SECRETS OF THE FEDERAL RESERVE
SECRETS OF THE
FEDERAL RESERVE
The London Connection By Eustace Mullins
HTTP://ELLHN.E-E-E.GR
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
who g e ne ro usly g a ve o f the ir va st kno wle d g e to a yo ung write r to
g uid e him in a fie ld whic h he c o uld no t ha ve ma na g e d a lo ne .
AC KNO WLEDG EMENTS
I wish to tha nk my fo rme r fe llo w me mb e rs o f the sta ff o f the Lib ra ry o f C o ng re ss who se ve ry kind a ssista nc e , c o o p e ra tio n a nd sug g e stio ns ma d e the e a rly ve rsio ns o f this b o o k p o ssib le . I a lso wish to tha nk the sta ffs o f the Ne wb e rry Lib ra ry, C hic a g o , the Ne w Yo rk
C ity Pub lic Lib ra ry, the Ald e rma n Lib ra ry o f the Unive rsity o f Virg inia ,
a nd the Mc C o rmic k Lib ra ry o f Wa shing to n a nd Le e Unive rsity, Le xing to n, Virg inia , fo r the ir inva lua b le a ssista nc e in the c o mp le tio n o f thirty ye a rs o f furthe r re se a rc h fo r this d e finitive wo rk o n the Fe d e ra l Re se rve Syste m.
Ab o ut the Autho r Eusta c e Mullins is a ve te ra n o f the Unite d Sta te s Air Fo rc e , with thirty-
e ig ht mo nths o f a c tive se rvic e d uring Wo rld Wa r II. A na tive Virg inia n, he wa s e d uc a te d a t Wa shing to n a nd Le e Unive rsity, Ne w Yo rk Unive rsity, O hio Unive rsity, the Unive rsity o f No rth Da ko ta , the Esc ue la s d e s Be lla s Arte s, Sa n Mig ue l d e Alle nd e , Me xic o , a nd the Institute o f C o nte mp o ra ry Arts, Wa shing to n, D.C .
The o rig ina l b o o k, p ub lishe d und e r the title Mullins O n The Fe d e ra l Re se rve , wa s c o mmissio ne d b y the p o e t Ezra Po und in 1948. Ezra Po und wa s a p o litic a l p riso ne r fo r thirte e n a nd a ha lf ye a rs a t St. Eliza b e th’ s Ho sp ita l, Wa shing to n, D.C . (a Fe d e ra l institutio n fo r the
insa ne ). His re le a se wa s a c c o mp lishe d la rg e ly thro ug h the e ffo rts o f Mr. Mullins.
The re se a rc h a t the Lib ra ry o f C o ng re ss wa s d ire c te d a nd re vie we d
d a ily b y G e o rg e Stimp so n, fo und e r o f the Na tio na l Pre ss C lub in Wa shing to n, who m The Ne w Yo rk Time s o n Se p te mb e r 28, 1952
c a lle d , "A hig hly re g a rd e d re fe re nc e so urc e in the c a p ito l.
G o ve rnme nt o ffic ia ls, C o ng re ssme n, a nd re p o rte rs we nt to him fo r info rm a tio n o n a ny sub je c t."
Pub lishe d in 1952 b y Ka sp e r a nd Ho rto n, Ne w Yo rk, the o rig ina l b o o k wa s the first na tio na lly-c irc ula te d re ve la tio n o f the se c re t me e ting s o f the inte rna tio na l b a nke rs a t Je kyll Isla nd , G e o rg ia , 1907-1910, a t whic h p la c e the d ra ft o f the Fe d e ra l Re se rve Ac t o f 1913 wa s writte n.
During the inte rve ning ye a rs, the a utho r c o ntinue d to g a the r ne w
a nd mo re sta rtling info rma tio n a b o ut the b a c kg ro und s o f the p e o p le who d ire c t the Fe d e ra l Re se rve p o lic ie s. Ne w info rma tio n
g a the re d o ve r the ye a rs fro m hund re d s o f ne wsp a p e rs, p e rio d ic a ls, g a the re d o ve r the ye a rs fro m hund re d s o f ne wsp a p e rs, p e rio d ic a ls,
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 Nine The A g ric ultural De p re ssio n 114
C ha pte r Te n The Mo ne y C re ato rs 119
C ha pte r Ele ve n Lo rd Mo ntag u No rm an 131
C ha pte r Twe lve The G re at De p re ssio n 143
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
Re se rve Ba nk o f Bo sto n in its se ve nth p rinting , 1982.
Fo re wo rd In 1949, while I wa s visiting Ezra Po und who wa s a p o litic a l p riso ne r
a t St. Eliza b e th’ s Ho sp ita l, Wa shing to n, D.C . (a Fe d e ra l institutio n fo r the insa ne ), Dr. Po und a ske d me if I ha d e ve r he a rd o f the Fe d e ra l Re se rve Syste m. I re p lie d tha t I ha d no t, a s o f the a g e o f 25. He the n sho we d me a te n d o lla r b ill ma rke d "Fe d e ra l Re se rve No te " a nd
a ske d me if I wo uld d o so me re se a rc h a t the Lib ra ry o f C o ng re ss o n the Fe d e ra l Re se rve Syste m whic h ha d issue d this b ill. Po und wa s una b le to g o to the Lib ra ry himse lf, a s he wa s b e ing he ld witho ut tria l a s a p o litic a l p riso ne r b y the Unite d Sta te s g o ve rnme nt. Afte r he wa s d e nie d b ro a d c a sting time in the U.S., Dr. Po und b ro a d c a st fro m Ita ly in a n e ffo rt to p e rsua d e p e o p le o f the Unite d Sta te s no t to
e nte r Wo rld Wa r II. Fra nklin D. Ro o se ve lt ha d p e rso na lly o rd e re d Po und ’ s ind ic tme nt, sp urre d b y the d e ma nd s o f his thre e p e rso na l
a ssista nts, Ha rry De xte r White , La uc hlin C urrie , a nd Alg e r Hiss, a ll o f who m we re sub se q ue ntly id e ntifie d a s b e ing c o nne c te d with
C o mmunist e sp io na g e .
I ha d no inte re st in mo ne y o r b a nking a s a sub je c t, b e c a use I wa s wo rking o n a no ve l. Po und o ffe re d to sup p le me nt my inc o me b y te n d o lla rs a we e k fo r a fe w we e ks. My initia l re se a rc h re ve a le d
e vid e nc e o f a n inte rna tio na l b a nking g ro up whic h ha d se c re tly p la nne d the writing o f the Fe d e ra l Re se rve Ac t a nd C o ng re ss’
e na c tme nt o f the p la n into la w. The se find ing s c o nfirme d wha t Po und ha d lo ng susp e c te d . He sa id , "Yo u must wo rk o n it a s a
d e te c tive sto ry." I wa s fo rtuna te in ha ving my re se a rc h a t the Lib ra ry o f C o ng re ss d ire c te d b y a p ro mine nt sc ho la r, G e o rg e Stimp so n, fo und e r o f the Na tio na l Pre ss C lub , who wa s d e sc rib e d b y The Ne w Yo rk Time s o f Se p te mb e r 28, 1952: "Be lo ve d b y Wa shing to n ne wsp a p e rme n a s ‘ o ur wa lking Lib ra ry o f C o ng re ss’ , Mr. Stimp so n wa s a hig hly re g a rd e d re fe re nc e so urc e in the C a p ito l. G o ve rnme nt o ffic ia ls, C o ng re ssme n a nd re p o rte rs we nt to him fo r info rma tio n o n
a ny sub je c t."
I d id re se a rc h fo ur ho urs e a c h d a y a t the Lib ra ry o f C o ng re ss, a nd we nt to St. Eliza b e th’ s Ho sp ita l in the a fte rno o n. Po und a nd I we nt o ve r the p re vio us d a y’ s no te s. I the n ha d d inne r with G e o rg e Stimp so n a t Sc ho ll’ s C a fe te ria while he we nt o ve r my ma te ria l, a nd I the n we nt b a c k to my ro o m to typ e up the c o rre c te d no te s. Bo th Stimp so n a nd Po und ma d e ma ny sug g e stio ns in g uid ing me in a fie ld in whic h I ha d no p re vio us e xp e rie nc e . Whe n Po und ’ s re so urc e s ra n lo w, I a p p lie d to the G ug g e nhe im Fo und a tio n, Hunting to n Ha rtfo rd Fo und a tio n, a nd o the r fo und a tio ns to I d id re se a rc h fo ur ho urs e a c h d a y a t the Lib ra ry o f C o ng re ss, a nd we nt to St. Eliza b e th’ s Ho sp ita l in the a fte rno o n. Po und a nd I we nt o ve r the p re vio us d a y’ s no te s. I the n ha d d inne r with G e o rg e Stimp so n a t Sc ho ll’ s C a fe te ria while he we nt o ve r my ma te ria l, a nd I the n we nt b a c k to my ro o m to typ e up the c o rre c te d no te s. Bo th Stimp so n a nd Po und ma d e ma ny sug g e stio ns in g uid ing me in a fie ld in whic h I ha d no p re vio us e xp e rie nc e . Whe n Po und ’ s re so urc e s ra n lo w, I a p p lie d to the G ug g e nhe im Fo und a tio n, Hunting to n Ha rtfo rd Fo und a tio n, a nd o the r fo und a tio ns to
b ut the nine te e nth, De vin G a rrity, p re sid e nt o f De vin Ad a ir Pub lishing C o mp a ny, g a ve me so me frie nd ly a d vic e in his o ffic e . "I like yo ur b o o k, b ut we c a n’ t p rint it," he to ld me . "Ne ithe r c a n
a nyb o d y e lse in Ne w Yo rk. Why d o n’ t yo u b ring in a p ro sp e c tus fo r yo ur no ve l, a nd I think we c a n g ive yo u a n a d va nc e . Yo u ma y a s we ll fo rg e t a b o ut g e tting the Fe d e ra l Re se rve b o o k p ub lishe d . I
d o ub t if it c o uld e ve r b e p rinte d ." This wa s d e va sta ting ne ws, c o ming a fte r two ye a rs o f inte nsive wo rk.
I re p o rte d b a c k to Po und , a nd we trie d to find a p ub lishe r in o the r p a rts o f the c o untry. Afte r two ye a rs o f fruitle ss sub missio ns, the b o o k wa s p ub lishe d in a sma ll e d itio n in 1952 b y two o f Po und ’ s d isc ip le s, Jo hn Ka sp e r a nd Da vid Ho rto n, using the ir p riva te fund s, und e r the title Mullins o n the Fe d e ra l Re se rve . In 1954, a se c o nd e d itio n, with una utho rize d a lte ra tio ns, wa s p ub lishe d in Ne w Je rse y, a s The Fe d e ra l Re se rve C o nsp ira c y. In 1955, G uid o Ro e d e r b ro ug ht o ut a
G e rma n e d itio n in O b e ra mme rg a u, G e rma ny. The b o o k wa s se ize d
a nd the e ntire e d itio n o f 10,000 c o p ie s b urne d b y g o ve rnme nt
a g e nts le d b y Dr. O tto Jo hn. The b urning o f the b o o k wa s up he ld Ap ril 21, 1961 b y jud g e Isra e l
Ka tz o f the Ba va ria n Sup re me C o urt. The U.S. G o ve rnme nt re fuse d to inte rve ne , b e c a use U.S. Hig h C o mmissio ne r to G e rma ny, Ja me s
B. C o na nt (p re sid e nt o f Ha rva rd Unive rsity 1933 to 1953), ha d
a p p ro ve d the initia l b o o k b urning o rd e r. This is the o nly b o o k whic h
ha s b e e n b urne d in G e rma ny sinc e Wo rld Wa r II. In 1968 a p ira te d
e d itio n o f this b o o k a p p e a re d in C a lifo rnia . Bo th the FBI a nd the U.S. Po sta l insp e c to rs re fuse d to a c t, d e sp ite nume ro us c o mp la ints fro m me d uring the ne xt d e c a d e . In 1980 a ne w G e rma n e d itio n
a p p e a re d . Be c a use the U.S. G o ve rnme nt a p p a re ntly no lo ng e r
d ic ta te d the inte rna l a ffa irs o f G e rma ny, the id e ntic a l b o o k whic h
ha d b e e n b urne d in 1955 no w c irc ula te s in G e rma ny witho ut inte rfe re nc e .
I ha d c o lla b o ra te d o n se ve ra l b o o ks with Mr. H.L. Hunt a nd he sug g e ste d tha t I sho uld c o ntinue my lo ng -d e la ye d re se a rc h o n the Fe d e ra l Re se rve a nd b ring o ut a mo re d e finitive ve rsio n o f this b o o k.
I ha d just sig ne d a c o ntra c t to write the a utho rize d b io g ra p hy o f
Ezra Po und , a nd the Fe d e ra l Re se rve b o o k ha d to b e p o stp o ne d . Mr. Hunt p a sse d a wa y b e fo re I c o uld g e t b a c k to my re se a rc h, a nd o nc e a g a in I fa c e d the p ro b le m o f fina nc ing re se a rc h fo r the b o o k.
My o rig ina l b o o k ha d tra c e d a nd na me d the sha d o wy fig ure s in the Unite d Sta te s who p la nne d the Fe d e ra l Re se rve Ac t. I no w
d isc o ve re d tha t the me n who m I e xp o se d in 1952 a s the sha d o wy fig ure s b e hind the o p e ra tio n o f the Fe d e ra l Re se rve Syste m we re the mse lve s sha d o ws, the Ame ric a n fro nts fo r the unkno wn fig ure s who b e c a me kno wn a s the "Lo nd o n C o nne c tio n." I fo und tha t no twithsta nd ing o ur suc c e sse s in the Wa rs o f Ind e p e nd e nc e o f 1812
a g a inst Eng la nd , we re ma ine d a n e c o no mic a nd fina nc ia l c o lo ny o f G re a t Brita in. Fo r the first time , we lo c a te d the o rig ina l sto c kho ld e rs o f the Fe d e ra l Re se rve Ba nks a nd tra c e d the ir p a re nt
c o mp a nie s to the Lo nd o n C o nne c tio n. This re se a rc h is sub sta ntia te d b y c ita tio ns a nd d o c ume nta tio n fro m
hund re d s o f ne wsp a p e rs, p e rio d ic a ls a nd b o o ks a nd c ha rts sho wing
b lo o d , ma rria g e , a nd b usine ss re la tio nship s. Mo re tha n a tho usa nd issue s o f The Ne w Yo rk Time s o n mic ro film ha ve b e e n c he c ke d no t o nly fo r o rig ina l info rma tio n, b ut ve rific a tio n o f sta te me nts fro m o the r so urc e s.
It is a truism o f the writing p ro fe ssio n tha t a write r ha s o nly o ne b o o k within him. This se e ms a p p lic a b le in my c a se , b e c a use I a m no w in the fifth d e c a d e o f c o ntinuo us writing o n a sing le sub je c t, the insid e sto ry o f the Fe d e ra l Re se rve Syste m. This b o o k wa s fro m its inc e p tio n
c o mmissio ne d a nd g uid e d b y Ezra Po und . Fo ur o f his p ro té g é s ha ve p re vio usly b e e n a wa rd e d the No b e l Prize fo r Lite ra ture , Willia m Butle r Ye a ts fo r his la te r p o e try, Ja me s Jo yc e fo r "Ulysse s", Erne st He ming wa y fo r "The Sun Also Rise s", a nd T.S. Ellio t fo r "The Wa ste La nd ". Po und p la ye d a ma jo r ro le in the insp ira tio n a nd in the
e d iting o f the se wo rks--whic h le a d s us to b e lie ve tha t this p re se nt wo rk, a lso insp ire d b y Po und , re p re se nts a n o ng o ing lite ra ry tra d itio n.
Altho ug h this b o o k in its inc e p tio n wa s e xp e c te d to b e a to rtuo us wo rk o n e c o no mic a nd mo ne ta ry te c hniq ue s, it so o n d e ve lo p e d into a sto ry o f suc h unive rsa l a nd d ra ma tic a p p e a l tha t fro m the o utse t, Ezra Po und urg e d me to write it a s a d e te c tive sto ry, a g e nre whic h wa s inve nte d b y my fe llo w Virg inia n, Ed g a r Alla n Po e . I
b e lie ve tha t the c o ntinuo us c irc ula tio n o f this b o o k d uring the p a st fo rty ye a rs ha s no t o nly e xo ne ra te d Ezra Po und fo r his muc h
c o nd e mne d p o litic a l a nd mo ne ta ry sta te me nts, b ut a lso tha t it ha s c o nd e mne d p o litic a l a nd mo ne ta ry sta te me nts, b ut a lso tha t it ha s
ha lf ye a rs witho ut tria l, a s a p o litic a l p riso ne r he ld in a n insa ne
a sylum a la KG B. His e a rlie st vind ic a tio n c a me whe n the
g o ve rnme nt a g e nts who re p re se nte d the c o nsp ira to rs re fuse d to
a llo w him to te stify in his o wn d e fe nse ; the se c o nd vind ic a tio n c a me in 1958 whe n the se sa me a g e nts d ro p p e d a ll c ha rg e s a g a inst him ,
a nd he wa lke d o ut o f St. Eliza b e th’ s Ho sp ita l, a fre e ma n o nc e mo re . His third a nd fina l vind ic a tio n is this wo rk, whic h d o c ume nts
e ve ry a sp e c t o f his e xp o sure o f the ruthle ss inte rna tio na l fina nc ie rs to who m Ezra Po und b e c a me b ut o ne mo re vic tim , d o o m e d to se rve ye a rs a s the Ma n in the Iro n Ma sk, b e c a use he ha d d a re d to
a le rt his fe llo w-Ame ric a ns to the ir furtive a c ts o f tre a so n a g a inst a ll p e o p le o f the Unite d Sta te s.
In my le c ture s thro ug ho ut this na tio n, a nd in my a p p e a ra nc e s o n ma ny ra d io a nd te le visio n p ro g ra ms, I ha ve so und e d the to xin tha t the Fe d e ra l Re se rve Syste m is no t Fe d e ra l; it ha s no re se rve s; a nd it is no t a syste m a t a ll, b ut ra the r, a c rimina l synd ic a te . Fro m No ve mb e r, 1910, whe n the c o nsp ira to rs me t o n Je kyll Isla nd ,
G e o rg ia , to the p re se nt time , the m a c hina tio ns o f the Fe d e ra l Re se rve b a nke rs ha ve b e e n shro ud e d in se c re c y. To d a y, tha t se c re c y ha s c o st the Ame ric a n p e o p le a thre e trillio n d o lla r d e b t, with a nnua l inte re st p a yme nts to the se b a nke rs a mo unting to so me thre e hund re d b illio n d o lla rs p e r ye a r, sums whic h sta g g e r the ima g ina tio n, a nd whic h in the mse lve s a re ultima te ly unp a ya b le . O ffic ia ls o f the Fe d e ra l Re se rve Syste m ro utine ly issue re mo nstra nc e s to the p ub lic , muc h a s the Hind u fa kir p ip e s a n insiste nt tune to the
d a ze d c o b ra whic h swa ys its he a d b e fo re him, no t to re so lve the situa tio n, b ut to p re ve nt it fro m striking him. Suc h wa s the so o thing le tte r writte n b y Do na ld J. Winn, Assista nt to the Bo a rd o f G o ve rno rs in re sp o nse to a n inq uiry b y a C o ng re ssm a n, the Ho no ra b le No rma n
D. Shumwa y, o n Ma rc h 10, 1983. Mr. Winn sta te s tha t "The Fe d e ra l Re se rve Syste m wa s e sta b lishe d b y a n a c t o f C o ng re ss in 1913 a nd is no t a ‘ p riva te c o rp o ra tio n’ ." O n the ne xt p a g e , Mr. Winn
c o ntinue s, "The sto c k o f the Fe d e ra l Re se rve Ba nks is he ld e ntire ly b y
c o mme rc ia l b a nks tha t a re me mb e rs o f the Fe d e ra l Re se rve Syste m." He o ffe rs no e xp la na tio n a s to why the g o ve rnme nt ha s ne ve r o wne d a sing le sha re o f sto c k in a ny Fe d e ra l Re se rve Ba nk, o r why the Fe d e ra l Re se rve Syste m is no t a "p riva te c o rp o ra tio n" whe n
a ll o f its sto c k is o wne d b y "p riva te c o rp o ra tio ns".
Ame ric a n histo ry in the twe ntie th c e ntury ha s re c o rd e d the
a ma zing a c hie ve me nts o f the Fe d e ra l Re se rve b a nke rs. First, the o utb re a k o f Wo rld Wa r I, whic h wa s ma d e p o ssib le b y the fund s
a va ila b le fro m the ne w c e ntra l b a nk o f the Unite d Sta te s. Se c o nd , the Ag ric ultura l De p re ssio n o f 1920. Third , the Bla c k Frid a y C ra sh o n Wa ll Stre e t o f O c to b e r, 1929 a nd the e nsuing G re a t De p re ssio n. Fo urth, Wo rld Wa r II. Fifth, the c o nve rsio n o f the a sse ts o f the Unite d Sta te s a nd its c itize ns fro m re a l p ro p e rty to p a p e r a sse ts fro m 1945 to the p re se nt, tra nsfo rming a vic to rio us Ame ric a a nd fo re mo st wo rld p o we r in 1945 to the wo rld ’ s la rg e st d e b to r na tio n in 1990. To d a y, this na tio n lie s in e c o no mic ruins, d e va sta te d a nd d e stitute , in muc h the sa me d ire stra its in whic h G e rma ny a nd Ja p a n fo und the mse lve s in 1945. Will Ame ric a ns a c t to re b uild o ur na tio n, a s
G e rma ny a nd Ja p a n ha ve d o ne whe n the y fa c e d the id e ntic a l
c o nd itio ns whic h we no w fa c e --o r will we c o ntinue to b e e nsla ve d
b y the Ba b ylo nia n d e b t mo ne y syste m whic h wa s se t up b y the Fe d e ra l Re se rve Ac t in 1913 to c o mp le te o ur to ta l d e struc tio n? This is the o nly q ue stio n whic h we ha ve to a nswe r, a nd we d o no t ha ve muc h time le ft to a nswe r it.
Be c a use o f the d e p th a nd the imp o rta nc e o f the info rma tio n whic h
I ha d d e ve lo p e d a t the Lib ra ry o f C o ng re ss und e r the tute la g e o f Ezra Po und , this wo rk b e c a me the ha p p y hunting g ro und fo r ma ny o the r wo uld -b e histo ria ns, who we re una b le to re se a rc h this ma te ria l fo r the mse lve s. O ve r the p a st fo ur d e c a d e s, I ha ve
b e c o me a c c usto me d to se e ing this ma te ria l a p p e a r in ma ny o the r
b o o ks, inva ria b ly a ttrib ute d to o the r write rs, with my na me ne ve r me ntio ne d . To a d d insult to injury, no t o nly my ma te ria l, b ut e ve n my title ha s b e e n a p p ro p ria te d , in a ma ssive , if o b tuse , wo rk c a lle d "Se c re ts o f the Te mp le --the Fe d e ra l Re se rve ". This he a vily a d ve rtise d
b o o k re c e ive d re vie ws ra ng ing fro m inc re d ulo us to hila rio us. Fo rb e s Ma g a zine a d vise d its re a d e rs to re a d the ir re vie w a nd sa ve the ir mo ne y, p o inting o ut tha t "a re a d e r will d isc o ve r no se c re ts" a nd tha t "This is o ne o f tho se b o o ks who se fa nfa re s fa r e xc e e d the ir me rit." This wa s no t a c c id e nta l, a s this o ve rb lo wn white wa sh o f the Fe d e ra l Re se rve b a nke rs wa s p ub lishe d b y the mo st fa mo us no nb o o k p ub lishe r in the wo rld .
Afte r my initia l sho c k a t d isc o ve ring tha t the mo st influe ntia l lite ra ry p e rso na lity o f the twe ntie th c e ntury, Ezra Po und , wa s imp riso ne d in "the He llho le " in Wa shing to n, I imme d ia te ly wro te fo r a ssista nc e to a Wa ll Stre e t fina nc ie r a t who se e sta te I ha d fre q ue ntly b e e n a g ue st.
I re mind e d him tha t a s a p a tro n o f the a rts, he c o uld no t a ffo rd to I re mind e d him tha t a s a p a tro n o f the a rts, he c o uld no t a ffo rd to
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.
(AUTHO R’ S NO TE: Dr. Po und wro te this intro d uc tio n fo r the e a rlie st ve rsio n o f this b o o k, p ub lishe d b y Ka sp e r a nd Ho rto n, Ne w Yo rk, 1952. Be c a use he wa s b e ing he ld a s a p o litic a l p riso ne r witho ut tria l
b y the Fe d e ra l G o ve rnme nt, he c o uld no t a ffo rd to a llo w his na me to a p p e a r o n the b o o k b e c a use o f a d d itio na l re p risa ls a g a inst him. Ne ithe r c o uld he a llo w the b o o k to b e d e d ic a te d to him , a ltho ug h
he ha d c o mmissio ne d its writing . The a utho r is g ra tifie d to b e a b le to re me d y the se ne c e ssa ry o missio ns, thirty-thre e ye a rs a fte r the
e ve nts.)
JEFFERSO N’ S O PINIO N O N THE
C O NSTITUTIO NALITY O F THE BANK Fe b rua ry 15, 1791 (The Writing s o f Tho ma s Je ffe rso n, e d . b y H. E. Be rg h, Vo l. III, p . 145
ff.) The b ill fo r e sta b lishing a na tio na l b a nk, in 1791, und e rta ke s, a mo ng
o the r thing s,--
1. To fo rm the sub sc rib e rs into a c o rp o ra tio n.
2. To e na b le the m , in the ir c o rp o ra te c a p a c itie s, to re c e ive g ra nts o f la nd s; a nd , so fa r, is a g a inst the la ws o f mo rtma in.
3. To ma ke a lie n sub sc rib e rs c a p a b le o f ho ld ing la nd s; a nd so fa r is
a g a inst the la ws o f a lie na g e .
4. To tra nsmit the se la nd s, o n the d e a th o f a p ro p rie to r, to a c e rta in line o f suc c e sso rs; a nd so fa r, c ha ng e s the c o urse o f d e sc e nts.
5. To p ut the la nd s o ut o f the re a c h o f fo rfe iture , o r e sc he a t; a nd so fa r, is
a g a inst the la ws o f fo rfe iture a nd e sc he a t.
6. To tra nsm it p e rso na l c ha tte ls to suc c e sso rs, in a c e rta in line ; a nd so fa r, is
a g a inst the la ws o f d istrib utio n.
7. To g ive the m the so le a nd e xc lusive rig ht o f b a nking , und e r the na tio na l
a utho rity; a nd , so fa r, is a g a inst the la ws o f mo no p o ly.
8. To c o m m unic a te to the m a p o we r to m a ke la ws, p a ra m o unt to the la ws o f the sta te s; fo r so the y must b e c o nstrue d , to p ro te c t the institutio n fro m the c o ntro l o f the sta te le g isla ture s; a nd so p ro b a b ly the y will b e
c o nstrue d .
I c o nsid e r the fo und a tio n o f the C o nstitutio n a s la id o n this g ro und --tha t a ll p o we rs no t d e le g a te d to the Unite d Sta te s, b y the C o nstitutio n, no r p ro hib ite d b y it to the sta te s, a re re se rve d to the sta te s, o r to the p e o p le (12th a me nd .). To ta ke a sing le ste p b e yo nd the b o und a rie s thus sp e c ia lly
d ra wn a ro und the p o we rs o f C o ng re ss, is to ta ke p o sse ssio n o f a
b o und le ss fie ld o f p o we r, no lo ng e r susc e p tib le o f a ny d e finitio n. The inc o rp o ra tio n o f a b a nk, a nd the p o we rs a ssume d b y this b ill, ha ve
no t, in my o p inio n, b e e n d e le g a te d to the Unite d Sta te s b y the
C o nstitutio n.
C HAPTER O NE Je kyll Isla nd
"The ma tte r o f a unifo rm d isc o unt ra te wa s d isc usse d a nd se ttle d a t Je kyll Isla nd ."--Pa ul M. Wa rb urg 1
O n the nig ht o f No ve mb e r 22, 1910, a g ro up o f ne wsp a p e r re p o rte rs sto o d d isc o nso la te ly in the ra ilwa y sta tio n a t Ho b o ke n, Ne w Je rse y. The y ha d just wa tc he d a d e le g a tio n o f the na tio n’ s le a d ing fina nc ie rs le a ve the sta tio n o n a se c re t missio n. It wo uld b e ye a rs
b e fo re the y d isc o ve re d wha t tha t missio n wa s, a nd e ve n the n the y wo uld no t und e rsta nd tha t the histo ry o f the Unite d Sta te s und e rwe nt a d ra stic c ha ng e a fte r tha t nig ht in Ho b o ke n.
The d e le g a tio n ha d le ft in a se a le d ra ilwa y c a r, with b lind s d ra wn, fo r a n und isc lo se d d e stina tio n. The y we re le d b y Se na to r Ne lso n Ald ric h, he a d o f the Na tio na l Mo ne ta ry C o mmissio n. Pre sid e nt The o d o re Ro o se ve lt ha d sig ne d into la w the b ill c re a ting the Na tio na l Mo ne ta ry C o mmissio n in 1908, a fte r the tra g ic Pa nic o f 1907 ha d re sulte d in a p ub lic o utc ry tha t the na tio n’ s mo ne ta ry syste m b e sta b ilize d . Ald ric h ha d le d the me mb e rs o f the
C o mmissio n o n a two -ye a r to ur o f Euro p e , sp e nd ing so me thre e hund re d tho usa nd d o lla rs o f p ub lic mo ne y. He ha d no t ye t ma d e a re p o rt o n the re sults o f this trip , no r ha d he o ffe re d a ny p la n fo r
b a nking re fo rm. Ac c o mp a nying Se na to r Ald ric h a t the Ho b o ke n sta tio n we re his
p riva te se c re ta ry, She lto n; A. Pia tt And re w, Assista nt Se c re ta ry o f the Tre a sury, a nd Sp e c ia l Assista nt o f the Na tio na l Mo ne ta ry
C o mmissio n; Fra nk Va nd e rlip , p re sid e nt o f the Na tio na l C ity Ba nk o f Ne w Yo rk, He nry P. Da viso n, se nio r p a rtne r o f J.P. Mo rg a n
C o mp a ny, a nd g e ne ra lly re g a rd e d a s Mo rg a n’ s p e rso na l e missa ry;
a nd C ha rle s D. No rto n, p re sid e nt o f the Mo rg a n-d o mina te d First Na tio na l Ba nk o f Ne w Yo rk. Jo ining the g ro up just b e fo re the tra in le ft the sta tio n we re Be nja min Stro ng , a lso kno wn a s a lie ute na nt o f J.P. Mo rg a n; a nd Pa ul Wa rb urg , a re c e nt immig ra nt fro m G e rma ny who ha d jo ine d the b a nking ho use o f Kuhn, Lo e b
1 Pro f. Na tha nie l Wrig ht Ste p he nso n, Pa ul Wa rb urg ’ s Me mo ra nd um, Ne lso n Ald ric h A Le a d e r in Ame ric a n Po litic s, Sc rib ne rs, N.Y. 1930 1 Pro f. Na tha nie l Wrig ht Ste p he nso n, Pa ul Wa rb urg ’ s Me mo ra nd um, Ne lso n Ald ric h A Le a d e r in Ame ric a n Po litic s, Sc rib ne rs, N.Y. 1930
Six ye a rs la te r, a fina nc ia l write r na me d Be rtie C ha rle s Fo rb e s (who la te r fo und e d the Fo rb e s Ma g a zine ; the p re se nt e d ito r, Ma lc o m Fo rb e s, is his so n), wro te :
"Pic ture a p a rty o f the na tio n’ s g re a te st b a nke rs ste a ling o ut o f Ne w Yo rk o n a p riva te ra ilro a d c a r und e r c o ve r o f
d a rkne ss, ste a lthily hie ing hund re d o f mile s So uth, e mb a rking o n a myste rio usla unc h, sne a king o nto a n isla nd d e se rte d b y
a ll b ut a fe w se rva nts, living the re a full we e k und e r suc h rig id se c re c y tha t the na me s o f no t o ne o f the m wa s o nc e me ntio ne d le st the se rva nts le a rn the id e ntity a nd d isc lo se to the wo rld this stra ng e st, mo st se c re t e xp e d itio n in the histo ry o f Ame ric a n fina nc e . I a m no t ro ma nc ing ; I a m g iving to the wo rld , fo r the first time , the re a l sto ry o f ho w the fa mo us Ald ric h c urre nc y re p o rt, the fo und a tio n o f o ur ne w c urre nc y syste m, wa s writte n . . . . The utmo st se c re c y wa s e njo ine d up o n a ll. The p ub lic must no t g le a n a hint o f wha t wa s to b e
d o ne . Se na to r Ald ric h no tifie d e a c h o ne to g o q uie tly into a p riva te c a r o f whic h the ra ilro a d ha d re c e ive d o rd e rs to d ra w up o n a n unfre q ue nte d p la tfo rm. O ff the p a rty se t. Ne w Yo rk’ s ub iq uito us re p o rte rs ha d b e e n fo ile d . . . Ne lso n (Ald ric h) ha d c o nfid e d to He nry, Fra nk, Pa ul a nd Pia tt tha t he wa s to ke e p the m lo c ke d up a t Je kyll Isla nd , o ut o f the re st o f the wo rld , until the y ha d e vo lve d a nd c o mp ile d a sc ie ntific
c urre nc y syste m fo r the Unite d Sta te s, the re a l b irth o f the p re se nt Fe d e ra l Re se rve Syste m , the p la n d o ne o n Je kyll Isla nd in the c o nfe re nc e with Pa ul, Fra nk a nd He nry . . . . Wa rb urg is the link tha t b ind s the Ald ric h syste m a nd the p re se nt syste m to g e the r. He mo re tha n a ny o ne ma n ha s ma d e the syste m p o ssib le a s a wo rking re a lity."2
The o ffic ia l b io g ra p hy o f Se na to r Ne lso n Ald ric h sta te s: "In the a utumn o f 1910, six me n we nt o ut to sho o t d uc ks,
Ald ric h, his se c re ta ry She lto n, And re ws, Da viso n, Va nd e rlip
a nd Wa rb urg . Re p o rte rs we re wa iting a t the Brunswic k (G e o rg ia ) sta tio n. Mr. Da viso n we nt o ut a nd ta lke d to the m . The re p o rte rs d isp e rse d a nd the se c re t o f the stra ng e jo urne y a nd Wa rb urg . Re p o rte rs we re wa iting a t the Brunswic k (G e o rg ia ) sta tio n. Mr. Da viso n we nt o ut a nd ta lke d to the m . The re p o rte rs d isp e rse d a nd the se c re t o f the stra ng e jo urne y
Da viso n ha d a n e xc e lle nt re p uta tio n a s the p e rso n who c o uld
c o nc ilia te wa rring fa c tio ns, a ro le he ha d p e rfo rme d fo r J.P. Mo rg a n
d uring the se ttling o f the Mo ne y Pa nic o f 1907. Ano the r Mo rg a n p a rtne r, T.W. La mo nt, sa ys:
"He nry P. Da viso n se rve d a s a rb itra to r o f the Je kyll Isla nd
e xp e d itio n."4 __________________________
2 "C URRENT O PINIO N", De c e mb e r, 1916, p . 382.
3 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 "
4 T.W. La mo nt, He nry P. Da viso n, Ha rp e r, 1933
2 Fro m the se re fe re nc e s, it is p o ssib le to p ie c e to g e the r the sto ry.
Ald ric h’ s p riva te c a r, whic h ha d le ft Ho b o ke n sta tio n with its sha d e s
d ra wn, ha d ta ke n the fina nc ie rs to Je kyll Isla nd , G e o rg ia . So me ye a rs e a rlie r, a ve ry e xc lusive g ro up o f millio na ire s, le d b y J.P. Mo rg a n, ha d p urc ha se d the isla nd a s a winte r re tre a t. The y c a lle d the mse lve s the Je kyll Isla nd Hunt C lub , a nd , a t first, the isla nd wa s use d o nly fo r hunting e xp e d itio ns, until the millio na ire s re a lize d tha t its p le a sa nt c lima te o ffe re d a wa rm re tre a t fro m the rig o rs o f winte rs in Ne w Yo rk, a nd b e g a n to b uild sp le nd id ma nsio ns, whic h the y
c a lle d "c o tta g e s", fo r the ir fa milie s’ winte r va c a tio ns. The c lub
b uild ing itse lf, b e ing q uite iso la te d , wa s so me time s in d e ma nd fo r sta g p a rtie s a nd o the r p ursuits unre la te d to hunting . O n suc h o c c a sio ns, the c lub me mb e rs who we re no t invite d to the se sp e c ific o uting s we re a ske d no t to a p p e a r the re fo r a c e rta in numb e r o f
d a ys. Be fo re Ne lso n Ald ric h’ s p a rty ha d le ft Ne w Yo rk, the c lub ’ s me mb e rs ha d b e e n no tifie d tha t the c lub wo uld b e o c c up ie d fo r the ne xt two we e ks.
The Je kyll Isla nd C lub wa s c ho se n a s the p la c e to d ra ft the p la n fo r
c o ntro l o f the mo ne y a nd c re d it o f the p e o p le o f the Unite d Sta te s, no t o nly b e c a use o f its iso la tio n, b ut a lso b e c a use it wa s the p riva te p re se rve o f the p e o p le who we re d ra fting the p la n. The Ne w Yo rk Time s la te r no te d , o n Ma y 3, 1931, in c o mme nting o n the d e a th o f
G e o rg e F. Ba ke r, o ne o f J.P. Mo rg a n’ s c lo se st a sso c ia te s, tha t "Je kyll
Isla nd C lub ha s lo st o ne o f its mo st d isting uishe d me mb e rs. O ne -sixth o f the to ta l we a lth o f the wo rld wa s re p re se nte d b y the me mb e rs o f the Je kyll Isla nd C lub ." Me mb e rship wa s b y inhe rita nc e o nly.
The Ald ric h g ro up ha d no inte re st in hunting . Je kyll Isla nd wa s
c ho se n fo r the site o f the p re p a ra tio n o f the c e ntra l b a nk b e c a use it o ffe re d c o mp le te p riva c y, a nd b e c a use the re wa s no t a jo urna list within fifty mile s. Suc h wa s the ne e d fo r se c re c y tha t the me mb e rs o f the p a rty a g re e d , b e fo re a rriving a t Je kyll Isla nd , tha t no la st na me s wo uld b e use d a t a ny time d uring the ir two we e k sta y. The
g ro up la te r re fe rre d to the mse lve s a s the First Na me C lub , a s the la st na me s o f Wa rb urg , Stro ng , Va nd e rlip a nd the o the rs we re p ro hib ite d d uring the ir sta y. The c usto ma ry a tte nd a nts ha d b e e n
g ive n two we e k va c a tio ns fro m the c lub , a nd ne w se rva nts b ro ug ht in fro m the ma inla nd fo r this o c c a sio n who d id no t kno w the na me s o f a ny o f tho se p re se nt. Eve n if the y ha d b e e n inte rro g a te d a fte r the Ald ric h p a rty we nt b a c k to Ne w Yo rk, the y c o uld no t ha ve
g ive n the na me s. This a rra ng e me nt p ro ve d to b e so sa tisfa c to ry tha t the me mb e rs, limite d to tho se who ha d a c tua lly b e e n p re se nt
a t Je kyll Isla nd , la te r ha d a numb e r o f info rma l g e t-to g e the rs in Ne w Yo rk.
Why a ll this se c re c y? Why this tho usa nd mile trip in a c lo se d ra ilwa y
c a r to a re mo te hunting c lub ? O ste nsib ly, it wa s to c a rry o ut a p ro g ra m o f p ub lic se rvic e , to p re p a re b a nking re fo rm whic h wo uld
b e a b o o n to the p e o p le o f the Unite d Sta te s, whic h ha d b e e n o rd e re d b y the Na tio na l
Mo ne ta ry C o mmissio n. The p a rtic ip a nts we re no stra ng e rs to p ub lic
b e ne fa c tio ns. Usua lly, the ir na me s we re insc rib e d o n b ra ss p la q ue s, o r o n the e xte rio rs o f b uild ing s whic h the y ha d d o na te d . This wa s no t the p ro c e d ure whic h the y fo llo we d a t Je kyll Isla nd . No b ra ss p la q ue wa s e ve r e re c te d to ma rk the se lfle ss a c tio ns o f tho se who me t a t the ir p riva te hunt c lub in 1910 to imp ro ve the lo t o f e ve ry
c itize n o f the Unite d Sta te s. In fa c t, no b e ne fa c tio n to o k p la c e a t Je kyll Isla nd . The Ald ric h
g ro up jo urne ye d the re in p riva te to write the b a nking a nd c urre nc y le g isla tio n whic h the Na tio na l Mo ne ta ry C o mmissio n ha d b e e n o rd e re d to p re p a re in p ub lic . At sta ke wa s the future c o ntro l o f the mo ne y a nd c re d it o f the Unite d Sta te s. If a ny g e nuine mo ne ta ry re fo rm ha d b e e n p re p a re d a nd p re se nte d to C o ng re ss, it wo uld g ro up jo urne ye d the re in p riva te to write the b a nking a nd c urre nc y le g isla tio n whic h the Na tio na l Mo ne ta ry C o mmissio n ha d b e e n o rd e re d to p re p a re in p ub lic . At sta ke wa s the future c o ntro l o f the mo ne y a nd c re d it o f the Unite d Sta te s. If a ny g e nuine mo ne ta ry re fo rm ha d b e e n p re p a re d a nd p re se nte d to C o ng re ss, it wo uld
ha d a lwa ys wa nte d . As the mo st te c hnic a lly p ro fic ie nt o f tho se p re se nt, Pa ul Wa rb urg
wa s c ha rg e d with d o ing mo st o f the d ra fting o f the p la n. His wo rk wo uld the n b e d isc usse d a nd g o ne o ve r b y the re st o f the g ro up . Se na to r Ne lso n Ald ric h wa s the re to se e tha t the c o mp le te d p la n wo uld c o me o ut in a fo rm whic h he c o uld g e t p a sse d b y C o ng re ss,
a nd the o the r b a nke rs we re the re to inc lud e wha te ve r d e ta ils wo uld b e ne e d e d to b e c e rta in tha t the y g o t e ve rything the y wa nte d , in a finishe d d ra ft c o mp o se d d uring a o ne time sta y. Afte r the y re turne d to Ne w Yo rk, the re c o uld b e no se c o nd g e t to g e the r to re wo rk the ir p la n. The y c o uld no t ho p e to o b ta in suc h se c re c y fo r the ir wo rk o n a se c o nd jo urne y.
The Je kyll Isla nd g ro up re ma ine d a t the c lub fo r nine d a ys, wo rking furio usly to c o mp le te the ir ta sk. De sp ite the c o mmo n inte re sts o f tho se p re se nt, the wo rk d id no t p ro c e e d witho ut fric tio n. Se na to r Ald ric h, a lwa ys a d o mine e ring p e rso n, c o nsid e re d himse lf the
c ho se n le a d e r o f the g ro up , a nd c o uld no t he lp o rd e ring e ve ryo ne
e lse a b o ut. Ald ric h a lso fe lt so me wha t o ut o f p la c e a s the o nly me mb e r who wa s no t a p ro fe ssio na l b a nke r. He ha d ha d sub sta ntia l b a nking inte re sts thro ug ho ut his c a re e r, b ut o nly a s a p e rso n who p ro fite d fro m his o wne rship o f b a nk sto c k. He kne w little
a b o ut the te c hnic a l a sp e c ts o f fina nc ia l o p e ra tio ns. His o p p o site numb e r, Pa ul Wa rb urg , b e lie ve d tha t e ve ry q ue stio n ra ise d b y the
g ro up d e ma nd e d , no t me re ly a n a nswe r, b ut a le c ture . He ra re ly lo st a n o p p o rtunity to g ive the me mb e rs a lo ng d isc o urse d e sig ne d to imp re ss the m with the e xte nt o f his kno wle d g e o f b a nking . This wa s re se nte d b y the o the rs, a nd o fte n d re w b a rb e d re ma rks fro m Ald ric h. The na tura l d ip lo ma c y o f He nry P. Da viso n p ro ve d to b e the
c a ta lyst whic h ke p t the m a t the ir wo rk. Wa rb urg ’ s thic k a lie n
a c c e nt g ra te d o n the m , a nd c o nsta ntly re mind e d the m tha t the y
ha d to a c c e p t his p re se nc e if a c e ntra l b a nk p la n w a s to b e
d e vise d whic h wo uld g ua ra nte e the m the ir future p ro -
4 fits. Wa rb urg ma d e little e ffo rt to smo o th o ve r the ir p re jud ic e s, a nd
c o nte ste d the m o n e ve ry p o ssib le o c c a sio n o n te c hnic a l b a nking q ue stio ns, whic h he c o nsid e re d his p riva te p re se rve .
"In a ll c o nsp ira c ie s the re must b e g re a t se c re c y."5 The "mo ne ta ry re fo rm" p la n p re p a re d a t Je kyll Isla nd wa s to b e
p re se nte d to C o ng re ss a s the c o mp le te d wo rk o f the Na tio na l Mo ne ta ry C o mmissio n. It wa s imp e ra tive tha t the re a l a utho rs o f the
b ill re ma in hid d e n. So g re a t wa s p o p ula r re se ntme nt a g a inst
b a nke rs sinc e the Pa nic o f 1907 tha t no C o ng re ssma n wo uld d a re to vo te fo r a b ill b e a ring the Wa ll Stre e t ta int, no ma tte r who ha d
c o ntrib ute d to his c a mp a ig n e xp e nse s. The Je kyll Isla nd p la n wa s a
c e ntra l b a nk p la n, a nd in this c o untry the re wa s a lo ng tra d itio n o f strug g le a g a inst inflic ting a c e ntra l b a nk o n the Ame ric a n p e o p le . It
ha d b e g un with Tho ma s Je ffe rso n’ s fig ht a g a inst Ale xa nd e r Ha milto n’ s sc he me fo r the First Ba nk o f the Unite d Sta te s, b a c ke d b y Ja me s Ro thsc hild . It ha d c o ntinue d with Pre sid e nt And re w Ja c kso n’ s suc c e ssful wa r a g a inst Ale xa nd e r Ha milto n’ s sc he me fo r the Se c o nd Ba nk o f the Unite d Sta te s, in whic h Nic ho la s Bid d le wa s
a c ting a s the a g e nt fo r Ja me s Ro thsc hild o f Pa ris. The re sult o f tha t strug g le wa s the c re a tio n o f the Ind e p e nd e nt Sub -Tre a sury Syste m , whic h sup p o se d ly ha d se rve d to ke e p the fund s o f the Unite d Sta te s o ut o f the ha nd s o f the fina nc ie rs. A stud y o f the p a nic s o f 1873, 1893, a nd 1907 ind ic a te s tha t the se p a nic s we re the re sult o f the inte rna tio na l b a nke rs’ o p e ra tio ns in Lo nd o n. The p ub lic wa s
d e ma nd ing in 1908 tha t C o ng re ss e na c t le g isla tio n to p re ve nt the re c urre nc e o f a rtific ia lly ind uc e d mo ne y p a nic s. Suc h mo ne ta ry re fo rm no w se e me d ine vita b le . It wa s to he a d o ff a nd c o ntro l suc h re fo rm tha t the Na tio na l Mo ne ta ry C o mmissio n ha d b e e n se t up with Ne lso n Ald ric h a t its he a d , sinc e he wa s ma jo rity le a d e r o f the Se na te .
The ma in p ro b le m, a s Pa ul Wa rb urg info rme d his c o lle a g ue s, wa s to
a vo id the na me "C e ntra l Ba nk". Fo r tha t re a so n, he ha d d e c id e d up o n the d e sig na tio n o f "Fe d e ra l Re se rve Syste m". This wo uld
d e c e ive the p e o p le into thinking it wa s no t a c e ntra l b a nk. Ho we ve r, the Je kyll Isla nd p la n wo uld b e a c e ntra l b a nk p la n, fulfilling the ma in func tio ns o f a c e ntra l b a nk; it wo uld b e o wne d b y p riva te ind ivid ua ls who wo uld p ro fit fro m o wne rship o f sha re s. As a
b a nk o f issue , it wo uld c o ntro l the na tio n’ s mo ne y a nd c re d it. In the c ha p te r o n Je kyll Isla nd in his b io g ra p hy o f Ald ric h,
Ste p he nso n write s o f the c o nfe re nc e : "Ho w wa s the Re se rve Ba nk to b e c o ntro lle d ? It must b e c o ntro lle d
b y C o ng re ss. The g o ve rnme nt b y C o ng re ss. The g o ve rnme nt
a ffa irs, b ut a ma jo rity __________________________
5 C la re nd o n, Hist. Re b . 1647
5 o f the d ire c to rs we re to b e c ho se n, d ire c tly o r ind ire c tly, b y the
b a nks o f the a sso c ia tio n."6 Thus the p ro p o se d Fe d e ra l Re se rve Ba nk wa s to b e "c o ntro lle d b y
C o ng re ss" a nd a nswe ra b le to the g o ve rnme nt, b ut the ma jo rity o f the d ire c to rs we re to b e c ho se n, "d ire c tly o r ind ire c tly" b y the b a nks o f the a sso c ia tio n. In the fina l re fine me nt o f Wa rb urg ’ s p la n, the Fe d e ra l Re se rve Bo a rd o f G o ve rno rs wo uld b e a p p o inte d b y the Pre sid e nt o f the Unite d Sta te s, b ut the re a l wo rk o f the Bo a rd wo uld
b e c o ntro lle d b y a Fe d e ra l Ad viso ry C o unc il, me e ting with the
G o ve rno rs. The C o unc il wo uld b e c ho se n b y the d ire c to rs o f the twe lve Fe d e ra l Re se rve Ba nks, a nd wo uld re ma in unkno wn to the p ub lic .
The ne xt c o nsid e ra tio n wa s to c o nc e a l the fa c t tha t the p ro p o se d "Fe d e ra l Re se rve Syste m" wo uld b e d o mina te d b y the ma ste rs o f the Ne w Yo rk mo ne y ma rke t. The C o ng re ssme n fro m the So uth a nd the We st c o uld no t survive if the y vo te d fo r a Wa ll Stre e t p la n. Fa rme rs a nd sma ll b usine ssme n in tho se a re a s ha d suffe re d mo st fro m the mo ne y p a nic s. The re ha d b e e n g re a t p o p ula r re se ntme nt
a g a inst the Ea ste rn b a nke rs, whic h d uring the nine te e nth c e ntury
b e c a me a p o litic a l mo ve me nt kno wn a s "p o p ulism". The p riva te p a p e rs o f Nic ho la s Bid d le , no t re le a se d until mo re tha n a c e ntury
a fte r his d e a th, sho w tha t q uite e a rly o n the Ea ste rn b a nke rs we re fully a wa re o f the wid e sp re a d p ub lic o p p o sitio n to the m.
Pa ul Wa rb urg a d va nc e d a t Je kyll Isla nd the p rima ry d e c e p tio n whic h wo uld p re ve nt the c itize ns fro m re c o g nizing tha t his p la n se t up a c e ntra l b a nk. This wa s the re g io na l re se rve syste m. He p ro p o se d a syste m o f fo ur (la te r twe lve ) b ra nc h re se rve b a nks lo c a te d in d iffe re nt se c tio ns o f the c o untry. Fe w p e o p le o utsid e the
b a nking wo rld wo uld re a lize tha t the e xisting c o nc e ntra tio n o f the na tio n’ s mo ne y a nd c re d it struc ture in Ne w Yo rk ma d e the p ro p o sa l o f a re g io na l re se rve syste m a d e lusio n.
Ano the r p ro p o sa l a d va nc e d b y Pa ul Wa rb urg a t Je kyll Isla nd wa s the ma nne r o f se le c tio n o f a d ministra to rs fo r the p ro p o se d re g io na l re se rve syste m. Se na to r Ne lso n Ald ric h ha d insiste d tha t the o ffic ia ls sho uld b e a p p o intive , no t e le c te d , a nd tha t C o ng re ss sho uld ha ve no ro le in the ir se le c tio n. His C a p ito l Hill e xp e rie nc e ha d ta ug ht him tha t c o ng re ssio na l o p inio n wo uld o fte n b e inimic a l to the Wa ll Stre e t inte re sts, a s C o ng re ssme n fro m the We st a nd So uth mig ht wish to
d e mo nstra te to the ir c o nstitue nts tha t the y we re p ro te c ting the m
a g a inst the Ea ste rn b a nke rs. Wa rb urg re sp o nd e d tha t the a d ministra to rs o f the p ro p o se d c e ntra l
b a nks sho uld b e sub je c t to e xe c utive a p p ro va l b y the Pre sid e nt. This p a te nt re mo va l o f the syste m fro m C o ng re ssio na l c o ntro l me a nt tha t the
6 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
6 Fe d e ra l Re se rve p ro p o sa l wa s unc o nstitutio na l fro m its inc e p tio n,
b e c a use the Fe d e ra l Re se rve Syste m wa s to b e a b a nk o f issue . Artic le 1, Se c . 8, Pa r. 5 o f the C o nstitutio n e xp re ssly c ha rg e s
C o ng re ss with "the p o we r to c o in mo ne y a nd re g ula te the va lue the re o f.". Wa rb urg ’ s p la n wo uld d e p rive C o ng re ss o f its so ve re ig nty,
a nd the syste ms o f c he c ks a nd b a la nc e s o f p o we r se t up b y Tho ma s Je ffe rso n in the C o nstitutio n wo uld no w b e d e stro ye d . Ad ministra to rs o f the p ro p o se d syste m wo uld c o ntro l the na tio n’ s mo ne y a nd c re d it, a nd wo uld the mse lve s b e a p p ro ve d b y the
e xe c utive d e p a rtme nt o f the g o ve rnme nt. The jud ic ia l d e p a rtme nt (the Sup re me C o urt, e tc .) wa s a lre a d y virtua lly c o ntro lle d b y the
e xe c utive d e p a rtme nt thro ug h p re sid e ntia l a p p o intme nt to the
b e nc h. Pa ul Wa rb urg la te r wro te a ma ssive e xp o sitio n o f his p la n, The
Fe d e ra l Re se rve Syste m , Its O rig in a nd G ro wth7 o f so me 1750 p a g e s,
b ut the na me "Je kyll Isla nd " a p p e a rs no whe re in this te xt. He d o e s sta te (Vo l. 1, p . 58):
"But the n the c o nfe re nc e c lo se d , a fte r a we e k o f e a rne st
d e lib e ra tio n, the ro ug h d ra ft o f wha t la te r d e lib e ra tio n, the ro ug h d ra ft o f wha t la te r