CHAPTER 1
In chapter one of the book entitled The Creature From Jekyll Island, it tells of the secret meeting with some of the worlds richest bankers at the time to create what we call today, the Federal Reserve. In 1910 at a New Jersey railway on a cold night a well-known Senator from Rhode Island named Nelson Aldrich and 6 guest whose estimated net worth was 1/4 of the total wealth of the entire world at the time. This journey to Jekyll Island would give birth to the Federal Reserve, the new Banking Cartel. Its purpose was to protect its members from competition and to strategize on how to convince Congress and the public that this new Banking Cartel was an agency of the United States Government. The guest on this midnight train to Georgia was as follows:
1. Paul M. Warburg, a representative of the Rothschild Banking Dynasty in England and France.
2. Benjamin Strong, head of J.P. Morgan Banker Trust Company
3. Frank A. Vanderlip, president of the National City Bank of New York, the most powerful of the banks at that time. Representing William Rockefeller and the international investment banking house of Kuhn, Loeb & Company.
4. Henry P. Davison, senior partner of the J.P. Morgan Company.
5. Charles D. Norton, president of J.P. Morgan’s First National Bank of New York.
6. Abraham Piatt Andrew, Assistant Secretary of the United States.
7. Nelson W. Aldrich, a Republican ” whip” in the Senate, Chairman of the National Monetary Commission, business associate of J.P. Morgan, father-in-law to John D. Rockefeller Jr.
The Purpose of the Meeting
The purpose of the meeting was to come to an agreement on the structure and operation of this Federal Reserve Scam. The goal was to maximize profits by minimizing the competition between members, to make it difficult for new competition, and how to use police power to enforce this Federal Reserve Scam. To put it simple, it was a meeting to create this Creature called the Federal Reserve Banking Cartel. The centralization of control over financial resources in 1910 in the United States belonged to the Morgan Group and the Rockefeller Group. In Europe, it was the Rothschild Group and the Warburg Group. Starting to see why these group of people came together. But why Jekyll Island? It had a population of only a few thousand and the coast of South Carolina to Florida had already become a popular winter resort for the wealthy. And to make a long story short, J.P. Morgan and several of his business associates brought the Island to hunt in the fall and winter.
The Birth of a Banking Cartel
The purpose of a cartel is to reduce competition and increase profitability. And these representatives of the worlds leading banking institutions were: Morgan, Rockefeller, Rothschild, Warburg, and Kuhn-Loeb. Their mission was to elimate any free enterprise competition in the banking system by any means necessary. Did they trust each other, hell no! But they came together to fight a common enemy, and that was the competition. In 1910 there was almost 20,000 banks in the United States, and most of them was popping up in the South and in the West causing New York banks to suffer a steady decline in the market, which is a no no. You see almost all banks in the 1880s were national banks which means they were chartered by the Federal government, were located in big cities, and were allowed by law to issue their own currency in the form of bank notes. As early as 1896 the number of non national had grown to 61% holding 54% of the countries total banking deposits and by time 1913 Federal reserve act was passed non national banks were at 71% with 54% of the countries total deposits. You see why they had to put aside their distrust for each and come together, or sink slowly.
The competition was also coming with a new trend in the industry to finance future growth out of profits rather than borrowed capital. This brilliant idea put a realistic balance between debt and thrift. Rates were low enough to attract serious borrowers and just high enough keeping the get rich schemes at bay. This was the result of LIMITED SUPPLY of money. Banks could create loans in excess of their actual deposits, but there was a limit to that process. And that limit was determined by the amount of Gold they held, another genius idea. Between 1900 to 1910, 70% of the funding for American corporate growth was internal. This was making the industry more and more independent of the banks. The Federal government even had they act together. They had a growing stockpile of Gold and was reducing the national debt, image that.
The other trend that had to be stopped was to intervene in the free market and tip the balance of interest rates downward to favor debt of thrift. To accomplish this, the money supply had to be disconnected from GOLD and made more plentiful or as THEY described it, more elastic. My interpretation is keep on printing just keep on printing.
The greatest threat the cartel wanted to prevent was a bank run, which came from the public. A bank run in short is say some panic occurs and everyone who has money in the bank want their money the bank won’t be able to supply that demand because simply put, they don’t have it. Another fear was a currency drain. Currency drains come from other banks. If one bank was reckless with loans and people have checks from others banks that want their customer money this would be a currency drain. Reckless bank would go under as they should but they needed a cover for the Banking Cartel so they would never go under, they would be too big to fail. The entire banking system might collapse under such a system but not individual banks…… at least not the ones that were part of the Banking Cartel. With almost 2,000 bank failures in the last 2 decades this was a problem, not because of the system but because the banks were weak.
Somehow they had to join forces to make this scam work. To do this they had to force a way for ALL banks to follow the same line, and when disaster hits shift public blame away from themselves to the economy rather than the private banking practice. This would open the door for TAX money to be used rather than they own funds to cover losses.
The main objectives of this group was:
1. Stop the competition of rival banks, and to insure control of the nations financial resources would remain with the Banking Cartel.
2. How to make printing up an unlimited supply of money ( more elastic) to reverse the trend of private capital formation and to recapture the industrial loan market.
3. How to pull together All banks together in one Large reserve. This would protect the Cartel from bank runs and currency drains.
4. And if this system should collapse, and it has, how to shift blame from the owners to the taxpayers.
5. How to convince Congress that this scam was a good idea to protect and keep you safe the public.
Finally this Banking Cartel had to come up with a name. Everyone knows the answer was a similar operation in Europe. But the American people didn’t like the concept of a cartel, this would never pass over with voters. If they could come up with a word that will fool you into thinking it has something to do with the government, than half the battle was won already. They left out the word bank all together and came up with the Federal Reserve. And in 1913 passed the Federal Reserve Act.
Introduction What are Banks For?
Chapter 2 The Name of the Game is Bank Bailouts