Money Masters Transcripts Part 21

21. JEKYLL ISLAND

After the crash, Teddy Roosevelt, in response to the Panic of 1907, signed into law a bill creating something called the National Monetary Commission. The Commission was to study the banking problem and make recommendations to Congress. Of course, the Commission was packed with Morgan's friends and cronies.

The Chairman was a man named Senator Nelson Aldrich £rom Rhode Island. Aldrich represented the Newport, Rhode Island homes of America's richest banking families and was an investment associate of J.P. Morgan, with extensive bank holdings. His daughter married John D. Rockefeller, Jr., and together they had five sons: John, Nelson (who would become the Vice-President in 1974), Laurence, Winthrop, and David (the head of the Council on Foreign Relations and former Chairman of Chase Manhattan bank).

As soon as the National Monetary Commission was set up, Senator Aldrich immediately embarked on a two-year tour of Europe, where he consulted at length with the private central bankers in England, France and German. The total cost of his trip to the taxpayers was $300,000 - a huge sum in those days.

Shortly after his return, on the evening of November 22, 1910, seven of the wealthiest and most powerful men in America boarded Senator Aldnch's private rail car and in the

{p. 50} strictest secrecy journeyed to Jekyll Island, off the coast of Georgia.

With Aldrich and three Morgan representatives was Paul Warburg. Warburg had been given a $500,000 per year salary to lobby for passage of a privately-owned central bank in America by the investment firm, Kuhn, Loeb & Company. 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 Frankfort.

Schiff, as, we'll later find out, was in the process of spending $20 million to finance the overthrow of the Czar of Russia. These three European banking families, the Rothschilds, the Warburgs, and the Schiffs were interconnected by marriage down through the years, just as were their American banking counterparts, the Morgans, Rockefellers and Aldrichs.

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, president of Rockefeller's National City Bank of New York and a representative of the Kuhn, Loeb & Company interests, confirmed the Jekyll Island trip in the February 9, 1935 edition of the Saturday Evening Post:

"I was as secretive - indeed, as furtive - as any conspirator… Discovery, we knew, simply must not happen, or else all our time and effort would be wasted. If it were to be exposed that our particular group had got together and written a banking bill, that bill would have no chance whatever of passage by Congress."

The participants came together to figure out how to solve their major problem - how to bring back a privately-owned central bank - but there were other problems that needed to be addressed as well. First of all, the market share of the big national banks was shrinking fast.

In the first ten years of the century, the number of U.S. banks had more than doubled to over 20,000. By 1913, only 29% of all banks were National Banks and they held only 57% of all deposits. As Senator Aldrich later admitted in a magazine article:

"Before passage of this Act, the New York bankers could only dominate the reserves of New York. Now, we are able to dominate the bank reserves of the entire county."

Therefore, something had to be done to bring these new banks under their control. As John D. Rockefeller put it: "Competition is a sin." Actually, moralists agree that monopoly abuse is a sin. But why quibble when there's money to be made.

Secondly, the nation's economy was so strong that corporations were starting to finance their expansion out of profits instead of taking out huge loans from large banks. In the first 10 years of the new century, 70% of corporate funding came from profits. In other words, American industry was becoming independent of the Money Changers, and that trend had to be stopped.

All the participants knew that these problems could be hammered out into a workable solution, but perhaps their biggest problem was a public relations problem - the name of the new central bank. That discussion took

{p. 51} place in one of the many conference rooms in the sprawling hotel now known as the Jekyll Island Club.

Aldrich believed that the word "bank" should not even appear in the name. Warburg wanted to call the legislation the National Reserve Bill or the Federal Reserve Bill. The idea here was to give the impression that the purpose of the new central bank was to stop bank runs, but also to conceal its monopoly character. However, it was Aldrich, the egotistical politician, who insisted it be called the Aldrich Bill.

After nine days at Jekyll Island, the group dispersed. The new central bank (with twelve branches, ultimately) would be very similar to the old Bank of the United States. It would eventually be given a monopoly over the national currency and create that money out of nothing.

How does the Fed "create" money out of nothing? It is a four-step process. But first a word on bonds. Bonds are simply promises to pay - or government IOUs. People buy bonds to get a secure rate of interest. At the end of the term of the bond, the government repays the principal, plus interest (if not paid periodically), and the bond is destroyed. There are about 3.6 trillion dollars worth of these bonds at present. Now here is the Fed moneymaking process:

Step 1. The Fed Open Market Committee approves the purchase of U.S. Bonds on the open market.

Step 2. The bonds are purchased by the New York Fed Bank from whoever is offering them for sale on the open market.

Step 3. The Fed pays for the bonds with electronic credits to the seller's bank, which in turn credits the seller's bank account. These credits are based on nothing tangible. The Fed just creates them.

Step 4. The banks use these deposits as reserves. They can loan out ten times the amount of their reserves to new borrowers, all at interest.

In this way, a Fed purchase of, say a million dollars worth of bonds, gets turned into over 10 million dollars in bank deposits. The Fed, in effect, creates 10% of this totally new money and the banks create the other 90%.

Actually, due to a number of important exceptions to the 10% reserve ratio, many loans require no (0%) reserves, making it possible for banks to create many times more than ten times the money they have in "reserve".

To reduce the amount of money in the economy, the process is just reversed - the Fed sells bonds to the public, and money flows out ofthe purchaser's local bank. Loans must be reduced by ten times the amount of the sale. So a Fed sale of a million dollars in bonds, results in 10 million dollars less money in the economy.

So how did the Federal Reform Act of l913 benefit the bankers whose representatives huddled at Jekyll Island?

1st - it totally misdirected banking reform efforts from proper solutions.

2nd - it prevented a proper, debt-free system of government finance - like Lincoln's Greenbacks - from making a comeback.

{p. 52} The bond-based system of government finance, forced on Lincoln after he created Greenbacks, was now cast in stone.

3rd - it delegated to the bankers the right to create 90% of our money supply-based on only fractional reserves - which they could loan out at interest.

4th - it centralized overall control of our nation's money supply in the hands of a few men.

5th - it established a new private U.S. central bank with a high degree of independence from effective political control. Sixteen (16) years after it's creation, the Fed's Great Contraction in the early 1930s would cause the Great Depression. This independence has been enhanced since then, through additional amendments.

In order to fool the public into thinking the government retained control, the plan called for the Fed to be run by a Board of Governors appointed by the President and approved by the Senate. But all the bankers had to do was to be sure that their men got appointed to the Board of Governors. That wasn't hard. Bankers have money, and money buys influence over politicians.

Once the participants left Jekyll Island, the public relations blitz was on. The big New York banks pooled a "educational" fund of five million dollars to finance professors at respected universities to endorse the new bank. Woodrow Wllson at Princeton was one of the first to jump on the bandwagon.

But the bankers' subterfuge didn't work. The Aldrich Bill was quickly identified as a bankers bill - a bill to benefit only what had become known as the "Money Trust." As Congressman Lindbergh put it during the Congressional debate:

"The Aldrich Plan is the Wall Street Plan. It means another panic, if necessary, to intimidate the people. Aldrich, paid by the government to represent the people, proposes a plan for the trusts instead."

Seeing they didn't have the votes to win in Congress, the Republican leadership never brought the Aldrich Bill to a vote. President Taft would not back the Aldrich bill. The bankers quietly decided to move to track two, the Democratic alternative.

They began financing Woodrow Wilson as the Democratic nominee. He was considered far more tractable than Bryan. As historian James Perloff put it, Wall Street financier Bernard Baruch was put in charge of Wilson's education:

To increase Wilson's chances of defeating the popular Taft, they funded the unwitting Teddy Roosevelt in order to split the Republican vote - a tactic often used since to insure getting their man in. The campaigning Roosevelt said:

"Issue of currency should be lodged with the government and be protected from domination by Wall Street… We are opposed to the Aldrich Bill because its provisions would place our currency and credit system in private hands."

This was certainly correct, and it helped draw votes from Taft and got Wilson elected.


Acknowledgement and credits

The Money Masters: How International Bankers Gained Control of America

Video Script
Produced by Patrick S. J. Carmack
Directed by Bill Still
Royalty Production Company 1998

Ref: [http://users.cyberone.com.au/myers/money-masters.html]

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