswick (Georgia) station. Mr. Davison went out and talked to them. The reporters dispersed and the secret of the strange journey was not divulged. Mr. Aldrich asked him how he had managed it and he did not volunteer the information" (Stephenson, 1930; as cited by Mullins, 1984) the work of Mullins states:

The Aldrich group had no interest in hunting. Jekyll Island was chosen for the site of the preparation of the central bank because it offered complete privacy, and because there was not a journalist within fifty miles. Such was the need for secrecy that 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. The Aldrich group journeyed there in private to write the banking and currency legislation which the National Monetary Commission had been ordered to prepare in public." (1984) After having drafted the plan those who had participated in the conference at Jekyll Island "returned to New York to direct a nationwide propaganda campaign in favor of the 'Aldrich Plan'. Three of the leading universities, Princeton, Harvard, and the University of Chicago, were used as the rallying points for this propaganda, and national banks had to contribute to a fund of five million dollars to persuade the American public that this central bank plan should be enacted into law by Congress." (1984)

In order to show the role played by the Rockefeller family in the creation of the Federal Reserve System one must take into account the statement of Nathaniel Wright Stephenson in his biography of Nelson Aldrich in which he states that: "A pamphlet was issued January 16, 1911, 'Suggested Plan for Monetary Legislation', by Hon. Nelson Aldrich, based on Jekyll Island conclusions." 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." (Stephenson, 1930; p. 388; as cited by Mullins, 1984) Additionally considered must be the statement of Congress Charles A. Lindberg, Sr. who wrote: "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." (Lindberg, 1913)

Additionally revealing the role of John D. Rockefeller, Sr., in the creation of the Federal Reserve is the information related by Mullins of the writing of George Sylvester Viereck a book entitled "The Strangest Friendship in History" which states that: "The Schiff, Warburg, Rockefeller and Morgan interests were personally represented in the mysterious conference at Jekyll Island. Frankfurter landed on the Harvard law faculty, thanks to a financial contribution to Harvard by Felix Warburg and Paul Warburg..." (Viereck, 1932; as cited by Mullins, 1984)

In the "Federal Reserve Directors: A Study of Corporate and Banking Influence" as cited by The World Newsstand publication is that chart one "...reveals the linear connection between the Rothschilds and the Bank of England, and the London banking houses which ultimately control the Federal Reserve Banks through their stockholdings of bank stock and their subsidiary firms in New York. The two principal Rothschild representatives in New York, J.P. Morgan Co., and Kuhn, Loeb & Co. were the firms which set up the Jekyll Island Conference at which the Federal Reserve Act was drafted, who directed the subsequent successful campaign to have the plan enacted into law by Congress, and who purchased the controlling amounts of stock in the Federal Reserve Bank of New York in 1914. These firms had their principal officers appointed to the Federal Reserve Board of Governors and the Federal Advisory Council in 1914. In 1914 a few families (blood or business related) owning controlling stock in existing banks (such as in New York City) caused those banks to purchase controlling shares in the Federal Reserve regional banks. Examination of the charts and text in the House Banking Committee Staff Report of August, 1976 and the current stockholders list of the 12 regional Federal Reserve Banks show this same family control." (World Newsstand: Wisdom and Freedom, 1999) The chart below labeled 'Figure 1' is based on the illustration provided for this structuring of the Federal Reserve System at creation.

Federal Reserve Structuring at Creation of the System

N.M. Rothschild, London - Bank of England

J. Henry Schroder

Banking Corp.

Brown, Shipley - Morgan Grenfell - Lazard - |

Company

Brothers |

Alex Brown - Brown Bros. - Lord Mantagu - Morgan et Cie -- Lazard -|

Son

Harriman

Norman

Paris

Bros

N.Y.

Governor, Bank | J.P. Morgan Co -- Lazard -| of England

N.Y. Morgan

Freres

1924-1938

Guaranty Co.

Paris

Morgan Stanley Co. |

Schroder Bank

Hamburg/Berlin

Drexel & Company

Philadelphia

Lord Airlie

M.M. Warburg

Chmn J. Henry Schroder

Hamburg - marr. Virginia F. Ryan grand-daughter of Otto

Kahn of Kuhn Loeb Co.

Lehman Brothers N.Y - Kuhn Loeb Co N.Y.

Lehman Brothers - Mont. Alabama Solomon Loeb

Abraham Kuhn

Lehman-Stern, New Orleans

Jacob Schiff/Theresa Loeb Nina Loeb/Paul Warburg

Mortimer Schiff

James Paul Warburg

Mayer Lehman |

Emmanuel Lehman

Herbert Lehman

Irving Lehman

Arthur Lehman

Phillip Lehman

John Schiff/Edith Brevoort Baker

Present Chairman Lehman Bros

Robert Owen Lehman

Kuhn Loeb - Granddaughter of George F. Baker

Lehman Bros Kuhn Loeb (1980)

Thomas Fortune Ryan

Federal Reserve Bank Of New York |

____National City Bank N.Y.

National Bank of Commerce N.Y -|

Hanover National Bank N.Y.

Chase National Bank N.Y.

Shareholders - National City Bank - N.Y.

James Stillman

Elsie m. William Rockefeller

Isabel m. Percy Rockefeller

William Rockefeller

Shareholders - National Bank of Commerce N.Y.

J.P. Morgan

M.T. Pyne

Equitable Life - J.P. Morgan

Percy Pyne

Mutual Life - J.P. Morgan

J.W. Sterling

H.P. Davison - J.P. Morgan

NY Trust/NY Edison

Mary W. Harriman

Shearman & Sterling

A.D. Jiullard - North British Merc. Insurance Jacob Schiff

Thomas F. Ryan

Paul Warburg

Levi P. Morton - Guaranty Trust - J.P. Morgan

Shareholders - First National Bank of N.Y.

J.P. Morgan

George F. Baker

George F. Baker Jr.

Edith Brevoort Baker

US Congress - 1946-64

Shareholders - Hanover National Bank N.Y.

James Stillman

William Rockefeller

Shareholders - Chase National Bank N.Y.

George F. Baker

SOURCE: THE WORLD NEWSSTAND ONLINE AVAILABLE at http://www.augustreview.com/index.php?module=pagesetter&func=viewpub&tid=4&pid=8