The power elite or super-rich do not become exceedingly and unjustly rich (mostly ‘legally’ and immorally) except through the creation of MONEY, the loaning of Money, and some significant, national or global event – such as new technology, industrialization, user fees for technology or resources, and war. Prior to the creation of the Federal Reserve, Congress was subject to laws that keep increases of National Debt in check and to a system that required U.S. Money backed by gold. Thus, there were checks, balances and limitations.
In 1906, Aldrich sold his interest in a Rhode Island Railway system to Charles Mellen (associate of J. P. Morgan; note: Bank of N.Y. & Mellon merged 2007). Early 1907, the New York Times published Paul Warburg stating America’s financial system was ‘at about the same point that had been reached by Europe at the time of the Medicis, and by Asia… at the time of Hammurabi.’ In 1907, there was a Bankers’ panic and the NYSE fell almost 50%. This led to the Aldrich-Vreeland Act of 1908, which set up the National Monetary Commission which called for a ‘National Reserve Association’ and led to the Aldrich Plan – the formation of the Federal Reserve System.
The Aldrich-Vreeland Act (1908) came ten years after the Report of the Indianapolis Monetary Commission of 1898 which, according to The Journal of Political Economy (October 1908), “gave to the public a study of the evils in our monetary system, and proposed certain reforms.” That Report showed the “dangers arising from the silver circulation and the steps for establishing the gold standard.” It recommended a revision of the system under which national bank notes were issued. It discussed asset-currency versus inelastic bond-secured issue. In December 1906, the Fowler Bill (H. R. 23017; Fowler was Chairman of the House Banking Committee), originally with support from the bankers – proposed a gradual move from notes secured by U.S. bonds to commercial assets as a basis. Yet, the panic of 1907 scared the public and prompted a demand for additional legislation on banking.
May 11 and 12, 1908, Congressman Vreeland introduced H.R. 21810 and 21871 which proposed National clearinghouse associations of not less than 10 banks with capital of at least $5 million. The following Act (H.R. 21871) of May 30, 1908, resulted from Aldrich’s senate bill (S. 3023) and amendments from the Senate Committee on Finance and from the House Committee on Banking and Currency (March 30; passed the Senate – March 27).
The Aldrich-Vreeland Emergency Currency Act (H. R. 21871; 60th Congress) passed by the Republican majority, stated in part, “…That National Banking Associations… not less than ten in number, having an aggregate capital and surplus of not less than five million dollars, may form voluntary associations to be designated as National Currency Associations. The banks uniting to form such association shall… acting under authority from the board of directors, make and file with the Secretary of the Treasury… The National Currency Association… shall have and exercise any and all powers necessary to carry out the purposes of this section… under the direction and control of the Secretary of the Treasury, as a basis for additional circulation any securities, including commercial paper, held by a national banking association… secured by the deposit of bonds of the United States to an amount not less than 40% of its capital stock… and surplus of 20%… The officers of the association may… make application to the Comptroller of the Currency for an issue of additional circulating notes to an amount not exceeding 75% of the cash value of the securities or commercial paper so deposited… (subject) to the judgment of the Secretary of the Treasury… (who) may direct an issue of additional circulating notes to the association… The Treasurer of the United States, with the approval of the Sec. of the Treasury, shall accept as security for the additional circulating notes… bonds or other interest-bearing obligations of any State of the U.S., or any legally authorized bonds issued by any city, town… municipality… ten years…’
“…Sec. 11… Section 5172. In order to furnish suitable notes for circulation, the Comptroller of the Currency shall, under the direction of the Secretary of the Treasury, cause plates and dies to be engraved, in the best manner to guard against counterfeiting… in denominations of five dollars, ten dollars, twenty… fifty… one hundred… five hundred… one thousand dollars, and ten thousand dollars, as may be required to supply the associations… Sec. 17. That a Commission is hereby created… ‘National Monetary Commission’ to be composed of nine members of the Senate… and 9 of the House… Sec. 18 …duty …to inquire and report to Congress, what changes are necessary or desirable in the monetary system of the United States or in the laws relating to banking and currency… Sec. 20. This Act shall expire… June 1914.” The Act made $500 million in emergency currency available to certain national banks over a six year period.
In 1909, the National Monetary Commission conducted investigations and held hearings in the U.S. and Europe. According to FederalReserveHistory.org, “A secret gathering at a secluded island off the coast of Georgia in 1910 laid the foundations for the Federal Reserve System. In November… Nelson Aldrich, A. Piatt Andrew, Henry Davison, Arthur Shelton, Frank Vanderlip and Paul Warburg met at the Jekyll Island Club… to write a plan to reform the nation’s banking system. The meeting and its purpose were closely guarded secrets, and participants did not admit that the meeting occurred until the 1930s… At the time… American banks held large required reserves of cash…. in the vaults of thousands of banks or as deposits in financial institutions… During crises, they became frozen… during booms …they tended to flow toward big cities… where bankers invested them in call loans… The brokers in turn loaned the funds to investors speculating in equity markets… In Europe… bankers invested much of their portfolio in short-term loans to merchants and manufactures. This commercial paper directly financed commerce and industry while providing banks with assets that they could quickly convert to cash during a crisis… (also) American banks could not operate overseas… and had to finance imports and exports through financial houses…’
“…By the fall of 1910, Aldrich was persuaded of the necessity of a Central Bank for the United States. With Congress ready to begin meeting in just a few weeks, Aldrich… decided to convene a small group… including his private secretary Arthur Shelton; Davison; Andrew (assistant Treasury secretary); Frank Vanderlip, president of National City Bank and a former Treasury official; and Warburg. A member of the exclusive Jekyll Island Club, most likely J. P. Morgan, arranged for the group to use the club’s facilities. Founded in 1886, the club’s membership boasted elites such as Morgan, Marshall Field, and William Vanderbilt… Munsey’s Magazine described it in 1904 as ‘the richest, the most exclusive, the most inaccessible’ club in the world… Once aboard, the men used only first names… to prevent the staff from learning their identities… An additional member of the ‘First Name Club’ was Benjamin Strong, vice president of the Bankers Trust Company and future Chief Executive Officer (governor; now president) of the Federal Reserve Bank of New York… Most scholars and journalists …included Bertie C. Forbes – founder of Forbes magazine and the journalist who first revealed the meetings in an article in 1916…’
“…Aldrich and his colleagues… agreed on …establishing an elastic currency supplied by a bank that held the reserves of all banks – they disagreed on details… By the end of their time… (they) developed a plan for a Reserve Association of America, a SINGLE CENTRAL BANK with 15 branches…. governed by boards of directors… with larger banks getting more votes. The branches would be responsible for holding the reserves of member banks; issuing currency; discounting commercial paper; transferring balances between branches… set discount rates… and buy and sell securities…’
“Aldrich presented the final report to the National Monetary Commission in January 1911 without telling the commission members how the plan had been developed. A final report, along with legislative text, went to Congress a year later with a few minor changes, including naming the new institution the National Reserve Association…”
Note: Chase Bank (1877) was named after form Treasury Sec. and Chief Justice S. P. Chase (no ties to bank). In 1799, Aaron Burr founded The Manhattan Co (N.Y. Bank). on Wall Street… to rival Hamilton’s Bank. In 1853, it was one N.Y. Clearing House original members; in 1955 after a merger, Chase and Manhattan merged as The Chase Manhattan Bank (CMB); then in 1996 Chemical Bank (1823) acquired CMB; in 2000 CMB acquired J.P. Morgan & Co. and renamed as JPMorgan Chase.
Bankers Trust after several mergers was acquired by Deutsche Bank in 1999.
Note: After World War I, Col. House led ‘the Inquiry’ group of about 150 scholars for post-war options. After the Paris Peace Conference of 1919, the Council on Foreign Relations was founded in 1921. Elihu Root (Sec. of War; Sec. of State; Sen. N.Y.), whose law firm represented ‘Boss’ Tweed, Carnegie, Chester Arthur, etc.), was its first Chairman. David Rockefeller is a Director and Honorary Chairman. A study revealed between 1945 and 1972 about 45% of the top foreign policy officials were members of CFR.
In 1912, the National Monetary Commission report went to Congress. But, it was an election year and the Republican Central Bank plan by Aldrich would not get the vote. The Democratic members of the National Monetary Commission railed against it in the public and Congress. Arsene Pujo of Louisiana formed a separate committee in 1912 to investigate the ‘money trust’ of the powerful financial trusts. The Pujo Committee found that these trusts were consolidate to gain control over industries. The findings supported the Sixteenth Amendment (‘Collect Taxes on incomes… without apportionment among the States;’ 1913) and the Clayton Antitrust Act (1914).
July 1911, W. G. McAdoo and Edward M. House (who helped 4 men become Texas governors) became Wilson’s campaign managers. William J. Bryan gave him support in return for Sec. of State position. November 1912, Woodrow Wilson won the electoral votes of 40 states and won the Presidency. The Democratic Party also gained control of both houses of Congress.
McAdoo became Wilson’s Sec. of Treasury and Colonel House declined a cabinet position, but soon became an advisor to Wilson on Foreign Affairs – having a room in the White House. House helped Wilson outline his Fourteen Points, the Treaty of Versailles and the League of Nations; he also worked on the establishment of the Council on Foreign Relations.
Senator Owens had traveled to Europe to study the Reichsbank (German Central Bank), banks in London and Paris; and in 1912 created a Senate Committee on Banking and Currency. Congressman Glass proposed a decentralized system and McAdoo a centralized model. Owen’s proposal was drafted with A. P. Andrew’s assistance. December 1912, Glass (Banking and Currency Committee) and Senator Owen (Sec. of the Senate Democratic Caucus) presented the compromise Glass-Owens Bill to Congress. Owen wrote “The Federal Reserve Act: Its Origin and Principles (1919): https://www.scribd.com/document/240927044/Fra-Owen-1919
Note: Joseph Morgan III (grandfather: who fought in Washington’s army and got start with stage coach lines) was a co-founder of Aetna Fire Insurance (1819 – Fire; Aetna 1853). J.P. Morgan after getting experience and funds through Dabney, Morgan & Co. (father: Junius Morgan – Peabody & Morgan of London) financed Thomas Edison’s research and General Electric (1892), Northern Pacific Railroad, and International Harvester’s merger. He bought a large share of Vanderbilt’s N.Y. Central Railroad (1879) and Carnegie’s steel company – creating U. S. Steel in 1901 (1st billion-dollar corporation). In Rome, at age 75, John Pierpont Morgan died March 31, 1913. He was survived by his 3 daughters and only son J. P. ‘Jack’ Morgan, Jr., who inherited control of his businesses. Before his death, JP Morgan testified at the Pujo Committee’s congressional hearings on Wall Street bankers.
According to The Federal Reserve Act of 1913: History and Digest (The National Bank News, 1914; FRASER; Fed. Res. Bank of St. Louis), “…The National Monetary Commission (offered) seventeen ‘principal’ defects in (current system and stated) …elsewhere in the report, the proposed association… ‘is not a bank, but a co-operative union of all the banks of the country, with very limited and clearly defined functions…’” A hundred years of future proven that statement very wrong – unless the Feds limited function is to also double the money supply at will. The Digest went on to say, “When the Democrats gained control… they forced the National Monetary Commission to make its report and wind up its work… (then) the Democratic platform of 1912…. Said: ‘We oppose the so-called Aldrich bill, of the establishment of a Central Bank; and we believe the people … will be largely freed from panics… by a systematic revision of our banking laws… with protection from control…by the Money Trust… We condemn the present methods of depositing Government funds in a few favored banks, largely situated in or controlled by Wall Street…” The Democrats also failed on both accounts.
The Digest continues… “The short session of Congress came to an end March 1913; and an extra session was called April 7 …by President Wilson to consider a tariff revision… August 29 …the currency bill was first introduced. This bill bore the name of the Glass-Owen Bill, because in its final shape it was the result of conferences between Mr. Glass, the President (Wilson), Secretary of the Treasury McAdoo, Sec. of State Bryan and Senator Owen, chairman of the newly organized Banking and Currency Committee of the Senate.”
There were many protested to the bill, and arguments for amendments to protect the various industrial and commerce sections of business, including agricultural. By September 9, enough Democrats and Republicans agreed to report to the House the bill for debate. On September 18, it passed the House 286 to 85. The Digest states, “The action of the House… was so speedy that the country had hardly had time to fully understand the measure that the new Democratic administration was forcing upon it…” Moreover, the American Bankers’ Association was given less than a month to prepare its arguments before the Senate committee.
The hearings ended in October. Frank Vanderlip appeared as a witness and offered a comprehensive central reserve bank plan – owned by public (meaning super-rich stockholders) and controlled by the government. It was the Republican plan modified. The bill was stuck in committee being debated until December when President Wilson called members of the committee to the White House and pressed them to move the bill to conference. On the day of the conference, several Democratic Senators agreed to finalize a report to the Senate. On November 20, two recommendations on the House bill were reported by two sections of the Committee. The Senate then held daily sessions in December from 10 am to 11 pm until a final vote was held. On December 19, the Bill passed 54 to 34.
Then the House committee received the Glass-Owen Bill December 20. The conference report was adopted on December 23, 1913 a day before Christmas Eve, and the bill was signed by the President. The result was the passage of the “Federal Reserve Act.”
The Act established “eight to twelve cities to be known as Federal Reserve cities…” “Shareholders… shall be individually responsible…” yet of course the taxpayers and government has bailed out several banks. The law established a Board of Directors, which were controlled primarily by the large banks and power elite shareholders. “No Senator or Representative in Congress shall be a member of the Federal Reserve Board or an officer or Director.” This left all control in the hands of the Corporate CEOs and BODs.
Moreover: “Sec. 7. After all necessary expenses of a Federal Reserve Bank have been paid or provided for (including Executive salaries), the stockholders shall be entitled to receive an annual dividend of 6% on the paid-in capital stock, which dividend shall be cumulative…” “Sec. 11. The Federal Reserve Board shall be authorized and empowered: to discounted paper of other Federal Reserve banks at rates of interest to be fixed by the Federal Reserve Board… (L) To employ such attorneys, experts, assistants, clerks… as may be deemed necessary…”
“Sec. 14. (a) Any Federal Reserve Bank may… purchase and sell in the open market, at home or abroad… deal in gold coin and bullion at home or abroad, to make loans thereon, exchange Federal Reserve notes for gold… U.S. bonds or other securities… (b) To buy and sell… bonds… notes… issued in anticipation of the collection of TAXES…”
“Sec. 16. Federal Reserve Notes, to be issued at the discretion of the Federal Reserve Board… Every Federal Reserve Bank shall maintain reserves in gold or lawful money of not less than 35% against its deposits and reserves in gold of not less than 40% against its Federal Reserve notes in actual circulation… In order to furnish suitable notes… Comptroller …engraved …denominations of $5, $10, $20, $50 $100…”
“Operations of Federal Reserve Banks… granted the power: 1. To receive deposits from member banks. 2. To received deposits from the United States…”
The Federal Reserve System was created by the Federal Reserve Act on December 23, 1913. The Fed would go off the Gold Standard and increase Money Supply, increasing National Debt and making billions for giant corporations and their elite billionaire shareholders.