By Brian O’Brien
11/12/2015
It turns out the conspiracy theorists were right. A cabal of powerful bankers led by a corrupt senator actually did put on disguises and sneak off in the night to a Victorian mansion on the ominously named Jekyll Island where they plotted the creation of the Federal Reserve.
“You gotta hand it to the conspiracy theorists, because, in fact, there was a conspiracy,” Roger Lowenstein told Ky Ryssdall during an interview on NPR about Lowenstein’s new book America’s Bank.
The meeting on Jekyll Island is unknown to most Americans, or else has remained in the realm of conspiracy theory and legend, but details leaked out over the decades in memoirs and in reports in the financial press. Several writers have written about the clandestine meeting, but Lowenstein takes us behind the scenes like no one has before and gives us the clearest picture yet of what happened during that fateful gathering on Jekyll Island in the winter of 1910.
Turkey, pheasant and venison roast in the kitchen at the exclusive Jekyll Island Club. The conspirators lounge on plush, ornate furniture, smoke cigars and drink their digestifs by a roaring fire. We listen in on the arguments and debates between the passionately driven Paul Warburg and the stern and commanding Senator Nelson Aldrich. We feast with them and work late into the night drawing up plans for a central bank, which cannot outwardly appear to be a central bank lest the American people and Congress rise up in populist anger and reject it out of hand.
History is written by the victors. In America’s Bank, Lowenstein gives us the victors’ narrative of the chain of events that led to the creation of the Federal Reserve. If you are wondering who those victors are, they are JPMorgan Chase, Citigroup, and the big international banks that have dominated the global economy over the past century. Wall Street banks were the beneficiaries of the Federal Reserve Act and they have risen to global dominance since its passage.
Roger Lowenstein is a highly regarded financial journalist who has written for some of America’s biggest and most influential newspapers and magazines, including The New York Times, The Wall Street Journal, Fortune and Atlantic Monthly. He has now written six books about Wall Street and finance—his first was an admiring biography of Warren Buffet.
Lowenstein is connected and knows finance. As well he should. In addition to being a best-selling author, he serves as chairman of the board of the multi-billion dollar hedge fund the Sequoia Fund, which was founded by one of Buffet’s close friends.
It’s been a marvel to behold America’s Bank being promoted in the press. Articles by Lowenstein about his book and glowing reviews have been printed in The Wall Street Journal, The New York Times, The Washington Post, The L.A. Times, Forbes and numerous other newspapers, magazines and websites, not to mention that chat with Ryssdall on NPR. This is how narrative becomes history in the minds of the American people.
The person who reviewed America’s Bank for The New York Times was none other than Robert Rubin, who worked 26 years as an investment banker for Goldman Sachs, then as Treasury Secretary at the U.S. Treasury where he was a leading advocate with Fed Chair Alan Greenspan and Deputy Treasury Secretary Larry Summers for massive deregulation of the financial sector. After Rubin’s de-regulating was done, he joined Citigroup as chairman of the executive committee and chairman of the board of directors. While Rubin was at Citigroup, the federal government injected $45 billion in taxpayer money into the bank and guaranteed some $300 billion in illiquid assets. Rubin left Citigroup in 2009 having enriched himself by $126 million during his tenure. After leaving the bank, he has been a frequent attendee of the Bilderberg Conference and became a co-chairman of the Council on Foreign Relations, an organization co-founded by the primary author of the Federal Reserve Act, Paul Warburg. Needless to say, Rubin loved Lowenstein’s book.
In his book, Lowenstein tells us how back at the turn of the century, popular opinion was hostile to the very idea of a central bank, but Wall Street bankers enlisted The New York Times, The Wall Street Journal and newspapers across the country in a propaganda campaign to convince the American people that a central bank was in their best interest. The press and the Federal Reserve have had a symbiotic relationship from the beginning that continues to this day.
That being said, supporters and detractors of the Fed will both find valuable information and new insights in America’s Bank. Lowenstein is an excellent researcher and a solid writer who can tell a good story. In America’s Bank, he brings past events and personalities to life in a clear and easy style.
Woodrow Wilson, Teddy Roosevelt, William Howard Taft, Col. Edward M. House, J.P. Morgan, Jacob Schiff, Carter Glass, William Jennings Bryan, and most importantly, Senator Nelson Aldrich and Paul Warburg, are all characters who play important roles in this story. Lord Rothschild even makes an appearance.
The story of the creation of the Federal Reserve begins when the German-born international banker Paul Warburg moved to New York City in 1902. Warburg had married Nina Loeb, daughter of Solomon Loeb, founder of the powerful New York investment firm Kuhn, Loeb & Co. Warburg went to work for the firm where his brother-in-law and mentor, the great international financier Jacob Schiff, was a senior partner.
At the time, Teddy Roosevelt was president and America was on the gold standard. The American economy had grown to become the largest, richest and most modern in the world, but was periodically wracked by financial crises. The money supply was held in the reserves of the nation’s banks. Each bank was an autonomous unit that acted independently in a laissez-faire banking system.
Most Americans worked in agriculture then and farmers held their money in country banks. The country banks deposited their reserves in city banks where returns were higher. The city banks then sent their reserves to Wall Street banks which used all this money to speculate on the stock market. But during the harvest months, farmers withdrew their savings from the country banks and took out loans to pay for seed, labor and equipment. This drained reserves from Wall Street and the cities to the country, causing the money supply to contract in urban areas during the economically busiest months of the year. It was an unorganized system in which the money supply swung between rapid expansions and violent contractions, where speculation was rampant and led to exuberant booms followed by devastating busts.
Warburg looked at the American monetary system with European eyes and was appalled. He held a passionate belief that America needed a central bank like those in Europe to control the bank reserves of the nation. But Schiff told Warburg that Americans would never accept any institution that even resembled a central bank.
Warburg discovered that America was haunted by a ghost—the ghost of Andrew Jackson.
America had established three central banks in its history. The first was the Bank of North America formed during the Revolutionary War before the ratification of the Constitution. It was replaced in 1791 by the First Bank of the United States, which was subsequently closed down after its 20-year charter expired. The Second Bank of the United States was chartered in 1816, but it was closed down in 1836 by President Andrew Jackson who had fought what was called the Bank War against it. Jackson had vowed to kill the bank and did.
Each of America’s central banks had been accused of engaging in fraud and corruption, of concentrating wealth and power into the hands of their shareholders and of being servants of plutocrats and foreign financiers.
The Second Bank of the United States had been dead and buried for more than half a century when Warburg arrived in the United States, but the ghost of Jackson was preventing any new central bank from rising up to replace it. Americans, especially Democrats from the Party of Jackson, did not trust bankers, especially central bankers, who wanted to centralize the American banking system.
When the Panic of 1907 caused widespread financial chaos in New York City and across the country, Warburg was not about to let the crisis go to waste. He went to work in the press and with bankers and politicians, trying to convince everyone that a central bank was the answer.
But an obstacle to banking reform was Rhode Island Senator Nelson Aldrich, who was the most powerful man in Congress and chairman of the Senate Finance Committee.
Aldrich had been born in a farmhouse. His father was a hard drinker who had not achieved success in life. Aldrich came from a humble background, but carried himself like an aristocrat and had a burning ambition to amass a fortune like the great robber baron monopolists of his day. The robber barons had gotten rich in railroads, steel, oil and shipping, but Aldrich’s road to riches was through politics. He became an agent of big business in Congress, especially for the Sugar Trust, and served the plutocrats so well that they enriched him by cutting him into favorable business deals.
“Aldrich, of course, was accustomed to leveraging his position for private gain,” Lowenstein wrote.
Lowenstein tells us that Aldrich was a card-playing companion of America’s most powerful banker, J.P. Morgan. Aldrich’s daughter Abby married John D. Rockefeller Jr., heir to the Rockefeller fortune. John D. Rockefeller Sr. was the richest man in America at the time, and by most measures the richest American ever.
Aldrich was opposed to banking reform and preferred the status quo, but after the Panic of 1907, he experienced a conversion. Warburg won him over and convinced him that a central bank was what America needed.
In response to the Panic, Congress established the bipartisan National Monetary Commission to study solutions to America’s banking problems. Aldrich was named the commission’s chairman. He took members of the commission on a fact-finding mission to Europe to study the central banks there. The first stop on their tour was at J.P. Morgan’s London mansion where Aldrich and his fellow fact-finders had dinner with Morgan and Lord Rothschild. Lowenstein says nothing more about Aldrich’s dinner with America’s most powerful banker and the most powerful banker in the British Empire, but, surely, the dinner conversation must have been splendid.
When Aldrich returned from Europe, he assembled Abram Piatt Andrew, assistant secretary of the Treasury; Henry P. Davison, a J.P Morgan senior partner; Charles D. Norton, president of J.P. Morgan's First National Bank of New York; Frank A. Vanderlip, president of National City Bank; and Warburg at Jekyll Island where the outline for what became the Federal Reserve Act was then written.
John D. Rockefeller Sr. is curiously absent from America’s Bank, but we know America’s richest man was heavily involved in banking. National City Bank was the biggest bank of the day. Today, it is known as Citigroup. Chase Bank has often been called the Rockefeller bank, but in his memoirs, David Rockefeller, grandson of Senator Nelson Aldrich and John D. Rockefeller Sr., tells us that National City Bank was really more of a Rockefeller Bank than Chase. John D. Rockefeller Sr.’s brother, William, owned a substantial percent of National City’s stock and was closely associated with James Stillman, the bank’s president between 1891 and 1909. Two of William’s sons married two of Stillman’s daughters.
When David Rockefeller became president of Chase in the 1960s, William Rockefeller’s grandson Stillman Rockefeller was chairman of First National City Bank, which later became Citigroup. Surely, John D. Rockefeller Sr. must have had some influence in the creation of the Fed. But what his influence was we will not learn from Lowenstein’s book.
After Jekyll Island, Aldrich returned to Congress and pushed for acceptance of the Aldrich Plan for a central bank while Warburg went to work in the press and with various business and banking groups in an attempt to turn public opinion. All the while Warburg kept it a secret that he had essentially been the primary author of the Aldrich Plan.
Unfortunately for the plan, muckraking journalists had so tarnished Aldrich’s name that it had become synonymous with crony capitalism and big business corruption. Taft was president but Congress had changed hands to the Democratic Party. Taft did not have the political capital to get any plan for a central bank through Congress, especially one with Aldrich’s name attached. The Aldrich Plan was dead in the water.
In a twist of fate, Teddy Roosevelt turned on his old friend Taft and made a third party run for president. Roosevelt split the Republican vote which enabled Woodrow Wilson to ascend to the White House. Wilson was a progressive reformer who had promised populist banking reforms, but had surrounded himself with Wall Street bankers. The bankers had switched parties and thrown their weight behind Wilson.
Lowenstein tells us how the mysterious Col. Edward M. House, the Gríma Wormtongue of American history, brought the fiery populist enemy of the banks, Williams Jennings Bryan, over to the Wilson camp. Wilson made Bryan secretary of state instead of treasury secretary, which kept Bryan on his side but safely out of the bank reform business. Congressman Carter Glass had taken the lead in writing a bank reform bill which up until it was signed was sold as a progressive reform, and which Bryan endorsed without being allowed to read.
Despite Democratic disdain for Aldrich, Glass’s bill was nothing more than the Aldrich Plan repackaged. Bryan had been betrayed. Warburg later proved in his book The Federal Reserve System that the structure and much of the wording of the Federal Reserve Act had actually been written on Jekyll Island.
Wilson signed the bill that gave us the Federal Reserve and set the stage for the American Century—a century of war, debt and an expansive government which spread its reach around the globe and deeper into all our lives.
Reading America's Bank, it is easy to draw parallels between the passage of the Federal Reserve Act and the passing of controversial bills today, such as the Affordable Care Act. A progressive president promises populist reforms; a bill is written by industry insiders and rushed through Congress with the help of a compliant media; a powerful, profit-devouring financial cartel is then created that reaches deeply into all our lives.
Lowenstein does a great job in piecing together the facts of history from numerous sources. But he tells the story firmly on the side of Warburg and agrees wholeheartedly with him that America needed a central bank—one that is independent from Congress and from public oversight. Lowenstein gives the characters in this story the benefit of the doubt that they acted in good faith and did what was best for the country—that the Fed was the best possible outcome for America and that bankers were not seizing control of the American money supply for private profit and power as detractors of the Fed said back then and still say today.
Of course, Warburg’s viewpoint is easily refuted. The Fed, and no central bank, has stopped financial chaos and pain. Booms and busts are symptoms of fractional reserve banking whether a central bank exists or not. The biggest bust in history, the Great Depression, struck the nation under the Fed’s watch. Booms and busts continue to our day.
Despite the constant propaganda we hear day in and day out, history clearly shows that the Fed does not protect American workers from losing their homes or their jobs during financial crises. During the housing bust of 2007, millions of Americans lost their homes and jobs while the biggest banks were bailed out. The Fed merely protects its owners, the big banks, such as JPMorgan Chase and Citigroup. It provides them with unlimited liquidity when the American people are being thrown out into the streets as their employers shut down and their homes are seized by debt collectors.
There are better ways to organize a monetary system.
No doubt another point of contention for critics of the Fed is the title of the book. The Fed cannot really be considered America’s bank. The Fed was purposefully designed to be independent from the American public and our representatives in Congress. The Fed does not belong to the American people but instead to its shareholders who own stock in the 12 regional Fed banks, which the Jekyll Island conspirators organized not as public institutions but as privately owned corporations that pay a guaranteed 6 percent dividend to their shareholders. These shareholders own and control the Fed, and they are as likely to be foreigners as Americans.
For evidence of this point, look no further than Stanley Fischer. Fischer is emblematic of the transnational elite that rules over our country today. Fischer was born in Northern Rhodesia, which is now Zambia. He spent his childhood in Africa and Israel before earning degrees in economics from the London School of Economics and then a Ph.D. from the Massachusetts Institute of Technology. Over his career, he held high ranking positions at the World Bank, the IMF and Citigroup. He was also a member of David Rockefeller’s Trilateral Commission. In 2005, he was appointed chairman of the Bank of Israel—Israel's central bank. In 2014, President Obama appointed Fischer as the vice-chair of the Federal Reserve, which is the second most powerful position at the Fed, second only to the Fed chair. Apparently, in our nation of 320 million people there is no one else as qualified to serve as vice-chair of the Fed than the former chairman of a foreign central bank.
America’s Bank comes to an end after a confusing and rushed flurry of backroom dealing and frenetic negotiations in Congress at the end of 1913 when Congressmen were eager to begin their long, cold winter journey home for the Christmas holiday. A final version of the Federal Reserve Act passed both the House and Senate and was sent to Wilson who signed it at the White House on Dec. 23, 1913, as his closest advisors looked on.
With the Act signed, Lowenstein concludes the book, stating, “Now, three quarters of a century after Andrew Jackson, the ghost was slain.”
But this is untrue. The ghost of Jackson has not been slain. Jackson’s ghost still haunts America with words of warning about the evils of a central bank. Jackson’s influence is now being strongly felt in Congress and across America as more and more people figure out that the Federal Reserve is not serving our interests but instead is serving a small clique of international bankers.
Lowenstein and his banker friends hope that Jackson’s ghost has been slain once and for all—that the American people will not rise up in populist Jacksonian anger and kill the Fed. The words attributed to Jackson long ago can still strike fear into the hearts of bankers everywhere, because those words still ring true.
“Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal God, I will rout you out!”
Brian O’Brien is the author of “The Tyranny of the Federal Reserve.”
“You gotta hand it to the conspiracy theorists, because, in fact, there was a conspiracy,” Roger Lowenstein told Ky Ryssdall during an interview on NPR about Lowenstein’s new book America’s Bank.
The meeting on Jekyll Island is unknown to most Americans, or else has remained in the realm of conspiracy theory and legend, but details leaked out over the decades in memoirs and in reports in the financial press. Several writers have written about the clandestine meeting, but Lowenstein takes us behind the scenes like no one has before and gives us the clearest picture yet of what happened during that fateful gathering on Jekyll Island in the winter of 1910.
Turkey, pheasant and venison roast in the kitchen at the exclusive Jekyll Island Club. The conspirators lounge on plush, ornate furniture, smoke cigars and drink their digestifs by a roaring fire. We listen in on the arguments and debates between the passionately driven Paul Warburg and the stern and commanding Senator Nelson Aldrich. We feast with them and work late into the night drawing up plans for a central bank, which cannot outwardly appear to be a central bank lest the American people and Congress rise up in populist anger and reject it out of hand.
History is written by the victors. In America’s Bank, Lowenstein gives us the victors’ narrative of the chain of events that led to the creation of the Federal Reserve. If you are wondering who those victors are, they are JPMorgan Chase, Citigroup, and the big international banks that have dominated the global economy over the past century. Wall Street banks were the beneficiaries of the Federal Reserve Act and they have risen to global dominance since its passage.
Roger Lowenstein is a highly regarded financial journalist who has written for some of America’s biggest and most influential newspapers and magazines, including The New York Times, The Wall Street Journal, Fortune and Atlantic Monthly. He has now written six books about Wall Street and finance—his first was an admiring biography of Warren Buffet.
Lowenstein is connected and knows finance. As well he should. In addition to being a best-selling author, he serves as chairman of the board of the multi-billion dollar hedge fund the Sequoia Fund, which was founded by one of Buffet’s close friends.
It’s been a marvel to behold America’s Bank being promoted in the press. Articles by Lowenstein about his book and glowing reviews have been printed in The Wall Street Journal, The New York Times, The Washington Post, The L.A. Times, Forbes and numerous other newspapers, magazines and websites, not to mention that chat with Ryssdall on NPR. This is how narrative becomes history in the minds of the American people.
The person who reviewed America’s Bank for The New York Times was none other than Robert Rubin, who worked 26 years as an investment banker for Goldman Sachs, then as Treasury Secretary at the U.S. Treasury where he was a leading advocate with Fed Chair Alan Greenspan and Deputy Treasury Secretary Larry Summers for massive deregulation of the financial sector. After Rubin’s de-regulating was done, he joined Citigroup as chairman of the executive committee and chairman of the board of directors. While Rubin was at Citigroup, the federal government injected $45 billion in taxpayer money into the bank and guaranteed some $300 billion in illiquid assets. Rubin left Citigroup in 2009 having enriched himself by $126 million during his tenure. After leaving the bank, he has been a frequent attendee of the Bilderberg Conference and became a co-chairman of the Council on Foreign Relations, an organization co-founded by the primary author of the Federal Reserve Act, Paul Warburg. Needless to say, Rubin loved Lowenstein’s book.
In his book, Lowenstein tells us how back at the turn of the century, popular opinion was hostile to the very idea of a central bank, but Wall Street bankers enlisted The New York Times, The Wall Street Journal and newspapers across the country in a propaganda campaign to convince the American people that a central bank was in their best interest. The press and the Federal Reserve have had a symbiotic relationship from the beginning that continues to this day.
That being said, supporters and detractors of the Fed will both find valuable information and new insights in America’s Bank. Lowenstein is an excellent researcher and a solid writer who can tell a good story. In America’s Bank, he brings past events and personalities to life in a clear and easy style.
Woodrow Wilson, Teddy Roosevelt, William Howard Taft, Col. Edward M. House, J.P. Morgan, Jacob Schiff, Carter Glass, William Jennings Bryan, and most importantly, Senator Nelson Aldrich and Paul Warburg, are all characters who play important roles in this story. Lord Rothschild even makes an appearance.
The story of the creation of the Federal Reserve begins when the German-born international banker Paul Warburg moved to New York City in 1902. Warburg had married Nina Loeb, daughter of Solomon Loeb, founder of the powerful New York investment firm Kuhn, Loeb & Co. Warburg went to work for the firm where his brother-in-law and mentor, the great international financier Jacob Schiff, was a senior partner.
At the time, Teddy Roosevelt was president and America was on the gold standard. The American economy had grown to become the largest, richest and most modern in the world, but was periodically wracked by financial crises. The money supply was held in the reserves of the nation’s banks. Each bank was an autonomous unit that acted independently in a laissez-faire banking system.
Most Americans worked in agriculture then and farmers held their money in country banks. The country banks deposited their reserves in city banks where returns were higher. The city banks then sent their reserves to Wall Street banks which used all this money to speculate on the stock market. But during the harvest months, farmers withdrew their savings from the country banks and took out loans to pay for seed, labor and equipment. This drained reserves from Wall Street and the cities to the country, causing the money supply to contract in urban areas during the economically busiest months of the year. It was an unorganized system in which the money supply swung between rapid expansions and violent contractions, where speculation was rampant and led to exuberant booms followed by devastating busts.
Warburg looked at the American monetary system with European eyes and was appalled. He held a passionate belief that America needed a central bank like those in Europe to control the bank reserves of the nation. But Schiff told Warburg that Americans would never accept any institution that even resembled a central bank.
Warburg discovered that America was haunted by a ghost—the ghost of Andrew Jackson.
America had established three central banks in its history. The first was the Bank of North America formed during the Revolutionary War before the ratification of the Constitution. It was replaced in 1791 by the First Bank of the United States, which was subsequently closed down after its 20-year charter expired. The Second Bank of the United States was chartered in 1816, but it was closed down in 1836 by President Andrew Jackson who had fought what was called the Bank War against it. Jackson had vowed to kill the bank and did.
Each of America’s central banks had been accused of engaging in fraud and corruption, of concentrating wealth and power into the hands of their shareholders and of being servants of plutocrats and foreign financiers.
The Second Bank of the United States had been dead and buried for more than half a century when Warburg arrived in the United States, but the ghost of Jackson was preventing any new central bank from rising up to replace it. Americans, especially Democrats from the Party of Jackson, did not trust bankers, especially central bankers, who wanted to centralize the American banking system.
When the Panic of 1907 caused widespread financial chaos in New York City and across the country, Warburg was not about to let the crisis go to waste. He went to work in the press and with bankers and politicians, trying to convince everyone that a central bank was the answer.
But an obstacle to banking reform was Rhode Island Senator Nelson Aldrich, who was the most powerful man in Congress and chairman of the Senate Finance Committee.
Aldrich had been born in a farmhouse. His father was a hard drinker who had not achieved success in life. Aldrich came from a humble background, but carried himself like an aristocrat and had a burning ambition to amass a fortune like the great robber baron monopolists of his day. The robber barons had gotten rich in railroads, steel, oil and shipping, but Aldrich’s road to riches was through politics. He became an agent of big business in Congress, especially for the Sugar Trust, and served the plutocrats so well that they enriched him by cutting him into favorable business deals.
“Aldrich, of course, was accustomed to leveraging his position for private gain,” Lowenstein wrote.
Lowenstein tells us that Aldrich was a card-playing companion of America’s most powerful banker, J.P. Morgan. Aldrich’s daughter Abby married John D. Rockefeller Jr., heir to the Rockefeller fortune. John D. Rockefeller Sr. was the richest man in America at the time, and by most measures the richest American ever.
Aldrich was opposed to banking reform and preferred the status quo, but after the Panic of 1907, he experienced a conversion. Warburg won him over and convinced him that a central bank was what America needed.
In response to the Panic, Congress established the bipartisan National Monetary Commission to study solutions to America’s banking problems. Aldrich was named the commission’s chairman. He took members of the commission on a fact-finding mission to Europe to study the central banks there. The first stop on their tour was at J.P. Morgan’s London mansion where Aldrich and his fellow fact-finders had dinner with Morgan and Lord Rothschild. Lowenstein says nothing more about Aldrich’s dinner with America’s most powerful banker and the most powerful banker in the British Empire, but, surely, the dinner conversation must have been splendid.
When Aldrich returned from Europe, he assembled Abram Piatt Andrew, assistant secretary of the Treasury; Henry P. Davison, a J.P Morgan senior partner; Charles D. Norton, president of J.P. Morgan's First National Bank of New York; Frank A. Vanderlip, president of National City Bank; and Warburg at Jekyll Island where the outline for what became the Federal Reserve Act was then written.
John D. Rockefeller Sr. is curiously absent from America’s Bank, but we know America’s richest man was heavily involved in banking. National City Bank was the biggest bank of the day. Today, it is known as Citigroup. Chase Bank has often been called the Rockefeller bank, but in his memoirs, David Rockefeller, grandson of Senator Nelson Aldrich and John D. Rockefeller Sr., tells us that National City Bank was really more of a Rockefeller Bank than Chase. John D. Rockefeller Sr.’s brother, William, owned a substantial percent of National City’s stock and was closely associated with James Stillman, the bank’s president between 1891 and 1909. Two of William’s sons married two of Stillman’s daughters.
When David Rockefeller became president of Chase in the 1960s, William Rockefeller’s grandson Stillman Rockefeller was chairman of First National City Bank, which later became Citigroup. Surely, John D. Rockefeller Sr. must have had some influence in the creation of the Fed. But what his influence was we will not learn from Lowenstein’s book.
After Jekyll Island, Aldrich returned to Congress and pushed for acceptance of the Aldrich Plan for a central bank while Warburg went to work in the press and with various business and banking groups in an attempt to turn public opinion. All the while Warburg kept it a secret that he had essentially been the primary author of the Aldrich Plan.
Unfortunately for the plan, muckraking journalists had so tarnished Aldrich’s name that it had become synonymous with crony capitalism and big business corruption. Taft was president but Congress had changed hands to the Democratic Party. Taft did not have the political capital to get any plan for a central bank through Congress, especially one with Aldrich’s name attached. The Aldrich Plan was dead in the water.
In a twist of fate, Teddy Roosevelt turned on his old friend Taft and made a third party run for president. Roosevelt split the Republican vote which enabled Woodrow Wilson to ascend to the White House. Wilson was a progressive reformer who had promised populist banking reforms, but had surrounded himself with Wall Street bankers. The bankers had switched parties and thrown their weight behind Wilson.
Lowenstein tells us how the mysterious Col. Edward M. House, the Gríma Wormtongue of American history, brought the fiery populist enemy of the banks, Williams Jennings Bryan, over to the Wilson camp. Wilson made Bryan secretary of state instead of treasury secretary, which kept Bryan on his side but safely out of the bank reform business. Congressman Carter Glass had taken the lead in writing a bank reform bill which up until it was signed was sold as a progressive reform, and which Bryan endorsed without being allowed to read.
Despite Democratic disdain for Aldrich, Glass’s bill was nothing more than the Aldrich Plan repackaged. Bryan had been betrayed. Warburg later proved in his book The Federal Reserve System that the structure and much of the wording of the Federal Reserve Act had actually been written on Jekyll Island.
Wilson signed the bill that gave us the Federal Reserve and set the stage for the American Century—a century of war, debt and an expansive government which spread its reach around the globe and deeper into all our lives.
Reading America's Bank, it is easy to draw parallels between the passage of the Federal Reserve Act and the passing of controversial bills today, such as the Affordable Care Act. A progressive president promises populist reforms; a bill is written by industry insiders and rushed through Congress with the help of a compliant media; a powerful, profit-devouring financial cartel is then created that reaches deeply into all our lives.
Lowenstein does a great job in piecing together the facts of history from numerous sources. But he tells the story firmly on the side of Warburg and agrees wholeheartedly with him that America needed a central bank—one that is independent from Congress and from public oversight. Lowenstein gives the characters in this story the benefit of the doubt that they acted in good faith and did what was best for the country—that the Fed was the best possible outcome for America and that bankers were not seizing control of the American money supply for private profit and power as detractors of the Fed said back then and still say today.
Of course, Warburg’s viewpoint is easily refuted. The Fed, and no central bank, has stopped financial chaos and pain. Booms and busts are symptoms of fractional reserve banking whether a central bank exists or not. The biggest bust in history, the Great Depression, struck the nation under the Fed’s watch. Booms and busts continue to our day.
Despite the constant propaganda we hear day in and day out, history clearly shows that the Fed does not protect American workers from losing their homes or their jobs during financial crises. During the housing bust of 2007, millions of Americans lost their homes and jobs while the biggest banks were bailed out. The Fed merely protects its owners, the big banks, such as JPMorgan Chase and Citigroup. It provides them with unlimited liquidity when the American people are being thrown out into the streets as their employers shut down and their homes are seized by debt collectors.
There are better ways to organize a monetary system.
No doubt another point of contention for critics of the Fed is the title of the book. The Fed cannot really be considered America’s bank. The Fed was purposefully designed to be independent from the American public and our representatives in Congress. The Fed does not belong to the American people but instead to its shareholders who own stock in the 12 regional Fed banks, which the Jekyll Island conspirators organized not as public institutions but as privately owned corporations that pay a guaranteed 6 percent dividend to their shareholders. These shareholders own and control the Fed, and they are as likely to be foreigners as Americans.
For evidence of this point, look no further than Stanley Fischer. Fischer is emblematic of the transnational elite that rules over our country today. Fischer was born in Northern Rhodesia, which is now Zambia. He spent his childhood in Africa and Israel before earning degrees in economics from the London School of Economics and then a Ph.D. from the Massachusetts Institute of Technology. Over his career, he held high ranking positions at the World Bank, the IMF and Citigroup. He was also a member of David Rockefeller’s Trilateral Commission. In 2005, he was appointed chairman of the Bank of Israel—Israel's central bank. In 2014, President Obama appointed Fischer as the vice-chair of the Federal Reserve, which is the second most powerful position at the Fed, second only to the Fed chair. Apparently, in our nation of 320 million people there is no one else as qualified to serve as vice-chair of the Fed than the former chairman of a foreign central bank.
America’s Bank comes to an end after a confusing and rushed flurry of backroom dealing and frenetic negotiations in Congress at the end of 1913 when Congressmen were eager to begin their long, cold winter journey home for the Christmas holiday. A final version of the Federal Reserve Act passed both the House and Senate and was sent to Wilson who signed it at the White House on Dec. 23, 1913, as his closest advisors looked on.
With the Act signed, Lowenstein concludes the book, stating, “Now, three quarters of a century after Andrew Jackson, the ghost was slain.”
But this is untrue. The ghost of Jackson has not been slain. Jackson’s ghost still haunts America with words of warning about the evils of a central bank. Jackson’s influence is now being strongly felt in Congress and across America as more and more people figure out that the Federal Reserve is not serving our interests but instead is serving a small clique of international bankers.
Lowenstein and his banker friends hope that Jackson’s ghost has been slain once and for all—that the American people will not rise up in populist Jacksonian anger and kill the Fed. The words attributed to Jackson long ago can still strike fear into the hearts of bankers everywhere, because those words still ring true.
“Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal God, I will rout you out!”
Brian O’Brien is the author of “The Tyranny of the Federal Reserve.”
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