-Caveat Lector- <A HREF="http://www.ctrl.org/"> </A> -Cui Bono?- Wall Street Goes for a Bust in 1907-1908 The war on Wall Street which spread economic devastation across the nation during 1907-1908 was the direct result of one huge money trust trying to cannibalize its competition. The record shows that the Rockefeller interests of "Amalgamated Copper" set out to destroy the Heinze combination which owned Union Copper Company. By cleverly manipulating the stock market, the Rockefeller faction drove down Heinze stock in Union Copper from 60 to 10. The rumor was then spread that not only Heinze Copper but also the Heinze banks were folding under Rockefeller pressure. J.P. Morgan joined the Rockefeller enclave to announce that he thought the Knickerbocker Trust Company would be the first Heinze bank to go. That was all it took to send depositors storming to the tellers' cages of the Knickerbocker Bank to get their money. Within a few days the bank was forced to close its doors. Similar fear spread to other Heinze banks and then to the whole banking world. The crash was on. Millions of people were sold out and rendered homeless. The destitute and hungry shifted for themselves as best they could. Circulating money was hoarded by any who happened to get some, so before long a viable medium of exchange became practically nonexistent. Many business concerns began printing IOU's on small pieces of paper and exchanging these for raw materials as well as giving them to their workers for wages. These "tokens" passed around as a temporary medium of exchange. At this critical juncture, J.P. Morgan came to the front. He offered to salvage the last Heinze bank (Trust Company of America) if it would turn over to him for merely a pittance of its true worth, the fabulously valuable Tennessee Coal and Iron Company in Birmingham. Morgan wished to add this to the U.S. Steel Company which he had purchased from Andrew Carnegie This arrangement violated the anti-trust laws but in the prevailing climate of crisis, the proposed transaction was approved in Washington. At this point J.P. Morgan told his partners he was intrigued by the "tokens" of paper or printed IOU's which various business houses were being allowed to circulate as a medium of exchange. He sold Washington on the idea of letting him put out 200 million dollars in such "tokens" issued by one of the Morgan establishments. He said this flow of Morgan "certificates" might get the economy going again. Approval was granted and as these new forms of Morgan" money" began circulating, the public regained its confidence so that hoarded money began to circulate again as well. Morgan never forgot how exciting it was to circulate 200 million dollars in "certificates" creating out of nothing more than his own "corporate credit" and the formal approval of Washington. Here was a superb device to make millions. In the mind of J.P. Morgan, the seeds for the Federal Reserve System had been sown. How J.P. Morgan Became Attracted to Woodrow Wilson On the surface J.P. Morgan seemed to have saved the day --like throwing a child in the river and then being lionized for saving him. No one was more fascinated with the new heroic image of Mr. Morgan than Woodrow Wilson. In the early 1900's Woodrow Wilson had gained a tremendous reputation as a writer and educator. People listened to him. He had practically "founded" the department of political science soon (sic) at Princeton. In fact, his philosophy of political science permeated universities all across the nation and to a large extent still represents the prevalent view today. Wilson reflected a strong criticism of what some called the "archaic nature" of the American system of government and the necessity of getting stronger administrative control over the affairs of the people. In many are as Wilson was very critical of the Founders' Constitutional concepts. Wilson wrote: "All this trouble (the 1907 depression) could be averted if we appointed a committee of six or seven public-spirited men like J.P. Morgan to handle the affairs of our country." Although, reputed to be a great spokesman for "democracy", Woodrow Wilson actually had a powerful instinct for the further strengthening of centralized power. Morgan liked what Wilson was saying. Soon after Wilson became President of Princeton University, certain Morgan interests began encouraging him to enter the political arena. By 1910, he found himself winning the election for Governor of New Jersey. In 1912, these same forces pushed Wilson into the Presidency of the United States. But that is getting ahead of our story. The Popular Demand for Monetary Reform By 1908 J.P. Morgan was already working through his wealthy friend, Senator Nelson Aldrich of Rhode Island, to establish a private central banking system similar to those operating in Europe. Mr. Morgan could not forget the exhilarating satisfaction of printing and circulating millions of dollars worth of "certificates" merely on Morgan's corporate "credit." It was even better than the schemes of the goldsmith-bankers! Meanwhile, public pressure was making increased demands for a plan to eliminate Wall Street control and exploitation of the economy. Accordingly, Morgan's friend, Senator Adlrich, had arranged to have himself made the chairman of the National Monetary Commission. Congress assigned this Commission the task of studying the United States monetary system and making recommendations of ways to improve it. The Commission promptly took off for Europe and after spending $300,000 returned to write 20 massive volumes extolling the advantages of Europe's central banking system. This report was barely published when there arrived on the scene none other than Paul Warburg whose brother, Max Warburg, was in charge of the Reichsbank, the privately-owned central bank of Germany. Paul Warburg came well-financed by the Rothschild family and they bought him a partnership in the Rothschild-dominated firm of Kuhn, Loeb and Company. Paul Warburg immediately associated himself with other Wall Street financial leaders as well as Senator Nelson Aldrich. Then he began circulating all over the country lecturing to universities and business organizations. He emphasize d the absolute necessity of setting up a new national banking system which would prevent Wall Street from putting the nation through those devastating "boom and bust" cycles as it had in the past. He promised that the new system he had in mind would really "clip the wings" of the big bankers It was exactly the sound of monetary music the people had been waiting to hear! Little did people know that Wall Street was preparing a plan of its own. The Meeting at Jekyll's Island On November 22, 1910, a private railroad car pulled out of the station at Hoboken, New Jersey, with some notable people aboard. Others joined the m later. They met at the J.P. Morgan estate on Jekyll's island, Georgia. This secret meeting included Senator Nelson Aldrich, A.P. Andrews, professional economist and Assistant Secretary of the Treasury who had traveled with Aldrich to Europe, Frank Vanderlip, President of the National Bank of New York City, Harry P. Davidson, senior partner of the J.P. Morgan Company; Charles D. Norton, President of Morgan's First National Bank of New York; Paul Warburg, partner of the banking house of Kuhn, Loeb Company in New York; and lastly, Benjamine Strong of the J.P. Morgan Company central office in New York. After nine days, they had prepared a bill for Congress which was later submitted as "The Aldrich Plan." Five million dollars were pressured out of major banks to "educate" the Congress and the American people to accept the plan. The main resistance to the Plan came from the House of Representatives where an official investigation had revealed some of the ruthless operations of powerful financial interests on Wall Street and definitely fixed responsibility on Wall Street (especially Rockefeller and Morgan) for the crash of 1907-1908. With the tide of opposition rising, it was obvious that the Republicans were not going to be able to get the Aldrich plan adopted. Strategy then switched to the Democratic Party which immediately came up with an "alternate" plan to be called the Federal Reserve System. It was almost identical with the Aldrich Plan but with a different name. The Election of President Wilson The next task was to defeat the Republican President, William Howard Taft, in the 1912 election and get a Democratic administration in power. Taft was popular, but opposed to the Aldrich Plan. The political strategy was therefore redesigned to induce another Republican, popular Teddy Roosevelt, to run on an independent ticket against Taft and thus divide the Republican Party. Two prominent Morgan officers, Fran Munsey and George Perkins, provided both the money and the strategy to help Roosevelt win Republican votes away from Taft. Meanwhile, George Harvey, President of the Morgan-controlled Harpers Weekly, and the Rockefeller money got behind Wilson. The Wilson team included Cleveland H. Dodge of Rockefellers' National City Bank, J. Ogden Armour, James Stillman, George F. Baker, Jacob Schiff, Bernard Baruch, Henry Morgenthau, and the publisher of the New York Times, Adolph Ochs. It is interesting that the Morgan officials who managed Teddy Roosevelt's campaign were also found to have put extensive money behind Wilson. As might have been expected, the strategy worked and Wilson was elected. The Wilson Administration Begins Reshaping America When Woodrow Wilson took over the White House in 1913, he brought with him his Wall Street advisors including "Colonel" Edward Mandell House who is now known to have been the major policy-maker and manager of the entire Wilson administration. In his personal writings, House describes the pile-driver tactics that were used to force a bill through Congress which would authorize the setting up of the new Federal Reserve System as a privately-owned central bank. A strong element of deception surrounded the team involved in the promoting of this legislation. To begin with, the bill was simply the Aldrich Bill in new dress, something the Congress had already rejected. Secondly, the leading financiers of Wall Street went into a carefully orchestrated act of vehemently pretending to protest against the bill. In his autobiography, William McAdoo, Wilson's son-in-law, who became Secretary of the Treasury, says he was very impressed by the way the "banke rs fought the Federal Reserve legislation --and every provision of the Federal Reserve Act -- with the tireless energy of men fighting a forest fire. They said it was populistic, socialistic, half-baked, destructive, infantile, badly conceived and unworkable." But Mr. McAdoo found that when he engaged these bankers in private conversation, he realized their opposition was merely a smokescreen to hide their true feelings. He wrote: "These interviews with bankers led me to an interesting conclusion. I perceived gradually, through all the haze and smoke of controversy, that the banking world was not really, as much opposed to the bill as it pretended to be. It was in this illusionary climate of Wall Street antagonism that Congress finally bit the bullet and took a chance on this new wonder-plan which promised to prevent depressions, stabilize the nation's money system and get Wall Street off the back of the American people. Congressman Charles Lindbergh of Minnesota whose son would later fly the Atlantic, raised a mighty voice of protest against the whole scheme, but the majority of the Congress were either too busy or too enamored with the promises of the new system to detect the snare. On December 22, 1913, with the prospects of the Christmas Holiday pressuring the Congress into final action before the session closed, the House voted 298 to 60 in favor of the new Federal Reserve System, and the Senate passed it 43 to 25. Had Thomas Jefferson, James Madison or Andrew Jackson been around, they would have no doubt exploded with indignation. Perhaps without quite realizing it, the Congress had created a powerful engine of private central banking which was given the power to indulge the bankers' voracious appetite for boom-and-bust economics, confiscatory taxation, smothering national indebtedness and the promotion of war on a world-wide scale. No one suspected that this power would be used to confiscate the people's gold, diminish their savings with inflation, erode away the value of insurance policies and fixed incomes, destroy the stability of the dollar, and eventually engulf the nation in a miasma of foreign entanglements which would threaten the very existence of the United States as a free and independent people. All of this would have to be demonstrated as the future unfolded chapter by chapter during the Twentieth Century. In our next "Behind the Scenes" letter we will cover "What Every America n Should Know About How the Federal Reserve System Works." In this next l etter we will trace the well-nigh incredible story which is finally coming out in several national best-sellers. These include Time For Truth by former U.S. Treasury Secretary William Simon, and Free to Choose by the Nobel prize-winning economist, Dr. Milton Friedman _________________________________________________________________________ What Americans Find Hard to Believe- How the Federal Reserve System Works The American colonists suffered so bitterly from the constant manipulation of their economy by the British money-trust and the privately-owned Bank of England that they structured the Constitution so that the issuing of money and the fixing of its value would be under the exclusive control of the people's government. Unfortunately, their original design was never carried out. From the very beginning the vested interests of the private money-trusts were successful in acquiring sufficient control of the country's finances so that they were able to make fabulous profits from carefully engineered "boom and bust" cycles which came on the average of about once every seven to fifteen years. One of the worst of these "busts" came in 1907-8 and the universal outcry from coast-to-coast was "Monetary Reform!" So the Federal Reserve was set up with elaborate machinery which its sponsors promised would achieve some very exciting things. It would stabilize the dollar, prevent depressions and promote prosperity. The fact that the entire operation would be in direct violation of the Constitution seemed trivial compared to all of the marvelous things it promised to accomplish. How America Adopted the Idea of a Privately-Owned Central Bank In spite of the warning of Jefferson, Jackson, Lincoln, and the provisions of the Constitution, Woodrow Wilson ran for President on the platform of adopting a privately-owned central banking system to be called the Federal Reserve. In the campaign Wilson promised that the Federal Reserve would get the nation out from under the oppressive control of Wall Street. What the public was never told, however, was the astonishing fact that the Federal Reserve Act actually had been written and promoted by the Wall Street money-trust itself. Nevertheless, Woodrow Wilson had come to trust these men. They had financed his campaign for President. It is not necessary to review all of the intrigue and deception which surrounded the passage of the Federal Reserve Act. We will simply outline its highly persuasive promises compared with the cold reality of its historical performance during the past 65 years. The record shows that Woodrow Wilson was one of the first to recognize what a horrendous mistake had been made. "From Woodrow Wilson with Regrets" In 1916, just three years after the Federal Reserve System got into operation President Wilson seems to have suddenly realized what a virtually uncontrollable power monopoly had been vested in the nation's new Federal Reserve System. He wrote: "A great industrial nation is controlled by its system of credit. Our system of credit is concentrated (in the Federal Reserve System). The growth of the nation, therefore, and all our activities are in the hands of a few men.... We have come to be one of the worst ruled, one of the most completely controlled and dominated governments in the civilized world -- no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and duress of small groups of dominant men." (Quoted in "National Economy and the Banking System," Senate Documents Co. 3, No. 23 , 76th Congress, 1st session, 1939.) President Wilson's protest against the "duress" of a few dominant men is especially interesting in view of the dozens of articles he had written as head of the political science department at Princeton criticizing the thinking of the Founding fathers and calling for stronger centralized power in Washington. In fact, these men from whom President Wilson was feeling such duress an d domination in 1916 were the very ones he had been praising a few years earlier when he said: "All this trouble (1907 depression) could be averted if we appointed a committee of six or seven public-spirited men like P. Morgan to handle the affairs of the country." H.A. Kenan, "The Federal Reserve Bank," p. 103.) It would seem that by 1916 the superior wisdom of the Founding Fathers had become increasingly apparent, even to Wilson. Additional Mourners The Federal Reserve Act was sponsored by Senator Robert L. Owen and Senator Carter Glass. Senator Owen was chairman of the Senate Banking and Currency Committee where the bill was drafted. The original bill required the Federal Reserve to maintain stable money which would produce a stable price level. Very shortly Senator Owen also became one of the mourners and wrote: "This mandatory provision was stricken out in the House under the leader ship of Carter Glass. I was unable to keep this mandatory provision in the Bill because of the secret hostilities developed against it, the origin of which at that time I did not fully understand." But he later found out where these hostilities were coming from. He said : "Under the administrations of Wilson, Harding, Coolidge and Hoover, this Act was diverted from its proper purpose on the advice of some who controlled the policies of a number of the largest banks." (Gertrude M. Coogan , Money Creators, p. IX of Introduction.) Owen spent the rest of his life trying to get the Federal Reserve System repealed. It is mentioned in most of the texts that the Federal Reserve Act would never have passed the House without the support of the Democratic Party whip, William Jennings Bryan, who later became Secretary of State. Bryan also became a mourner and wrote: "In my long political career, the one thing I genuinely regret is my part in getting the banking and curre ncy legislation enacted into law." (Quoted by H.S. Kenana, The Federal Reserve Bank, 1967 ed. rev., p. 125.) Unfortunately, all of these powerful political personalities who had so much to do with adoption of the Federal Reserve System, found that it was too big and too powerful to control or repeal once it had become entrenched. All they could do was mourn. Federal Reserve System Operates on Three False Premises The whole purpose of establishing the Federal Reserve System was to prevent depressions, stabilize the currency, and protect the savings and chec king deposits of the people in the custody of the banks. However, there are three things Jefferson, Jackson and Lincoln identified as outright enemies of a sound money system, and the Federal Reserve co ntains all three of them. The first thing they said the nation should avoid is turning over to a group of private bankers the right to print the official currency of the nation. They said this right is inherent in the people and belongs to the people's government. Whenever this right has been delegated to private bankers they have always used it to abuse the people and gradually devour the wealth of the nation. Jefferson wrote: "If the American people ever allow private banks to control the issue of currency, first by inflation, then by deflation, the banks and corporations that will group up around them will deprive the people of all property until their children will wake up homeless on the continent their fathers conquered." (K.S. Kenan, The Federal Reserve Bank, 1967 ed. rev., p. 2 34.) When Abraham Lincoln was not able to initiate a monetary reform act but was compelled to accept the National Bank Act in 1863, he wrote: "I see in the near future a crisis approach which unnerves me and cause me to tremble for the safety of my country. Corporations (of banking) have been enthroned, an era of corruption in high places will follow, and the money power of the country will endeavor to prolong its reign by working upon the prejudices of the people until the wealth is aggregated in a few hands and the Republic destroyed." (H.S. 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